Clark, Timothy Marcus v The Official Trustee in Bankruptcy as Trustee of the Bankrupt Estate of Timothy Marcus Clark
[1998] FCA 945
•28 JULY 1998
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE – security for costs – Federal Court Rules O 53 r 8 -application for early discharge from bankruptcy – where bankrupt unable to pay security – whether Court can infer that bankrupt’s wife will pay security – whether security likely to stultify appeal – what constitutes “special circumstances”
BANKRUPTCY – security for costs – application for early discharge from bankruptcy – where bankrupt unable to pay security – whether Court can infer that bankrupt’s wife will pay security – whether security likely to stultify appeal
Federal Court Rules O 53 r 8
Bond v Trustee of Property of Alan Bond, a bankrupt, (1994) 20 AAR 1 discussed
Fletcher v Commissioner of Taxation (1992) 37 FCR 288 mentioned
TIMOTHY MARCUS CLARK v OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF TIMOTHY MARCUS CLARK
NO. VG 206 of 1998
JUDGE: HEEREY J
DATE: 28 JULY 1998
PLACE: MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 206 of 1998
BETWEEN:
TIMOTHY MARCUS CLARK
APPLICANTAND:
OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF TIMOTHY MARCUS CLARK
RESPONDENTJUDGE:
HEEREY J
DATE OF ORDER:
28 JULY 1998
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The applicant provide security for costs of and incidental to the appeal in the sum of $10,000 in such a manner as is acceptable to the respondent, or failing agreement in such a manner and on such terms as the Court directs.
The appeal be stayed until the security is provided.
Liberty to apply be reserved.
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
VG 206 of 1998
BETWEEN:
TIMOTHY MARCUS CLARK
APPLICANTAND:
OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF TIMOTHY MARCUS CLARK
RESPONDENT
JUDGE:
HEEREY J
DATE:
28 JULY 1998
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
The respondent applies for an order for security for costs in respect of the applicant’s appeal against a decision of the Administrative Appeals Tribunal. It is accepted that the relevant power is conferred by O 53 r 8 of the Federal Court Rules which is in an order dealing with appeals under the Administrative Appeals Tribunal Act 1975 (Cth). Rule 8 provides:
(1) The Court may, in special circumstances, order that such security for costs of appeal to the Court be given as it thinks fit;
(2) Subject to subrule (1), no security for costs of an appeal to the Court shall be required.
It can be said at once that this rule would seem to erect a higher threshold than the unqualified discretion as to security for costs conferred by s 56 of the Federal Court of Australia Act 1976 (Cth) or Order 28.
On 24 April 1996 the applicant was made bankrupt on his own petition. His statement of affairs dated the same day disclosed assets totalling some $255,000 and liabilities totalling $81.25 million. It is perhaps a matter of notoriety that the prime liability was a judgment debt in favour of the State of South Australia which arose out of the collapse of the State Bank of that State.
On 25 October 1996, that is just to say immediately after the passage of the minimum period of 6 months, the applicant applied for early discharge from bankruptcy under Pt VII Div 3 of the Bankruptcy Act 1966 (Cth) (the Act). The Official Trustee refused that application and the applicant appealed to the Tribunal. After a contested hearing over several days the Tribunal, constituted by its President, delivered a decision on 23 April 1998 dismissing the appeal. It is from that decision that the present appeal is taken. By force of s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) the appeal must be heard by a Full Court.
The decision of the Tribunal was the first to deal with some new provisions of the Act. It is accepted for the purposes of the present application that the appeal is bona fide and arguable. It is also accepted, again for the purposes of the present application, that the applicant has, for all practical purposes, no assets and no source of income. However, what is relied on by the Official Trustee is the fact that up until now the applicant’s legal expenses in relation to his bankruptcy have been met by his wife, Mrs Micaele Vivian Clark.
As at 20 May 1998 Mrs Clark had paid the applicant's solicitors $21,614.30 with respect to legal fees in connection with his bankruptcy. Details of those fees were also provided by the solicitors. They also disclose that the payments of the fees by Mrs Clark were on a timely basis. In an affidavit sworn in opposition to this application the applicant deposed as follows:
Mrs Clark has, since the date of my bankruptcy, paid all accounts rendered to me by my solicitors herein. As stated in the letter from my solicitors to Mr Ballantyne dated 20 May 1998, and referred to in his affidavit at paragraph 7, those accounts were paid by Mrs Clark pursuant to an arrangement I have with her. That arrangement does not impose an obligation on Mrs Clark to pay my legal fees. The arrangement arises out of the usual domestic circumstances of my marriage to Mrs Clark. Any obligation which Mrs Clark may feel she has to pay my legal fees is purely a moral obligation. Mrs Clark has informed me, and I verily believe, that she will not provide me with any funds or form of security for the purpose of providing for the costs of the respondent in this proceeding.
