Charan v Gleeson
[2010] FMCA 703
•25 August 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CHARAN v GLEESON | [2010] FMCA 703 |
| BANKRUPTCY – Application for orders in relation to administration of bankrupt estate of the son of the applicant – whether mother of bankrupt who is co-owner of property was affected by an act, omission or decision of the trustee within s.178 of the Bankruptcy Act – when applicant became aware of the act, omission or decision in question. |
| Bankruptcy Act 1966 (Cth), ss.30, 81, 116, 120, 121, 133, 139DA, 176, 178 |
| Colgate-Palmolive Company and Another v Cussons Pty Limited (1993) 46 FCR 225; [1993] FCA 536 Ebner v Official Trustee in Bankruptcy (2003) 126 FCR 281; [2003] FCA 73 Freeman v National Australia Bank Ltd (2003) 2 ABC(NS) 51; [2003] FCA 1233 Frost v Sheahan (Trustee) [2009] FCAFC 20 Genovese v BGC Construction Pty Ltd (No. 2) [2007] FMCA 601 Healey v Prentice (No. 2) [2000] FCA 1598 Health Insurance Commission v Trustee in Bankruptcy of the Estate of Alekozoglou (2003) 1 ABC(NS) 365; [2003] FCA 848 Macchia v Nilant (2001) 110 FCR 101;[2001] FCA 7 Moore v Macks (2007) 4 ABC(NS) 639; [2007] FCA 10 Ogawa v The University of Melbourne(No 2) [2004] FCA 1275 Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166; [1994] FCA 1348 |
| Applicant: | USHA WATI CHARAN |
| Respondent: | BRUCE GLEESON |
| File Number: | SYG 80 of 2010 |
| Judgment of: | Barnes FM |
| Hearing date: | 25 August 2010 |
| Delivered at: | Sydney |
| Delivered on: | 25 August 2010 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Mr J O’Connor |
| Solicitors for the Respondent: | Gillis Delaney Lawyers |
ORDERS
The application be dismissed.
The applicant pay the costs of the respondent as agreed and in the absence of agreement taxed in accordance with the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 80 of 2010
| USHA WATI CHARAN |
Applicant
And
| BRUCE GLEESON |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
Before the court is a further amended application filed by the applicant, Ms Charan, on 29 June 2010. The respondent, Mr Gleeson, is the Trustee in bankruptcy of the estate of Mrs Charan’s son, Prashant Prashikan Charan. Mrs Charan, seeks orders in the following terms:
S178 - Ommission (sic) in relation to sale of property by the trustee and request court to make just and equitable order in favour of the applicant
S133(5A)/(5B) - Court should give leave to disclaim property imposing terms and conditions in favour of applicant by making order for sale of property
S81 – Breach of duty by trustee
S116 – Property not divisible amongst creditors
S139DA - No contribution from bankrupt
S176 - Make good loss in the sum of $175,000These proceedings were commenced by application filed on 18 January 2010. The applicant filed an amended application on 30 April 2010. She now relies on the further amended application (referred to as an amended application) filed on 29 June 2010.
In addition to affidavits, a considerable number of documents were tendered by Mrs Charan in these proceedings. Counsel for the Trustee tendered a copy of an affidavit sworn by him (with exhibits) which was not filed in these proceedings. It was explained that an affidavit to this effect would be filed in proceedings that were to be commenced in this court against Mrs Charan and her husband Mr P Charan.
In essence, the applicant relies on s.178 of the Bankruptcy Act 1966 (Cth) as a person affected by an act, omission or decision of a trustee. Section 178 is as follows:
(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
(2) The application must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision.
Mrs Charan sought that the Trustee “uplift” or in some way withdraw a caveat on property at Lot 804 Flame Tree Street, Casula (the Casula property) which is registered in her name and that of the bankrupt. She sought orders to enable her to sell the Casula property. She contended that the Trustee did not carry out his duties under the Bankruptcy Act or the Bankruptcy Regulations. She claimed that he ought to be liable to her in damages for negligence.
There is a somewhat complicated background to these proceedings, as disclosed in the exhibits to the affidavit of Mr Gleeson. The proceedings arose out of circumstances prior to the appointment of Mr Gleeson as Trustee of the bankrupt estate of the applicant’s son, Prashant Preshika Charan (the bankrupt) on 16 November 2006.
