FEDERAL COURT OF AUSTRALIA

Culleton v Macquarie Leasing Pty Ltd (No 2) [2015] FCA 1478

THE COURT ORDERS THAT:

1.    Order 2 of the orders made by the Federal Circuit Court on 31 October 2014 is set aside.

2.    There be no order as to costs in relation to the dismissal of the Creditor’s Petition in Federal Circuit Court proceedings number SYG 3241 of 2013.

3.    Insofar as the order made on 9 March 2015 awarded costs of the appeal to the respondent up to and including that date, that order is confirmed.

4.    The appellant is to pay the respondent’s costs of and incidental to the appeal as agreed or assessed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1.    INTRODUCTION

1    On 21 November 2014, the appellant, Mr Rodney Norman Culleton, filed a notice of appeal against the decision of the Federal Circuit Court (FCC) given on 31 October 2014 to make a sequestration order against his estate and awarding costs against his estate to the respondent, Macquarie Leasing Pty Limited (Macquarie). That appeal was dismissed summarily by Gleeson J on 9 March 2015 under s 25(2B)(bb) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) by reason of Mr Culleton’s failure to comply with directions and to attend the directions hearing on that day. By an interlocutory application filed on 2 April 2015, Mr Culleton sought an order to vacate or otherwise set aside the orders made on 9 March 2015.

2    The interlocutory application and appeal were listed for hearing before me on 28 October 2015. However the hearing was adjourned in order to permit Mr Culleton to regularise his case on the appeal after it became evident that the oral submissions being made by counsel newly engaged by Mr Culleton were not reflected in the notice of appeal or in Mr Culleton’s written submissions; nor did they reflect the way in which the case had been conducted at first instance.

3    On 4 December 2015, I made orders by consent setting aside the orders made on 9 March 2015 dismissing the appeal and allowing the appeal on an amended notice of appeal with consequential orders. Specifically, the orders made were that:

THE COURT NOTES THAT:

1.    Having read the appellant’s draft amended notice of appeal, together with the appellant’s further submissions, both filed on 2 November 2015, the Court considers that it is appropriate to make the orders set out below, it being at least arguable that there were appellable errors.

BY CONSENT, THE COURT ORDERS THAT:

2.    The Order of Justice Gleeson made on 9 March 2015 dismissing the appeal be set aside (reserving for argument and determination the question of whether the costs order made on March 2015 should also be set aside).

3.    Leave be granted to the Appellant to file and serve the Amended Notice of Appeal in the form of the Draft Amended Notice of Appeal from the Federal Circuit Court of Australia filed 2 November 2015.

4.    The appeal be allowed.

5.    The Orders made by Judge Altobelli on 31 October 2014 in Federal Circuit Court proceedings number (P)SYG3241/2013 be set aside.

6.    The Creditor's Petition in Federal Circuit Court proceedings number (P)SYG3241/2013 be dismissed (reserving for argument and determination the question of what costs order should be made in relation to those proceedings).

7.    On or before 4.00pm on 11 December 2015 the Appellant and the Respondent are to file and serve and exchange an outline of submissions on costs.

4    This judgment is concerned with resolving the outstanding issues to costs. Three issues arise with respect to the question of costs:

(1)    what costs order should be made in relation to the dismissal of the Creditor’s Petition in the Federal Circuit Court proceedings number SYG 3241 of 2013;

(2)    should the costs order made on 9 March 2015 by Gleeson J be set aside; and

(3)    what costs order should be made otherwise with respect to the appeal proceedings?

5    With respect to these issues, Mr Culleton contends that:

(1)    Macquarie should pay his costs of the proceedings in the Court below;

(2)    the order made by Gleeson J on 9 March 2015 that Mr Culleton pay Macquarie’s costs of the appeal should be set aside; and

(3)    Macquarie should pay Mr Culleton’s costs of the appeal.

6    Macquarie, however, contends that:

(1)    no order should be made as to costs in relation to the dismissal of the Creditor’s Petition in the Court below;

(2)    the Court should not set aside the costs order made on 9 March 2015; and

(3)    an order should be made that Mr Culleton pay Macquarie’s costs of and incidental to the appeal as and from 10 March 2015.

