Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 (31 January 2006)

BANKRUPTCY – application to reopen – discretionary factors militating for and against reopening – parties proceeded on an understanding that the applicants would not adduce evidence on quantification of loss – interest in finality of litigation – whether applicants made an election between alternative rights – application to reopen refused

Bankruptcy Act 1966 (Cth) s 155

Inspector-General in Bankruptcy v Bradshaw [2005] FCA 424 referred to
Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 referred to
Re Smith; ex parte Inspector-General in Bankruptcy [1996] FCA 1076 referred to
Hughes v Hill [1937] SASR 285 cited
Smith v New South Wales Bar Association [No 2] (1992) 108 ALR 55 cited
Brown v Petranker (1991) 22 NSWLR 717 cited
Murray v Figge (1974) 4 ALR 612 cited
Henning v Lynch [1974] 2 NSWLR 254 cited
Urban Transport Authority of NSW v NWEISER (1992) 28 NSWLR 471 cited
The Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard’s Pty Ltd (No 2) [2004] FCA 1310 cited
David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 referred to
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 cited
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 cited
Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 4) (1995) 16 WAR 277 cited

McGregor on Damages (16^th ed, Sweet & Maxwell Ltd, 1997)

INSPECTOR-GENERAL IN BANKRUPTCY AND THE COMMONWEALTH OF AUSTRALIA v DAVID ANTHONY BRADSHAW AND ACE INSURANCE LIMITED

VID 972 OF 2004

KENNY J
31 JANUARY 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 972 OF 2004

BETWEEN:	INSPECTOR-GENERAL IN BANKRUPTCY FIRST APPLICANT THE COMMONWEALTH OF AUSTRALIA SECOND APPLICANT
AND:	DAVID ANTHONY BRADSHAW FIRST RESPONDENT ACE INSURANCE LIMITED (FORMERLY KNOWN AS CIGNA INSURANCE AUSTRALIA LIMITED) SECOND RESPONDENT
JUDGE:	KENNY J
DATE OF ORDER:	31 JANUARY 2006
WHERE MADE:	MELBOURNE

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 972 OF 2004

BETWEEN:	INSPECTOR-GENERAL IN BANKRUPTCY FIRST APPLICANT THE COMMONWEALTH OF AUSTRALIA SECOND APPLICANT
AND:	DAVID ANTHONY BRADSHAW FIRST RESPONDENT ACE INSURANCE LIMITED (FORMERLY KNOWN AS CIGNA INSURANCE AUSTRALIA LIMITED) SECOND RESPONDENT

JUDGE:	KENNY J
DATE:	31 JANUARY 2006
PLACE:	MELBOURNE

1 In the circumstances outlined below, the applicants seek leave to re-open their case to present evidence quantifying the Commonwealth’s loss. For the reasons that follow, I would refuse such leave.

2 In reasons for judgment delivered on the 15 April last year, I held that the respondents had contravened the conditions of the bonds given by them to the second applicant ("the Commonwealth") under s 155 of the Bankruptcy Act 1966 (Cth) ("the Act") and the Commonwealth was entitled to recover only that which was proven to be its compensable loss. At the same time, I rejected the respondents’ contention that the applicants’ case should be dismissed because the applicants had failed to adduce evidence quantifying that loss. In so doing, I noted that (1) the applicants had presented evidence that the Commonwealth had incurred significant, though unquantified, costs in the investigation and prosecution of the first respondent ("Bradshaw"); (2) the respondents conceded that compensable loss included the costs to the Commonwealth of investigating the conduct of Bradshaw; and (3) such costs might equal or exceed the bond amount. Bearing in mind the evidence presented as to costs and the purpose to be served by the bond, I stated that, for these reasons, I would not dismiss the application before giving the applicants an opportunity to adduce further evidence as to the precise quantum of the Commonwealth’s loss. Accordingly, I adjourned the further hearing of the proceeding in order that the Commonwealth might have this opportunity, and I made directions to prepare the matter for further hearing if this were necessary.