Mr P Charan and Mrs Charan are the parents of the bankrupt. There are three properties relevant to the matters raised in these proceedings.
Mr P Charan and Mrs Charan are the registered proprietors of a property at 5 Yengo Court, Holsworthy (the Holsworthy property).
In 2001 the bankrupt purchased a property at 10 Primula Close, Woongarrah (the Woongarrah property) for $130,000 with the assistance of a first homeowner’s grant of $14,000. He also borrowed around $120,000 from Seaforth Securities to purchase this property.
Some time in 2002, Mr and Mrs Charan borrowed $165,000, apparently secured on the Holsworthy property. The evidence as to which property was security for which loan is not clear. It is, however, clear that in January 2003 the bankrupt sold the Woongarrah property for $345,000. There is material before the Court, including settlement statements and other material tendered by the applicant in relation to the sale of that property and the disposition of the money received. Of the proceeds of sale an amount of about $120,000 was paid to Seaforth Securities and a sum of $195,445.07 was paid to Mrs Charan and her husband on 31 January 2003. She acknowledged in cross-examination that this was so.
In about October 2003, Mrs Charan and the bankrupt purchased the Casula property to which I have referred, for $240,000. Mrs Charan and the bankrupt are the registered proprietors of the Casula property as tenants in common, Mrs Charan held a 13/20ths interest and the bankrupt held a 7/20ths interest at the time of his bankruptcy. It appears from copies of correspondence before the court between the parties, the certificate of title and the documents tendered by Mrs Charan, that the bankrupt and his parents are named as joint borrowers from the Commonwealth Bank of Australia and also in relation to a Viridian line of credit with a limit of a little over $50,000 under a facility provided on or about 21 August 2006 and that these loans are secured by mortgages over the Casula property and the Holsworthy property.
The background to the bankruptcy is that the Chief Commissioner of State Revenue sought repayment of the first homeowner’s grant by Mr P P Charan on the basis that he was not entitled to it. A bankruptcy notice was issued and a creditor’s petition presented. A sequestration order was made against Mr P P Charan’s estate on 16 November 2006. Mr Gleeson was appointed Trustee of his bankrupt estate.
Mr Gleeson arranged for a caveat to be lodged against the title to the Casula property in November 2006. Over the next few years there was correspondence between Mrs Charan and the Trustee, either directly or via solicitors. Mrs Charan has had at least two different firms acting for her in relation to dealings with the Trustee.
Mrs Charan has asserted on a number of occasions that her son did not contribute financially to the Casula property. She maintains this assertion, which underlies the present action against the Trustee.
Thus, in a letter of 6 September 2007 to the solicitor for the Trustee, Mrs Charan stated that the money to buy the Casula property was borrowed from Wizard Home Loans and refinanced by the Commonwealth Bank. She claimed that she and her husband had decided to invest in a property for retirement income and for the future of their three sons. She claimed that the bankrupt did not financially contribute to the property. However she stated that she “gave” a one-third share of the Casula property to the bankrupt and “kept the other two thirds for myself for my other two sons”. She went on to explain that she wanted to sell the property. She took issue with whether or not the Trustee was willing to transfer to her the bankrupt’s share in the property and whether she should be required to pay for this share (on the basis that there was no equity in the property).
Ms Charan’s evidence is that she provided “all” relevant documentation to support her claims to the Trustee on at least three occasions during the course of the administration of the bankruptcy. On this basis she contended that the Trustee should have withdrawn the caveat and enabled her to sell the Casula property, essentially on the basis that her son had no interest in the property. She claimed that the Trustee should have accepted this assertion. She seeks orders from the court to compel removal of the caveat and to allow her to sell the Casula property.
Mrs Charan did not put before the court the first letter that she claimed she sent to the Trustee in late 2006 (claiming that there had been a computer malfunction and she did not have a copy of that letter). She tendered copies of letters of 6 September 2007 and 7 March 2009. However these refer generally to enclosing “documents” but do not detail precisely what documents were enclosed. She tendered a bundle of documents which she said were those documents. However I am not satisfied that these documents were all provided to the Trustee in 2006. The documents include a bank statement from 2009.
