FEDERAL COURT OF AUSTRALIA

Canberra Childcare Pty Ltd as trustee of the Fyshwick Child Care Trust v Arcidiacono [2019] FCA 1017

File number:

ACD 4 of 2019

Judge:

GRIFFITHS J

Date of judgment:

27 June 2019

Catchwords:

COSTS – application for administration in bankruptcy of the estate of the respondent – where the Commissioner for ACT Revenue was a supporting creditor - whether the Commissioner is entitled to costs in circumstances where the application was not contested – no order for costs concerning the Commissioner’s costs

Legislation:

Bankruptcy Act 1996 (Cth) ss 52, 244

Federal Court (Bankruptcy) Rules 2016 (Cth) r 2.03

Cases cited:

ONE.TEL Ltd v Commissioner of Taxation [2000] FCA 270; 101 FCR 548

Re John Ing; Ex parte : Pendlemoore Pty Ltd (In Liquidation), unreported decision of Olney J, 24 March 1995

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622

Re Perkins; Ex parte Westpac Banking Corporation [1999] FCA 986

St George Bank Ltd v Helfenbaum [2001] FCA 559

Date of hearing:

27 June 2019

Registry:

New South Wales

Division:

General Division

National Practice Area:

Commercial and Corporations

Sub-area:

General and Personal Insolvency

Category:

Catchwords

Number of paragraphs:

24

Counsel for the Applicants:

Mr H D Smith

Solicitor for the Applicants:

Chamberlains Law Firm

Counsel for the Commissioner of ACT Revenue (supporting creditor):

Mr N Oram

Solicitor for the Commissioner of ACT Revenue (supporting creditor):

ACT Government Solicitor

Counsel for the Respondent:

Mr N Oram mentioned the appearance for the respondent

Solicitor for the Respondent:

McEvoy Legal

ORDERS

ACD 4 of 2019

BETWEEN:

CANBERRA CHILDCARE PTY LTD AS TRUSTEE OF THE FYSHWICK CHILD CARE TRUST (ACN 122 783 822)

First Applicant

EMIL ALBERT BULUM

Second Applicant

AND:

PHILLIP ARCIDIACONO

Respondent

JUDGE:

GRIFFITHS J

DATE OF ORDER:

27 June 2019

THE COURT ORDERS THAT:

1.    The application filed on 28 March 2009 to dismiss the creditor’s petition be dismissed with no order as to costs.

2.    The deceased estate of Phillip Arcidiacono be sequestrated under the Bankruptcy Act 1966 (Cth).

3.    The applicants’ costs fixed in the sum of $6,473.00 are to be paid from the estate of the respondent in accordance with the Bankruptcy Act 1966 (Cth).

4.    There be no order for costs concerning the costs of the supporting creditor.

THE COURT NOTES THAT

1.    A consent to act as trustee signed by Mr Stephen John Hundy has been filed under s 156A of the Bankruptcy Act 1966 (Cth).

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

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

GRIFFITHS J:

1    These proceedings were commenced by the applicants relying on a creditors’ petition. The applicants and the respondent recently agreed to settle the proceeding on terms which included an order that the respondent pay the applicants costs. The Court is satisfied that orders should be made in accordance with the proposed consent orders. The only issue remaining for determination is whether the respondent should also bear the costs of the supporting creditor, the Commissioner for ACT Revenue.

Summary of background matters

2    On 4 February 2019, the applicants filed an application under s 244 of the Bankruptcy Act 1996 (Cth) (Bankruptcy Act) seeking an order of administration in bankruptcy of the estate of the late Phillip Arcidiacono. The applicant creditors claimed that the estate of the deceased respondent debtor owed them an amount of approximately $90,000, being part of the applicants’ costs arising from proceedings No ACD119/2015 in this Court. On 17 March 2017 orders were entered in those proceedings which had the effect that the deceased respondent debtor was liable to pay costs in the amount specified in order 6 of those orders.

3    On 21 February 2019, the Commissioner filed a notice of appearance. At no point did the Commissioner make a formal application for leave to be heard under r 2.03 or file an application in accordance with Form B3 as required by r 2.03(6) of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules). Nothing of particular significance may attach to those omissions for present purposes.

