Flagmeier v Official Trustee in Bankruptcy
[2007] FMCA 1875
•30 October 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FLAGMEIER v OFFICIAL TRUSTEE IN BANKRUPTCY | [2007] FMCA 1875 |
| BANKRUPTCY – Application for recognition as secured creditor – trustee’s application for security for costs – applicant ordinarily resident outside Australia – considerations favouring an order for security – security calculated on the basis of a one day hearing. |
| Bankruptcy Act 1966, s.121 Federal Court of Australia Act 1976 (Cth), s.56 Federal Court Rules (Cth), Order 28 Federal Magistrates Act 1999 (Cth), s.80 Federal Magistrates Court Rules 2001 (Cth), r.21.01 |
Greenwood v World of Maths Pty Ltd [2005] FMCA 1557
| Applicant: | MARTHA FLAGMEIER |
| Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY |
| File Number: | SYG 1152 of 2007 |
| Judgment of: | Smith FM |
| Hearing date: | 30 October 2007 |
| Delivered at: | Sydney |
| Delivered on: | 30 October 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Biscoe |
| Solicitors for the Applicant: | Roderick Harris |
| Counsel for the First Respondent: | Mr Freidman |
| Solicitors for the Respondent: | Harris Freidman Hyde Page |
ORDERS
The applicant, Mrs Flagmeier, provide security for the respondent’s costs in this proceeding in the sum of $10,000 in such form as may be agreed between the parties or, failing agreement, in a form acceptable to the District Registrar of the Court.
The application is stayed until security is provided, or until further order.
Liberty to either party to have the matter listed for directions on a date allowing 3 days notice to the other party.
The matter is otherwise to be listed for directions on 14 December 2007 at 9.30am. If the applicant has not provided security before that date, the respondent may apply for the dismissal of the application under r.13.03 on that occasion, without further notice to the applicant.
Subject to the giving of security and other orders, the proceeding is listed for hearing on 24 January 2008 at 10.15 (one day + allowed).
The applicant must file and serve an outline of submissions and list of authorities 5 working days before the hearing.
The respondent must file and serve an outline of submissions and list of authorities 2 working days before the hearing.
The respondent trustee’s costs of the interim application are its costs in the cause.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1152 of 2007
| MARTHA FLAGMEIER |
Applicant
And
| OFFICIAL TRUSTEE IN BANKRUPTCY |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
In this matter, the Official Trustee is the respondent to an application by Mrs Flagmeier concerning its administration of the bankrupt estate of her son. She seeks relief which would maintain her position as a secured creditor over the proceeds of real estate, which passed into the estate as a result of her son appearing as the registered proprietor of the property. Her application was filed on 10 April 2007, but her evidence in support was only completed at the end of August, and it appears that the trustee has not yet completed the filing of its evidence.
The trustee filed an interim application on 12 October 2007, seeking an order for security for costs in the sum of $15,000. An affidavit in support indicates that those costs have been estimated on the basis of a hearing going beyond one day into a second day.
Both the substantial application and the interim application were referred to my docket by the Registrar today. The parties are agreed that I should appoint a hearing for the former, and decide the latter application today.
The Court's power to order security is given by s.80 of the Federal Magistrates Act 1999 (Cth) and r.21.01 of the Federal Magistrates Court Rules 2001 (Cth). Neither of those powers identifies the relevant considerations which should guide the discretion. However, the Court commonly considers the principles established in the Federal Court of Australia under s.56 of the Federal Court of Australia Act 1976 (Cth) and Order 28 of the Federal Court Rules. One of the considerations favouring an order for security which is identified in r.3 of O.28 is that “an applicant is ordinarily resident outside Australia”. There are other identified considerations in favour of ordering security, which do not arise in this case.
As to Mrs Flagmeier's place of ordinary residence, her solicitor has informed the trustee that “Our client resides in Germany” and also “Our client has permanent residency in Australia but she is presently living in Germany”. The evidence also reveals some difficulties encountered by her legal representatives in obtaining instructions in the proceeding. She has filed no evidence in response to the application for security, whether addressing her place of ordinary residence, or her ability to meet costs orders from assets found in any part of the world.
On the evidence before me, I find that she is ordinarily resident outside Australia, and that this provides prima facie support for requiring security. I also note that the application for security has been brought with reasonable promptness, and that Mrs Flagmeier has not made any claim that she is impecunious or would be shut out of pursuing her application against the bankrupt estate by reason of an order for security. Rather, her evidence-in-chief suggests that she may be a lady of means, who is able to meet an order for security. In the present case, considerations in relation to oppression or shutting out a meritorious case do not, therefore, arise (compare the principles set out in Greenwood v World of Maths Pty Ltd (2005) FMCA 1557 at [7]).
Considering the strength of her application, as shown on the material currently filed, I am not persuaded that it has obvious merits. I accept that she has an arguable case that moneys passed from her and her deceased husband to her son, which may have been applied by him in a series of property acquisitions, and are ultimately traceable into the property over which security was given to her in 2004.
However, the trustee in a notice of opposition has raised whether consideration for the giving of security was given, and has also raised issues under s.121 of the Bankruptcy Act 1966 (Cth). At this stage, it appears to me that the grounds of opposition may have comparable merits to the grounds of the principal application. Evidentiary problems facing both parties in the proceedings are also obvious.
Questions of merits in the substantive proceedings should not be resolved by me today, but I consider that, on all the material before me, considerations of merits are neutral in relation to ordering security.
The trustee has not put before me evidence concerning the state of the bankrupt estate or the implications of this litigation on his ability to administer it, so that I cannot take into account any special considerations in relation to these matters. However, I note his official position, and the public interest in bankruptcy litigation being conducted responsibly on both sides.
Weighing up all the relevant considerations in this case, I have concluded that it is appropriate to order security, but only calculated on the basis of a one day hearing.
I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Michael Abood
Date: 13 November 2007
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