Cosenza v Stephen Duncan of Duncan Powell (Trustee in Bankruptcy) (No.2)
[2018] FCCA 1749
•4 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COSENZA v STEPHEN DUNCAN OF DUNCAN POWELL (TRUSTEE IN BANKRUPTCY) (No.2) | [2018] FCCA 1749 |
| Catchwords: BANKRUPTCY – Application by unsecured creditor of discharged bankrupt against trustee in bankruptcy – discharged bankrupt not a party to proceedings – application purported to be brought pursuant to Limitation of Actions Act 1936 (SA) – applicant did not bring proceedings against bankrupt pursuant to section 81 of Bankruptcy Act 1966 – automatic discharge from bankruptcy – no objection made by trustee to automatic discharge from bankruptcy – summary dismissal – no reasonable prospects of success - provision of information about bankrupt by unsecured creditor to trustee – proper acquittal of duties by the trustee – matters to be considered – application dismissed. |
| Legislation: Bankruptcy Act 1966, ss.19; 77; 81; 126; 127; 134; 149; 152; 153; 176; 178; 263; 265 Corporations Act 2001 |
| Cases cited: McKellar v Container Terminal Manager Services Limited (1999) 165 ALR 400 Dey v Victorian Railway Commissioners (1949) 78 CLR 62 Webster v Lampard (1993) 177 CLR 598 Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541 Przbylowski v Australian Human Rights Commission (No 2) [2018] FCA 473 | ||
| Applicant: | DEAN COSENZA | |
| Respondent: | STEPHEN DUNCAN OF DUNCAN POWELL (TRUSTEE IN BANKRUPTCY) |
| File Number: | ADG 161 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 31 January 2018 |
| Date of Last Submission: | 31 January 2018 |
| Delivered at: | Adelaide |
| Delivered on: | 4 July 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Lazarevich |
| Solicitors for the Applicant: | Maurice Blackburn Lawyers |
| Counsel for the Respondent: | Mr Bullock |
| Solicitors for the Respondent: | Cowell Clarke |
ORDERS
The application filed 3 May 2017 and the application in a case filed 14 November 2017 are dismissed.
The application for costs filed 4 October 2017 is fixed for hearing at 2:15pm on 24 September 2018.
The respondent file and serve any further affidavit material on which he wishes to rely on or before 27 August 2018.
The applicant file any answering affidavit material on or before 10 September 2018.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 161 of 2017
| DEAN COSENZA |
Applicant
And
| STEPHEN DUNCAN OF DUNCAN POWELL (TRUSTEE IN BANKRUPTCY) |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant in these proceedings is Dean Cosenza. The respondent is Stephen Duncan, in his capacity as trustee in bankruptcy of the Estate of Thomas Tigani.
Mr Tigani is not a party these proceedings. His financial affairs are, however, central to it. He was bankrupted, on his own petition, on 20 November 2006. Mr Duncan was appointed to administer his estate on 20 November 2006.
Mr Cosenza and a company of which he was sole director, Denco Holdings Pty Ltd, were two of Mr Tigani’s creditors. In 1998, Mr Cosenza and his company invested the sum of $150,000.00 in a commercial olive farm Kingsford Olives operated by Mr Tigani through a company Annatom Pty Ltd.
The monies advanced were subject to a guarantee. I have not been provided with a copy of the guarantee and do not know the specific parties to it. Both Mr Tigani and Mr Cosenza, at relevant times, operated companies and related trusts.
Denco Holdings Pty Ltd obtained a judgment, against Mr Tigani and Annatom Pty Ltd, in the District Court of South Australia, on 7 June 2005, in an amount of $199,699.00.[1] The presiding judge was His Honur Judge Kitchen. This judgment was unsatisfied at the date of Mr Tigani’s bankruptcy.
[1] See Judgement of Judge Kitchen dated 7 June 2005 being Annexure DC 2 to the applicant’s affidavit filed 14 November 2017
A reading of Judge Kitchen’s judgment indicates that Mr Cosenza became bankrupt, on his own petition, in December of 2003. During the course of the proceedings before me, I was provided with a deed of assignment dated 1 May 2017, by Mr Lazarevich, counsel for Mr Cosenza, which indicated that, as at 1 May 2017, Denco Holdings Pty Ltd, through the agency of its sole director, Mr Cosenza assigned to Mr Cosenza personally all its rights in any debts owed to it by Mr Tigani.[2]
[2] See Exhibit A
As a consequence, during the proceedings before me, it has been generally agreed, by all concerned, that Mr Cosenza was an unsecured creditor of Mr Tigani. Certainly, during Mr Tigani’s bankruptcy, Mr Cosenza approached Mr Duncan and his staff as if he was such.
On 21 November 2009 Mr Tigani was automatically discharged from his bankruptcy, due to the operation of section 149 of the Bankruptcy Act 1966.[3] It is Mr Cosenza’s view that Mr Duncan should have opposed the discharge and, moreover, during the course of his administration done more to pursue Mr Tigani to recover monies from him in order to reimburse his various creditors, among whose number are Mr Cosenza and Denco Pty Ltd.
[3] Hereinafter referred to as “the Act”
Mr Cosenza commenced these proceedings on 3 May 2017, some seven years and approximately five months after this discharge, by way of an application supported by an affidavit, which he had prepared himself. In the application, he sought the following orders:
·An application to set aside the notice of discharge of Mr Tigani’s bankruptcy on the basis of fraud;
·A declaration that Mr Tigani “committed a fraud upon his creditors and trustee in bankruptcy”;
·A declaration that Mr Tigani “not be released from bankruptcy for fraud or fraudulent breach of trust upon his trustee and creditors to which he was a party”.
Insofar as he requires any extension of time, within which to issue these proceedings, Mr Cosenza also seeks such an extension. The application is expressed to be brought pursuant to the provisions of section 48 of the Limitation of Actions Act (South Australia) and sections 77, 81, 126, 127, 134, 149D, 152, 153, 176, 178, 263 and 265 of the Act.
The Act has recently been significantly amended by the Insolvency Law Reform Act 2016. So far as it is relevant, Mr Cozenza also asserts his application has been brought pursuant to the provisions of section 90-5, 90-10, 90-15 and 90-20 of this Act.
Mr Duncan, by way of an application filed on 4 October 2017, supported by an affidavit of Symoane Natalie Mercurio, seeks the dismissal of Mr Cosenza’s application, on a summary basis, pursuant to the provisions of section 17A of the Federal Circuit Court of Australia Act 1999. In addition, Mr Duncan seeks the payment of his costs, by Mr Cosenza, on an indemnity basis.