7    As to the last of these orders, Macquarie submits that, assuming the costs order made on 9 March 2015 is not set aside, such costs would include all costs incurred by Macquarie since 10 March 2015 to date, excluding those costs of and incidental to the directions hearing on 15 September 2015 which Mr Culleton was ordered to pay on that day.

8    An application by Macquarie for indemnity costs of the appeal was ultimately not pressed.

2.    BACKGROUND

2.1    The decision of Federal Circuit Court

9    By a creditor’s petition filed on 23 December 2013 (the Petition), Macquarie applied for a sequestration order under s 43 of the Bankruptcy Act 1966 (Cth) against the estate of Mr Culleton. The Petition alleged that Mr Culleton owed Macquarie the amount of $96,738.50. The debt comprised the sum of $94,304.66, being that amount of the judgment of the District Court of Western Australia entered in default on 8 March 2013 for breach of a Chattel Mortgage Agreement, together with interest.

10    Mr Culleton opposed the Petition by way of a Notice of Grounds of Opposition to the Petition filed on 18 June 2014.

11    The hearing of the Petition was adjourned five times, once on the application of Macquarie and otherwise on the application of Mr Culleton so that he could file further evidence and a Notice of Grounds of Opposition to the Petition. Despite Mr Culleton’s applications for adjournments being granted on 29 April 2014, 13 May 2014, 10 June 2014 and 24 June 2015, he did not then appear at the hearing of the Petition on 14 July 2014, and the sequestration order was made in his absence. Later that day the sequestration order was set aside pursuant to r 16.05 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) and listed again for hearing the following day.

12    The Petition and Notice of Grounds of Opposition to the Petition ultimately proceeded before the primary judge on 15 July 2014 and, in relation to Mr Culleton’s application for leave to re-open, on 17 September 2014.

13    While the appellant had been legally represented for most stages of the proceedings in the Court below, he represented himself at both hearings (reasons of the Court below at [9]). Neither party sought to cross-examine the others’ witnesses (reasons of the Court below at [10]).

14    In his reasons, the primary judge set out matters of background described by his Honour as “uncontentious” (at [4]):

5.    On 19 August 2013, the Official Receiver issued a Bankruptcy Notice in respect of the said debt, addressed to [Mr Culleton].

6.    On 5 October 2013, the said Bankruptcy Notice was placed in a sealed envelope addressed to [Mr Culleton], and left affixed to padlocked gates at 329 (Lot 13061) McKenzie Road, Williams in the State of Western Australia. This matter was not put in contention by [Mr Culleton]. He maintained, however, that he did not receive it.

7.    If service was effected in accordance with the relevant legislation, [Mr Culleton] committed an act of bankruptcy by failing to comply with the said Notice on or before 28 October 2013.

15    The question at trial was whether the bankruptcy notice was served on Mr Culleton at his “last-known address” for the purposes of reg 16.01(1)(c) of the Bankruptcy Regulations 1996 (Cth) (Bankruptcy Regulations). Regulation 16.01(1) of the Bankruptcy Regulations provides relevantly that a document required to be served on a person “may be … (c) left, in an envelope or similar packaging marked with the person's name, at the last-known address of the person”. By reg 16.01(2), a document served on a person in accordance with reg 16.01(1)(c) is, “in the absence of proof to the contrary”, taken to have been received by, or served on, the person when, relevantly, “the document is left”.

16    The trial judge found on the basis of the evidence led on behalf of Macquarie, that (at [25] of the reasons of the Court below):

1.    The property in question was clearly a place from which [Mr Culleton] conducted business, at the very least through Elite Grains Pty Ltd.

2.    He may not have lived there permanently, but he was certainly at the property at various times in the year preceding the date of service.

3.    When all the evidence is viewed objectively, the information that [Mr Culleton] conveyed to the world at large, either actively, or passively, is that his business address at the property in question was his last known address for the purpose of regulation 16.01. The degree of connection that he had with the property leads to the conclusion that it was his last known address.

4.    All reasonably available public records indicate that the address in question was [Mr Culleton’s] last known address.

5.    Even if [Mr Culleton’s] contention were accepted that his Affidavit on 21 August 2013 deposed to the Company’s address, this is still consistent with the findings made above.