Mrs Charan than suggested that the material she had provided to the Trustee related to the Woongarrah property purchased by her son (as distinct from the Casula property subject to the caveat). However she also claimed that the documents before the court established that her son had not made any financial contribution to the Casula property.
The evidence before the court is incomplete. The fact that funds were available to Mr and Mrs Charan and that certain money was spent by Mr and Mrs Charan (for example on mortgage repayments) does not of itself establish an absence of financial contribution by the bankrupt or answer all issues of concern to the Trustee addressed in correspondence with Mrs Charan in relation to the disposition of the net proceeds of sale of the Woongarrah property, in particular the sum of $195,000 that was paid by the bankrupt to his parents in January 2003 (see s.120 and s.121 of the Bankruptcy Act). It is apparent that the trustee is also concerned about the bankrupt’s possible resort to the Viridian line of credit that was secured over the Casula property (and apparently also over the Holsworthy property). The Trustee has advised Mrs Charan of his view that the bankrupt contributed to the purchase and development of the Casula property to a greater extent than his 7/20ths interest.
It is apparent from the correspondence between the parties that the Trustee’s attempts to settle the matter (by Mrs Charan purchasing his interest in the Casula property) has been unsuccessful. In November 2009 Mrs Charan made a complaint to the Insolvency and Trustee Service of Australia (ITSA) in relation to the conduct of Mr Gleeson as Trustee of the bankrupt estate of her son. ITSA has power to intervene if there is evidence of an actual or perceived failure on the part of a trustee to discharge duties under the Bankruptcy Act.
Before the court is a copy of the ITSA report. Mrs Charan had complained that she had made an offer to purchase the bankrupt’s share of the Casula property (for $3,000) and that this offer had been rejected by Mr Gleeson who had refused to lift the caveat. She claimed she had tried to negotiate with Mr Gleeson and that there was no surplus from the sale of the Woongarrah property and no equity in the Casula property. She reiterated these contentions in court. Indeed it must be said that many of the matters she raised in court were matters that she had previously raised with ITSA. ITSA sought the Trustee’s comments.
In December 2009 ITSA found that Mrs Charan’s complaint was not justified. In a letter of 17 December 2009 ITSA stated that the Trustee’s lodgement of a caveat over the Casula property was consistent with his obligation to protect assets of the bankrupt estate. The letter referred to investigations and inquiries by the Trustee and considered whether the bankrupt and Mrs Charan had provided sufficient cooperation and information to the Trustee to support the removal of the caveat over the Casula property. Importantly, ITSA pointed out that there had been an apparent failure on the part of the Mr and Mrs Charan to provide evidence of security to the Trustee in relation to the sale of the Woongarrah property (from which Mrs Charan and her husband received payment of $195,445) and that there was also an issue about the likely benefit Mr and Mrs Charan would receive in the form of increased equity in the Holsworthy property should the sale of the Casula property proceed first (based on the cross-collateralisation of loans for both properties). It was pointed out that the Trustee had consistently sought specific information from Mrs Charan and from the bankrupt in relation to sale of the Woongarrah property and also about the extent of the bankrupt’s interest in contributions to the Casula property which had not been addressed by Mrs Charan. Specific outstanding documentation was referred to by ITSA.
ITSA also addressed the Trustee’s invitation to Mrs Charan to purchase the bankrupt’s share of the Casula property, a counter-offer from Mrs Charan and differing amounts offered and the fact that that this issue not been resolved. ITSA found that the trustee’s actions were commensurate with his obligations under the Act and that his refusal to remove the caveat appeared justified in the absence of receiving specific and relevant information from the bankrupt and from Mrs Charan or a reasonable offer for the purchase of the bankrupt’s share of the Casula property. On that basis, there was said to be no justification for ITSA to intervene.
At the end of its letter ITSA addressed the fact that Mrs Charan had sought an indication of the date from which the 60 day time limit would commence within which to bring an application of the court against a decision of the Trustee. These proceedings were commenced on 18 January 2010.
In these proceedings Mrs Charan contended generally that the material she tendered would make it clear that the bankrupt had no interest in the Casula property and that on that basis the court should make the orders sought. There is some evidence before the court, such as bank statements, which indicates mortgage repayments from bank accounts of Mr and Mrs Charan or Mr P Charan, but it does not address other matters that the Trustee had expressed concern about and that ITSA found had not been satisfactorily addressed, in particular in relation to the disposition of over $195,000 paid to Mr and Mrs Charan from the sale of the bankrupt’s Woongarrah property.
