FEDERAL COURT OF AUSTRALIA

Dlaw Pty Ltd v Rusca Bros Services Pty Ltd [2020] FCA 1038

ORDERS

THE COURT DIRECTS THAT:

1.    The appellant file a notice of discontinuance of the appeal in accordance with Form 126 on or before 4 August 2020.

THE COURT ORDERS THAT:

2.    Leave be granted to the respondent to file by 21 August 2020 an application to have its costs, payable pursuant to r 36.73(4) of the Federal Court Rules 2011, determined by the Court on a lump sum basis.

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

REASONS FOR JUDGMENT

(Revised from transcript)

GLEESON J:

1    This proceeding was commenced by a notice of appeal filed on 12 December 2019, appealing from a decision of a single judge of the Court (Markovic J) setting aside a statutory demand served by the appellant (DLaw) on the respondent (Rusca): Rusca Bros Services Pty Ltd v DLaw Pty Ltd, in the matter of Rusca Bros Services Pty Ltd (No 2) [2019] FCA 1865 (Rusca Bros No 2). On 26 March 2020, leave was granted to DLaw to file and serve an application for an extension of time for leave to appeal, leave was granted to Rusca to file a notice of objection to competency of the appeal and the matter was adjourned for case management on 21 May 2020.

2    On 30 April 2020, DLaw filed an application for extension of time (Form 67). The application states that DLaw “applies for an extension of time under rule 36.05 to file a notice of appeal (including an application for leave to appeal)”. Annexed to the application was a judgment of Markovic J on 24 April 2019 in which her Honour made orders in relation to an amended interlocutory process filed by DLaw on 6 November 2018: Rusca Bros Services Pty Ltd v DLaw Pty Ltd, in the matter of Rusca Bros Services Pty Ltd [2019] FCA 562 (Rusca Bros No 1), and the judgment in Rusca Bros No 2.

3    DLaw also filed an affidavit of Tara O’Connell, paralegal, sworn 29 April 2020, apparently in support of the application for extension of time. The affidavit gives the following explanation for why the application was not filed earlier:

29.    The application was not filed before the 11 December 2019 as the Appellant contends that the appeal against the final judgment included an appeal against the interlocutory judgments during the proceedings. Further, the need to pursue the solicitor’s lien has become more relevant after the institution of the appeal because the insolvency has been revealed in the recent administration where previously the ability to pay the amount due under the costs assessments could be wrongly inferred from the continued trading of the Respondent.

4    On 7 May 2020, Rusca filed a notice of objection to competency of the appeal from Rusca Bros No 2. The notice also stated, in relation to DLaw’s application for extension of time:

The appellant has filed an Application for Extension of Time which states under the heading “Details of application”, “The Applicant applies for an extension of time under rule 36.05 to file a notice of appeal (including an application for leave to appeal)”. No application is made pursuant to Part 35 of the Federal Court Rules for leave to appeal. No grounds are advanced in the Application for Extension of Time nor the affidavit in support for leave to appeal. Absent leave of the Court the appeal is incompetent.

5    On 21 May 2020, orders were made for the filing and service of submissions in respect of DLaw’s application and Rusca’s notice of objection to competency. The application and notice of objection to competency were listed for hearing today.

6    Neither party filed any submissions, although a “Notice of acting – change of lawyer” was filed by Rusca on 2 June 2020.

7    DLaw now seeks leave to file a notice of discontinuance. More specifically, DLaw seeks the following orders:

(1)    The appellant has leave to discontinue the whole of the appeal.

(2)    No order is made as to costs.

(3)    The file be referred to the Australian Securities and Investments Commission for investigation.

8    By a letter to the Court dated 17 July 2020, DLaw stated that it proposed to “withdraw the proceedings due to its limited utility”.

9    In response, Rusca proposes that the discontinuance be on the following terms:

(1)    The appellant pay the costs of the respondent as agreed or assessed.

(2)    Leave be granted to the respondent to file by 21 August 2020 an application to have costs determined by the Court on a lump sum basis.

10    Rule 36.73(1) of the Federal Court Rules 2011 (Rules) provides that an appellant may discontinue an appeal by filing a notice of discontinuance of the appeal, in accordance with Form 126 without the Court’s leave – at any time before the hearing of the appeal; or with the Court’s leave – at the hearing or after the hearing and before the judgment is pronounced or the order is made. By r 36.73(4), an appellant who files a notice under subr (1) must, unless the parties otherwise agree, pay the costs of each respondent.

11    Rule 1.33 provides that the Court may make an order subject to any conditions the Court considers appropriate.

12    Rule 1.34 provides that the Court may dispense with compliance with any of the Rules, either before or after the occasion for compliance arises.

Consideration

13    In effect, DLaw’s proposed orders require dispensation from r 36.73(4).

14    Rule 36.73(4) is consistent with the usual rule that the costs of a proceeding follow the event. In this case, the event is that DLaw no longer wishes to pursue the appeal. In the ordinary course, DLaw should pay the costs of the proceeding that it has commenced but not pursued successfully.

15    DLaw argues that it should not pay the costs of the appeal for the following reasons:

(1)    the company has been through an insolvency process, being an administration which commenced on about 23 December 2019 and concluded with the execution of a deed of company arrangement on 13 February 2020, returning control of the company to Rusca. Mr Doyle, DLaw’s solicitor, gave evidence from the Bar table that, by the DOCA, Rusca’s debt to Dlaw was compromised; and

(2)    as a result, the aim of DLaw’s statutory demand was effectively achieved.

16    DLaw has not demonstrated that there should be a departure from the ordinary course in this case. The relevant event, acknowledged by DLaw’s intention to file a notice of discontinuance, is that the appeal has failed, or will fail for want of prosecution. Even if the relevant event was Rusca’s administration, that event was concluded prior to the first case management hearing, at which orders were made for the prosecution of the appeal. Accordingly, by failing to file a notice of discontinuance earlier, DLaw has put Rusca to additional cost and there is no good reason why it should not be compensated for that cost.

17    Accordingly, I will make an order directing DLaw to file a notice of discontinuance promptly, will not dispense with compliance with r 36.73(4) and will not order that there be no order as to costs.

18    Dlaw’s proposal that the file should be referred to ASIC for investigation is based on the observation that the administrator formed the view that Rusca was insolvent as at 31 July 2019, if not earlier. Accordingly, Mr Doyle submitted, Rusca was insolvent when the Court heard the application to set aside the statutory demand. Mr Doyle stated that the hearing was on 8 August 2019, although Rusca No 2 records the date of the hearing as 8 July 2019. Mr Doyle also submitted that there was evidence before the Court below that Rusca was trading insolvent since 2017.

19    The Court is not in a position to reach an informed view about whether the matters identified by Mr Doyle warrant examination by ASIC and, accordingly, I will not refer the file to ASIC for investigation. Mr Doyle can raise those matters with ASIC himself, if he considers that worthwhile.

20    Finally, paragraph 4.1 of the Court’s Costs Practice Note (GPN-COSTS) states:

The Court’s preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order.

21    I am satisfied that it is practicable and appropriate in this case, where the relevant costs are likely to be discrete and readily identified, to make a lump-sum costs order. Accordingly, I will grant leave to Rusca to seek determination of the costs that will be payable under rule 36.73(4) determined by the court on a lump-sum basis.

Associate:

Dated:    27 July 2020