Essentially, Mr Duncan accepts that Mr Cosenza has many complaints about Mr Tigani’s financial conduct, both before and after his bankruptcy, and alleges that he (Mr Tigani) concealed assets from Mr Duncan, whilst he was administering the estate.
Mr Duncan has deposed that Mr Cosenza has raised these issues with his office many times, which has caused members of Mr Duncan’s staff to seek advice from the Official Trustee as to whether Mr Tigani has committed any offence under the Act and, if so, what actions should Mr Duncan pursue.
It is Mr Duncan’s evidence that this advice has been that his actions, as trustee, in respect of these matters, are limited. In these circumstances, he has elected to take no action, arising from any of Mr Cosenza’s complaints, because he believes that such actions will be not be cost efficient.
Mr Duncan further asserts that he has no funds (and did not during the administration of the estate) to pursue the matters raised by Mr Cosenza and was therefore not in a position to initiate any action sought by Mr Cosenza, against Mr Tigani, even if he had considered it warranted.
Underpinning Mr Duncan’s position is the fact that Mr Tigani has been discharged from his bankruptcy for a period in excess of six years. He is not in funds to pursue the matters of such pressing interest to Mr Cosenza, which he (Mr Duncan) assesses to have no validity.
However, Mr Duncan asserts that his views and assessment of the situation are no bar to Mr Cosenza himself bringing proceedings against Mr Tigani personally, particularly pursuant to the provisions of section 81 of the Act, which authorise him, as a creditor, to seek that the court exercise its discretion to summon Mr Tigani for oral examination by him.
In this context, Ms Mercurio, Mr Duncan’s solicitor wrote to Mr Cosenza in the following terms:
“If … your objective is to establish that the bankrupt concealed property or otherwise did not disclose property that would have vested in the Trustee and delivered a return to creditors, then you are capable of pursing the matter simply by bringing an application to examine the bankrupt pursuant to section 81. It does not need to involve our client nor such an elaborate application (that is fundamentally flawed and misconceived) of this nature.”[4]
[4] See annexure SNM 2 to the affidavit of Ms Mercutio filed 4 October 2017
It is this statement, together with an indication that, as at 19 September, Mr Duncan had incurred costs in an amount of $5,000.00, which is the basis of the trustee’s claim for indemnity costs, incurred in the proceedings thus far.[5] Mr Duncan submits that the proceedings are misconceived and Mr Cosenza was on notice, at an early stage that he was at risk of costs, if he proceeded further.
[5] Ibid at annexure SNM 6
Background
Mr Cosenza has many complaints and criticisms in respect of the manner in which Mr Duncan and his professional associates managed Mr Tigani’s bankrupt estate. In particular, he alleges as follows:
·The trustee, during the bankruptcy, failed to examined Mr Tigani’s business affairs and assets with due diligence, particularly in respect of companies and trusts, with which Mr Tigani and members of his family were associated;
·Mr Tigani failed to disclose assets to his trustee, which fell within his estate and were therefore subject to this bankruptcy, which should have been more thoroughly investigated by Mr Duncan.
·Mr Tigani misappropriated significant funds, during the bankruptcy, in order to defeat the interests of his creditors, again something which should have been more thoroughly investigated by Mr Duncan;
·Mr Tigani continued to engage in business, during his bankruptcy, including in respect of an olive farm, related water licences and an agricultural machinery firm.
It is Mr Cosenza’s case that he has consistently raised issues to do with Mr Tigani and his business affairs, with Mr Duncan’s office, both during and after Mr Tigani’s bankruptcy, but these issues have not been properly investigated, to the detriment of Mr Cosenza and others of Mr Tigani’s creditors.
Mr Duncan disputes these various assertions. It is his position that he and his associate Mr Gyss did all that was statutorily required of them to administer Mr Tigani’s bankrupt estate, including investigating matters referred to them by Mr Cosenza.
Mr Duncan has provided the court with a copy of Mr Tigani’s statement of affairs, which was completed in November of 2009.[6] This statement of affairs revealed that Mr Tigani had been a director of a number of companies, prior to his bankruptcy. These included the following:
·Tomdan Nominees Pty Ltd;
·Australian Olive Oil Corporation Pty Ltd;
·Estotilandia Investments Pty Ltd; and
·Annatom Pty Ltd.
[6] See annexure SJD2 to the affidavit of Stephen James Duncan filed 27 June 2017
Tomdan Nominees Pty Ltd was the corporate trustee of two trusts, which were also disclosed in Mr Tigani’s statement of affairs. At first blush, there would appear to be some level of complexity about Mr Tigani’s former affairs.
Mr Cosenza would assert that this complexity was intended by Mr Tigani to enable him to conceal his finances and defeat his creditors and Mr Duncan did not investigate it with appropriate diligence.
Mr Duncan has deposed that he and Mr Gyss investigated the following matters, whilst administering Mr Tigani’s estate:
·Interviewed Mr Tigani personally;
·Conducted motor vehicle, company and property searches with respect to Mr Tigani;
·Contacted the accountants of the various corporations of which Mr Tigani had been a director;
·Identified other assets owned by Mr Tigani.
Mr Duncan has further deposed that he was aware of proceedings, involving Annatom Pty Ltd and Tomdan Nominees Pty Ltd, in the period leading up to Mr Tigani’s automatic discharge from bankruptcy, in November of 2009. These included proceedings by the liquidator of Annatom Pty Ltd to prosecute Mr Tigani, pursuant to the provisions of the Corporation Act 2001, to prevent him from being a director in future.
In all these circumstances, Mr Duncan formed the view that there was no utility in opposing Mr Tigani’s discharge from bankruptcy. At the time, he was aware that Mr Cosenza did not agree with this decision. In this context, on 24 August 2009, Mr Gyss wrote to Mr Cosenza, in the following terms:
“I advise that the Trustee will not be lodging an objection to Tigani’s release from bankruptcy.
The matter has been discussed with ITSA and the Trustee has considered the costs and benefits of lodging an objection from the perspective of the bankruptcy administration and what it would practically achieve.
The Trustee has taken into consideration in making a decision that other parties including other regulatory authorities are carrying out or funding investigations which are likely to result in prosecution including his banning as a director under the Corporations Act.
In addition Court proceedings have been initiated by other parties in an attempt to deal with Tigani regarding his previous conduct and his dealings with various assets.
These parties are better placed and better funded to pursue these matters.
The bankruptcy administration will continue beyond the discharge of the bankrupt. Any asset or claim that we become aware of that would form part of the bankrupt’s estate can still be pursued or recovered by the Trustee. As you are aware there have been no assets realised to date in the administration.”[7]
[7] See affidavit of Stephen James Duncan filed 27 June 2017 at [45]
Mr Cosenza was aggrieved at this decision and formally complained to the Insolvency & Trustee Services Australia,[8] the bankruptcy regulator. Mr Cosenza’s complaint was referred to Tim Howes, who at the time, was the Senior Inspector, for South Australia of the Bankruptcy Regulation Branch of ITSA.