17    Mr Culleton argued that there was proof to the contrary for the purposes of reg 16.01(2) because he had not in fact received the bankruptcy notice. However, the primary judge held at [26] that that contention was not sustainable as Mr Culleton had not challenged the evidence of the process server as to delivery. As such, the primary judge held that delivery was an uncontested fact at trial and, even if established, the fact of non-receipt does not displace the result that delivery is deemed to have been effected (reasons of the Court below at [26]).

18    The primary judge concluded at [27] that there was no reasonable way that Macquarie could have known that Mr Culleton was living somewhere other than the property in question. Nor did the further evidence led by Mr Culleton after leave was granted to re-open, take the matter any further.

2.2    Conduct of the appeal

2.2.1    Circumstances in which the order for summary dismissal was made

19    On 21 November 2014, Mr Culleton filed a notice of appeal (the first notice of appeal). On 10 December 2014, Gleeson J made directions setting a timetable for the preparation of the appeal and listed the appeal for hearing on 17 March 2015.

20    On 9 March 2015, the appeal was dismissed by reason of Mr Culleton’s failure to comply with the Court’s directions to submit a folder of appeal papers including submissions, and by reason of his failure to attend the directions hearing on 9 March 2015 scheduled in order to address his non-compliance with the directions. As to the latter, Gleeson J found that:

3.    The email from the respondent’s solicitor dated 3 March 2015 stated that on 17 February 2015 Mr John Brown of McIntyres Lawyers, Norfolk Island had advised that he had ceased acting for Mr Culleton and that on 26 February 2015 Mr Brown advised that he expected that his client would file a Notice of Address for Service on 27 February 2015, failing which Mr Brown would file a Notice of Ceasing to Act.

4.    This morning at 7.28 am my chambers received an email from Mr Brown, Mr Culleton’s former lawyer, which said relevantly that the appellant lived in Perth, that he had recently suffered a significant leg injury, that Mr Culleton sought to attend the directions hearing by telephone, and that Mr Culleton had not yet been able to afford to pay to obtain a transcript of the relevant Federal Circuit Court hearings or to afford to fund counsel’s assistance in finalising the folder of documents for the appeal. The email also asked whether it would be possible to adjourn today’s directions hearing until later this week and foreshadowed the possibility that Mr Culleton may need to seek an order vacating the 17 March 2015 hearing date.

5.    In response to that email Mr Brown was notified that Mr Culleton could attend the directions hearing by telephone (provided that his contact details were supplied), and that it may be possible to change the time for the directions hearing if the respondent consented to that. In the event Mr Culleton’s telephone number was not provided to the Court and the directions hearing proceeded at 9.30 am this morning. Shortly before the directions hearing my Associate was informed by email from Mr Brown that Peter King of counsel would appear at the directions hearing. In his absence the matter was stood down to 9.45 am to enable counsel for the respondent, Ms Glover, to communicate with Mr King. At 9.45 am I was informed by Ms Glover from the Bar table that she had spoken with Mr King and that he did not have any instructions to attend this morning, although it was possible that he might receive instructions in the future.

2.2.2    The application to vacate the order for summary dismissal

21    On 11 March 2015, McIntyres Lawyers filed a notice of ceasing to act for the appellant.

22    McIntyres Lawyers filed a notice of acting again on 2 April 2015. On the same day, they filed an interlocutory application on behalf of Mr Culleton seeking to vacate the orders dismissing the appeal with costs, together with an affidavit of Mr Culleton in support.

23    On 20 October 2015, Levitt Robinson Solicitors filed a notice of acting – change of lawyer for the appellant.

24    Shortly thereafter on 23 October 2015, the appellant served five affidavits on Macquarie, being further evidence upon which he then wished to rely on the appeal. However, on 27 October 2015, the appellant’s solicitors advised that they would not in fact be seeking to rely upon the five affidavits served on 23 October 2015 and a fresh affidavit of Mr Culleton sworn 27 October 2015 was served that day on Macquarie.