3 The respondents subsequently filed motions seeking leave to appeal. The exhibits to the supporting affidavits revealed that, in the correspondence before the hearing on 20 September 2004 ("the first hearing"), the applicants had specifically declined the respondents’ request to quantify their loss upon the basis that the costs incurred by the Commonwealth were irrelevant to the applicants’ entitlement and, in any case, these costs could not be quantified. After the directions of 15 April 2005, the respondents wrote to the applicants, saying that it was not open to them to resile from the position they had taken and to re-open their case by filing further affidavit evidence quantifying their costs. The applicants replied that they saw no such impediment and sought to take advantage of my orders, which had been made in ignorance of the pre-hearing correspondence. No draft notice of appeal accompanied the motions, but the respondents confirmed, at a subsequent directions hearing on 8 June 2005, that they sought to appeal my directions on the grounds that either the applicants had made an election not to quantify their loss or, as a matter of discretion, they should not, in the circumstances revealed, be permitted to re-open their case.

4 At this directions hearing of 8 June 2005, I observed that the Court had not considered whether the applicants had made an election or the like because the respondents had made no submission to this effect.

5 The fact was that, in oral submissions at the first hearing, counsel for the first respondent ("Bradshaw") conceded that the Commonwealth was entitled to recover its investigatory costs but argued that the application for payment should be dismissed because the Commonwealth had not quantified these costs or any other loss. At the first hearing, the applicants maintained that quantification was irrelevant, although they had tendered the affidavit of Mr TD Clarke, which referred to the costs incurred by the Commonwealth in investigating the bankrupt estates under Bradshaw’s control. The respondents had not contested the contents of Mr Clarke’s affidavit. Further, the applicants had not told the Court that the Commonwealth’s costs could not be quantified, although they had said as much to the respondents earlier (see further below). The respondents had submitted that the Commonwealth should and could quantify its costs and had not referred to the applicants’ statement to them that it could not do so. It was in these circumstances that I gave my directions on 15 April 2005: see Inspector-General in Bankruptcy v Bradshaw [2005] FCA 424 ("Bradshaw (No 1)") at [80].

6 Bearing this in mind, at the directions hearing of 8 June 2005, I stated that the parties should be permitted to make further submissions as to the appropriate disposition of the case. In particular, I held that it was open to the respondents to submit that the Commonwealth was precluded from recovering its loss for the reasons outlined in their letters to the applicants and to contest the recoverability and quantification of any loss specified by the applicants. The applicants had concomitant rights to pursue their claim and answer the respondents. The respondents stated that they would not pursue their motions for leave to appeal and the matter continued before me on 13 December 2005.

7 At the hearing on 13 December 2005 ("the second hearing") the applicants sought to rely on a further affidavit of Mr TD Clarke sworn on 24 May 2005, the affidavits of Darren Kane and Shane Kirne sworn on the same day, and the affidavit of Terrence Burke sworn on 23 May 2005. There was no cross-examination, but, as foreshadowed, the respondents contended that it was not, or ought not to be, open to the applicants to adduce this further evidence.

8 The respondents relied on an affidavit of Nicholas Brand and exhibits, originally filed in support of Bradshaw’s motion for leave to appeal, and on an affidavit of Alexandra Golding and exhibits, which had been filed in support of the second respondent’s motion for leave to appeal.

9 The respondents adopted one another’s submissions. Bradshaw’s primary submission was that the applicants had closed their case on all issues. In his submission, the applicants should not be permitted to re-open their case because they had made "a clear and conscious decision" not to adduce evidence on the quantification of loss. Theirs was not a case of oversight or misunderstanding.

10 Bradshaw conceded that, if permitted to quantify their loss, the "[d]isbursements incurred in investigating his failure well and sufficiently to perform and execute all the duties required of him may well form a component of the quantum damnificatus". He accepted that these disbursements totalled $4,729, as described in Mr Clarke’s affidavit of 24 May 2005. He contended, however, that the applicants were not entitled to recover the disbursements incurred in his prosecution or the alleged cost of having employees of the first applicant ("ITSA") investigate his misconduct. Counsel for Bradshaw emphasized that the bond was to cover the cost to the Commonwealth, not the cost of the percentage of time that was going to be expended by the Commonwealth in any event. Further, as Bradshaw’s counsel put it, the prosecution costs were too remote to be covered by the bond. Counsel for Bradshaw also submitted that, if the Court came to the view that the additional evidence would not make any significant difference to the outcome of the case, even if admitted, then the application to adduce it should be dismissed as futile.

11 The second respondent ("Ace") argued that the applicants were not entitled to re-open their case because they had unequivocally elected to proceed on the basis that they were not obliged to prove the quantum of their actual loss. This election was constituted by the manner the applicants had conducted their case at the first hearing, the parties’ written submissions and the correspondence. Ace submitted that the applicants had elected to conduct their case "on the footing that they sought a ruling on the fact that the bond was, in effect, a good behaviour bond, forfeitable without proof of loss". In so doing, the applicants had, so Ace said, adopted a course that was "inconsistent with, and antithetical to, a course involving the adduction of any evidence of loss".