Mrs Charan confirmed in submissions that in essence she sought to rely on s.178 of the Bankruptcy Act and sought to have the caveat removed to be able to sell the property. She also sought that the Trustee pay her the amount of loss that she claimed she had suffered by reason of what she asserted was his negligence.
Section 178 of the Bankruptcy Act provides that if the bankrupt, a creditor or any other person is affected by an act, omission or decision of the Trustee, he or she may apply to the court and the court may make such order in the matter as it thinks just and equitable. Mrs Charan claimed primarily that there had been an omission by the Trustee.
Under s.178(2), the application must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision.
Mrs Charan’s submission was that it was only when she obtained a copy of the Bankruptcy Act or a text on the Bankruptcy Act in late 2009 that she became aware of the Trustee’s act, omission or decision (insofar as she contended that the Trustee had omitted to comply with a number of obligations which she said he should have complied with under the Bankruptcy Act). No authority was cited in support of the proposition that this was a proper interpretation of s.178(2).
Section 178 gives the court a very wide discretion consisting as it does of a general power of review and conferring a supervisory jurisdiction over the conduct of the trustee. However it is a judicial power and, as stated in Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166, [1994] FCA 1348 the court cannot stand in the shoes of an administrative body and exercise the powers of that body in its stead. This limitation is relevant insofar as Mrs Charan seemed to ask that the court do what she thought the Trustee should do. The power does not extend that far.
While it is not necessary for the Trustee to have acted absurdly, unreasonably or in bad faith (see Frost v Sheahan (Trustee) [2009] FCAFC 20) for the court to intervene under s.178, it is appropriate to consider whether the impugned conduct or inaction was incorrect, or whether other conduct was or would be preferable and whether justice and equity require the court’s intervention (see Healey v Prentice (No. 2) [2000] FCA 1598). It is open to the court to consider matters not raised before the Trustee (Frost v Sheahan).
It has been suggested (in the context of a decision by a Trustee not to pursue litigation), that the court should consider whether the trustee had reached a perverse or necessarily wrong conclusion about the prospects of success of the proposed litigation being successful, or that the decision not to prosecute was shown to be either unjust or inequitable (Freeman v National Australia Bank Ltd (2003) 2 ABC(NS) 51; [2003] FCA 1233). In addition, the court must bear in mind that the Trustee is an officer of the court and has a public duty to administer an estate so as to maximise the return from estate assets to maximise satisfaction of creditors’ claims and any possible surplus for the bankrupt. The court “should not be too ready to intervene for fear of making the role and work of the trustee unmanageable” and it is very clear that it is not enough that the judge might have acted differently (see Healey v Prentice (No. 2) at [21]). Moreover, and importantly, in an application under s.178, the applicant, in this case Mrs Charan, bears the onus of showing a ground on which the Trustee’s administration of the affairs of the bankrupt ought to be reviewed.
Under s.178 of the Act concepts of justice and equity are relevant. Hence the conduct of the applicant (and that includes any delay in asserting rights) can be relevant in determining whether it is appropriate to make the orders sought, irrespective of the correctness or otherwise of any act or omission (see Health Insurance Commission v Trustee in Bankruptcy of the Estate of Alekozoglou (2003) 1 ABC(NS) 365; [2003] FCA 848).
The court has very wide powers under s.178 to make such order as it thinks just and equitable. That includes the power to make declarations and orders as to the ownership of property. This should be seen in light of the court’s general power under s.30 of the Bankruptcy Act (which was referred to in passing by the applicant), which is a broadly-expressed power to make such orders as necessary to deal with matters. However while s.178 needs to be considered in the context of s.30, it does not create a cause of action sounding in damages, nor does it extend to claims for damages for losses unrelated to the bankrupt estate, whether arising in tort or otherwise (see Macchia v Nilant (2001) 110 FCR 101;[2001] FCA 7; Ebner v Official Trustee in Bankruptcy (2003) 126 FCR 281; [2003] FCA 73 and Moore v Macks (2007) 4 ABC(NS) 639; [2007] FCA 10).
It is also important to note that a general complaint about the manner in which the trustee has carried out the administration of the estate is not such as to bring s.178 into play. There must be a complaint about an act, omission or decision.