25    During the appellant’s oral submissions on the appeal on 28 October 2015, counsel for Macquarie, Ms Glover, objected on the ground that the submissions raised matters not articulated in the appellant’s written submissions. Macquarie contended that it was prejudiced by the late raising of these arguments and that the appellant should not be permitted to raise them or alternatively that the hearing should be adjourned. Counsel for Mr Culleton then carefully identified each of the arguments relied upon and accepted that those arguments were not specifically raised in the written submissions. While he submitted some of the grounds of appeal might embrace them, that submission was open only because the grounds of appeal in the first notice of appeal were so broadly framed as to fail to comply with r 36.01(2) of the Federal Court Rules 2011 (Cth) (FCR). Given therefore that the appellant’s written submissions did not address the arguments raised on 28 October 2015, it cannot be said that Macquarie was given fair notice of those arguments by the first notice of appeal. In effect, the first set of submissions were abandoned and an entirely new case was raised at the hearing of the appeal. While it does not excuse the appellant’s conduct, I note that counsel appearing for the appellant at the hearing was engaged after written submissions were filed.

26    In the circumstances, I considered that it would not be procedurally fair if the appeal were to proceed on 28 October 2015. Equally, given the seriousness of the orders made against the appellant by the Court below, I did not consider that I should preclude the appellant from running the new arguments provided that the matter could be dealt with in a timely fashion. As a result, I allowed the application for an adjournment and made directions for the appellant to file and serve a proposed draft amended notice of appeal, and affidavit in support, and for the exchange of further written submissions between the parties.

27    On 2 November 2015, the appellant filed and served a draft amended notice of appeal, an affidavit sworn by the appellant’s solicitor and further written submissions. Subsequently, the parties were able to reach agreement on the consent orders set out at [3] above.

3.    CONSIDERATION

3.1    Relevant principles

28    The Court has power to award costs in all proceedings under s 43 of the FCA Act. That discretion includes power to order the parties to bear costs in specified proportions, and to award costs in favour of or against a party whether or not the party is successful in the proceeding (s 43(3)(c) and (e) respectively).

29    The discretion to award costs must be exercised judicially and in a manner that relates to the particular litigation: Summers v Repatriation Commission (No 2) [2015] FCAFC 64 at [13]-[14] (Kenny, Murphy and Beach JJ). Importantly, it must be borne in mind that costs are compensatory in nature and not punitive: Hockey v Fairfax Media Publications Pty Limited (No 2) [2015] FCA 750 at [37] (White J).

30    While the question of costs is a matter for the Court’s discretion, the general rule is that a successful party is entitled to its costs: Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234-235 [11] (Black CJ and French J); Scott v Secretary, Department of Social Security (No 2) [2000] FCA 1450 at [2] (Beaumont and French JJ). In Hughes v Western Australian Cricket Association (Inc.) (1986) ATPR 40-748 at 48,136, Toohey J observed that the discretion must be exercised judicially and identified three principles as to the exercise of the discretion evident from the authorities:

1.    Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v. Godfrey (1920) 2 K.B. 47.

2.    Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1 Q.B. 564.

3.    A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at p. 12.

31    However, as the Full Court (Gummow, French and Hill JJ) said in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272:

Generally speaking, and notwithstanding the considerations referred to by Toohey J and the other authorities mentioned above, the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption that a successful party is entitled to all its costs. In Commissioner of Australian Federal Police v Razzi (No 2) (1991) 101 ALR 425 at 430, Wilcox J, after referring to the importance of the general principle enunciated by Toohey J, said:

But I do not think that courts should be reluctant to recognise the existence of exceptional cases. In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. If parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take.

3.2    Costs in the Court below

32    The appellant seeks its costs with respect to the proceedings in the Court below on the following grounds:

(1)    First, Macquarie has consented to orders setting aside the orders made by the Court below and in lieu thereof that Macquarie’s Petition be dismissed. It follows that Mr Culleton has been wholly successful.

(2)    Secondly, one of the flaws in the proceedings commenced in the Court below was that the bankruptcy notice had been fixed to a padlocked gate on the boundary of a large rural property and had not therefore been served on Mr Culleton in accordance with the relevant statutory requirements. Notwithstanding that, Macquarie commenced bankruptcy proceedings which it now recognises should have been dismissed.

(3)    Thirdly, the onus lay upon Macquarie to prove strict compliance with each of the preconditions for a valid bankruptcy notice, including valid service of the bankruptcy notice, to make the sequestration order. It was not Mr Culleton’s role to notify Macquarie of any deficiencies in service.

