FEDERAL COURT OF AUSTRALIA

Pattison (Trustee), In the matter of Bellin (Bankrupt) v Bellin (No 2)

[2000] FCA 1268

COSTS – costs of application in bankruptcy – applicant successful – original application misconceived – apportionment of costs.

IN THE MATTER OF BERYL RITA BELLIN

PAUL ANTHONY PATTISON (as Trustee of the Bankrupt Estate of BERYL RITA BELLIN) v BELLIN (No 2)

V 7248 of 2000

GOLDBERG J

7 SEPTEMBER 2000

MELBOURNE

IN THE MATTER OF BERYL RITA BELLIN

THE COURT ORDERS THAT:

1.         The following questions asked by the applicant are answered as follows:

Q:        Is the applicant entitled to claim remuneration, costs and expenses in respect of administering the estate of Beryl Rita Bellin in addition to the amounts approved by a resolution of creditors on 2 September 1997?

A:         Yes.

Q:        If the answer to question 1 is yes, is the applicant entitled to seek the approval of the creditors in respect of any further claims for remuneration, costs and expenses?

A:         Yes.

Q:        If the answer to question 1 is yes, but the answer to question 2 is no, what is the appropriate quantum of such remuneration, costs and expenses?

A:         Unnecessary to answer.

Q:        Is the applicant entitled to remuneration, costs and expenses including legal costs incurred in bringing this application and administering the estate after 30 April 2000 and if so, upon what basis?

A:         Yes.  Theremuneration, costs and expenses are to be determined by the creditors.  The legal costs are to be taxed in default of agreement.

THE COURT DECLARES THAT:

1.         The applicant is entitled to recover from the respondent such remuneration, costs and expenses as may be fixed by the creditors of the respondent as referred to in the reasons for judgment dated 22 August 2000 to the extent to which there are insufficient funds in the bankrupt estate of the respondent to cover such remuneration, costs and expenses.

THE COURT FURTHER ORDERS THAT:

1.         The respondent’s cross-claim filed 30 June 2000 is dismissed save that liberty is reserved to the respondent to apply further consistently with the reasons for judgment dated 22 August 2000 for an order that the applicant be ordered to give a certificate to the Official Receiver under s 153A(2) of the Bankruptcy Act 1966 (Cth) annulling the respondent’s bankruptcy.

2.                  One‑third of the applicant’s solicitor and client costs, charges and expenses of and incidental to the proceeding be paid out of the estate of the respondent and to the extent to which there are insufficient funds in that estate to cover one‑third of such costs, charges and expenses, one‑third of those costs, charges and expenses be paid by the respondent. 

3.                  The applicant is not entitled to recover from the respondent, or retain out of the estate of the respondent any costs, charges and expenses incurred in relation to the proceeding other than one‑third of his total costs, charges and expenses ordered to be paid by this order.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE MATTER OF BERYL RITA BELLIN

REASONS FOR JUDGMENT

Background

1                     On 22 August 2000 I published Reasons for Judgment answering certain questions which had been raised by the applicant in relation to his claim for remuneration, costs and expenses in relation to the administration of the bankrupt estate of the respondent.  I gave the parties the opportunity to make written submissions as to the costs of the applicant’s claim and the respondent’s cross‑claim.

2                     The applicant submitted that as he had succeeded on the issues raised in the claim and the cross‑claim he was entitled to an order for his costs on an indemnity basis as he was acting in the exercise of his duties as trustee.  The applicant also drew my attention to a letter which his solicitors had written to the respondent’s solicitors on 7 April 2000 which was expressed to be “Without prejudice except as to costs”.  In that letter the applicant’s solicitors’ stated that the applicant was prepared to reduce his remuneration by 25% if the matter was settled within seven days.  That offer was rejected by the respondent’s solicitors on 18 April 2000.  The applicant submitted that I could take his offer into account as a “Calderbank” offer:  Calderbank v Calderbank [1976] Fam 93; John S Hayes & Associates Pty Limited v Kimberly‑Clark Australia Pty Limited (1994) 52 FCR 201.  I do not consider the applicant’s offer as one appropriate to be considered by reference to Calderbank principles.  The questions which I answered did not determine the amount of remuneration, costs and expenses to which the applicant was entitled but only determined the means by which the remuneration might be determined.

3                     The respondent submitted that the applicant should not be allowed his costs of the application or, alternatively, that they should be disallowed or reduced by setting off the costs which should be ordered to be paid by the applicant to the respondent.  The respondent submitted that the application brought by the applicant sought an indulgence and was not brought for the benefit of the creditors, the estate or for the respondent, but rather only for the applicant.  It is true that creditors have been paid in full but the issue which arose between the applicant and the respondent, which was contested by the respondent, was the entitlement of the applicant to be paid further remuneration, costs and expenses.  It is not correct to characterise the application as one seeking an indulgence; rather it sought the determination of a claimed entitlement.