First, it is necessary to consider s.178(2) which requires an application to be made not later than 60 days after the day on which the applicant “became aware of the trustee’s act, omission or decision”. Insofar as Mrs Charan is complaining about the Trustee’s failure to obtain the removal of the caveat over the Casula property, I do not accept her contention that she became aware of the Trustee’s omission – that is, the failure to remove the caveat – at the time at which she informed herself of bankruptcy law. Section 178(2) refers to becoming aware of the trustee’s act, omission, or decision, not to becoming aware of the assumed legal consequences of that decision. It is clear that there has been ongoing correspondence between the Trustee and Mrs Charan and that at a very early stage in the proceedings, at least in 2007, Mrs Charan raised the issue with the trustee that she now pursues under s.178.
Insofar as Mrs Charan takes issue with more specific aspects of the Trustee’s alleged “omissions”, including his failure to accept the amount that she offered to pay to acquire the bankrupt’s share in the Casula property, or, indeed, his failure to take steps to obtain a public examination of her, the bankrupt or her husband, the applicant was informed by Mr Gleeson in a letter of 18 March 2009 that the most appropriate manner in which issues in relation to the first procurement of the homeowner’s grant and subsequent transactions could be addressed was by way of a public examination and that he would be speaking to the petitioning creditor (the Office of State Revenue) to ascertain whether or not it wished to provide funding. He advised that if it did there would be a public examination. The letter added that as Mrs Charan had rejected a counteroffer by the trustee in relation to a payment to acquire the bankrupt’s interest in the Casula property the caveat over that property would remain.
Clearly by this date, at the latest, Mrs Charan was made aware of the Trustee’s attitude, and any time under s.178(2) would run from then. Hence it would appear she is, in fact, out of time to bring the application and the application should be dismissed on this basis.
Given that I was not addressed in detail on the operation of s.178(2) and the applicant is self-represented, in case I am wrong I have considered whether Ms Charan has established that she is a person affected by an act, omission, or decision of the Trustee and, if she is, whether the court should make any orders in relation to such act or omission.
Mrs Charan’s standing under s.178 was not challenged by the Trustee. The difficulty that faces her however is that the evidence before the court is not such as to satisfy me that the Trustee has erred in a manner which ought to be reviewed under s.178, in particular in relation to any failure to act to remove the caveat. The material before the court is not such as to resolve, from the court’s perspective, the outstanding concerns which the Trustee clearly has notwithstanding that Mrs Charan made a number of assertions about sources and expenditure of money.
Insofar as issue is taken with a decision or omission of the Trustee, in circumstances where the certificate of title showed that the bankrupt had a 7/20ths interest in Casula property and given the unresolved issues discussed above, I am not satisfied that there would be any basis under s.178 for disturbing the decision of the trustee to place a caveat on the Casula property.
The main contention of Mrs Charan is that as the Trustee has been informed of her claim that the bankrupt had no interest in the Casula property (notwithstanding that at one point in time she suggested that she gave a third of the property to the bankrupt), the caveat should have been removed by the trustee. She asks the court to ensure that the Trustee remove the caveat on the basis that the fact that this was not done is an omission within s.178 of the Bankruptcy Act.
The connection between which money was spent where and, in particular, the fate of the $195,000 part proceeds of sale of the Woongarrah property owned by the bankrupt and paid to his parents is not clear on the material before the court, albeit that there is evidence that some mortgage payments in relation to the Casula property were made by Mr and Mrs Charan.
The evidence before the court is simply not sufficient to make out the claims on which the applicant seeks to rely to establish that the Trustee has omitted to act appropriately in failing to remove the caveat or, indeed, that the other acts or omissions or decisions of the Trustee or are such that orders ought to be made under s.178.
I note that at one point Mrs Charan suggested that her son had no interest in the Casula property and that he held it on trust for her. The evidence before the court is simply not sufficient to establish this claim. It was not put in those terms in the application. Even if the court has a power to make a declaration by virtue of s.178 (seen in conjunction with s.30) in relation to interests in property (in light of the provisions of s.116 of the Act in relation to property divisible among creditors) the evidence before the court is not sufficient to establish a trust of any kind. I was not addressed in any detail on precisely how any trust arose and the evidence before the court in fact suggests that the bankrupt has an interest in the Casula property.
