Dubow v Official Receiver (NSW)

Case [2013] FCA 709

FEDERAL COURT OF AUSTRALIA

Dubow v Official Receiver (NSW) [2013] FCA 709

Citation: Dubow v Official Receiver (NSW) [2013] FCA 709
Appeal from: Dubow v Official Receiver & Anor [2013] FMCA 217
Parties: YOLANDE VICTORIA FRANCES DUBOW v OFFICIAL RECEIVER and ANDREW BARNDEN
File number: QUD 203 of 2013
Judge: COLLIER J
Date of judgment: 19 July 2013
Catchwords: PRACTICE AND PROCEDURE – Costs – security for costs of appeal – different considerations where security for costs sought in appeal – whether bankrupt should provide security for costs to trustee in bankruptcy – risk that costs order will not be satisfied – duty of trustee in bankruptcy – irrelevant that trustee in bankruptcy did not enter appearance or file evidence at trial – relevant discretionary factors
Legislation: Bankruptcy Act 1966 (Cth) ss 19(1)(j), 55, 153B, 154, 160, 181A
Federal Court of Australia Act 1976 (Cth) s 56(1)
Federal Court Rules 2011 (Cth) r 36.09
Cases cited: Abram v Bank of New Zealand (1996) ATPR 41-507; [1996] FCA 635 cited
Adsett v Berlouis (1992) 37 FCR 201 cited
Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 cited
Clack v Collins (No 1) [2010] FCA 513 cited
Dye v Commonwealth Securities Limited [2012] FCA 992 cited
Soh v Commonwealth of Australia [2008] FCA 1524 cited
Thomson v STX Pan Ocean Co Ltd [2011] FCA 254 cited
Date of hearing: 18 July 2013
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 50
Counsel for the Appellant: The Appellant appeared in person
Counsel for the First Respondent: The First Respondent was granted leave not to appear
Counsel for the Second Respondent: Mr DC Eardley
Solicitor for the Second Respondent: Diamond Conway Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 203 of 2013
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN:

YOLANDE VICTORIA FRANCES DUBOW
Appellant
AND:

OFFICIAL RECEIVER
First Respondent

ANDREW BARNDEN
Second Respondent

JUDGE:

COLLIER J

DATE OF ORDER:

19 JULY 2013

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.Pursuant to rule 36.09 of the Federal Court Rules 2011 (Cth), within 21 days of the date of these orders Ms Dubow provide security for the costs of the appeal of the second respondent in the amount of $25,000.00 in a form acceptable to the Registrar of the Court.

2.The appeal be stayed until security is provided.

3.If Ms Dubow fails to provide the security in accordance with Order 1 the appeal be dismissed.

4.Ms Dubow pay the costs of the second respondent of the amended interlocutory application for security for costs filed on 18 July 2013.

Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 203 of 2013
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN:

YOLANDE VICTORIA FRANCES DUBOW
Appellant
AND:

OFFICIAL RECEIVER
First Respondent

ANDREW BARNDEN
Second Respondent

JUDGE:

COLLIER J

DATE:

19 JULY 2013

PLACE:

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AGLC
Dubow v Official Receiver (NSW) [2013] FCA 709
Case
[2013] FCA 709
Decision Date

CaseChat Overview and Summary

This appeal arises from proceedings in the Federal Magistrates Court concerning Ms Dubow's application to have her bankruptcy annulled. The Official Receiver has now appealed to this Court, seeking security for costs of the appeal. The Official Receiver argues that Ms Dubow should provide security for costs to the Official Receiver, her trustee in bankruptcy. Ms Dubow opposes the application for security for costs on the basis that the Official Receiver did not enter an appearance or file evidence at trial. This Court must determine whether the Official Receiver is entitled to security for costs of the appeal and, if so, the appropriate amount.

In determining whether to order security for costs of an appeal, this Court must consider various discretionary factors. These include the risk that the costs order will not be satisfied and the duties of the trustee in bankruptcy. The Official Receiver argues that Ms Dubow, who is insolvent, should provide security for costs of the appeal. The Official Receiver contends that it is not necessary for the Official Receiver to have entered an appearance or filed evidence at trial in order to be entitled to security for costs of the appeal. Ms Dubow argues that the Official Receiver's failure to enter an appearance or file evidence at trial means that the Official Receiver should not be entitled to security for costs of the appeal.

This Court finds that the Official Receiver is entitled to security for costs of the appeal. This Court considers that the Official Receiver has discharged the onus of establishing that there is a risk that the costs order will not be satisfied. This Court also considers that the Official Receiver's duties as trustee in bankruptcy are relevant to the question of whether security for costs should be ordered. This Court finds that the Official Receiver's failure to enter an appearance or file evidence at trial is not a bar to the Official Receiver being entitled to security for costs of the appeal. This Court orders that Ms Dubow provide security for the costs of the appeal in the amount of $25,000.00 within 21 days of the date of this judgment.

Accordingly, pursuant to rule 36.09 of the Federal Court Rules 2011 (Cth), within 21 days of the date of these orders Ms Dubow must provide security for the costs of the appeal of the second respondent in the amount of $25,000.00 in a form acceptable to the Registrar of the Court. The appeal is to be stayed until security is provided. If Ms Dubow fails to provide the security in accordance with Order 1 the appeal will be dismissed. Ms Dubow must also pay the costs of the second respondent of the amended interlocutory application for security for costs filed on 18 July 2013. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. Pursuant to rule 36.09 of the Federal Court Rules 2011 (Cth), within 21 days of the date of these orders Ms Dubow provide security for the costs of the appeal of the second respondent in the amount of $25,000.00 in a form acceptable to the Registrar of the Court.

