FEDERAL COURT OF AUSTRALIA

Bovaird v The Trustee of the Bankrupt Estate of Frost (No 2) [2011] FCA 465

THE COURT ORDERS THAT:

1.    The applicant is granted leave, nunc pro tunc, to proceed with Court of Appeal proceedings number 2009/298581 in the Supreme Court of New South Wales, except insofar as the said appeal proceedings seek relief concerning the quantum of damages awarded against the bankrupt estate of the Late Maxwell Walter Allen Frost by the judgment of Brereton J in proceedings 3159 of 2004.

2.    The applicant is granted leave, nunc pro tunc, to proceed with Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

3.    Alan Maxwell Frost and Diana Catherine Fallon pay the applicant’s costs of this application, but this order be stayed until the determination of the New South Wales Court of Appeal proceedings number 2009/298581.

THE COURT NOTES:

4.    The undertaking of the applicant to:

(i)    Not raise any opposition should the respondent seek to be joined to Supreme Court of New South Wales Equity Division proceedings number 2010/41888;

(ii)    Keep the respondent informed as to any order sought by the applicant in Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

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.

THE COURT ORDERS THAT:

1.    The applicant is granted leave, nunc pro tunc, to proceed with Court of Appeal proceedings numbers 2009/298569 and 2009/298580 in the Supreme Court of New South Wales, except insofar as the said appeal proceedings seek relief concerning the quantum of damages or order under the Family Provision Act 1982 (NSW) awarded against the bankrupt estate of the Late Maxwell Walter Allen Frost by the judgment of Brereton J in proceedings 2211 of 2004 and 1923 of 2006.

2.    The applicant is granted leave, nunc pro tunc, to proceed with Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

3.    Alan Maxwell Frost and Diana Catherine Fallon pay the applicant’s costs of this application, but this order be stayed until the determination of the New South Wales Court of Appeal proceedings numbers 2009/298569 and 2009/298580.

THE COURT NOTES:

4.    The undertaking of the applicant to:

(i)    Not raise any opposition should the respondent seek to be joined to Supreme Court of New South Wales Equity Division proceedings number 2010/41888;

(ii)    Keep the respondent informed as to any order sought by the applicant in Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

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.

THE COURT DIRECTS:

1.    The trustee in bankruptcy of the estate of the Late Maxwell Walter Allen Frost to distribute a dividend of four cents in the dollar to Leon Bovaird and Monica Bovaird as creditors of the said bankrupt estate forthwith.

2.    The trustee in bankruptcy of the estate of the Late Maxwell Walter Allen Frost would not be justified in paying the costs of the applicants in respect of:

(i)    Supreme Court of New South Wales, Court of Appeal proceedings numbers 2009/298581, 2009/298569 and 2009/298580; or

(ii)    Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

THE COURT ORDERS THAT:

3.    The application is otherwise dismissed.

4.    The applicants pay the costs of Leon Bovaird and Monica Bovaird.

5.     Order 4 be stayed until the determination of the proceedings in the New South Wales Court of Appeal, being proceedings 2009/298581, 2009/298569 and 2009/2898580.

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.

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicants pay the respondents’ costs of the application.

3.    Order 2 be stayed until the determination of the proceedings in the New South Wales Court of Appeal, being proceedings 2009/298581, 2009/298569 and 2009/2898580.

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

1    I heard this case last year and determined it on 27 October 2010: Bovaird v The Trustee of the Bankrupt Estate of Frost [2010] FCA 1159 (the “primary judgment”); these reasons for judgment should be read with those. These matters were listed for hearing this morning for the determination of a number of debates which have now been largely resolved by consent. There remains the question of costs. The costs question itself is divided into two issues: first, what the actual costs orders which should be made are; and secondly, whether those costs, if they be made against the Executors, should be expressed such that they are personal. The suggestion that an order of that personal kind be made reflects an anxiety on the part of the Bovairds pre-emptively to cut short the entitlement of the Executors to any indemnity out of the estate.

2    It is appropriate in the first instance to deal with the question of what the actual costs orders should be. One substantive issue determined in the primary judgment was whether leave to continue with the proceedings in the New South Wales Court of Appeal should be granted. The Bovairds were successful in obtaining a grant of leave, albeit not insofar as the proposed grounds of appeal included an attack upon the quantum of damages which had been determined at first instance. In relation to that ground I held that the pursuit of such an appeal would be futile and accordingly declined leave.

3    Despite that, in my opinion the Bovairds were substantially successful in seeking leave and the matter upon which leave was not granted formed a relatively small part of the argument which took place. In those circumstances, I think it is appropriate that the Executors pay the costs of the Bovairds.

4    A second substantive issue, of whether leave to continue certain devastavit proceedings should be granted, was also determined in the primary judgment. Again, the Bovairds were effectively successful in resisting the Executors’ attempt to stop those proceedings, however there was a procedural hiccough in that conclusion. The Executors had applied for a stay of the devastavit proceedings and in circumstances where the Bovairds themselves had not sought leave of the Court to proceed with them it was correct that the Executors were entitled to a stay.

5    As events transpired orders were then made granting leave to proceed with the devastavit proceedings, with the necessary logical consequence that the Executors’ stay application failed. In that sense there was a measure of defeat on both sides, however I do not think that that defeat should stand against the ledger of the Bovairds. This is because, although there was a procedural deficit, ultimately that procedural deficit was cured and as a matter of substance they were successful.