Mrs Charan also referred to specific provisions under the Bankruptcy Act, on the basis that she contended that the Trustee had failed to comply with these provisions. Section 116 deals with property divisible among creditors. Mrs Charan contended that certain property was not within s.116 because it was held in trust. That has not been made out and does not provide a basis for an order under s.178.
Mrs Charan also referred to s.81 of the Act, which is the power for the court or a registrar on the application of a creditor who has or had a debt provable in the bankruptcy, the trustee or the official receiver, to summons the bankrupt or another examinable person for examination in relation to the bankruptcy. It was not suggested that the court should make such an order. Rather, it was suggested that the trustee should have adopted this procedure.
However the trustee clearly contemplated such a procedure, subject to obtaining funds. He did not pursue that procedure. It has not been established that his failure to do so is such that the court should, on the evidence before it and in the circumstances of this case, intervene in the manner contended for by the applicant.
It was open at all times to Mrs Charan to provide information to the trustee. She indicated that she had provided a considerable amount of information to him on three occasions. However she also explained that she had not given the trustee all of the information that she has now provided to the court. On the evidence before the Court Mrs Charan has not established the claims she wanted the Trustee to accept. Nor has she established that the Trustee erred is not accepting her claims such that his acts or omissions should be the subject of orders under s.178 of the Act. There is no basis for the court to make any order directed to the Trustee in relation to whether or not he should make an application to bring into play an examination under s.81 of the Act. As indicated, it is not for the court to stand in the shoes of the Trustee, but in any event, the basis for such an order has not been established.
I note that counsel for the Trustee has indicated that the Trustee intends to pursue an outstanding issue in proceedings to be commenced in this court against Mrs Charan and her husband in the interests of the creditors of the bankrupt estate on the basis that it will be alleged that Mr and Mrs Charan received a benefit of up tor $195,000 from the sale of the Woongarrah property.
The evidence before the court does not establish that the Trustee has not been taking appropriate action, albeit some considerable time has elapsed since the sequestration order was made. There is some explanation for this in the lengthy correspondence between the Trustee and Mrs Charan, given the limited nature of the evidence she provided to the Trustee and information provided by the bankrupt and the Trustee’s unsuccessful endeavours to ascertain the precise financial circumstances of the bankrupt.
The amended application also refers to s.139DA of the Bankruptcy Act. It is not clear why reference is made to s.139DA of the Bankruptcy Act. That is a provision for orders that the court can make if there has been an application under s.139A by the trustee of a bankrupt estate for an order in relation to a respondent entity. It appears that it may be intended to be submitted that the Trustee ought to have made such an application to the court. There was no explanation of how the circumstances in this case are such that it is appropriate for the Trustee to apply to the court for orders in relation to property of an entity that is controlled by the bankrupt, or from which the bankrupt has derived a benefit. The relevance of these provisions has not been established on the submissions of the applicant and the material before the court. This section provides no basis for any orders to be made by the court, whether under s.178 of the Bankruptcy Act or otherwise.
There is also a reference in the amended application to s.176 of the Bankruptcy Act. It provides that if on application by the Inspector‑General or a creditor who has or had a debt provable in the bankruptcy, the court is satisfied that a person who is or has been trustee of a bankrupt estate has been guilty of breach of duty in relation to the bankrupt’s estate or affairs, the court may make orders, including making good any loss that the bankrupt’s estate has sustained because of the person’s breach of duty, or any other order that the court considers just and equitable in the circumstances. Mrs Charan explained in submissions that she was not seeking an order under s.176 and, indeed, it would not seem that she could do so, as there is no suggestion or evidence before the court that she is a creditor who has or had a debt provable in the bankrupt estate. Section 176 has no application. Nor has it been established that s.133(5A) and (5B) (in relation to a trustee seeking leave of the court to disclaim a contract) has any relevance or provides any basis for a remedy under s.178 or otherwise.