[8] Commonly referred to as “ITSA” It is now known as the Australian Financial Security Authority “AFSA”
In response to an inquiry from Mr Howes, Mr Duncan wrote to him, on 6 October 2009, detailing his activities in respect of the estate. He noted that, up to this stage, he had not been able to identify any assets, which might be realised for the benefit of Mr Tigani’s estate.
Mr Duncan did however concede that Mr Tigani’s business affairs, particularly the involvement with the various corporate entities outlined above, were complex, particularly since those entities were in administration. In this context, Mr Duncan advised as follows:
“We identified properties and plant & equipment however these assets were owned by companies that were subject to formal administration and subject to the claims of secured creditors. Discussions were held with the Receivers & Managers and Liquidators of the companies who were in control of these assets and investigating the conduct of the relevant company and it’s [sic] officers including the bankrupt.
…
For the period 20 November 2006 to 30 September 2009 the Trustee and his staff have spent a total 114.5 hours in the conduct of the bankrupt estate and investigating the affairs of Mr Tigani. The Trustee has paid out of pocket expenses in conducting the various statutory searches. To date no assets have been realised in the bankrupt estate.
It is apparent that Mr Tigani has had an involvement with a significant number of trading entities over a number of years. The assets within the Tigani Group according to the investigations by the Trustee were all encumbered to financiers and are currently the subject of formal administration by receiver & managers and / or liquidators. The Trustee has had ongoing discussions with the respective liquidators and receivers & managers regarding the realisation of those assets and the activities of Mr Tigani.
The Trustee has considered the various lines of enquiry and considers that reasonable steps have been taken to investigate. Notwithstanding the investigation work carried out the Trustee has not been able to identify any particular asset or legal claim that might reasonably be considered capable of realising value for the benefit of the bankrupt estate. The investigation of the bankrupt's affairs has not been finalised.
The Trustee has considered the conduct of Mr Tigani in allegedly continuing to manage various businesses including companies currently subject to formal administration. The Trustee has not been able to identify any other assets or claims that might give rise to the realisation of the assets for the benefit of the bankrupt estate.”[9]
[9] Ibid at [50-[51]
Ultimately, Mr Howes found that there was no substance to Mr Cosenza’s complaint, as in his assessment, Mr Duncan had discharged his obligations under the Bankruptcy Regulations 1996, particularly in terms of the taking of appropriate steps to identify the assets of the estate.[10]
[10] See Division 4.2 of Schedule 4A of the Bankruptcy Regulations 1996
As indicated, in his correspondence above, Mr Duncan was aware of the complexity of Mr Tigani’s business dealings prior to his bankruptcy, which included his involvement in several corporate structures and several financiers. Although, Mr Tigani was a common element of all these structures, different mechanisms and different legislative regimes apply to corporate insolvency to those applicable to personal insolvency.
In addition, in that correspondence, Mr Duncan made the same point as he has maintained in his opposition to the current proceedings. His statutory obligations, as trustee, require him to approach the investigation of a bankrupt’s affairs, in a prudent and fiscally responsible manner. He does not have carte blanche to pursue every possible line of inquiry open to him.
In these circumstances, Mr Tigani was discharged from his bankruptcy on 20 November 2009. Section 149(3) of the Act provides for automatic discharge from bankruptcy after a period of three years.
The section is subject to section 149A, which allows for objections to be lodged to such discharge. If an objection is lodged, it has the effect of extending the period of bankruptcy. Mr Cosenza faces a number of difficulties, in respect of the application of these provisions, which include the following.
Pursuant to section 178(2), any such application must be made not later than 60 days after the day on which the person concerned became aware of the applicable act, omission or decision of the trustee, to which exception is taken. As will become clear, Mr Cosenza has been concerned about Mr Duncan’s former administration of Mr Tigani’s estate for a significant period of time.
As Mr Duncan did not object to the discharge of Mr Tigani’s bankruptcy, there was no extension of the bankruptcy in question, pursuant to the provisions of section 149A.
The possible grounds of objection to discharge are set out in section 149D. They include circumstances in which a bankrupt has failed, whether intentionally or not, to disclose to the trustee any beneficial interest in property.
In mid-2016, Mr Cosenza discovered that Mr Tigani was apparently personally involved, as a plaintiff, in proceedings in the District Court of South Australia in Stix Farms Pty Ltd.
It is Mr Cosenza’s position that evidence provided by Mr Tigani, on oath, in these proceedings, confirmed his (Mr Cosenza’s) assertion that Mr Tigani and his wife were in control of assets, not disclosed to Mr Duncan, during the period of Mr Tigani’s bankruptcy.
Accordingly, by necessary implication, these disclosures could have formed the basis for Mr Duncan to object to Mr Tigani’s discharge from bankruptcy, pursuant to the provisions of section 149D(1)(ma) & (n). This potentially could have extended the prescribed number of years of Mr Tigani’s bankruptcy to eight years.
In particular, Mr Cosenza alleged that affidavit material filed in the District Court proceedings, by Mr Tigani, indicated that he had received rent from leasing land and olive oil harvesters, as well as direct income from the sale of wheat, charcoal and olive oil products.
As a consequence of the information received by him from Mr Cosenza, Mr Gyss contacted Gemma Denton, who at relevant times was the Assistant Director (Enforcement) for the Australia Financial Security Authority,[11] the statutory authority currently responsible for the prosecution of regulatory offences arising under the Bankruptcy Act.
[11] Hereinafter referred to as “AFSA”. It is the regulatory successor to ITSA.
Mr Gyss took this action because of Mr Cosenza’s assertion that the evidence available to him, from the District Court proceedings involving Stix Farms Pty Ltd indicated that Mr Tigani had committed offences under the Act.
In this context, Mr Gyss forwarded to Ms Denton the affidavits of Mr Tigani and his wife Francesco Tigani, which had been filed in the District Court proceedings in September and October of 2014 respectively.
In covering correspondence, he indicated to Ms Denton that the affidavit of Mr Tigani appeared to refer to a number of business transactions and relationships, in which he appeared to “have been personally involved during the terms of his bankruptcy”.
Mr Gyss further indicated that these transactions and any income derived from them had not been disclosed to Mr Duncan during the term of Mr Tigani’s bankruptcy.
