Southern Cross Mine Management Pty Ltd v Ensham Resources
[2006] QCA 211
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- Appeal Determined (QCA) - Appeal Determined (HCA)
- Southern Cross Mine Management Pty Ltd v Ensham Resources[2006] QCA 211
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Southern Cross Mine Management Pty Ltd v Ensham Resources[2006] QCA 211
Southern Cross Mine Management Pty Ltd v Ensham Resources[2006] QCA 211
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Court of Appeal | |
PROCEEDING: | Application for Security for Costs |
ORIGINATING COURT: | |
DELIVERED ON: | 16 June 2006 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 16 May 2006 |
JUDGES: | Jerrard JA, Helman and Muir JJ Separate reasons for judgment of each member of the Court, each concurring as to the order made |
ORDER: | 1.Kenneth John Foots to provide security for the costs of Ensham Resources Pty Ltd on the appeal in the amount of $7500 2.Ensham Resources Pty Ltd to pay Kenneth John Foots’ costs, limited to the costs of the hearing on 16 May 2006, to be assessed on the standard basis. |
CATCHWORDS: | PROCEDURE – COSTS – PRACTICE MATTERS – FORM, EFFECT AND SETTLING OF ORDERS – where trial judge held that costs order against Foots in favour of Ensham was not a provable debt within s 82(1) Bankruptcy Act 1966 (Cth) and that Ensham therefore did not need to obtain leave of a Federal Court or Federal Magistrates Court under s 58(3)(b) Bankruptcy Act to bring application for costs against Foots – whether an order for costs is a provable debt – whether Ensham required leave of a Federal Court or Federal Magistrates Court to bring application for costs against Foots PROCEDURE – COSTS – PRACTICE MATTERS – FORM, EFFECT AND SETTLING OF ORDERS – where judgment debt for damages of $2,460,000 in favour of Ensham was ordered before Foots became bankrupt – whether the judgment debt was a provable debt – whether Ensham’s application for costs was a fresh step in the legal proceedings between Ensham and Foots in respect of the judgment debt – whether Ensham needed leave under s 72(1) Uniform Civil Procedure Rules 1999 (Qld) to bring application for costs against Foots - where respondent made open offer to pay $7500 to applicant as security for costs Bankruptcy Act 1966 (Cth), s 58(3)(b), s 82(1) Uniform Civil Procedure Rules 1999 (Qld), s 72(1) Calderbank v Calderbank [1976] Fam 93, cited Fraser Property Developments Pty Ltd v Sommerfeld (No. 2) [2005] 2 Qd R 404; [2005] QCA 242; Appeal No 10072 of 2004, 15 July 2005, considered Gertig v Davies (2003) 85 SASR 226; [2003] SASC 86, 25 March 2003, cited Green v Schneller [2001] NSWSC 897; SC No 331 of 2001; 16 October 2001, cited Melnik v Melnik (2005) 221 ALR 577; [2005] FCAFC 160; QUD 209 of 2004, 16 August 2005, cited Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd & Ors [2006] QSC 007; S9548 of 2002, 3 February 2006, cited Re British Gold Fields of West Africa [1899] 2 Ch 7, cited Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd & Ors [2005] QSC 233; S9548 of 2002, 26 August 2005, cited |
COUNSEL: | A M Pomerenke for the applicant P J Dunning for the respondent |
SOLICITORS: | Allens Arthur Robinson for the applicant Conroy & Associates for the respondent |
[1] JERRARD JA: This matter is the hearing of an application filed on 28 April 2006, by which Ensham Resources Pty Ltd sought an order that Mr Foots provide it with security in the amount of $22,000 for Ensham’s costs of the appeal in Kenneth John Foots v Ensham Resources Pty Ltd (Appeal Number 1768 of 2006) filed in this Court on 2 March 2006. Mr Foots resists the application for security of Ensham’s costs of the appeal in the amount requested; the written outline of argument filed by Mr Foots includes his open offer to provide security for those costs in the amount of $7,500.
[2] The orders under appeal were made on 3 February 2006[1], and were in these terms:
“1.That Ensham Resources Pty Ltd be granted leave to proceed against Kenneth John Foots pursuant to r 72 of the Uniform Civil Procedure Rules.