Insofar as Mrs Charan appeared to be contending that she had suffered loss by virtue of the Trustee’s act or omission and that this should be compensated under s.178 by way of some analogy with s.176, I have indicated the limited scope of s.178 and that it does not provide a cause of action for damages in the manner that appears to be contended for by Mrs Charan. In any event, it has not been established that the Trustee has been guilty of a breach of any duty in relation to the bankrupt’s estate owed to Mrs Charan and nor, for that matter, has there been any proper calculation of any claimed loss. There is no basis on the material before the court on which I can be satisfied that there has been some negligence in the manner contended for by the applicant. I was not addressed on the elements of the asserted negligence, beyond a general complaint about the Trustee’s administration of the estate. Mrs Charan’s claim that the Trustee failed to do certain things which she understood that a Trustee should do under the Bankruptcy Act does not suffice. She also referred to the fact that the Trustee did not accept her claim that the bankrupt had no interest in the Casula property, that the caveat should be lifted and she should be able to sell the property. However these matters do not establish negligence.
It may be that there are issues in relation to the value of the Casula property and the value of the mortgage, but this is not such that the court would make an order for damages against the Trustee. None of the other provisions referred to in the amended application, nor any of the other provisions in the Bankruptcy Act and Regulations referred to in the earlier applications, are such as to establish that there has been an act or omission by the Trustee such as to warrant the court making any order under s.178 of the Bankruptcy Act.
In particular it is clear that there is an outstanding issue in relation to the bankrupt’s interest in and contribution to the Casula property that has not been addressed to the satisfaction of the Trustee. The material before the court is not such as to satisfactorily address it. There is insufficient material before the court to justify the court making any order, even if it could do so, such as to compel the Trustee to accept any offer that Mrs Charan might see fit to make in relation to the value of the bankrupt’s interest in the Casula property. There is no basis in the material before the court for any order to be made by the court compensating Mrs Charan for claimed loss that in relation to the Casula property.
In all of the circumstances the claim that Mrs Charan makes is not made out on the evidence before the court.
RECORDED : NOT TRANSCRIBED
As the applicant has been unsuccessful it is appropriate that she meet the costs of the respondent Trustee. The respondent seeks costs on an indemnity basis. The issue of costs is a matter in the discretion of the court. In the normal course of events, costs would be ordered on a party/party basis. The court does have a discretion to determine whether the particular facts and circumstances of the case warrant the making of an order for the payment of costs on some other basis, such as on an indemnity basis.
A number of cases have considered the circumstances in which an indemnity costs order is appropriate (see, for example, Colgate-Palmolive Company and Another v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536 and the summary in Genovese v BGC Construction Pty Ltd (No. 2) [2007] FMCA 601). Relevant factors include whether a party should have known that there were no prospects of success in a case, whether a party alleged fraud or forgery knowing the accusation to be false or irrelevant; whether a party punctuated proceedings by resiling from a previously adhered to view, acted in a high-handed manner or proceeded vexatiously without sufficient grounds to cause trouble or annoyance or for no good purpose; whether a party persisted in the making of allegations that ought not to have been made causing loss of time to the court and other parties or imprudently refused an offer of compromise. Regard is to be had to the objects of encouraging the savings of public and private costs.
A factor of particular significance in this case is that the party against whom indemnity costs are sought is self-represented. Generally, courts are more reluctant to make order for indemnity costs against litigants in person (Ogawa v The University of Melbourne(No 2) [2004] FCA 1275), although that does not mean that a costs order on an indemnity basis could never be made against a self-represented litigant. If a litigant in person continued to pursue an action that was hopeless where that had been pointed out and the action was obviously hopeless, such an order may be justified. Similarly if an action was devoid of merit and there was unreasonable perseverance prolonging the action such an order might be made.
This case is one which is fairly finely balanced, in that from a lawyer’s point of view it can be seen that it is not a case which had merit as it was pursued. Insufficient evidence has been put before the court in support of the claims that are made. The action was commenced in circumstances where there had been an unsuccessful complaint to ITSA, but that should not, of itself, mean that indemnity costs are appropriate, having regard to the different nature of the jurisdiction of the court under s.178 and the role of ITSA.
On balance, I am not persuaded on the material before the court that this is a case in which costs should be ordered on an indemnity basis. While the Trustee, understandably, was not satisfied with Mrs Charan’s explanation about the $195,000 proceeds of sale, I do not consider that the case is one in which it could be said that Ms Charan should have known that there was no prospect of success. In addition, the manner in which she has conducted herself and the proceedings is not such as to warrant an order of costs on an indemnity basis. I consider, however, that she should meet costs on the usual basis.
I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 16 February 2010
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