Following her review of this affidavit material, Ms Denton did not recommend that any prosecution be commenced against Mr Tigani. She reached this conclusion for the following reasons:
·The evidence in Mr Tigani’s affidavit was disputed by other witnesses in the proceedings;
·There was no evidence to indicate what amount of income Mr Tigani had earned during the bankruptcy. In these circumstances, it was not possible to determine what effect, if any, the alleged non-disclosure would have had on the administration of the bankruptcy;
·It was not an offence per se for a bankrupt to operate a business during a period of bankruptcy;
·There was no evidence that Mr Tigani had obtained credit, whilst a bankrupt;
·It was not in the public interest to investigate the matter further, given the passage of time since the alleged misconduct had occurred.
In these circumstances, Mr Duncan disputes the assertion that he and his office took no action in respect of the matters raised with him, by Mr Cosenza, in respect of the litigation involving Stix Farm Pty Ltd.
To the contrary, he asserts that he reviewed the pleadings and affidavit material relating to the proceedings and formed the view that there was insufficient evidence to justify him taking any further steps against Mr Tigani. In particular, it was his view that these proceedings had not had the effect of disclosing any asset of Mr Tigani not otherwise identified.
It is clear that Mr Cosenza does not accept this conclusion. It is in these circumstances he has commenced the current proceedings, ostensibly pursuant to the provisions of section 178(1) of the Bankruptcy Act, which reads as follows:
“If the bankrupt, or 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.”
The section has been repealed, as a consequence of the Insolvency Law Reform Act 2016.[12] Its repeal took effect from 1 March 2017, some two months prior to the commencement of the relevant application by Mr Cosenza.
[12] Hereinafter referred to as the Reform Act
Subdivision B of Schedule 1, creates the Insolvency Practice Schedule, which is now Schedule 2 to the Act. It empowers the court to inquire into the administration of a bankrupt’s estate. In particular, pursuant to section 90-20(1)(a) a person with an interest in the administration of a debtor’s estate may apply pursuant to section 90-15(3)(a) into “any question arising in the administration of the estate”. It is Mr Cosenza’s position that he is such a person because of the debt arising to him or Denco Pty Ltd.
In addition, section 90-15(1) empowers the court to make any order, as it thinks fit, in relation to the administration of a debtor’s estate. In particular, pursuant to subsection (3), it can make an order in relation to any loss that the estate has sustained because of a breach of duty by the trustee.
In all these circumstances, it is Mr Cosenza’s submission that the court has significant powers to inquire into the question of whether Mr Duncan should have taken action against Mr Tigani and, if as a result of those inquiries, it is determined that Mr Duncan acted inappropriately, has a wide discretion in respect of what resulting orders should be made.
It is Mr Duncan’s position (as advocated by his counsel, Mr Bullock) that Mr Cosenza’s application constitutes a broad shopping list of complaints against him (Mr Duncan), which lack substance. In particular, when Mr Cosenza’s claim is boiled down, the substance of his complaint is against Mr Tigani and his conduct, rather than that of Mr Duncan in his capacity as trustee.
In these circumstances, Mr Duncan contends that Mr Cosenza should proceed against Mr Tigani, if he wishes to investigate affairs relating to his bankruptcy, rather than against Mr Duncan, who has considered the various matters raised by Mr Cosenza, during the period of the bankruptcy and afterwards and concluded that they do not merit further action.
In this context, reference is made to section 81, which empowers the court at any time, including after the end of a bankruptcy, to summons a person, including any former bankrupt to be examined. Mr Cosenza as a purported creditor of Mr Tigani has the standing to make such an application.
Mr Duncan had made it clear that he has no interest in seeking any remedy under this section. However, he contends that it is open to Mr Cosenza to do so, if he wishes.
In these circumstances, it is Mr Duncan’s case that Mr Cosenza has no reasonable prospects of being successful, in his application against him and therefore the application so far as it pertains to him, should be dismissed.
Counsel for Mr Duncan, Mr Bullock contends that the proceedings against his client are without merit, on the following basis:
·The relief in the application is sought against Mr Tigani alone and bears no rationale relationship to any allegation of fact or law against Mr Duncan;
·To the extent that the various statutory provisions outlined by Mr Cosenza, in his self-prepared application of 3 May 2017, none of those provisions give rise to any cause of action against Mr Duncan specifically or enable the court to grant the relief sought by Mr Cosenza.
·In these circumstances, Mr Bullock submits that it is open to the court to conclude that Mr Cosenza has either seriously misconceived the role of a bankruptcy trustee and the relevant provisions arising under the Act, or is pursuing the proceedings against Mr Duncan for some collateral or ulterior purpose.
·In these circumstances, given Mr Duncan has long concluded his administration of Mr Tigani, it is onerous for him to be involved in any litigation instigated by Mr Cosenza because there is no possibility of him being remunerated from the now administered estate of Mr Tigani.
·Accordingly, Mr Bullock contends that it has the potential to wreak significant injustice, on his client, if these unmeritorious proceedings are able to continue against Mr Duncan.
·In this context, Mr Bullock submits that when Mr Cosenza’s application is subject to analysis, the orders and remedies which he seeks are all potentially applicable to Mr Tigani, rather than Mr Duncan. These are declarations that Mr Tigani has committed a fraud; a declaration that Mr Tigani not be released from his bankruptcy and an injunction restraining Mr Tigani from dealing with assets.
·Essentially, it is Mr Bullock’s submission that, as yet, Mr Cosenza has not put any flesh on the bone of any application directed towards Mr Duncan to do anything specifically. If Mr Cosenza wishes to examine Mr Tigani, it is he, rather than Mr Cosenza, who should put such a course in action.
·On this basis, it is Mr Duncan’s position that Mr Cosenza has no reasonable prospects of succeeding in his action against him, which therefore should be summarily dismissed.
·On the other hand, it is Mr Cosenza’s position that a close analysis of the material, which he has gathered in respect of Mr Tigani, indicates that he does have an action against Mr Duncan, as a consequence of Mr Duncan failing to oppose Mr Tigani’s discharge from bankruptcy.
Legal principles applicable to summary dismissal
Section 17A of the Federal Circuit Court of Australia Act 1999 (Cth) provides as follows:
“(1) The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a)the first party is prosecuting the proceeding or that part of the proceeding; and
(b)the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2)The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a)the first party is defending the proceeding or that part of the proceeding; and
(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a)hopeless; or
(b)(b) bound to fail;
for it to have no reasonable prospect of success.
(4)This section does not limit any powers that the Federal Circuit Court of Australia has apart from this section.”
Rule 13.10 of the Federal Circuit Court Rules 2001 reads as follows:
“The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court is satisfied that:
(a)the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b)the proceeding or claim for relief is frivolous or vexatious; or
(c)the proceeding or claim for relief is an abuse of the process of the Court.”
