FEDERAL COURT OF AUSTRALIA

BDT Holdings Pty Ltd v Piscopo (No 3)[2010] FCA 1480

THE COURT ORDERS THAT:

1.    There be no order as to costs in the proceedings against the fourth, fifth and tenth cross-respondents.

2.    Leave be granted to the respondent/cross-claimant to file a notice of discontinuance of his cross-claim against the fourth, fifth and tenth cross-respondents on or before 23 December 2010.

3.    The respondent/cross-claimant not be entitled to claim any indemnity out of the bankrupt estate of the tenth cross respondent in respect of the respondent / cross-claimants’ motion seeking leave to discontinue.

4.    The motion dated 3 December 2010 be dismissed with costs.

5.    In the event no notice of discontinuance is filed pursuant to order 2, the cross-claim be dismissed as against each of the fourth, fifth and tenth cross-respondents on 24 December 2010.

6.    The proceedings (including the cross-claim) be otherwise dismissed.

THE COURT NOTES:

7.    The undertaking of the solicitor for the respondent/cross-claimant, that in the event that the notice of motion directed to be filed on 3 December 2010 has not in fact been filed, he shall do so no later than 21 December 2010 and pay any relevant filing fees.

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 Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    This is an application, which is somewhat unusual, by Samuel Piscopo, the trustee in bankruptcy of Terry Hill, the tenth cross-respondent to Mr Piscopo’s cross-claim. Mr Piscopo has settled his substantive proceedings the subject of his cross-claim against all but three of the fourteen cross-respondents (namely, Helen Walker, a New Zealand accountant, a New Zealand company associated with her, Nominee Shareholdings Ltd and Mr Hill). He now seeks to discontinue the cross-claim with an order that each of Ms Walker and Mr Hill pay costs of the cross-claim. Mr Piscopo does not seek costs against Nominee Shareholdings.

2    Mr Piscopo is not in a position to prove that Ms Walker has been served with his notice of motion seeking leave to discontinue and that she pay costs, that I directed be filed on 3 December 2010. Since Mr Piscopo cannot prove that Ms Walker has been served with his motion seeking costs against her, I refuse to grant him an order that requires her to pay costs. Mr Piscopo also seeks to proceed with his motion for leave to discontinue against Mr Hill on the basis on which I have outlined. Mr Hill opposes that course.

3    I have been informed from the bar table that it is not known whether Ms Walker is able at the moment to give instructions by reason of her medical condition. Mr Piscopo does not suggest that he is in a position to resolve the proceedings against either Ms Walker or Mr Hill. In those circumstances, I raised with counsel for Mr Piscopo whether he wished to proceed with the motion to discontinue, and, if he did not, I ought to dismiss the cross-claim, including as against Ms Walker, on the basis that he was no longer wishing to prosecute it. Mr Piscopo elected to seek to proceed with his application to discontinue under O 22 r 2(1)(d) of the Rules. Relevantly, O 22 provides:

“2     Discontinuance — Form 29

(1)    Subject to subrules 2 and 3 a party making a claim for relief may discontinue a proceeding so far as concerns the whole or any part of any claim for relief, by notice in accordance with Form 29:

(a)    at any time before the directions hearing — without the leave of the Court or the consent of any other party;

(b)    where after the directions hearing the proceeding continues on pleadings but the pleadings are not closed — without the leave of the Court or the consent of any other party;

(c)    where judgment has not been entered — with the consent of all the parties; and

(d)    at any time — with the leave of the Court.

.....

Costs

(1)    A party who discontinues pursuant to paragraph 2 (1) (a) or (b) shall be liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding.

(2)    A party who discontinues under paragraph 2 (1) (c) is liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding, unless the terms of the consent provide otherwise.” (emphasis added)

4    In the course of argument today, Mr Piscopo sought to rely on the decision of the Federal Magistrates Court in Rose v Piscopo [2010] FMCA 948, which was decided earlier this week on 14 December 2010. There, the trial judge noted that, after he had completed and edited his judgment, the solicitors representing Mr Piscopo had advised the Court that, as a result of a global settlement of all proceedings and claims involving Ms Rose and Mr Piscopo, consent orders disposing of the proceedings involving those two parties had been forwarded to the Court and so that his Honour did not decide those matters. The judgment dealt with, among other things, an application by Mr Hill to set aside an examination summons under s 81 of the Bankruptcy Act 1966 (Cth), which Mr Piscopo had caused to be issued and served on him, and also to have an inquiry into the conduct of Mr Piscopo under s 179 of that Act in relation to his conduct as trustee in bankruptcy, which were both dismissed. Mr Hill was ordered to pay Mr Piscopo’s costs of the proceedings before the Federal Magistrates Court on a party/party basis. Mr Piscopo contended that the purpose of the tender was to identify, within the ambit of what might be admissible under s 91 of the Evidence Act 1995 (Cth), the issues before the Federal Magistrates Court and their resolution.

principles AS TO GRANTING LEAVE TO Discontinue

5    Where a party seeks to discontinue proceedings without the leave of the court, ordinarily, that party becomes liable to pay the costs of the other party or parties unless, in cases where they consent, the consent provides otherwise. As Jacobson, Siopis and Foster JJ said in Rickus v Motor Trades Association of Australia Superannuation Fund Pty Limited (2010) 265 ALR 112 at 136 [116], O 22 r 3 reflects a more general policy of the law to the effect that a party should always be permitted to discontinue his, her or its proceedings, but that, in the modern setting, they should usually have to pay the costs of the other parties occasioned by the bringing of the proceedings and their subsequent abandonment. Their Honours noted that in Mineralogy Pty Limited v National Native Title Tribunal [1998] FCA 1700, Lee, Tamberlin and RD Nicholson JJ had held that, when the court was considering the question of costs in relation to an application for leave to discontinue proceedings pursuant to O 22 r 2(1)(d), the appropriate test to apply was that explained by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625.

