Federal Court of Australia

Fidelity Capital (Australia) Pty Ltd v Delic (No 2) [2022] FCA 123

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed in respect of grounds 1A and 8 of the amended notice of appeal and ground 13 in part for an amount of $2,682.33.

2.    The appeal otherwise be dismissed.

3.    The orders dated 5 February 2021 in the proceeding below be set aside.

4.    Pursuant to s 104(2) of the Bankruptcy Act 1966 (Cth), the second respondent admit the appellant’s proof of debt for the amount of $97,847.33.

5.    The orders made below on 9 April 2021, as amended on 22 April 2021, be set aside.

6.    There be no order as to costs regarding the appeal, save for the following:

(a)    the first respondent pay the appellant’s costs thrown away by reason of the adjournment granted on 30 June 2021, as agreed or taxed;

(b)    the first respondent pay the appellant’s costs of the appearance on 31 August 2021 which was consequential upon the adjournment granted on 30 June 2021, as agreed or taxed; and

(c)    the first respondent pay the appellant’s costs thrown away on 10 November 2021 resulting from the first respondent’s failure to comply with the Court’s orders dated 31 August 2021, as agreed or taxed.

7.    The first respondent pay one-third of the appellant’s costs of the proceeding below, as agreed or taxed.

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

REASONS FOR JUDGMENT

GRIFFITHS J:

1    On 1 February 2022, the Court published its reasons for judgment in the appeal and invited the parties to make submissions on final orders, including as to costs. The parties have been unable to agree final orders and the appellant and first respondent has each provided proposed draft orders together with short written submissions. These reasons for judgment should be read in conjunction with the primary reasons which are reported as Fidelity Capital (Australia) Pty Ltd v Delic [2022] FCA 41 (J).

The appellant’s submissions

2    The appellant submitted that it should be awarded costs of both the trial and the appeal, if not in whole, then at least in part.

3    The appellant submitted that it was substantially successful and that it should not be penalised because it did not succeed on all grounds of appeal, which it submitted added little to the overall cost of running the appeal. The appellant also submitted that in any event in the appeal it should have an order for costs in its favour thrown away by reason of Mr Delic’s adjournment granted on 30 June 2021, the cost of the appearance on 31 August 2021 necessitated by that adjournment and the costs thrown away on 10 November 2021 by reason of his failure to comply with the Court’s orders dated 31 August 2021.

4    The appellant submitted that it was also appropriate to award it the costs of the trial having regard to the error at first instance, or at least have 80% of those costs.

Mr Delic’s submissions

5    Mr Delic submitted that the costs order below should not be disturbed and that there should be no order as to costs in the appeal. Mr Delic emphasised the appellant’s limited success in the appeal, not only in respect of the few grounds which were upheld but also concerning the admitted proof being in an amount significantly less than that originally sought by the appellant. Mr Delic also submitted that he had not contributed to any delay and that it was the appellant’s responsibility for lodging the proposed consent orders which were ultimately rejected by the Court. Mr Delic said that it was appropriate to characterise his participation in the appeal as being the equivalent of a submitting appearance, noting that he represented himself at all times during that proceeding.

Consideration and determination

6    As might be expected, the parties were in substantial agreement concerning the relevant principles in a case such as this. Those principles were recently helpfully summarised by the Full Court in Commissioner of Taxation v Bosanac (No 2) [2022] FCAFC 5. It is appropriate to set out [11]-[12], [16] and [17] of the Full Court’s reasons for judgment:

11    The disposition of costs is in the Court’s discretion; and of course that discretion must be exercised judicially, having regard to the applicable principles and the justice of the case in all the circumstances: s 43 of the Federal Court of Australia Act 1976 (Cth) (‘the Act’), discussed in Ruddock v Vadarlis (No 2) at [9]-[10]. As Black CJ and French J said in that case at [11]:

Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that:

•    Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.

•    Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.

•    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 parties’ 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 law.

In support of these propositions their Honours referred to Hughes v Western Australian Cricket at 48,136.

12    As indicated above, where an appeal is successful, ordinarily a respondent will be ordered to pay the costs of the appeal and of the first instance proceeding but this is not an invariable rule. The discretion, which is conferred on the Court by s 43 of the Act, “enables it to respond to the wide variety of circumstances that may arise in relation to the making of costs orders”: Ruddock v Vadarlis (No 2) at [16].