Section 17A of the Federal Circuit Court Act is in similar terms to section 31A of the Federal Court Act 1976. In Spencer v The Commonwealth of Australia French CJ and Gummow J said that the section:
“… authorises summary disposition of proceedings on a variety of bases under its general rubric. It will apply to the case in which the pleadings disclose no reasonable cause of action and their deficiency is incurable. It will include the case in which there is unanswerable or unanswered evidence of a fact fatal to the pleaded case and any case which might be propounded by permissible amendment. It will include the class of case in the longstanding category of cases which are "frivolous or vexatious or an abuse of process". The application of s 31A is not, in terms, limited to those categories.”
The jurisdiction of the court to dismiss a claim upon the basis that it discloses no reasonable cause of action is to be sparingly invoked.[13] The case “must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination … by the court …”[14]
[13] See McKellar v Container Terminal Manager Services Limited (1999) 165 ALR 400 per Weinberg J at 415 [12]
[14] See Dey v Victorian Railway Commissioners (1949) 78 CLR 62
In Webster v Lampard[15] the High Court said as follows:
“The power to order summary judgment must be exercised with exceptional caution … and should never be exercised unless it is clear that there is no real question to be tried.”
[15] See Webster v Lampard (1993) 177 CLR 598 at 602
In McKellar Weinberg J, after summarising the various authorities, relating to summary dismissal, said as follows:
“… a proceeding should not be dismissed summarily merely on the ground that it appears, at the early stage of the hearing of the motion brought for that purpose, to advance a highly implausible claim which will very probably fail, but only where the claim may properly be described as unarguable, and almost incontestably bad, or where the claim is otherwise objectionable as an abuse of the process of the court.”[16]
[16] Ibid at 416 [18]
In this context, I also bear in mind what was said by Kirby J in Lindon v The Commonwealth (No 2):
“An opinion of the Court that a case is appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant termination… Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently uncompromising cause into a successful judgment…”[17]
[17] See Lindon v The Commonwealth (No 2) (1996) 70 ALJR 541 cited in Bigg v Suzi (1998) FLC 92-799 at 84,975
In Przbylowski v Australian Human Rights Commission (No 2)[18] Perry J considered that section 31A set a lower threshold than previous tests for summary dismissal, which required cases to be manifestly groundless or hopeless before they warranted dismissal. Whilst bearing in mind the need for caution, Her Honour indicated that the exercise of discretion under section 31A involved the making of value judgements in the absence of a full and complete factual matrix and argument.
[18] Przbylowski v Australian Human Rights Commission (No 2) [2018] FCA 473 at [7]
In this context, Perry J endorsed the following comments of Reeves J in Australian Securities and Investment Commission v Cassimatis:[19]
“…the determination of a summary dismissal application therefore does not require a mini-trial based upon incomplete evidence to decide whether the proceedings are likely to succeed or fail at trial. Instead, it requires a critical examination of the available materials to determine whether there is a real question of law or fact that should be decided at trial. Each application for summary judgment or summary dismissal has to be determined according to its particular circumstances. What is required is a practical judgment of the case at hand. The relevant circumstances will partly depend upon the stage which the proceedings have reached. Among other things, this will affect the materials available to the Court considering the application, for example, whether pleadings have been exchanged, or discovery of documents has occurred.”
[19] Australian Securities and Investment Commission v Cassimatis (2013) 220 FCR 256 at [46]
In exercising this practical judgment a demonstration that an aspect of a case that relied on the establishment of a question of fact that is fanciful, trifling, implausible, improbable, tenuous, or contradicted by all available documents or evidence was likely to be central in whether that case should be summarily dismissed. To the contrary, a case which raised real question of fact of a substantial, plausible or weighty nature should not be so dismissed.
The material collated by Mr Duncan in respect of Mr Tigani
Mr Cosenza’s affidavit, filed on 14 July 2017, is a lengthy document, to which are annexed many other documents. It is not easy to follow. The chief difficulty being in differentiating between activities which personally involve Mr Tigani and which involve entities with which he is related in some way.
In this context, it must be categorically stated that the purpose of these proceedings is not to provide some sort of inquiry into Mr Tigani’s activities or character over the last decade or so. Rather the case concerns the obligations of Mr Duncan and what level of oversight, if any, the court should have over them, given the matters raised by Mr Cosenza.
It is, however, clear from reading the affidavit concerned that Mr Cosenza has many longstanding grievances against Mr Tigani, which pre-date Mr Tigani’s bankruptcy. In particular, Mr Cosenza has deposed that he has known Mr Tigani and members of his family since 1980 and been involved, with them, in a variety of commercial enterprises.
From 1983 onwards, Mr Cosenza was employed by a corporate entity, controlled by the Tigani family, which operated a travel agency. During this period, Mr Cosenza alleges that Mr Tigani was implicated in customs and tax fraud, relating to the duty levied on imported motor vehicles. Clearly, this has no relevance to any issue relating to Mr Tigani’s bankruptcy.
In any event, notwithstanding these concerns, Mr Tigani invested in an olive oil business associated with Mr Tigani in 1998. In his affidavit material, Mr Cosenza alleges that Mr Tigani misappropriated significant moneys from the olive oil business, to Mr Cosenza’s personal detriment.
Mr Cosenza himself apparently became a bankrupt, on his own petition in December of 2003. As indicated above, a company related to Mr Cosenza, Denco Holdings Pty Ltd, as well as Mr Cosenza himself, sued Mr Tigani and Annatom Pty Ltd, in the District Court at Adelaide in respect of a guarantee for the repayment of a loan advanced to Mr Tigani.
Ultimately, judgment was entered in Denco Holdings Pty Ltd’s favour, in an amount of $199,699.00, on 7 June 2005. The judgment was in the company’s favour only, it would seem, as a consequence of Mr Cosenza’s bankruptcy.
During the proceedings before me, Mr Cosenza tendered a deed of assignment, dated 1 May 2017, which indicated that through its sole director, Mr Cosenza himself, Denco Holdings Pty Ltd had assigned its debt from Mr Tigani to Mr Cosenza personally. It is this deed of assignment which is the apparent basis of Mr Cosenza’s standing to bring these current proceedings and his asserted interest in Mr Duncan’s former management of Mr Tigani’s estate.
In his judgment, which Mr Cosenza has provided to me, Judge Kitchen alluded to some of the complicating factors in the proceedings before him, which might potentially impact upon the credibility of Mr Cosenza’s evidence concerning Mr Tigani and his affairs. These included the fact that Mr Cosenza had apparently been sentenced to a term of imprisonment in respect of a charge of assaulting Mr Tigani’s brother and the fact of Mr Cosenza’s bankruptcy itself.