2. The appeal be stayed until security is provided.

3. If Ms Dubow fails to provide the security in accordance with Order 1 the appeal be dismissed.

4. Ms Dubow pay the costs of the second respondent of the amended interlocutory application for security for costs filed on 18 July 2013.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Before considering the merits of this interlocutory application it is useful to set out the background facts.Background In or around 2011 it appears that Ms Dubow was involved in extensive litigation against Fitness First Australia Pty Ltd and Kent Attorneys (“the Creditors”). At the trial before the Federal Magistrate, Ms Dubow deposed that she was taking advice from a registered trustee, Mr Hugh Ramsay, in relation to demands from Fitness First Australia Pty Ltd. On 18 October 2011, Ms Dubow sent a debtor’s petition and consent to act as trustee from Mr Hugh Ramsay to Insolvency and Trustee Australia (“ITSA”). It appears that Ms Dubow subsequently withdrew and re-sent her petition several times to ITSA, before the Official Receiver accepted her debtor’s petition on 20 March 2012. The Federal Magistrate found that there was no consent to act as trustee attached to the version of the debtor’s petition that was accepted. The Official Trustee became the trustee of Ms Dubow’s estate in bankruptcy pursuant to s 160 of the Bankruptcy Act. On 26 April 2012 Mr Barnden was appointed trustee of Ms Dubow’s estate in bankruptcy pursuant to s 181A of the Bankruptcy Act.Proceedings in the Federal Magistrates Court On 8 June 2012 Ms Dubow filed an application to have her bankruptcy annulled pursuant to s 153B of the Bankruptcy Act in the Federal Magistrates Court. The Federal Magistrate granted leave to the Creditors to appear at the hearing of the application. In summary, Ms Dubow argued that her bankruptcy be annulled because:·her debtor’s petition should not have been presented to the Official Receiver; and·her debtor’s petition should not have been accepted by the Official Receiver when it was presented. In dismissing Ms Dubow’s application, the Federal Magistrate found, in summary, that:·Ms Dubow had not demonstrated that she was solvent at the time she presented her debtor’s petition, or that she could realise assets quickly in order to become solvent.·Ms Dubow had not demonstrated that either the debtor’s petition or the statement of affairs did not comply with any of the requirements of s 55 of the Bankruptcy Act so that the Official Receiver was bound not to accept the petition. The Federal Magistrate also made the following observations in relation to the exercise of his discretion:Discretion42.In the event that I am wrong about either of the limbs of s 153B of the Act as discussed above, I would decline to exercise the court’s discretion to annul the bankruptcy in any event because:a)Her bankruptcy has come about upon her own application, which she made after taking advice from a registered bankruptcy trustee;b)She sought to avoid legal proceedings being pursued by one of her creditors by presenting her own petition;c)Despite seeking that she be made bankrupt upon her own petition she now says that her petition ought to have been rejected; andd)The evidence establishes that Ms Dubow is presently insolvent. She is unable to meet the costs orders against her that are now due.43.I have a concern that arises out of the way in which Ms Dubow has presented her case. On the one hand she actively sought to have the Official Trustee accept her debtor’s petition. She presented the petition to, as she says, try and bring the ongoing litigation with Fitness First Australia to an end. Yet she says that at that time she knew she was solvent and the Official Receiver, if he had been doing his job correctly, ought to have picked up that fact from the morass of material that accompanied her petition. Presenting a debtor’s petition when the debtor knows that he or she is not insolvent is an abuse of process. Having on her own case engaged in an abuse of process, the Court should be slow, in my view, to provide its assistance to her. In any event, the material demonstrates that she is in fact insolvent and the bankruptcy should not be annulled.Appeal to this Court

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

The objection of the second respondent to Ms Dubow’s affidavit, in its entirety, is upheld.Consideration - Security for costs I turn now to the second respondent’s application for security for costs. The power of the Court to order security for costs payable in respect of an appeal is found in s 56(1) of the Federal Court of Australia Act 1976 (Cth), which provides:56 Security(1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her.(2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs.(3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given.(4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed.(5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security. Further, r 36.09 of the Federal Court Rules 2011 (Cth) provides:36.09 Security for costs of appeal(1) A party may apply to the Court for an order that:(a) Ms Dubow give security for the costs of the appeal, and for the manner, time and terms for giving the security; and(b) the appeal be stayed until security is given; and(c) if Ms Dubow fails to comply with the order to provide security within the time specified in the order—the appeal be stayed or dismissed.(2) An application under subrule (1) must be accompanied by an affidavit stating the facts in support of the application.Note: Section 56 of the Act also deals with security for costs. The Court must exercise its discretion to order security for costs judicially, as noted in Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1. Otherwise, however, the discretion is broad and unfettered. The principles upon which security for costs are ordered for an appeal are well-settled, although they differ from considerations in ordering security in trials at first instance. As explained by Jagot J in Clack v Collins (No 1) [2010] FCA 513:8 In Moore v Macks [2007] FCA 509 at [20] Mansfield J referred with approval to the decision in Cowell v Taylor (1885) 31 Ch D 34 at 38. In that case, Bowen LJ said:The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law, and also, I believe, in equity. There is an exception in the case of appeals, but there Ms Dubow has had the benefit of a decision by one of Her Majesty’s courts, and so an insolvent party is not excluded from the courts, but only prevented, if he cannot find security, from dragging his opponent from one court to another.9 Mansfield J also referred to the decision of Spender J in Skyring v Sweeney [1999] FCA 61 at [6] to the effect that:Impecuniosity is a factor which can be taken into account as justifying the grant of security. Impecuniosity ought not to be a bar to a person prosecuting at first instance a claim, but the position on appeal seems to me to be fundamentally different. In effect, in the absence of an order for security for costs in the circumstances of this case, Mr Skyring, in effect, is given a free hit, and that seems to me to be intrinsically unfair.