4    Orders were made by the Court on 22 February 2019, 29 March 2019 and 30 April 2019 in the present proceedings, including orders for the filing of evidence and submissions.

5    On 28 March 2019, the respondent filed a notice in the proceeding seeking to have the creditor’s petition dismissed on various grounds stated therein. The notice was accompanied by a supporting affidavit.

6    The proceeding was included in the callover of the ACT list on 30 April 2019. Shortly before that day, proposed short minutes of order were provided to the Court by solicitors for the applicants. They included the proposed order that the Commissioner for ACT Revenue, as a supporting creditor, be granted leave to be heard in the proceeding. The Court was informed that the applicants and the Commissioner consented to that and other orders in the proposed short minutes. When the matter was called on 30 April 2019, the solicitor for the respondent said that there were practical difficulties obtaining instructions from the deceased respondent’s widow, but he added that the proposed minutes appeared “very reasonable”. Accordingly, the Court made orders in accordance with the proposed short minutes of order while granting the respondent liberty to apply if the expected instructions were not obtained. In those circumstances, on 30 April 2019, the Commissioner for ACT Revenue, being a supporting creditor, was granted leave to be heard in the proceeding under r 2.03 of the Bankruptcy Rules. On that day, the matter was listed for a one day hearing on 27 June 2019. The parties and the Commissioner were directed to provide outlines of written submissions.

7    On 6 June 2019, the Commissioner for ACT Revenue filed an outline of submissions in which it was expressly stated that the Commissioner “supports the orders sought in the Petition”. The Commissioner submitted that, in circumstances where the respondent’s estate is insolvent, “the estate should be independently administered by a properly qualified person for the benefit and protection of creditors”. The Commissioner stated that he was owed $4,174,709.10 by the respondent arising from a notice of assessment. The Commissioner submitted that, unless an order was made under s 244(11) of the Bankruptcy Act, “the Court cannot be confident that the interests of creditors of the estate will be adequately protected” and that “an order under Part XI may enlarge the property available for distribution to the creditors”. Towards the end of his outline, the Commissioner stated that “the principal purpose of Part XI and the Bankruptcy Act as a whole is best achieved by the appointment of an independent and appropriately qualified trustee to administer the deceased estate.

8    On 25 June 2019, the applicants and the respondent forwarded to the Court proposed consent orders which would have the effect of disposing of the proceeding. By consent, they proposed that the originating application be dismissed with no order as to costs; that the deceased estate be sequestrated under the Bankruptcy Act and that the applicant creditor’s costs (fixed in a specified amount) be paid from the respondent’s estate. The Court was asked to note that a consent to act as trustee signed by Mr Stephen John Hundy had been served on the respondent.

9    When the proposed consent orders were forwarded to the Court, the Court was advised that the attitude of the supporting creditor was unknown.

10    By an email dated 25 June 2019 at 4.08 pm, the ACT Government Solicitor, who acted for the supporting creditor, advised that the Commissioner did not consent to the proposed orders and that, by virtue of s 31(1) of the Bankruptcy Act, the matter had to be heard and determined in open court and not in Chambers.

11    In the light of the supporting creditor’s position, the hearing proceeded today by video link to Sydney.

12    It is appropriate to set out r 2.03 of the Bankruptcy Rules:

Leave to be heard

(1)    The Court may grant leave to be heard in a proceeding to a person who is not a party to the proceeding.

(2)    The Court may grant the leave on conditions, and may revoke the leave at any time.

(3)    The Court may order the person to pay costs if:

(a)    the granting of leave to the person causes additional costs for a party to the proceeding; and

(b)    the Court considers that the costs should be paid by the person.

(4)    The Court may also order that the person is not to be further heard in the proceeding until the costs are paid or secured to the Court's satisfaction.

(5)    The Court may grant leave or make an order under this rule:

(a)    on the Court's own initiative; or

(b)    on the application of a party, or a person who has an interest in the proceeding.

(6)    An application for leave or for an order must be made by filing an interim application in accordance with Form B3.