33    At the hearing, counsel for Mr Culleton accepted that the appellant did not seek costs for his appearance unrepresented at the trial or otherwise for work undertaken when the appellant was unrepresented. Costs are intended as reimbursement for work done or expenses incurred by a legal practitioner or the employee of the legal practitioner, and not for the time spent by a litigant in person preparing and conducting her or his case: Cachia v Hanes (1994) 179 CLR 403.

34    Notwithstanding the careful and considered submissions made by counsel for Mr Culleton, in my view, Macquarie’s submission that no order as to costs should be made in relation to the dismissal of the Petition in the Court below should be accepted.

35    First, as counsel for Macquarie submitted, the fact that the appeal was conceded can be put no higher than that Macquarie correctly accepted that the appeal, as recast in the amended notice of appeal and further submissions, was arguable. This is not a case where the appellant was successful after an adjudication by the Court on the merits of appeal. Nor did either party submit, for example, that the issue of whether it sufficed for the purposes of reg 16.01 of the Bankruptcy Regulations to leave a bankruptcy notice affixed to the gate of a large rural property has been settled by authority, although the prudence of adopting such a method of service might be questionable. It follows that the assumption underpinning the appellant’s submission that the issue of costs should be determined on the basis that the bankruptcy notice was not compliant with, or served in compliance with, the strict statutory requirements for such notices is not made out.

36    Secondly, the appellant correctly contends that the onus lay upon Macquarie to establish that the strict preconditions for the making of the sequestration order were satisfied. Nonetheless, even in the bankruptcy jurisdiction, litigation is adversarial in nature such that the debtor’s conduct in defending the litigation and defining the issues remains, in my view, relevant to the exercise of discretion to award costs.

37    Thirdly, the appeal was conceded by Macquarie at the first opportunity on the grounds pleaded in the amended notice of appeal and developed in the appellant’s further written submission. Those grounds were not identified in the Notice of Grounds of Opposition to the Petition filed on 18 June 2014 or otherwise advanced by the appellant in the Court below. Yet, in acceding to the several adjournment applications and the application to re-open after judgment was reserved, the primary judge gave the appellant ample opportunity to raise all relevant matters, as Macquarie submits.

38    Furthermore, the appellant’s conduct of the proceedings in the Court below, including the several adjournments and application to re-open after judgment was reserved, is not suggestive of compliance with the requirements imposed on parties by r 1.03(4) of the FCC Rules. Rule 1.03 provides that:

1.    The object of these Rules is to assist the just, efficient and economical resolution of proceedings.

2.    In accordance with the objects of the Act, the Rules aim to help the Court:

•    to operate as informally as possible

•    to use streamlined processes

•    to encourage the use of appropriate dispute resolution procedures.

3.    The Court will apply the Rules in accordance with their objects.

4.    To assist the Court, the parties must:

•    avoid undue delay, expense and technicality

•    consider options for primary dispute resolution as early as possible.

5.    If appropriate, the Court will help to implement primary dispute resolution.

(Emphasis added.)

39    Finally and related to the last point, one consequence of the fact that the arguments on which the appellant succeeded were raised for the first time at the hearing of the appeal is that Macquarie was deprived of the opportunity to consider in a properly informed manner whether or not to press the proceedings below or resolve the dispute at an earlier stage. In this regard, Macquarie submits that:

If the appellant had raised those matters that the appellant now relies upon it is highly probable that the respondent would have either, abandoned the proceedings and served a fresh bankruptcy notice thereby avoiding any argument as to the proper construction of Regulation 16.01 or alternatively, conducted the case differently and called additional evidence.

40    I accept that these are appropriate inferences to draw given, among other things, that Macquarie consented to orders allowing the appeal promptly once given fair notice of the new arguments. It follows that the appellant’s conduct may well have had the consequence that the matter unnecessarily went to a contested hearing in the Court below, and therefore unnecessarily also on appeal.

41    For these reasons I do not consider that the appellant should be awarded any of his costs in the Court below.

3.3    Should the costs order made by Gleeson J on 9 March 2015 be set aside?

42    The appellant submits that the costs order made by Gleeson J on 9 March 2015 should be set aside because it was “based on procedural defaults”, an explanation for those defaults has been given in the affidavits served by the appellant, and the appeal has been allowed with Macquarie’s consent.