In respect of the former issue, Judge Kitchen had no regard to it in respect of assessing the credibility of Mr Cosenza’s evidence regarding Mr Tigani. In respect of the latter issue, Judge Kitchen noted that Mr Cosenza had apparently purported to assign his interest in the loan made to Mr Tigani and/or entities related to him to a person identified only as Mr GS “for valuable consideration”.[20]
[20] See Cosenza & Denco Holdings Pty Ltd v Tigani & Annatom Pty Ltd [2005] SADC 63 at [17] – [18] contained in Annexure DC 2 to Mr Cosenza’s affidavit filed 14 November 2017
In this context, Judge Kitchen noted that Mr Cosenza had declined to answer questions about this assignment on the basis that any answers provided by him might incriminate him in respect of the commission of a serious offence. What relevance these matters have to the ultimate success of any action Mr Cosenza might have against Mr Tigani personally are matters for conjecture, at this stage. The fact remains, the judgment debt concerned was not made in his favour.
Judge Kitchen’s judgment was entered against both Mr Tigani and Annatom Pty Ltd. Annatom Pty Ltd was subsequently placed into liquidation. It is Mr Cosenza’s evidence that Annatom Pty Ltd held some form of interest in land at Peebinga/Pinaroo, including water licences, which he assumed from Annatom Pty Ltd, prior to its liquidation, via another company Tomdan Pty Ltd, which his sons controlled.
In these circumstances, Mr Cosenza has deposed as follows:
“Shortly, thereafter Tomdan was also liquidated and Tigani then entered into a long term 30 year lease in his own personal capacity with Stix on 2 May 2007. Tigani was at all material times an undischarged bankrupt when executing the lease with Stix whereby he agreed to pay a rental income of $30,000 per annum for exclusive and sole possession of the subject land. This leas provided Tigani with a longstanding interest to benefit from various business enterprises generated from his sole use and occupation of the subject land.”[21]
[21] Ibid at paragraph 9
It is Mr Cosenza’s submission that these are matters, which Mr Duncan should have pursued during Mr Tigani’s bankruptcy and which should have led to him to oppose the automatic discharge. In addition, he asserts that he has provided Mr Gyss with obvious evidence that Mr Tigani was actively engaged in commercial activities during his bankruptcy, including prior to discharge. This includes the following:
·Mr Tigani operated businesses selling olive oil and olive oil machinery, namely McLaren Vale Olive Oil Processing Co and Kingford Machinery Sales and Service;
·Mr Tigani instituted proceedings, on behalf of Kingsford Machinery and Stix farms to recover monies owed for rent of land at Peebinga, which he admitted, on oath, was owned by a trust of which he was “in charge”;
In this context, Mr Cosenza has provided me with transcript of proceedings, before the Murray Bridge Magistrates’ Court on 5 July 2011, in which Kingsford Machinery and Stix Farms are described as ‘Plaintiff’ and Colmar Enterprises was described as ‘Defendant’. The agreement in question relating to the lease of agricultural land and irrigation equipment. It is unclear, from the judgment, whether any of these entities were incorporated.
The magistrate dismissed the action, which was subject to appeal in the Supreme Court of South Australia before Kourakis J (as His Honour then was). From the subsequent judgment, it seems apparent that Kingsford Machinery & Stix Farms Pty Ltd was incorporated and Kourakis J described Mr Tigani as being “the principal of Stix Farms”. On this basis Mr Cosenza asserts that Mr Duncan should have investigated what was Mr Tigani’s personal interest in Stix Farms.
In addition, Mr Cosenza has provided evidence in respect of various criminal activities in which he alleges Mr Tigani has been involved. These include an allegation regarding the theft of machinery and the cultivation of cannabis.
Mr Tigani was acquitted of the latter matter. In respect of the former, he was charged with some firearms offences. I include these references only as a reflection of the likely level of animus Mr Cosenza is likely to feel for Mr Tigani personally. There do not seem to have any relevance to any statutory duties incumbent upon Mr Duncan.
The final matter, which appears to be the catalyst for the current application against Mr Duncan, stem from an action in the District Court of South Australia instituted by Mr Tigani against Stix Farms Pty Ltd, which at one stage Mr Cosenza seems to have suggested was the alter ego of Mr Tigani and of which he was described as “the principle” by Kourakis J.
Mr Cosenza has provided some documents to me which have been filed in the District Court proceedings. The ones on which he places most weight consist of two affidavits of Mr Tigani, filed in them on 3 September 2014 and 14 October 2014. In his first affidavit, Mr Tigani describes Stix Farms Pty Ltd as a company trustee of which his father is the sole director. Mr Thomas Tigani and his children are designated beneficiaries. Mr Tigani further deposes that it is the company which owns land at Peebinga.
Mr Tigani further asserts that, in 2007, he leased the land for the trust, which lease was executed, upon behalf of the trust, by his parents. He further deposes that he invested significant funds in developing the land so leased by him and regularly paid rent to Stix Farms Pty Ltd. The lease ran until 2037. The subject of the dispute, in the District Court, seems to have arisen when Mr Tigani’s father wished to sell the land subject to the lease.
At an earlier stage of the proceedings, Mr Cosenza also provided a copy of the statement of claim filed in the proceedings.[22] This indicated that the land at Peebinga, which was the subject of the proceedings was owned by Stix Farms Pty Ltd as trustee of a trust and his father controlled the company in question. In the statement of claim, Mr Tigani complained to have invested $500,000.00 in improving the land, whilst he as its tenant, from 2007 onwards, during the currency of his bankruptcy.
[22] See Annexure DC 1 to Mr Cosenza’s affidavit filed on 3 May 2017
These proceedings have been subsequently compromised on terms which Mr Cosenza has not been able to disclose to this court. The subject of his complaint, regarding Mr Duncan, is that Mr Tigani has apparently acknowledged, on oath, being involved in some form of commercial enterprise, involving the payment of rent and the investment of capital from 2007 onwards, which is concurrent with his bankruptcy and which Mr Duncan should now investigate further and more rigorously.
Legal principles relating to the duties of trustee
As I understand Mr Cosenza’s case, it is that Mr Duncan has not properly acquitted his duties as trustee under the Act and, as a consequence, on his application, as an interested person, he (Mr Duncan) should be subject to the authority of the court pursuant to either section 178(1) of the repealed Act or pursuant to section 90-20(1)(a) of the new Act.
On the other hand, it is Mr Duncan’s position that he has a wide discretion regarding how he elects to administer any estate conferred upon him and, in this context, the evidence provided by him, including the advice he sought from relevant administrative bodies, such as ITSA and AFSA, indicate that he exercised his authority appropriately and in a commercially responsible way.