12 Ace further submitted that the authorities distinguished between a case where there has been a mistake or misunderstanding on the part of counsel and a case conducted on a particular basis from which a party later seeks to resile. Leave to re-open would not be granted where a party had made "a conscious tactical decision not to lead evidence" or "deliberately elected not to introduce the evidence earlier". It was, so Ace submitted, "inconsistent with the manifest requirement for finality of litigation to allow cases within [this] category to be reopened when the tactic has not resulted in success".

13 Ace contended that Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 prevented recovery for the cost of lawyers’ investigations preparatory to Bradshaw’s prosecution. Further, the costs of the time involved in the investigatory work of Mr Clarke, his ITSA colleagues and Mr Kane were irrecoverable because they were costs incurred within the scope of the work they were employed to perform in any event. Ace also argued that the applicants’ reference to the difficulty in assessing loss was misplaced and refuted the applicants’ submission that exemplary damages might be awarded.

14 The applicants denied that they had made any election. According to them, they had simply called on payment under the bonds, which had been breached. They added:

15 The applicants contended that they were not seeking to re-open their case but merely to finish it. Alternatively, they submitted that this was a "clear case" in which leave to re-open should be given, since there would be "no reagitation of any issue". They also argued that what they termed the "decision" of 15 April 2005 was "in the nature of a determination of a preliminary question". The applicants submitted that there were numerous factors militating in their favour in any exercise of discretion, including the reasonableness of their reliance on the decision in Re Smith; ex parte Inspector-General in Bankruptcy and Brown [1996] FCA 1076 ("Re Smith"), the absence of prejudice to the respondents, the absence of formal pleadings, and public policy.

16 The applicants estimated their loss as $115,348 and sought to recover $100,000 under the bond. They submitted that the Court is not discharged from an obligation to assess loss simply because quantification was "not a simple exercise" and was imprecise. In ascertaining the loss that flowed from the breach of the bond, there were, so the applicants said, three relevant questions: (1) what action was required to be taken by them once they became aware of a possible breach of the bond?: (2) What resources were used to take such action?: and (3) How can those resources be valued for the purpose of quantifying a loss?

17 The applicants contended that no issue of managerial time arose, although if it did, they were entitled to recover in respect of such time. They submitted that the employee status of relevant officers did not disentitle the applicants from recovering the costs claimed for them. They contended that "the value of the time they have spent is the cost of the resources used by the applicants in carrying out their duties following a breach of the bond". They maintained that they were entitled to recover the costs referable to Bradshaw’s prosecution and submitted that the Court could award exemplary damages.

18 This is a case in which it was clear to the parties from the commencement of the proceeding, and now to the Court, that the applicants had determined to carry on their case without seeking to quantify their loss.

19 In Bradshaw (No 1) at [5], I referred to a letter from the applicants’ solicitors dated 7 July 2000, stating that they would provide details of the costs incurred by the Commonwealth in relation to its investigation and prosecution of Bradshaw. Bradshaw deposed, and it was not disputed, that no such details were provided prior to the hearing. The full significance of this becomes clear when regard is had to certain subsequent correspondence.

20 A letter of 25 August 2004 from Ace’s solicitors to the applicants’ solicitors was an exhibit to Ms Golding’s affidavit (upon which the second respondent relied at this later stage of the proceeding). This letter asked the applicants to "quantify and provide particulars of ... costs" and also stated "the amount of costs to the Commonwealth is relevant to the extent to which the bond can be called upon". The applicants’ letter in reply dated 27 August 2004, which was also an exhibit, specifically said:

21 Counsel for the applicants sought to explain what was intended by this letter. He submitted that the reference to "not costs chargeable" was a reference to the fact that no bills were sent by the people who did the work. This may be accepted. The reference to inability to quantify was, so he said, a reference to the fact that there could be no quantification "with any mathematical accuracy". It may be that this was what the author intended but I doubt that a reader in the respondents’ position would have understood the relevant statement in this way. The gloss that counsel for the applicants would place upon the clear statement in the letter (namely, that the costs "cannot be quantified") is without foundation.