…

16    Of course, a successful appellant who has failed on some issues may be deprived of the costs of the issues on which the party failed or ordered to pay the costs of them to the other party. The determination of costs on an issue by issue basis is ordinarily not desirable, however; and the fact that a court does not accept all of a successful party’s submissions does not necessarily make it appropriate to deal with costs on an issue by issue basis: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 90 ALJR 270; 327 ALR 192 at [6] and Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124 at [23]. We do not consider that the justice of the case warrants the determination of costs on an issue by issue basis in this case. As already noted, the Commissioner succeeded on a ground identified in his Notice of Appeal and argued in the proceeding below. The point at issue was specifically addressed at the hearing of the appeal, without objection or complaint. Further, in our view, while the failure by the primary judge to include in his consideration the fact that the first respondent had “assumed a substantial liability without acquiring any beneficial interest” was critical in the Court’s reasons, it was not the sole basis on which the Court departed from the primary judge’s determination of the issue: see, e.g. Reasons at [24]–[26].

Costs of the proceeding below

17    In our opinion, there is also no sufficient basis to depart from the ordinary position with respect to the costs of the proceeding at first instance. In conformity with the general rule that costs follow the event, the primary judge made an order that the Commissioner, the unsuccessful party at first instance, pay the costs of the second respondent “to be assessed if not agreed”. Given the outcome of the appeal, this order would ordinarily be set aside: see [11] above. There is no justification, so far as we can see, to depart from the usual order as to the costs of the first instance proceeding in an appeal such as this, where the same issue was before the primary judge; his Honour's determination with respect to the issue was specifically challenged, as identified in the appellant’s notice of appeal; and, on an appeal by way of rehearing, the Court has come to a contrary conclusion to that of the primary judge and upheld the appellant’s case: see Commissioner of Taxation v Bosanac (No 7) [2021] FCA 249 at [213]-[231] (‘Bosanac (No 7)’) and ground 2 of the appellant’s notice of appeal filed 16 April 2021.

7    Unlike the position in Bosanac I consider that this is an appropriate case in which to assess the costs of the appeal with reference to the fact that the appellant succeeded on only a few issues raised by it. Those other issues on which the appellant was unsuccessful were discrete and occupied a significant part of the appellant’s outline of written submissions, as well as taking up additional time at the oral hearing.

8    I think it also appropriate to take into account the fact that the amount of the proof of debt upon which the appellant ultimately succeeded is significantly less than that sought by it. Moreover, I accept Mr Delic’s submission that the appellant should bear most responsibility for the misconceived proposed consent orders dated 18 November 2021 which were ultimately withdrawn (see J[9] ff).

9    For those reasons, I consider that it is appropriate that there be no order as to costs of the appeal, save that I accept that Mr Delic should be ordered to pay the appellant’s costs thrown away by reason of the adjournment sought by Mr Delic on 30 June 2021, the appellant’s costs of the appearance on 31 August 2021 consequential upon that adjournment and the costs thrown away on 10 November 2021 because of Mr Delic’s failure to comply with the Court’s orders made on 31 August 2021.

10    As to the costs of the proceeding below, having regard to the appellant’s limited success in establishing error in essentially one part of the primary judge’s reasoning, I consider it appropriate that Mr Delic pay one-third of the appellant’s costs in the proceeding below, as agreed or taxed. The balance of the primary judge’s reasons were ultimately correct in rejecting the other amounts claimed under the amended proof of debt (as recalculated in the affidavit of Mr Abinav Sharma dated 24 August 2020), including an amount of $31,665 referable to enforcement costs and $64,340.14 in interest which were not pressed on appeal.

Conclusion

11    Finally, the appellant’s proposed orders did not seek any order as to ground 13 despite its partial success on this ground in the amount of $2,682.33 (see J[76]). Without an order as to ground 13, the proof of debt could not be admitted for an amount of $97,847.33 as sought by the appellant consistent with my earlier reasons. The appellant’s proposed orders as to the grounds of appeal will therefore be amended accordingly.

12    Final orders will be made appropriately.

Associate:

Dated:    18 February 2022