Save for the provision of any financial assistance from Mrs Clark, I have no means available to me to meet an order of This Honourable Court that I provide security for the respondent's costs of this application. Accordingly, in the event that This Honourable Court makes such an order, I verily believe that I will not be able to proceed with the application herein.
No affidavit was sworn by Mrs Clark. It will be noted that the applicant's affidavit does not suggest that Mrs Clark would not be providing funds for his own representation on the appeal.
Counsel for the Official Trustee placed reliance on a decision by French J in Bond v Trustee of the Property of Alan Bond, a Bankrupt, (1994) 20 AAR 1. In that case Mr Bond was seeking to appeal to this Court from a decision of the Tribunal which had assessed him for liability to the extent of approximately $300,000 under Div 4B of Pt VI of the Act. There was evidence that members of Mr Bond's family, and in particular his son Mr John Bond, had paid for his legal costs up until that stage.
It was argued that Mr Bond had no assets and that his inability to comply with any order for security “may lead to the stultification of the proceedings”. French J accepted that there was no legal obligation on Mr John Bond to make any payment to his father; payments appeared to be in his absolute discretion. His Honour, however, remarked (at 8):
But, as I said in argument to Mr Mullany, counsel for Bond, I consider that in assessing whether or not special circumstances exist and in looking at Bond's circumstances generally, I am entitled to look through the forms to the substance. In this case, there is a substantial record of considerable financial support from members of his family in relation to legal proceedings and expenses associated with his accommodation and travel. And, looking through the forms to the substance, I am entitled to make, I think, a judgment about the probability of the continuance of that kind of support in this case and the probability that this appeal is being funded by support derived from those sources. I think the probabilities are that it is being so funded. The timing of the Accommodation Facility and the payments made under it in October 1993 are all highly suggestive of that fact. I consider that, given the amount at stake in this case, which is possible exposure to a contribution in excess of $300,000, against the modest quantum of the security which is sought, that is $7,500, it is unlikely in the extreme that support to enable Bond to comply with an order would not be forthcoming. So I think the special circumstance in this case is that he is nominally impecunious but is being funded or likely to be funded by members of his family. The framework that they have set up and the course of conduct which they have established indicates that the security order would be met. In other words, I think it is highly unlikely that this appeal would be stultified by the making of such an order in these circumstances.
History records that his Honour's prediction turned out to be correct. The appeal did proceed and, what is more, successfully from Mr Bond's point of view. In the present case counsel for the applicant properly stressed that Bond was a discretionary decision, ultimately turning on its own facts. It is not appropriate to compare in detail different elements of the factual matrix in that case with those in the present case. However, I think Bond provides support for a general approach to this case. It does seem to me that if there were a choice between providing security and the appeal not proceeding I think security would be forthcoming. In other words, I am not prepared to draw the inference that an order for provision of security would lead to the stultification of the appeal.
Having regard to the funds which have already been provided by way of legal expenses and the total lack of evidence, even on a hearsay basis, to suggest that Mrs Clark is in any way short of the relevant funds, I would infer that the money would be forthcoming. It is not for me to say whether it is unusual for family members of bankrupts to support litigation. There is simply no empirical evidence one way or the other. However, the circumstances of this case do amount to special circumstances within the meaning of the rule. I should add that, in predicting that the security would be forthcoming, I draw the inference that both the applicant and Mrs Clark regard bankruptcy as an unfortunate and disabling status for Mr Clark and something they would both wish to bring to an end as soon as possible. Amongst other things, I note the funds already expended by Mrs Clark and the early date on which the application for early discharge was made.
There was also a point made by counsel for the applicant that the Court should be less ready to make an order for security for costs when the respondent is funded out of the public purse. Reference was made to Fletcher v Commissioner of Taxation (1992) 37 FCR 288 at 293. That seems to me, however, a very different situation, being concerned as it was with the administration of the tax system. Understandably, Hill J indicated his natural reluctance to make an order for security for costs against a natural person seeking to appeal as part of the ordinary taxation appeals system against a decision of the Tribunal reviewing an objection decision.
In the present case the burden of the costs will fall on the creditors of the estate. The fact that the major creditor is the State of South Australia does not materially alter the situation.
There being no argument as to the quantum of the amount sought I will order that the applicant provide security for costs of and incidental to the appeal in the sum of $10,000 in such a manner as is acceptable to the respondent, or failing agreement in such a manner and on such terms as the Court directs. I further order that the appeal be stayed until the security is provided.
I reserve liberty to apply.
I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey
Associate:
Dated: 28 July 1998
Counsel for the Applicant: Mr G T Bigmore QC Solicitor for the Applicant: Gadens Laywers Counsel for the Respondent: Mr R S Randall Solicitor for the Respondent: Cornwall Stodart Date of Hearing: 28 July 1998 Date of Judgment: 28 July 1998
0
0
0