The issue of the Commissioner’s costs

13    The Commissioner submitted that the respondent should bear his costs. The Commissioner acknowledged the Court’s broad discretion in relation to costs, including the power to make a costs order in favour of a non-party. He submitted that he should have his costs because of:

(a)    the nature of the proceeding;

(b)    his interest and role in the proceeding; and

(c)    that it would be consistent with authorities and established principles to do so.

14    The Commissioner submitted that proceedings under Pt XI of the Bankruptcy Act are quasi-representative proceedings, in the sense that they are brought for the benefit of all creditors and in the public interest. He said that the appropriate course was for a creditor who has not filed a creditor’s petition to appear in such proceedings and support the petition, as the Commissioner had done here.

15    The Commissioner submitted that the size and nature of his debt was a material consideration in the exercise of the discretion to make a sequestration order. He emphasised that he had taken an active role in the proceeding, including by filing evidence and appearing by counsel on two dates on which the matter was listed for directions, and by filing an outline of submissions.

16    The Commissioner submitted that supporting creditors “are routinely awarded their costs in relation to creditor’s petitions, citing Re John Ing; Ex parte : Pendlemoore Pty Ltd (In Liquidation), unreported decision of Olney J, 24 March 1995(Pendlemoore); Re Perkins; Ex parte Westpac Banking Corporation [1999] FCA 986 (Perkins) and St George Bank Ltd v Helfenbaum [2001] FCA 559 (Helfenbaum). The Commissioner also submitted that where a sequestration order is made costs ordinarily follow the event.

17    The Commissioner acknowledged that the respondent had withdrawn its opposition to the creditor’s petition but he submitted that the matter had to be heard and determined in open Court and a sequestration order could only be made after the Court is satisfied that the necessary requirements are met, citing s 52(1) of the Bankruptcy Act. The Commissioner submitted that the withdrawal of opposition to the making of a sequestration order does not have the consequence that the Court should depart from the usual order, citing ONE.TEL Ltd v Commissioner of Taxation [2000] FCA 270; 101 FCR 548 (ONE.TEL) at [6] per Burchett J.

18    For the following reasons, I am not persuaded that the respondent should bear the Commissioner’s costs.

19    First, the authorities relied upon the Commissioner which are referred to in [16] above are distinguishable. In applying the general principles concerning costs (which are relatively well settled), each case necessarily turns on its own facts. Each of Pendlemoore, Perkins and Helfenbaum involved the making of costs orders at the completion of contested proceedings. That is not the case here. As noted above, the applicants and the respondent agreed to settle the proceedings, including on the basis that a sequestration order be made. There is no reason why the Court would not give effect to the proposed orders, having regard to the evidence which was placed before the Court by the applicants in particular. The amount the subject of the creditor’s petition was of a sufficient magnitude to warrant the making of a sequestration order in appropriate circumstances without regard to the separate sizable debt owing to the Commissioner.

20    Secondly, while I acknowledge the Commissioner’s active role in the proceeding effectively as an intervener, he is not a party to the proceeding and the compromise of the proceedings was reached by the applicants and the respondent alone. The Court is satisfied that the proposed orders should be made without reference to the Commissioner’s material.

21    Thirdly, I do not accept the Commissioner’s submission that ONE.TEL is relevant. The issue there was whether the applicants should have their costs in a proceeding in which they sought to set aside notices issued by the Commissioner of Taxation under the Sales Tax Assessment Act 1992 (Cth). Before the hearing, the respondent consented to orders setting aside the notices. Justice Burchett held that the applicants were entitled to their costs because they had succeeded or, alternatively, the respondent had acted unreasonably.

22    Different considerations arise when an intervener, who is not a party, seeks its costs where the proceedings have been settled by the parties to the proceeding and without reference to the intervener. As I have already indicated, I am satisfied that the proposed orders ought to be made, having regard to the evidence which has been filed by the applicants.

23    For completeness, I would add that no one has suggested that the respondent acted unreasonably in the period preceding the compromise.

Conclusion

24    For these reasons, the Court will make orders in accordance with the parties’ proposed short minutes of order. There will be no order for costs in relation to the Commissioner. The Court will bear the costs of the video link today.

I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.

Associate:

Dated:    28 June 2019