4                     The respondent submitted, in my view correctly, that the applicant’s initial application, dated 16 May 2000 filed on 17 May 2000, was misconceived.  That application claimed an order that the respondent pay the applicant $42,430.49 in respect of his remuneration, costs and expenses of administering the estate of the respondent.  On the same day a notice of motion was filed seeking an order that the respondent pay the applicant $31,510.17 in respect of outstanding remuneration, fees and expenses associated with the estate of the respondent.  When the matter came on for hearing before me on 5 June 2000 the applicant filed an amended application deleting the claim for an order for payment of $31,510.17 and seeking a declaration that the applicant was entitled to claim remuneration, costs and expenses in respect of administering the estate of the respondent in addition to the amounts approved by the resolution of creditors on 2 September 1997, in the total sum of $42,455.79 together with the costs of bringing the application on an indemnity basis.  The additional remuneration was sought in accordance with Reg 8.08 of the Bankruptcy Regulations.

5                     Subsequently on 20 July 2000 the applicant filed a further amended application and an amended notice of motion seeking answers to certain questions and deleting any claim for the payment of money sums.  I gave the applicant leave to file these documents at the hearing on 24 July 2000. 

6                     At the hearing the applicant’s principal submission appeared to be that the applicant’s remuneration should be determined either by the Court or pursuant to Reg 8.08 of the Bankruptcy Regulations.  It was an alternative submission of the applicant that the creditors had reserved to themselves the power to allow further remuneration to the applicant and that they had the right to exercise that power.

7                     The respondent submitted that the applicant should not be entitled to any of his costs incurred prior to 19 July 2000 (the date upon which proposed amended notice of motion asking the questions was served) and that the applicant should pay the respondent’s costs thrown away by the amendments to the application and the notice of motion. 

Reasoning

8                     Although the applicant has succeeded in obtaining the decision of the Court that he is entitled to claim remuneration, costs and expenses in respect of administering the estate of the respondent in addition to the amounts approved by the resolution of creditors on 2 September 1997, he would not have achieved that result by the form of his application and notice of motion as they existed prior to 20 July 2000.  When the matter came on for hearing before me on 5 June 2000 it was pointed out, by the respondent, correctly, that the application was misconceived.  It was also apparent at that date that the applicant needed to file further material in order to sustain the claim he was then making.

9                     As a general rule, a trustee in bankruptcy, so long as he or she acts reasonably, is entitled to an indemnity in respect of his or her costs in bringing any proceeding before the court:  Adsett v Berlouis (1992) 37 FCR 201.  In that case, the Full Court of the Federal Court rejected the submission that a trustee in bankruptcy should only be deprived of the right to recover his or her costs from the bankrupt estate when he or she has recklessly instituted or precipitated litigation.  Consistently with the principles analysed in that case I consider that it is an appropriate exercise of discretion to disallow part of a trustee in bankruptcy’s costs where proceedings have either been misconceived or have resulted in the unnecessary incurring of costs.  In my opinion that situation has occurred in the present case.  The proceeding as instituted, and as initially amended, was misconceived.  The proceeding was only placed on the footing which led to the relevant   questions being asked of the Court when the further amended application and amended notice of motion were served on 19 July 2000 and filed on 20 July 2000.

10                  In those circumstances the applicant should not be entitled to recover his costs incurred in relation to his initial application and amended application or the hearing on 5 June 2000 although he should be allowed some of the costs incurred in the preparation of the supporting affidavits, some of the contents of which were relevant to the questions put to the Court.  The respondent should be allowed her costs of the initial application and as first amended and the hearing on 5 June 2000.  However, the applicant should be allowed his costs of the final hearing on 24 July 2000 as the respondent contested the application in its final amended form and did not succeed in her opposition nor in her cross‑claim.

11                  I therefore consider that the appropriate order to make as to costs, weighing and balancing the costs to be disallowed to the applicant, the costs to be allowed to the applicant, the costs which should be allowed to the respondent and the costs which the respondent should pay, is to order that the applicant only be entitled to recover one‑third of his costs on an indemnity basis either out of the estate of the respondent or from the respondent.  The formal order will be that one‑third of the applicant’s solicitor and client costs, charges and expenses of and incidental to the proceeding be paid out of the estate of the respondent and to the extent which there are insufficient funds in that estate to cover one‑third of such costs, charges and expenses, those costs, charges and expenses be paid by the respondent.  It should be made clear that the applicant is not entitled to recover from, or retain out of the estate of the respondent any costs, charges and expenses incurred in relation to the proceeding other than one‑third of his total costs, charges and expenses ordered to be paid.

Associate:

Dated:              7 September 2000