FEDERAL COURT OF AUSTRALIA

Goyan v Motyka (No 2) [2009] FCA 1360

MARIA GOYAN v WOLODYMYR MOTYKA

SAD 93 of 2008

MICHAEL GOYAN v WOLODYMYR MOTYKA

SAD 94 of 2008

BESANKO J

24 NOVEMBER 2009

ADELAIDE

THE COURT ORDERS THAT:

1.         The applicant pay the respondent’s costs of the applicant’s application dated 29 April 2008 assessed on the following basis:

1.1       from 29 April 2008 to 20 November 2008, on a party and party basis, save and except for the costs of the applicant’s application for questions of fact to be tried by a jury pursuant to s 30(3) of the Bankruptcy Act 1966 (Cth) which costs are to be assessed and paid on an indemnity basis;

1.2       from 21 November 2008, on an indemnity basis.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

THE COURT ORDERS THAT:

1.         The applicant pay the respondent’s costs of the applicant’s application dated 29 April 2008 assessed on the following basis:

1.1       From 29 April 2008 to 20 November 2008, on a party and party basis, save and except for the costs of the applicant’s application for questions of fact to be tried by a jury pursuant to s 30(3) of the Bankruptcy Act 1966 (Cth) which costs are to be assessed and paid on an indemnity basis;

1.2       From 21 November 2008, on an indemnity basis.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          These reasons deal with the costs of two proceedings in the Court. In the first proceeding (No SAD 93 of 2008), Mrs Maria Goyan sought orders against Mr Wolodymyr Motyka in relation to a bankruptcy notice served on her by Mr Motyka on 10 April 2008. In the second proceeding (No SAD 94 of 2008), Mr Michael Goyan (Mrs Maria Goyan’s husband) sought orders against Mr Wolodymyr Motyka in relation to a bankruptcy notice served on him by Mr Motyka on 10 April 2008.

2                          Each proceeding was instituted in the Federal Magistrates Court on 29 April 2008 and transferred to this Court by order made by the Federal Magistrates Court on 9 July 2008. From 29 April 2008 to 13 February 2009, the proceedings have proceeded together and the applicants have been represented by the same solicitors and counsel. On 13 February 2009, the solicitors and counsel previously acting for both applicants announced that they no longer had instructions to act for Mrs Goyan. They were given leave to cease acting for her. Counsel for Mr Goyan then indicated that Mr Goyan was no longer pressing his application and I made an order that it be dismissed. The question of costs was reserved. Mrs Goyan, who was now unrepresented, pursued her application to hearing but was unsuccessful: Goyan v Motyka [2009] FCA 776 (“Goyan v Motyka”). Her application was dismissed on 24 July 2009.

3                          The respondent seeks an order in each proceeding that his costs be paid by the applicant and that the costs be assessed on an indemnity basis. Mr Goyan does not oppose an order that he pay the respondent’s costs on a party and party basis, but he opposes an order that the costs be assessed on an indemnity basis. Mrs Goyan opposes any order for costs and I heard her on the respondent’s application for costs on 24 July 2009.

4                          In each proceeding, I have had regard to the history of the proceeding, both before the Federal Magistrates Court and this Court. I have also considered the evidence put forward by the parties. In my reasons in Goyan v Motyka, I summarised the history of the proceedings (at [1]-[22]) and I will not repeat what I said in those reasons. Since delivering my reasons, the following evidence and submissions have been put before the Court:

1.         Affidavit of Mardi Conduit sworn on 13 August 2009.

2.         Respondent’s Submissions on Costs dated 13 August 2009.

3.         Respondent’s Supplementary Submissions on Costs dated 20 August 2009.

4.         Outline of Submissions on behalf of Michael Goyan dated 4 September 2009.

5.         Affidavit of Michael Goyan sworn on 7 September 2009.

6.         Additional Submission on Behalf of Michael Goyan dated 7 September 2009.

7.         Respondent’s Submissions in Reply dated 15 September 2009.

5                          In the circumstances, I think it is appropriate to consider the submissions made on behalf of Mr Goyan as if they were also made on behalf of Mrs Goyan.