On this basis, he contends that Mr Cosenza has failed to adduce sufficient evidence to convince the court that he has a cause of action against him, which has reasonable prospects of success. Further, the proper source of Mr Cosenza’s complaints is Mr Tigani, against whom Mr Cosenza has possible remedies arising under the Act, including seeking to have him orally examined.
The statutory duties of trustees are set out in section 19(1) of the Act. They include the following:
·taking appropriate steps to recover property for the benefit of the estate;
·taking whatever action is practical to try and ensure the bankrupt discharges duties arising under the Act;
·considering whether the bankrupt has committed any offence arising under the Act;
·referring to any relevant authority any evidence of a bankrupt having committed such an offence;
·administering the estate as efficiently as possible by avoiding unnecessary expense.
Section 19AA(1) of the Act provides bankruptcy trustees with a discretion to investigate the affairs and conduct of a bankrupt, including any books or records concerned, so far as they relate to the bankrupt.
The substance of Mr Cosenza’s complaint against Mr Duncan, which he wishes the court to investigate under section 178 or its equivalent under the Insolvency Law Reform Act, is that Mr Duncan has breached his statutory duty to Mr Cosenza, as a creditor of Mr Tigani’s estate, by failing to take “appropriate steps to recover property for the benefit of the estate” [see section 19(1)(f)].
Essentially, it is Mr Duncan’s position that he did take such appropriate steps, in respect of Mr Tigani, and the decisions made by him, in this regard, were reasonable ones, which were exercised in a commercially sound way.
In Wakim v HIH Casualty & General Insurance Pty Ltd[23] Einfeld J held that the duty of a trustee to recover, secure and apply the assets of the estate concerned is not an unqualified one. Rather, it is tempered by considerations of what an ordinary prudent person of business would do in the circumstances prevailing. As with all business decisions, prudent interviews may differ about the commercial and cost effective nature of any decision required to be made.
[23] See Wakim v HIH Casualty & General Insurance Pty Ltd (2001) 111 FCR 58 at 93
In Adsett v Berlouis[24] the Full Court noted that a trustee in bankruptcy must exercise judgement in order to save the estate concerned unnecessary expenditure of money. In these circumstances, the trustee was bestowed with a great deal of discretion and judgement.
[24] Adsett v Berlouis (1992) 37 FCR 201 at 208
The extent of the jurisdiction conferred on the court, pursuant to section 178, was discussed in Khadpekar v Trustee in Bankruptcy (No.2)[25] the court made the following observations, in respect of the role of the court, in exercising power under the section in question, which can be summarised as follows:
[25] Khadpekar v Trustee in Bankruptcy (No2) (2009) 175 FCR 247 at [253] per Siopis J citing Frost v Sheahan (Trustee) [2009] FAFC 20 at [8]
·Section 178 confers a supervisory jurisdiction over the conduct of a bankruptcy trustee;
·The discretion conferred upon the court, by the section, is a very wide one;
·In this context, it is not necessary for an applicant, seeking relief under the section, to show that any relevant decision was absurd, or unreasonable or taken in bad faith;
·Rather, given the width of the discretion in question, the court was empowered to make such order as it deemed appropriate;
·However, at the same time:
“the Court will be slow to make orders which will have the effect of interfering in the day to day administration of a bankrupt’s estate and, in cases involving an exercise of business or commercial judgement, will place considerable weight on the trustee’s decision.”[26]
·An order may nonetheless be made pursuant to section 178, even if the trustee’s initial decision was correct, if additional material is placed before the court.
[26] See Re Tyndall; Ex parte Official Receiver (1977) 30 FLR 6 at [9-10] per Deane J
In Wakim v HIH[27] Einfeld J considered that whether a trustee had taken advice, in respect of some area of administration of the relevant estate, could be a relevant consideration as to whether any subsequent decision relating to that area was appropriate or reasonable, within the context of the trustee’s duties as delineated in section 19.
[27] supra
Conclusions
One of the central actions of the trustee, of which Mr Cosenza complains, and in respect of which he wishes to invoke the court’s supervisory jurisdiction, concerns Mr Duncan’s decision not to object to Mr Tigani’s discharge from bankruptcy. This stems from his earlier objections that Mr Duncan did not pursue Mr Tigani with sufficient rigour, during the actual currency of the bankruptcy.
In this context, in my view, it is central to note that these issues arose almost a decade ago. Section 178 (as it previously applied to this period) is subject to a time limit. As a consequence of section 178(2) any such application “must be made not later than sixty days after the day on which the person became aware of the trustee’s act, omission or decision” in respect of which complaint has been made.
In Heshmati v Burness & Lane (Trustees)[28] Driver FM (as His Honour then was), considered that there was a dearth of authority regarding how strictly the sixty day time limitation period, arising under section 178(2) was to be applied. After considering analogous provisions, arising under the Corporations Act, he found as follows:
“In my view, s.178(2) on its face discloses a parliamentary intention that the 60 day time limit is an absolute one which cannot be extended by the Court. I note first the imperative language of the section in the use of the word “must”. I note secondly that the limitation period is a long one. Federal statutory limitation periods generally range from a few days to a period of 35 days, as in the Migration Act 1958 (Cth). I note further that the administration of bankrupt estates could be significantly disrupted if there were no certainty in decisions made by trustees in that administration. The opportunity to bring proceedings outside the limitation period of 60 days could create significant uncertainty, including after the bankrupt administration had been completed. In that regard, I note that the limitation period does not commence to run until the person becomes aware of the trustee’s act, omission, or decision.
Considering those factors in combination, I am minded to conclude that Parliament intended that the limitation period was not one that could be extended by the Court.”
[28] Heshmati v Burness & Lane (Trustees) [2012] FMCA 884 at [48]
In all these circumstances, in my view, Mr Cosenza faces insuperable difficulties in respect of his proposed action against Mr Duncan. I do not consider that any provisions of the South Australian Limitation of Actions Act 1936 can assist him. In addition, in my view, there are significant public policy considerations, which militate against the reopening of a trustee’s administration of a bankruptcy, many years after that administration has been concluded.
In these circumstances, I consider that Mr Cosenza has no reasonable prospects of success in his efforts to invoke the court’s supervisor jurisdiction, pursuant to section 178 of the Act, in respect of decisions made by Mr Duncan in respect of his actual administration of Mr Tigani’s estate and his decision not to oppose Mr Tigani’s automatic discharge.
The next question, which arises, is whether the matters raised by Mr Cosenza, which came to his attention with the discovery of the action by Mr Tigani against Stix Farms Pty Ltd in 2014 disclose a potential cause of action against Mr Duncan, which has reasonable prospects of success.