2.That Kenneth John Foots pay Ensham Resources Pty Ltd’s costs of and incidental to the counter-claim against him, including the costs of this application and all reserved costs, on the indemnity basis and assessed in accordance with paragraph 5 of the order made on 22 November 2005;”
There were other orders made that day, but those orders are not appealed. The notice of appeal asks that the appeal be allowed, orders 1 and 2 of 3 February 2006 be set aside, and that Ensham pay Mr Foots’ costs of and incidental to the appeal and of the hearings on 16 and 22 November 2005 before the learned trial judge.
[3] The orders made on 3 February 2006 were further orders in a proceeding in which a number of parties had made claims and cross-claims against each other. Judgment in the principal proceedings had been given on 26 August 2005[2], with some orders pronounced then and further orders made on 1 September 2005. The defendants, for convenience collectively designated “Ensham”, were completely successful in the action, and the principal plaintiff, and Mr Foots and companies he controlled, were unsuccessful. On 16 and 22 November 2005 the learned trial judge heard submissions as to costs, and on 22 November pronounced some orders as to costs, but otherwise reserved the decision. On 3 February 2006 the judge gave reasons for the orders made on 22 November, together with reasons for the orders made on 3 February 2006.
[4] On 1 September 2005 the learned judge had given judgment for Ensham against Mr Foots for damages in the sum of $2,460,000, further ordering that execution of the judgment for any amount in excess of $1,460,000 be stayed. On 22 November 2005 the judge set aside that stay of execution, and the learned judge heard that day submissions by counsel for Mr Foots resisting Ensham’s application for costs on an indemnity basis against Mr Foots. The appeal by Mr Foots against orders 1 and 2 made on 3 February 2006 does not challenge that there was a proper basis for ordering indemnity costs against him. What Mr Foots contended to the learned judge and repeats on his appeal is that a costs order would be a provable debt in Mr Foots’ bankruptcy within the meaning of s 82(1) of the Bankruptcy Act 1966 (Cth), and that the learned judge consequently erred in granting leave to Ensham, pursuant to r 72(1) of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), to take the further step in the proceeding of applying for costs against him, absent the leave needed under s 58(3)(b) of the Bankruptcy Act. Leave under r 72(1) of the UCPR was independently necessary, irrespective of whether the proceeding was in respect of a provable debt.
[5] Mr Foots became bankrupt on 15 September 2005 upon the presentation of his own petition, after judgment had been pronounced against him but before submissions were heard as to costs. The reasons for judgment on 3 February 2006 repeated some findings, not challenged on this appeal, in the judgment given in August 2005, namely that Mr Foots’ dealings with Ensham were thoroughly dishonest and that his evidence at the trial was untruthful. The judge repeated on 3 February 2006 that his findings in August 2005 were that substantially the whole of Mr Foots’ evidence was a deliberate concoction, Mr Foots had continued his defence of Ensham’s claim and prolonged the proceeding in wilful disregard of the known facts, Mr Foots should have known that he had no chance of successfully defending the proceedings if the true facts were told, Mr Foots had concealed relevant facts and misrepresented others, and Mr Foots had made a baseless allegation on the fact which was the central issue in the case. It follows from those unchallenged findings that it was almost inevitable a costs order would be made against Mr Foots.
[6] Mr Pomerenke, counsel for Ensham Resources on the application, conceded as much in his argument, although making the point that a theoretical possibility would include that Mr Foots had made a Calderbank[3] offer, or an earlier offer under the UCPR, which bettered the judgment against Mr Foots. What is on issue in the appeal by Mr Foots is whether it was necessary for Ensham to obtain leave from a Federal Court to bring the application for costs against him. In part his argument depended on the proposition that the order for costs was a debt provable in his bankruptcy.
[7] Section 82 of the Bankruptcy Act relevantly provides:
“82. Debt Provable in Bankruptcy.
(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.”
Section 58(3) of that Bankruptcy Act provides:
“Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding”
[8] ‘Court’ relevantly means the Federal Court or Federal Magistrates Court.[4] Applied to this matter, the relevant prohibition is against a creditor, other than with the leave of the court, taking any fresh step in a legal proceeding in respect of a provable debt. The argument before the learned trial judge was as to whether the order for costs made by the learned judge was a legal proceeding in respect of a provable debt constituted by the costs order. That is, the issue argued was whether the costs order was itself a provable debt. The learned judge held that it was not one within the meaning of s 82(1), and that therefore s 58(3)(b) did not apply to Ensham’s application for those costs. Ensham submits that that conclusion was correct, relying on, inter alia, Fraser Property Developments Pty Ltd v Sommerfeld (No. 2) [2005] 2 Qd R 404[5] at 408 and Glenister v Rowe [2005] Ch 76.