6                          As I have said, each proceeding was commenced in the Federal Magistrates Court on 29 April 2008 and each was transferred to this Court on 9 July 2008. Mr Goyan did not suggest that this Court could not make a costs order which included the costs incurred by the respondent in the Federal Magistrates Court and I think this Court does have the power to make such an order (see Federal Court of Australia Act 1975 (Cth) s 43; Federal Court Rules O 62 r 5, O 82 r 3). In the ordinary case, the costs actually fixed in a proceeding of this nature will be the same whether the proceeding be in this Court or in the Federal Magistrates Court (Federal Court (Bankruptcy) Rules 2005 r 13.01; Federal Magistrates Court (Bankruptcy) Rules 2006 r 13.01).

7                          In my opinion, the respondent is entitled to his costs in both proceedings and I reject Mrs Goyan’s argument that the respondent is not entitled to an order for costs against her. The only question is as to the basis upon which the costs should be assessed.

8                          The Court’s power to award costs on an indemnity basis is not in doubt (Federal Court of Australia Act 1976 (Cth) s 43; Federal Court Rules O 62 r 4). The principles governing the exercise of the power have been discussed in numerous cases and it is sufficient for the purposes of this case to refer to the following: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Jianshe Southern Pty Ltd v Turnbull Cooktown Pty Ltd (No 2) [2007] FCA 903 at [32]). The starting point is that, in the ordinary case, costs are assessed and paid on a party and party basis. There are various categories of cases where a Court will make an order that a party pay costs assessed on another basis, whether it be on a solicitor and client basis or an indemnity basis. The authorities establish that the categories of cases in which such orders may be made are not closed. The respondent did not seek to identify a new category for the purposes of his applications, and the principal categories, in terms of the categories to be considered in this case, are the pursuit of a case where a party, properly advised, should have known the case had no chance of success and the imprudent refusal of a settlement offer by a party.

9                          In my opinion, the same order as to costs should be made in each proceeding and that order should be as follows:

The applicant pay the respondent’s costs of the applicant’s application dated 29 April 2008 assessed on the following basis:

1.         from 29 April 2008 to 20 November 2008, on a party and party basis, save and except for the costs of the applicant’s application for questions of fact to be tried by a jury pursuant to s 30(3) of the Bankruptcy Act 1966 (Cth) which costs are to be assessed and paid on an indemnity basis;

2.         from 21 November 2008, on an indemnity basis.

10                        My principal conclusions in relation to the submissions made to me are as follows. First, I reject the respondent’s submission that in each proceeding he should receive all of his costs assessed on an indemnity basis. Secondly, I reject a submission by Mr Goyan that, as he relied on legal advice throughout the proceeding, he should not be required to pay costs beyond costs assessed on a party and party basis. Thirdly, I find that the application by each applicant for certain questions of fact to be tried by jury was pursued in circumstances where, properly advised, each of them should have known that the application had no chance of success. In addition, or in the alternative, the application prolonged the proceeding and involved groundless contentions. On either ground, the costs of the application should be assessed and paid on an indemnity basis. Fourthly, I find that the applicants’ rejection of an offer of compromise made by the respondent on or about 20 November 2008 was an imprudent refusal of an offer of compromise and costs should be assessed and paid on an indemnity basis after that date.

11                        I turn now to explain my reasons for reaching those conclusions.

The respondent’s claim for costs to be assessed and paid on an indemnity basis for the whole proceeding

12                        There are two issues here. First, is it the case that from the outset each applicant pursued a case where, properly advised, he or she should have known that the case had no chance of success? Secondly, assuming the answer to the first question is no, was the point reached at some stage during the proceeding where, properly advised, each applicant should have known the continuation of the proceeding had no chance of success?

13                        The first question is not easy to resolve and I have given it anxious consideration. As it transpired, there was little, if any, merit in either application. In the end, Mr Goyan did not pursue his application and my reasons in Goyan v Motyka show that Mrs Goyan’s application had little merit. In addition, the applicants made a number of extreme allegations which were either irrelevant or not established by evidence, or both. On the other hand, the proceedings instituted by the applicants had to be instituted within a certain period of time. Furthermore, I do not think it was unreasonable for the applicants to investigate and receive advice on whether they had a cross demand against the respondent (Goyan v Motyka at [58]-[75]).