Mr Cosenza has deposed that he became aware of this action “during October 2016”[29]. He apparently raised the issue, with Mr Gyss, in June of 2016. As previously indicated, following the receipt of this information, Mr Gyss conferred with Ms Denton of AFSA in November of 2016. On 30 November 2016, Mr Gyss wrote to Mr Cosenza indicating the following:
·During the bankruptcy, Mr Tigani disclosed nominal income to the trustee;
·No income was disclosed as having been received in respect of any leasehold interest with Stix Farms.
[29] See affidavit of Dean Cosenza filed 3 May 2017 at [11]
In these circumstances, Mr Gyss, albeit somewhat tangentially, indicated that any decision to object to Mr Tigani’s bankruptcy would have been dependant on:
“… what the facts of the alleged interest actually were, that is, the quantum of the income and/or the leasehold interest.”[30]
[30] See annexure SJD 13 to Mr Duncan’s affidavit filed 27 June 2017
It is implicit, I think, from this email that in November 2016 Mr Gyss declined to take any further action against Mr Tigani, as a consequence of the matters raised by Mr Cosenza relating to Stix Farms Pty Ltd. Mr Cosenza is aggrieved at this decision. Ostensibly, at least, Mr Cosenza is also out of time to invoke the court’s jurisdiction in respect of this decision.
More significantly, in my view, Mr Cosenza has not established any arguable basis that the circumstances delineated by him invoke the court’s supervisory jurisdiction under either section 178 or section 90-15(3)(a) of the Insolvency Law Reform Act 2016.
I appreciate that it is the case that the court has a wide jurisdiction arising under the relevant legislation. However, Mr Duncan is also required to exercise his professional skills, particularly in the context of what is commercially sound. In my view, the court must be careful not to interfere with a bankruptcy trustee’s decision making, in respect of an estate, particularly one in which the administration has been concluded.
It is evidence that Mr Cosenza has a significant degree of animus for Mr Tigani. That is his entitlement. Mr Duncan is under no obligation to take direction from Mr Cosenza as to how he exercises his duties as a trustee. In these circumstances, in my view, Mr Cosenza faces a high threshold, which he must cross before the court’s supervisory jurisdiction can be invoked, on his behalf.
As was observed in Cassimatis, at the summary judgement stage, the court is required to exercise its practical judgement to determine whether the case in question should be summarily dismissed. In exercising its discretion to dismiss, the court is directed to identify cases which depend of the establishment of some central issue, which appears tenuous or otherwise improbable – that being a central consideration relevant to a summary determination.
In this case, Mr Cosenza is not able to point to any actual physical assets, which he asserts have been concealed by Mr Tigani. In my view, his case relies on conjecture and innuendo arising from the uncertain medium of court pleadings. The matters raised, in those documents, were investigated by Mr Gyss.
Significantly, Mr Gyss sought advice from the independent regulator regarding his possible duties as a trustee under section 19(1)(h) & (i), particularly whether there was any possibility Mr Tigani had committed an offence under the Act.
The advice received by Mr Gyss was that there was insufficient evidence available to conclude that any such offence had been committed. In addition, Mr Gyss exercised his professional judgement, based on the trustee’s investigation into Mr Tigani’s affairs, over several years, to form the view that there were no options open to the trustee to recoup any further moneys from Mr Tigani. In my view, there is currently no evidence available to me to indicate that this conclusion was capricious or otherwise legally unreasonable.
More significantly, at this juncture, Mr Cosenza has not provided any further evidence, which was not available to Mr Duncan, and his staff, to call into question this decision. To adopt the phraseology of Mr Bullock, Mr Cosenza has not been able “to put any flesh on the bones” of his various assertions against Mr Duncan and his staff.
For all these reasons, I have reached the conclusion that Mr Cosenza has no reasonable prospects of success in his application against Mr Duncan. For these reasons, the application filed on 3 May 2017 must be dismissed.
Other interim proceedings
On 14 November 2017, Mr Cosenza filed a further application in which he sought orders to join Mr Tigani to the proceedings involving Mr Duncan and some ancillary orders requiring Mr Tigani to provide details of the compromise of his action with Stix Farms Pty Ltd; and an injunction preventing him dealing with assets.
Mr Tigani has not filed any answering documents in respect of this interim application and his attitude towards potentially being joined as a party is not known to me. In addition, Mr Cosenza sought an order that would require Mr Tigani to be orally examined.
With the failure of his substance application against Mr Duncan, in my view, there are now no-longer any proceedings on foot to which this application in a case can apply. In addition, in my view, for the reasons outlined above, if Mr Cosenza does wish to bring proceedings against Mr Tigani personally, he should do so in the manner envisaged by the court’s rules.
Pursuant to Rule 4.05 of the Federal Circuit Court Rules 1999, an applicant must ordinarily file an affidavit stating the facts relied upon together with an application in approved form. However, pursuant to rule 4.05(2), an affidavit is not required if, in a general law proceeding, a statement of claim or points of claim are filed. So far as Mr Tigani is concerned, I do not consider that Mr Cosenza has done so.
Costs
Mr Duncan seeks costs on an indemnity basis. The court has a wide discretion as to the calculation of costs. Pursuant to Rule 21.02(2) of the Federal Circuit Court Rules:
In making an order for costs in a proceeding, the Court may:
a) set the amount in costs; or
b) set the method by which the costs are to be calculated; or
c) refer the costs for taxation under Part 40 of the Federal Court Rules or under Chapter 19 of the Family Law Rules; or
d) set a time for payment of costs, which maybe before the proceeding is concluded.
In Colgate-Palmolive v Cussons Pty Ltd[31] it was held that indemnity costs are not commonly ordered and will only be ordered if the Court is satisfied that there is “some special or unusual feature of the case to justify the Court in departing from the ordinary practice” of ordering the costs be paid on a party and party basis.
[31] See Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225
There is no closed category of cases in which indemnity costs might appropriately be ordered, but in Colgate Palmolive v Cussons Pty Ltd, the Court said that the kinds of situation in which indemnity costs might be considered were where a litigant had:
·commenced or continued an action knowing it to have no chance of success;
·made false or irrelevant allegations of fraud;
·made groundless allegations which prolong a case; and
·imprudently refused an offer to compromise.
The issue of costs was not the subject of a significant degree of agitation during the proceedings before me, particularly by Mr Cosenza. In these circumstances, I will direct that the respondent file and serve any further affidavit material, on which he wishes to rely on or before 27 August 2018, with the applicant to file any answering affidavit material on or before 10 September 2018 and fix the application for short hearing at 2:15pm on 24 September 2018.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and thirty-four (134) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 4 July 2018
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