[9] I consider it unnecessary to say anything as to that on this application, because I am satisfied that Mr Foots has a reasonable but different argument to advance on the appeal on s 58(3)(b), namely that the reference to a provable debt should be construed in circumstances such as these to the judgment debt for damages of $2,460,000 in favour of Ensham, and ordered before Mr Foots became bankrupt. That is, Mr Foots has a reasonable argument that the application for a costs order was a fresh step in the legal proceeding already in existence between Mr Foots and Ensham and which was in respect of a provable debt constituted by the judgment. It was common ground on this application that that judgment sum was a provable debt.
[10] The argument is open to Mr Foots that that construction of s 58(3)(b) accords with the statement in the joint judgment in the High Court in Coventry v Charter Pacific Corporation Ltd (2005) 80 ALJR 132[6], in respect of an appellant who was made bankrupt shortly before the date fixed for oral argument of that appeal in the High Court, that:
“An order for costs [of the appeal] could not be made against [the bankrupt] if the claim… made against him… was a proceeding in respect of a provable debt.” (Interpolation mine).
Mr Foots also has an argument that that statement, supporting his position on the appeal, is consistent with the reasoning and the result in Fraser Property Developments Pty Ltd v Sommerfeld (No. 2), and with the reasoning and result in Re British Gold Fields of West Africa [1899] 2 Ch 7 at 11-12; and that it accords with the result and reasoning in Melnik v Melnik (2005) 221 ALR 577[7] and the cases relied on therein, including Green v Schneller [2001] NSWSC 897[8]; and it is not inconsistent with the reasoning in Gertig v Davies (2003) 85 SASR 226 at 237[9].
[11] Mr Pomerenke made clearly articulated submissions contrary to each of those conclusions, but nevertheless Mr Foots had a reasonably arguable case that leave from a Federal Court was needed before Ensham could proceed with its costs application. It is also very much arguable, despite Mr Pomerenke’s submissions to the contrary, that if Mr Foots succeeds in overturning order number 1 made on 3 February 2006, this Court could make consequential orders overturning order number 2 of 3 February 2006. Order number 2 could only be made against Mr Foots after a proper grant of leave to Ensham.
[12] That means that Ensham had established on this application that Mr Foots has had his day in court before the learned primary judge, and is impecunious, but Mr Foots has established that he has a reasonably arguable case on the appeal to overturn both the orders he challenges. Further, he has made an open offer to pay $7,500 to the applicant as security for costs. As he has made that offer, it is appropriate to make an order in those terms. I would not order any greater amount, because this Court has generally adopted a conservative approach when determining the quantum of any amount to be awarded as security for costs, and chooses not to examine closely competing (and in this case considerably differing) estimates of the likely costs of an appeal.[10] As to those likely costs, the appeal is limited to one discrete point of law, and the appeal record will be small. It is appropriate therefore to be conservative as to costs. I would order Ensham pay Mr Foots’ costs of hearing the application, because his earlier offer made it unnecessary for the application to be heard.
[13] I would order that Kenneth John Foots provide security for the costs of Ensham Resources Pty Ltd on the appeal in the amount $7,500, and that Ensham Resources Pty Ltd pay Kenneth John Foots’ costs, limited to the costs of the hearing on 16 May 2006, to be assessed on the standard basis.
[14] HELMAN J: I agree with the orders proposed by Jerrard JA and with his reasons.
[15] MUIR J: I agree with the reasons of Jerrard JA and with the orders he proposes.
Footnotes
[1] Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd & Ors [2006] QSC 007; S9548 of 2002, 3 February 2006.
[2] Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd & Ors [2005] QSC 233; S9548 of 2002, 26 August 2005.
[3] Calderbank v Calderbank [1976] Fam 93.
[4] Bankruptcy Act, s 27(1).
[5] [2005] QCA 242; Appeal No 10072 of 2004, 15 July 2005.
[6] (2005) 80 ALJR 132 at [73]; [2005] HCA 67; B68 of 2004, 15 November 2005.
[7] [2005] FCAFC 160; QUD 209 of 2004, 16 August 2005.
[8] SC No 331 of 2001; 16 October 2001.
[9] [2003] SASC 86, 25 March 2003.
[10] Eastgate Properties v J Hutchinson P/L [2005] QCA 342; Appeal No 6074 of 2005, 16 September 2005.