22 In conformity with the applicants’ statement in the letter of 27 August 2004, their application of 12 August 2004 sought declarations that the respondents pay $100,000, being the full amount of the bonds and, at the first hearing, the applicants contended that liability under the bonds was absolute: see Bradshaw (No 1) at [10]. The gravamen of the case for Bradshaw at the first hearing was that, in order to recover on his bond, the Commonwealth was required to quantify its loss because the Commonwealth could recover only that portion of the bond amount that would compensate it for its loss: Bradshaw (No 1) at [12]–[14]. The applicants replied that Bradshaw’s liability was not affected by the Commonwealth’s failure to quantify its loss: Bradshaw (No 1) at [10]. Although the first affidavit of Mr Clarke, which was tendered at the first hearing, touched briefly on the loss to the Commonwealth, it was then common ground between the parties that his evidence was insufficient on the question of quantification. The correspondence to which I have referred makes it clear that the parties understood that the applicants’ case was that they were entitled to the payment of the full amount of the bonds upon proof of breach of the conditions of the bonds and that they were not going to make any quantification.

23 In these circumstances, I would not accept the applicants’ characterisation of their attempt to quantify the relevant loss as no more than the resolution of a remaining issue. The circumstances with which I am now acquainted show that the applicants should be taken to have opened and closed their case at the first hearing on the basis that they would not quantify their loss. Accordingly, I accept that it was necessary for them to seek leave to re-open their case, as in fact their counsel has now done.

24 The authorities indicate that, broadly speaking, there are four recognised classes of case in which a court may grant leave to re-open, although these classes overlap and are not exhaustive. These four classes are (1) fresh evidence (Hughes v Hill [1937] SASR 285 at 287; Smith v New South Wales Bar Association [No 2] (1992) 108 ALR 55 at 61-2); (2) inadvertent error (Brown v Petranker (1991) 22 NSWLR 717 at 728 (application to recall a witness); Murray v Figge (1974) 4 ALR 612 at 614 (application to tender answers to interrogatories); Henning v Lynch [1974] 2 NSWLR 254 at 259 (application to re-open); (3) mistaken apprehension of the facts (Urban Transport Authority of NSW v NWEISER (1992) 28 NSWLR 471 ("UTA") at 478; and (4) mistaken apprehension of the law (UTA at 478). In every case the overriding principle to be applied is whether the interests of justice are better served by allowing or rejecting the application for leave to re-open: see UTA at 478; also The Silver Fox Company Pty Ltd as Trustee for the Baker Family Trust v Lenard’s Pty Ltd (No 2) [2004] FCA 1310 ("Silver Fox") at [22] and [25].

25 The present is not a case of new evidence, inadvertent error or mistaken apprehension of the facts. Further, I accept that, as counsel for the respondents submitted, this was not a case of mistaken apprehension of the law, because the applicants knew the substance of the respondents’ case, which depended on an understanding of the law that differed from their own. That is, with full knowledge that there was another view of the law to theirs, the applicants decided not to attempt to present the evidence that was relevant and necessary if the Court accepted the respondents’ case and not theirs. This was not a case in which a particular issue was pleaded or argued but, by reason of circumstances outside the relevant litigant’s control, was not adequately addressed at trial (as in David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 386 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ). There could have been no misapprehension on the applicants’ part about the respondents’ position as to the law. All that has happened is that the Court has accepted the respondents’ submissions on the bond in preference to their own. I accept that, as counsel for Ace contended, the principle of finality of litigation should preclude the Court from regarding this circumstance as a relevant ‘misapprehension’ on an application for leave to re-open.

26 As already noted, however, the overriding principle requires that the Court consider whether, taken as a whole, the justice of the case favours the grant of leave to re-open. In this case, the applicants’ decision not to present evidence on quantification was deliberate, but, as Clarke JA, with whom Mahoney and Meagher JJA agreed, said in UTA at 478:

27 There are a number of factors militating in favour of granting the applicants leave to re-open their case. There is a matter of the public interest and public policy involved. There has been a serious breach on Bradshaw’s part of his duties as a trustee, which also constituted a breach of the condition of his bond. There was evidence of loss to the Commonwealth before the Court at the first hearing. The Commonwealth has been obliged to investigate Bradshaw’s misconduct and has determined to prosecute him for his criminal misconduct. This has involved time and money. If the Commonwealth were able to quantify its loss, then it would be entitled to payment under the bond to the extent of that quantified loss (but not exceeding $100,000). If the Court were to grant leave to re-open, the costs that the respondents have unnecessarily incurred might be met by a costs order in their favour. The evidence that the applicants seek to present concerns an issue that the Court has not previously considered and the respondents have indicated that they would not seek to cross-examine the relevant deponents. The applicants’ conduct at the first hearing was explicable by reference the decision in Re Smith, although, as stated in Bradshaw (No 1) at [41], this decision provided only limited guidance. There were no pleadings in which issues of the present kind might have been ventilated prior to the first hearing. Apart from the matter of costs, the respondents identified no prejudice to them if leave were granted, save for the fact that the parties had at all times until the directions of 15 April 2005 proceeded on the basis that the applicants would not and could not quantify the Commonwealth’s loss.