43    I disagree and do not consider that the costs order should be set aside. First, the proceedings were relisted on 9 March 2015 at Macquarie’s request due to the appellant’s failure to comply with the directions made on 10 December 2014 for preparation of the appeal. That non-compliance formed part of her Honour’s reasons for dismissing the appeal. The appellant sought to explain the failure to comply with the directions for the filing of the appeal book for the first time only on 27 October 2015. No reason is given as to why that explanation could not have been provided by Mr Culleton in his affidavit sworn on 2 April 2015 in support of his application to set aside the summary judgment.

44    Secondly and more importantly, I do not consider that the explanation then given was adequate. Mr Culleton says that he had understood up until about late February 2015 that his then solicitor was attending to the preparation and filing of the appeal bundle by 13 February 2015 because his solicitor was acting for him in the proceedings and he had emailed Mr Culleton on 10 December 2014 informing him about the orders made on that date. None of those matters deals with the obligation on Mr Culleton to do his best to ensure that the proceedings instituted by him were prosecuted in compliance with the Court orders. It is no excuse in my view for Mr Culleton to simply blame his lawyer. That proposition ignores the obligation on parties under s 37N(1) of the FCA Act to conduct proceedings in a manner that is consistent with the overarching purpose, including the efficient use of judicial resources and disposal of proceedings in a timely manner. It follows in my view that the failure by Mr Culleton to comply with the directions made on 10 December 2014 reflects a pattern of non-compliance with timetabling orders apparent from Mr Culleton’s conduct also of the proceedings in the Federal Circuit Court.

45    Nor do I consider that the reasons given by Mr Culleton in his affidavit sworn on 2 April 2015 for not attending the directions hearing on 9 March 2015 are sufficient. Mr Culleton deposed that:

3.    I reside in Western Australia.

4.    It has been my experience in matters in which I have been a party that the Registry of the particular Court has advised me in advance of the hearing, if I am required to appear, so that (if the hearing is to be in the Eastern States) I can get up early so that I can participate in the hearing by telephone.

5.    Perth is three hours behind Sydney time, and the time difference requires me to telephone the Court at 6.30AM Perth time, if the hearing is in Sydney at 9.30AM.

6.    I received no call from the Federal Court of Australia Registry on 9 March 2015 or prior to that day informing me that the matter was before the Court on 9 March 2015 and that my appearance was required.

7.    I apologise to the Court for my non-appearance on 9 March 2015, which was due to the circumstances set out above.

46    However, it is clear from the correspondence to which Justice Gleeson referred in her reasons quoted at [20] above and that annexed to Mr Culleton’s affidavit sworn on 27 October 2015 that Mr Culleton’s former lawyer, Mr Brown, had been in touch with Mr Culleton about the hearing so that it cannot be said that Mr Culleton was unaware of it. Specifically, an email from Macquarie on 3 March 2015 to the Associate to Gleeson J was copied to Mr Culleton. That email requested that the matter be relisted before her Honour because Mr Culleton had not complied with the orders made on 10 December 2014 and suggested a number of dates for relisting, including 9 March 2015. In response to an email from the Associate to Gleeson J on 4 March 2015 setting the hearing down for 9 March 2015, Mr Brown confirmed that he was no longer acting in the matter but would send Mr Culleton a copy of the Associate’s email. The request conveyed by Mr Brown to her Honour’s associate at 7:28AM on 9 March 2015 for Mr Culleton to attend by telephone or alternatively for the hearing to be adjourned lends further weight to the evidence that Mr Culleton knew that the directions hearing had been set down on that date. Nor, consistently with this view of the evidence, does Mr Culleton say that he was unaware of the directions hearing in his affidavit. Rather the tenor of his evidence is that he expected to be told if he was required to appear. Yet, given that Mr Culleton had at that stage advised his lawyers that he no longer wished them to act for him, it must have been apparent to him that if he did not appear or arrange someone else to do so, there was no one who would appear on his behalf at the directions hearing.

47    The appellant points to email correspondence between Mr Brown and the Court which suggests that Mr Brown attempted to arrange for Mr King of counsel to attend that morning and that this did not occur through a misunderstanding. However, the short answer to that evidence is that Mr Culleton explains in clear terms the reason why he did not appear and the fact that Mr Brown was endeavouring to arrange counsel to appear was not a reason which Mr Culleton gave.