6    Mr Cotman SC, who appeared for the Executors, put, not without some force I think, that what had occurred was “an honourable draw”. It does, at first blush, perhaps bear that characterisation, however when attendance is made to the substantive result, I think that submission should not be accepted. Accordingly, the appropriate order in relation to the devastavit proceedings is that the Executors bear the Bovaird’s costs.

7    The more difficult question on the present applications concerns whether there should be an order in some way pre-determining the question of the Executors’ indemnity.

8    The resolution of the issues before the Court of Appeal may resolve the questions which arise in relation to the Executors’ indemnity. It is also possible, however, that they will not. There are two conflicting interests at stake. On the one hand, the Bovairds have been successful in procuring in their favour a costs order and from that perspective there is much to be said for the view that whether the Executors do or do not have an indemnity out of the estate assets is a matter of disinterest to them; they have a costs order, they should be entitled to enforce it.

9    On the other hand, there is also no doubt that for the Executors the question of whether they are going to have to meet these costs orders personally or instead whether they will be entitled, as they might ordinarily be, to an indemnity out of the estate generates on their part at least some diffidence about immediately having to pay these costs orders. There is a third factor, I think, which needs to be confronted as well: that is the extraordinary nature of the present litigation. No person who has looked upon this litigation or been involved in it can have any confidence that anything which can be argued will not be argued.

10    If the costs orders are permitted simply to be made, I have no doubt that the Bovairds will seek to enforce them and consequently that that will then engender further litigation when the Executors seek to stay the costs orders pending resolution of the Court of Appeal proceedings. Even if that course is not taken, I do not doubt that there are various ways in which the making of a costs order could simply involve the entanglement of the parties in further expensive and unpleasant litigation.

11    These two sets of matters are such that I do not think the Bovairds should be held long out of their entitlement to costs, but neither do I think that it would be fruitful to allow further litigation to occur under the shadow of the Court of Appeal proceedings. What I propose to do in those circumstances is to make the costs orders and to stay their operation pending the determination of the proceedings in the Court of Appeal, but nothing further.

12    In proceeding NSD 283 of 2010, I direct:

1.    The trustee in bankruptcy of the estate of the Late Maxwell Walter Allen Frost to distribute a dividend of four cents in the dollar to Leon Bovaird and Monica Bovaird as creditors of the said bankrupt estate forthwith.

2.    The trustee in bankruptcy of the estate of the Late Maxwell Walter Allen Frost would not be justified in paying the costs of the applicants in respect of:

(i)    Supreme Court of New South Wales, Court of Appeal proceedings numbers 2009/298581, 2009/298569 and 2009/298580; or

(ii)    Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

And I order that:

3.    The application is otherwise dismissed.

4.    The applicants pay the costs of Leon Bovaird and Monica Bovaird.

5.    Order 4 be stayed until the determination of the proceedings in the New South Wales Court of Appeal, being proceedings 2009/298581, 2009/298569 and 2009/2898580.

13    In proceeding NSD 470 of 2010, I order that:

1.    The application be dismissed.

2.    The applicants pay the respondents’ costs of the application.

3.    Order 2 be stayed until the determination of the proceedings in the New South Wales Court of Appeal, being proceedings 2009/298581, 2009/298569 and 2009/2898580.

14    In proceeding NSD 1395 of 2009 I make the following orders:

1.    The applicant is granted leave, nunc pro tunc, to proceed with Court of Appeal proceedings numbers 2009/298569 and 2009/298580 in the Supreme Court of New South Wales, except insofar as the said appeal proceedings seek relief concerning the quantum of damages or order under the Family Provision Act 1982 (NSW) awarded against the bankrupt estate of the Late Maxwell Walter Allen Frost by the judgment of Brereton J in proceedings 2211 of 2004 and 1923 of 2006.

2.    The applicant is granted leave, nunc pro tunc, to proceed with Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

3.    Alan Maxwell Frost and Diana Catherine Fallon pay the applicant’s costs of this application, but this order be stayed until the determination of the New South Wales Court of Appeal proceedings numbers 2009/298569 and 2009/298580.

And the Court notes the undertaking of the applicant to:

(i)    Not raise any opposition should the respondent seek to be joined to Supreme Court of New South Wales Equity Division proceedings number 2010/41888;

(ii)    Keep the respondent informed as to any order sought by the applicant in Supreme Court of New South Wales Equity Division proceedings number 2010/41888

15    In proceeding NSD 1394 of 2009 I order:

1.    The applicant is granted leave, nunc pro tunc, to proceed with Court of Appeal proceedings number 2009/298581 in the Supreme Court of New South Wales, except insofar as the said appeal proceedings seek relief concerning the quantum of damages awarded against the bankrupt estate of the Late Maxwell Walter Allen Frost by the judgment of Brereton J in proceedings 3159 of 2004.

2.    The applicant is granted leave, nunc pro tunc, to proceed with Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

3.    Alan Maxwell Frost and Diana Catherine Fallon pay the applicant’s costs of this application, but this order be stayed until the determination of the New South Wales Court of Appeal proceedings number 2009/298581.

And the Court notes the undertaking of the applicant to:

(i)    Not raise any opposition should the respondent seek to be joined to Supreme Court of New South Wales Equity Division proceedings number 2010/41888; and

(ii)    Keep the respondent informed as to any order sought by the applicant in Supreme Court of New South Wales Equity Division proceedings number 2010/41888.

Associate:

Dated:    3 May 2011