28 The above-mentioned considerations do not, however, persuade me to give the applicants leave to re-open. There are weightier factors militating against the grant of leave. These factors are as follows.

29 In view of this conclusion, it is strictly unnecessary to consider the question of election, which is generally said to arise "when a state of affairs comes into existence which enables a person to exercise alternative and inconsistent rights against another": see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 ("GEC Marconi") at 89 [356] per Finn J. When faced with such a choice (e.g., the right to terminate a contract for breach or repudiation or the right to insist on performance of the contract), a person is required to elect which of the mutually exclusive courses of action the person wishes to take. Before such a choice arises, the person must be aware of the circumstances giving rise to the choice: GEC Marconi at 90 [357].

30 Counsel for Ace contended that the applicants sought to exercise alternative inconsistent rights by seeking, at the first hearing, payment under the bond without proof of the quantum of loss and, now, payment under the bond to the extent of proven loss. This misconstrues the right in issue, which is the Commonwealth’s right to payment under the bond. The relevant debate was whether the Commonwealth was entitled to the whole of the bond amount or to an amount that represented the Commonwealth’s quantified loss. This was not a case of election in the sense discussed in GEC Marconi.

31 Since I would not grant the applicants’ leave to re-open their case, it is also strictly unnecessary to consider the further question of quantification. I do so, however, since the parties have argued various issues relating to quantification.

32 The applicants’ uncontested evidence was as follows. Between February and December 1996, Mr Clarke was employed by ITSA on a salary of $47,591 per annum and spent approximately 60% of his time in the investigation of Bradshaw’s conduct as trustee of bankrupt estates. Between December 1996 and June 1998, he also spent some time in preparing for and attending court. In 1996, two other officers also spent about one week of their time assisting Mr Clarke in the investigation. At the time they were employed on annual salaries of $41,000 and $54,000 respectively. The applicants claimed $31,933 in respect of Mr Clarke and a total of $2,219 in respect of ITSA’s other employees. Further, in the investigation and prosecution of Bradshaw, the Commonwealth, through ITSA, incurred out of pocket expenses in the sum of $4,729.

33 From April 1996 to October 1998, Mr Kane was seconded from the Australian Federal Police ("AFP") to what was then the Australian Securities Commission and, between October and December 1996, spent approximately 60% of his time in the investigation of Bradshaw on behalf of the AFP and the Commission. His salary at that time was $41,470 per annum and the applicants claimed $7,588 in respect of him.

34 The Commonwealth Director of Public Prosecutions ("DPP") was involved in the successful prosecution of Bradshaw. The DPP incurred disbursements in the sum of $16,936 for counsel’s fees and $1,583 for process servers’ fees. A cost consultant assessed the solicitor/client professional costs exclusive of disbursements on the County Court Scale "D" at $50,360.

35 The disbursements incurred by the Commonwealth, through ITSA, in investigating the misconduct of Bradshaw in the administration of the estates under his control may well be part of the loss to the Commonwealth. However, the evidence that the applicants have sought to rely on would be insufficient to establish that the Commonwealth, through ITSA or the AFP, suffered the further losses deposed to in the affidavits of Mr Clarke and Mr Kane. It was incumbent on the applicants to prove, on the balance of probabilities, not only that they suffered loss as a result of the breach of the condition of the bond but also the amount of that loss. This is not a case where the plaintiff cannot adduce precise, or at the least relatively precise, evidence of what has been lost: see Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 at 266 per Hayne J.