48    It follows that I do not consider that the tenor of the costs order made by Gleeson J awarding the respondent the costs of the appeal should be disturbed although it related, of course, only to the costs incurred up to the date on which the order was made. Given the way in which the orders made by Gleeson J on 9 March 2015 were expressed, namely “[t]he appeal be dismissed with costs”, and that the appeal has now been allowed by consent, I have made an order for the avoidance of doubt confirming that order insofar as it awarded the respondent its costs of the appeal up to and including 9 March 2015.

3.4    Costs of the appeal proceedings

49    The grounds on which the appellant contends that he is entitled to his costs on the appeal are essentially the same as those put forward in support of the submission that he is entitled to the costs of the trial. Specifically the appellant contends that:

(1)    he was highly successful in the appeal and costs should follow the event;

(2)    this was not a case where success on the appeal was based on new evidence not before the judge below;

(3)    even though the appellant’s initial written submissions were not pressed, that should not deprive him of his costs where he was ultimately successful and it would have been necessary for the same steps to have been taken in commencing and preparing the appeal even if the appellant’s arguments had not changed; and

(4)    the appeal was necessary because Macquarie commenced bankruptcy proceedings which were flawed and now recognises should have been dismissed.

50    I agree, however, with the submissions by Macquarie that the appellant should pay its costs for the following reasons.

51    First, for the reasons given at [35] above, the appellant’s submissions assume that costs should be determined on the basis that the bankruptcy notice was not compliant with, or served in compliance with, the strict statutory requirements. Yet the position can be put no higher than that the appeal grounds to that effect were arguable.

52    Secondly, it was only shortly after commencement of the hearing of the appeal on 28 October 2015 that the appellant first put an arguable case. So much seems to have been conceded by the abandonment by the appellant of the earlier submissions which had been filed in support of the appeal and the near complete recasting of the notice of appeal. Conversely, as I have said, the respondent conceded the appeal at the first available opportunity once fully appraised of the appellant’s new case. These are factors to which I have given particular weight.

53    Thirdly, I agree with the respondent that the first notice of appeal did not comply with the requirements of r 36.01 of the FCR in that it failed to state “briefly but specifically, the grounds relied on in support of the appeal” (emphasis added). The first notice of appeal did no more than assert that the primary judge erred in making key findings, including that the bankruptcy notice had been lawfully served, without identifying any bases on which it was said that an error was made. I do not consider that the respondent can be criticised for not raising such obvious deficiencies before its outline of submissions dated 9 July 2015. More to the point, the appellant did not seek to remedy those deficiencies at any stage, with the amended notice of appeal effectively recasting the appeal.

54    Finally, it is true that certain aspects of preparation of the appeal were not rendered otiose by reason of the recasting of the appeal, such as preparation of the appeal book. Nonetheless, in the event, the appellant’s first written submissions on the appeal dated 25 May 2015 were (very properly) not pressed by the appellant, which I understand also to be the appellant’s position with respect to his written submissions in reply dated 21 August 2015. Furthermore, it will be recalled that the appellant advised the respondent on 27 October 2015 that he no longer sought to rely upon the five affidavits served on 23 October 2015 but on a further affidavit. In short, the work undertaken by Macquarie in preparing for the appeal on the basis of the first notice of appeal and submissions and evidence filed was in large part wasted up to the date of the hearing. The conduct by the appellant of his case in raising these issues only at the hearing of the application to set aside summary judgment on the appeal and the appeal on 28 October 2015 is difficult to reconcile with the obligations upon a party under s 37N of the FCA Act (see above at [44]).

4.    CONCLUSION

55    For these reasons:

(1)    order 2 of the orders made by the Federal Circuit Court on 31 October 2014 awarding the respondent its costs should be set aside;

(2)    there should be no order as to costs in relation to the dismissal of the Petition in Federal Circuit Court proceedings number SYG 3241 of 2013;

(3)    the order as to costs made on 9 March 2015 should be confirmed; and

(4)    the appellant should be required to pay the respondent’s costs of the appeal from 10 March 2015.

Associate:

Dated:    21 December 2015