14                        On balance, I am not persuaded that, at the time the proceedings were commenced, each applicant, properly advised, should have known that his or her case had no chance of success. As to the second question, I think that, at a point in time in 2008, each applicant, properly advised, should have known that his or her case had no chance of success. In reaching that conclusion, I am in no way critical of Mr Goyan’s present solicitors and counsel. The difficulty is in determining the point in time in 2008.

15                        I have concluded on another basis that costs assessed on an indemnity basis should be awarded from 21 November 2008 (see [19] below). I think that, on 20 November 2008, each applicant, properly advised, should have known that his or her case had no chance of success and an award of costs on an indemnity basis is justified on this basis as well. It can be said with some force that that point was reached at a time earlier than 21 November 2008, but I am not sufficiently persuaded that this is so to award costs on an indemnity basis prior to 21 November 2008. This conclusion is subject to my conclusion in relation to the particular application identified in [17] below.

The applicants’ claim that they simply followed the legal advice given to them

16                        Counsel for Mr Goyan referred to an affidavit of Mr Goyan sworn on 15 January 2009 wherein he said (so it was submitted) that he did no more than follow the advice he was given. It is difficult to make a precise finding about this topic for two reasons. First, there is no doubt that Mrs Goyan feels very strongly that she has been the victim of an injustice in the defamation proceedings. Her conduct reveals as much and I refer, by way of example, to the incident referred to by Mr Goyan in paragraph 25 of his affidavit. Secondly, there is some evidence that the applicants were, on at least one occasion, not prepared to follow the advice of their solicitors (see Goyan v Motyka at [11]-[12]). In the result, I do not need to make a precise finding because, even if I assume the applicants received poor or incompetent legal advice, that would not dissuade me from making an order for indemnity costs if I considered that to be otherwise appropriate. I do not think the respondent’s rights should be affected by the quality of legal advice given to the applicants.

The applicants’ application for questions of fact to be determined by a jury

17                        The application for questions of fact to be determined by a jury resulted in a transfer of each proceeding from the Federal Magistrates Court to this Court and it resulted in delay in the progress of the proceedings. The application was hopeless and, ultimately, it was not pursued. The costs of the application should be assessed and paid on an indemnity basis. I am able to reach this conclusion without making any findings about the conduct on the application of counsel previously engaged by the applicants.

The applicants’ refusal of an offer of compromise

18                        Ms Mardi Conduit is a solicitor employed by the firm acting for the respondent. Her affidavit sets out the details of the settlement negotiations between the parties in November 2008. Her affidavit was admitted without objection.

19                        The settlement negotiations in November 2008 included an offer by the respondent to forgo part of a claim for interest, a claim for costs and to accept payment of the principal amounts by instalments. The offer was not accepted by the applicants. In my opinion, it is proper to characterise their refusal of the offer as an imprudent refusal of an offer of compromise and to award costs assessed on an indemnity basis from 21 November 2008.

Conclusion

20                        For these reasons, I will make the following orders:

No SAD 93 of 2008:

The applicant pay the respondent’s costs of the applicant’s application dated 29 April 2008 assessed on the following basis:

1.         from 29 April 2008 to 20 November 2008, on a party and party basis, save and except for the costs of the applicant’s application for questions of fact to be tried by a jury pursuant to s 30(3) of the Bankruptcy Act 1966 (Cth) which costs are to be assessed and paid on an indemnity basis;

2.         from 21 November 2008, on an indemnity basis.

No SAD 94 of 2008:

The applicant pay the respondent’s costs of the applicant’s application dated 29 April 2008 assessed on the following basis:

1.         from 29 April 2008 to 20 November 2008, on a party and party basis, save and except for the costs of the applicant’s application for questions of fact to be tried by a jury pursuant to s 30(3) of the Bankruptcy Act 1966 (Cth) which costs are to be assessed and paid on an indemnity basis;

2.         from 21 November 2008, on an indemnity basis.

Associate:

Dated:         24 November 2009