6    Jacobson, Siopis and Foster JJ noted that in Mineralogy [1998] FCA 1700 the Full Court had held that, in most cases where there has been no trial on the merits, it is not appropriate, in determining an issue of costs, to make a prediction as to the outcome of the hypothetical case. They said that the question of costs thrown up by a grant of leave to a trustee (of a superannuation fund) to discontinue proceedings was one which had to be determined in light of that discontinuance and having regard to the circumstances in play at the time that the discontinuance was put into effect: Rickus 265 ALR at 136-137 [118].

7    In Qin 186 CLR at 624, McHugh J cautioned against a court being put in a position, when the moving party no longer wished to proceed with the action, of trying a hypothetical action between the parties. He drew attention to the need to consider whether or not the parties could be seen to be acting reasonably in their stances. McHugh J identified the ordinary rule as being that, if it appeared that both parties had acted reasonably in commencing and defending the proceedings, and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean the court will make no order as to the cost of the proceedings: Qin 186 CLR at 625. The Full Court followed that approach in Rickus 265 ALR 137 [119]-[120].

Consideration

8    Here, the trustee also sought today to rely upon material in an affidavit which he had read last year for the purposes of obtaining leave to join and serve Ms Walker and Nominee Shareholders in New Zealand: BDT Holdings Pty Limited v Piscopo (No 2) [2009] FCA 1126. There, I determined that there was a sufficient prima facie case, on the material then before me, to show that inferences were open that, if translated into findings of fact, would support the relief claimed. That was the test for service out of the jurisdiction identified in Ho v Akai Pty Limited (in liq) (2006) 24 ACLC 1526; [2006] FCAFC 1598 at [10] per Finn, Weinberg JJ and myself. However, such a finding on an application to serve outside the jurisdiction is not a determination of anything more. It is an interlocutory proceeding. The material on which Mr Piscopo relied at that time may or may not have been admissible in evidence on a final hearing so as then to give rise to inferences that, if translated to findings of fact, actually would support the relief claimed.

9    It would be inappropriate to determine, on the present motion, the validity of the claims made by Mr Piscopo against Mr Hill. Mr Hill has not had to answer them at this stage. To require him now to do so would involve the Court in having to undertake the very exercise which McHugh J pointed out ought be eschewed: Qin 186 CLR at 624. Mr Piscopo no longer wishes to pursue these proceedings. That is his right. In my opinion, I should grant him leave to file and serve a notice of discontinuance against each of Nominee Shareholdings, the fourth cross-respondent, Ms Walker, the fifth cross-respondent and Mr Hill, the tenth cross-respondent, on or before 23 December 2010. If no notice of discontinuance is filed by then, I will order that, on 24 December 2010, the cross-claim be dismissed against each of those respondents, with no order as to costs. I see no reason why, on the material Mr Piscopo has put before me, it would be appropriate to order Mr Hill or Ms Walker to pay costs.

10    Given that Mr Piscopo has filed no evidence to elucidate the basis of his present application, I am not able to resolve the circumstances as to why Ms Walker, Nominees Shareholdings or Mr Hill have not been involved in the otherwise successful resolution of these proceedings and, apparently, the Federal Magistrates Court proceedings. Because I cannot resolve the rights and wrongs of the proceedings, it seems to me that the appropriate order is, other than on this motion, to make no order as to the costs of the proceedings as against the three parties against whom Mr Piscopo seeks leave to discontinue.

11    Mr Hill, however, has been served with the motion and has opposed it. Indeed, his opposition is both reasonable and supported by authority of Full Courts of this Court and McHugh J as a single justice of the High Court. Mr Hill has appeared in person, representing himself, as he has throughout most of the proceedings. Such costs as he may be able to recover, were an order for costs made in his favour, are within a narrow compass: Cachia v Hanes (1994) 179 CLR 403. In my opinion, the motion is misconceived, and I will order that it be dismissed with costs.

12    Mr Piscopo should not be entitled to claim any indemnity out of the bankrupt estate of Mr Hill in respect of the motion seeking leave to discontinue: Donnelly v Maxwell-Smith [2010] FCAFC 154 per Bennett, Rares and McKerracher JJ. It will be a matter for the taxing officer to determine whether and to what extent the bankrupt estate ought to bear any costs involved in the cross-claim that Mr Piscopo brought against Mr Hill which is now to be discontinued or dismissed.

Associate:

Dated:    5 January 2011