36 In the present context, had the Commonwealth expended monies in investigating Bradshaw’s conduct as trustee, then it would have been entitled to payment under the bond in respect of such expenditure. The affidavits of Mr Clarke and Mr Kane provide no evidence of such expenditure. They show only that the Commonwealth, through ITSA and the AFP, expended monies in the employment of these officers who, in the course of their employment as salaried officers of the Commonwealth, undertook the investigation. There was no necessary correlation, causal or otherwise, demonstrated between the cost of the work done on account of Bradshaw’s misfeasance and the cost of Mr Clarke’s or Mr Kane’s annual salary. Put another way, there is no necessary connection between Bradshaw’s breach of the condition of his bond and the amount claimed in relation to Mr Clarke and Mr Kane. Further, there is nothing to indicate that their services would not have been retained or that they would have been more profitably employed but for their investigation of Bradshaw: compare National Coal Board v Galley [1958] 1 WLR 16 at 29-30 referred to by Harvey McGregor in McGregor on Damages (16^th ed, Sweet & Maxwell Ltd, 1997) at [1250]. There is nothing to show that their work on Bradshaw’s account saved the Commonwealth from other expenditures: compare Christmas Island Resort Pty Ltd v Geraldton Building Co Pty Ltd (No 4) (1995) 16 WAR 277 at 280. There is no evidence in the relevant affidavits about the work that they would have undertaken if they had not undertaken the investigations into Bradshaw’s activities.

37 Moreover, whilst the Commonwealth might recover payment under the bond in respect of its expenditure in investigating Bradshaw, it does not follow that it would be entitled to recover its expenditure on Bradshaw’s prosecution. The prosecution flowed from a decision by the DPP to prosecute Bradshaw and not from the breach by Bradshaw of the condition of his bond. The decision to prosecute is separate and distinct from the investigation that flowed from the breach of the bond. The costs of the prosecution cannot be said to flow from that breach.

38 For the reasons advanced by counsel for Ace, there is no basis upon which the Court might award exemplary damages.

39 For the reasons stated, I would refuse the application to re-open the applicants’ case. In accordance with my previous reasons for judgment, I would make the declarations sought in paragraphs 1 and 3 of the application filed 12 August 2004. I would not make the declarations sought in paragraphs 2 and 4 of this application. As they requested, I shall give the parties an opportunity to be heard on the question of costs.

I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Counsel for the Applicants:	P F Agardy

Solicitor for the Applicants:	Australian Government Solicitor

Counsel for the First Respondent:	G T Bigmore Q C

Solicitor for the First Respondent:	Bazzani Brand

Counsel for the Second Respondent:	P G Cawthorn

Solicitor for the Second Respondent:	Herbert Geer & Rundle

Date of Hearing:	13 December 2005

Date of Judgment:	31 January 2006

(1)	The applicants deliberately chose not to quantify the Commonwealth’s loss at the first hearing, perhaps because they believed that they could not do so (see their letter of 27 August 2004) or for some other reason. This factor, though not conclusive, is a significant one.
(2)	Prior to the first hearing, the applicants had plainly led the respondents to believe that the applicants were proceeding on the basis that quantum was irrelevant and, in any case, that the loss could not be quantified.
(3)	The applicants opened and closed their case on the basis that they had not quantified their loss and did not need to do so.
(4)	The applicants did not make any application for a split trial, whether by the preliminary determination of a separate question under O 29 r 2 of the Federal Court Rules or otherwise, although it was open to them to do so.
(5)	By their correspondence and their conduct before and at the first hearing, the applicants led the respondents to understand that they had presented the totality of their evidence at the first hearing.
(6)	Before the first hearing, the applicants knew that it would be said against them that they could not succeed without evidence quantifying their loss.
(7)	The respondents prepared, planned and conducted their case on the basis that the applicants would not present quantification evidence. This factor is also significant. In the belief that the applicants were not going to present quantification evidence, Bradshaw contended that the applicants could not succeed without such evidence. As counsel for Bradshaw observed, if the applicants had provided the respondents with some evidence of the quantum of their loss, the respondents might have taken a different view of their claim for payment under the bond. Had he not been led to believe that there would be no evidence of quantification, Bradshaw would presumably have conducted his case differently.
(8)	Whilst there were no pleadings, the issue in debate was clearly addressed in the correspondence between the parties prior to the first hearing.
(9)	In circumstances where the applicants had full knowledge of the considerations relevant to their conduct and proceeded on a particular basis, the public interest in the finality of litigation weighs strongly against permitting them to depart from that basis: compare Silver Fox at [25] and the cases there cited.
(10)	In the circumstances outlined, a costs order is inadequate compensation to the respondents and, in any event, does not satisfactorily meet the public interest in finality of litigation.

Federal Court of Australia

Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 (31 January 2006)