Gargan v The Official Trustee in Bankruptcy

IN THE FEDERAL COURT OF AUSTRALIA     )No QB 697 of 1993
GENERAL DIVISION                   )
BANKRUPTCY DISTRICT OF             )
THE STATE OF QUEENSLAND            )

RE:PETER ALEXANDER GARGAN

EX PARTE:PETER ALEXANDER GARGAN

Applicant

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:                Drummond J
DATE OF ORDER:  8 September, 1995
WHERE MADE:  Brisbane

THE COURT ORDERS THAT:

The Official Trustee's costs of and incidental to the hearing of the application on 1 and 2 August, 1995 be paid out of the estate with priority in accordance with the Bankruptcy Act 1966 (Cth) as costs incurred by the trustee in the course of the administration of the estate of the applicant.

John Ernest Gargan, Grace Elaine Gargan, Gary John Gargan, Michael Ernest Gargan, Simon Alexander Gargan and SAM Industries Pty. Ltd.'s costs of and incidental to the hearing of the application on 1 and 2 August, 1995 be paid out of the estate of the applicant, after the Official Trustee and all persons entitled to priority have been paid and before any distribution is made to any creditors.

William Lindsay Jue Sue, Barry Michael Johnson, Charles Anthony Marino and Lance Lindsay Kippin's costs of and incidental to the hearing of the application on 1 and 2 August, 1995 be paid out of the estate of the applicant, after the Official
Trustee and all persons entitled to priority have been paid and before any distribution is made to any creditors.

NOTE:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )     No. QB 697 of 1993
GENERAL DIVISION                   )
BANKRUPTCY DISTRICT OF             )
THE STATE OF QUEENSLAND            )

RE:PETER ALEXANDER GARGAN

EX PARTE:PETER ALEXANDER GARGAN

Applicant

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

CORAM:    Drummond J
PLACE:    Brisbane
DATE:     8 September, 1995

REASONS FOR JUDGMENT

I have now received submissions on costs from the parties and from the various persons not parties to the proceedings represented by Mr. Toy and Mr. Cochrane of counsel.

Mr. Gargan had sued some of these persons prior to his bankruptcy. These persons are John Ernest Gargan, Grace Elaine Gargan, Gary John Gargan, Michael Ernest Gargan, Simon Alexander Gargan, SAM Industries Pty. Ltd. and Queensland Water Resources Commission. He sought the assignment direction to resurrect the claims he had made against them prior to his bankruptcy. I directed that they be given notice of Mr. Gargan's application to the intent that they would have
an opportunity to present evidence and submissions on the hearing of Mr. Gargan's application if they saw fit to do that. Without being authorised to do so by my direction, Mr. Gargan also served his application and supporting material on certain other persons. He has not so far sued any of this group. I later directed that they be permitted to file material and be represented at the hearing, if they wished. They were also represented at the hearing by Mr. Toy or Mr. Cochrane. Mr. Gargan complained about the actions of a number of these other persons, viz., William Lindsay Jue Sue, Barry Michael Johnson, Charles Anthony Marino and Lance Lindsay Kippin. There are others of this group against whom he made no allegations in his written submissions directed to be filed and served in these proceedings. They are Michael Patrick Montgomery and various creditors and some persons who appear to be associated with SAM Industries Pty. Ltd., viz., Chris White and Bruce & Associates.

Except for Queensland Water Resources Commission, all these persons took advantage of the opportunity to be represented in circumstances in which the Official Trustee, the only respondent to the application, adopted the attitude that he would abide the order of the Court, although he did put a body of evidence before the Court in relation to the application. They also put additional evidence before the Court designed to show, successfully in the event, that there were good grounds why the application should fail.

I do not accept the submission by Mr. Gargan that the costs of the hearing on 1 and 2 August, 1995 should be reserved pending his appeal. It is important that all issues touching on the matters I determined, including issues as to costs, are finally resolved.

For the reasons I gave in Re Ayre; Ex parte Deputy Commissioner of Taxation (unreported, 25 July, 1995), I consider I have power to make an order for costs in favour of a non-party under s. 32 the Bankruptcy Act 1966 (Cth). I consider that the persons I have referred to as persons against whom Mr. Gargan has previously taken legal action are entitled to some relief in respect of the costs they incurred in participating in the hearing, although not parties to it. I do not, however, think it right that they should have an order for costs against Mr. Gargan personally, the practical effect of which could well be a second bankruptcy that would be unlikely to yield any return to the creditors in that bankruptcy. Justice can be done, in my view, by making an order that the following persons: John Ernest Gargan, Grace Elaine Gargan, Gary John Gargan, Michael Ernest Gargan, Simon Alexander Gargan and SAM Industries Pty. Ltd. be paid their costs of and incidental to the hearing on 1 and 2 August, 1995 out of the estate, after the Official Trustee is paid his costs and after all other persons (if any) who are already entitled to priority in respect of costs and before any distribution is made to any creditors. Those persons not previously sued by Mr. Gargan against whom he made complaint in his written submissions should also have their costs of the hearing before me on this same basis. They are William Lindsay Jue Sue, Barry Michael Johnson, Charles Anthony Marino and Lance Lindsay Kippin. I do not think that the other persons represented in the proceedings against whom Mr. Gargan did not make complaint are entitled to a costs order in their favour.

The Official Trustee is also entitled to his costs of and incidental to the hearing on 1 and 2 August: he was justified in taking the part he did in those proceedings, given the complaints made by Mr. Gargan about his conduct, which Mr. Gargan ventilated in the course of seeking the assignment directions. These costs will be part of his costs of administering the estate and entitled to priority accordingly.

I certify that this and the preceding
three pages are a true copy of the
reasons for judgment herein of the
Honourable Justice Drummond.

Associate:

Date: 8 September, 1995

The case of Gargan v The Official Trustee in Bankruptcy concerns the distribution of costs incurred during the hearing of an application made by Peter Alexander Gargan, the applicant, against The Official Trustee in Bankruptcy, the respondent. The hearing in question took place on August 1 and 2, 1995, in the Federal Court of Australia in Brisbane. The applicant sought an assignment direction to resurrect claims he had previously made against certain parties before his bankruptcy. The court was tasked with determining the appropriate allocation of the costs incurred by the parties during the hearing of this application.

The primary legal issue before the court was whether it had the authority to order the costs of the hearing to be paid out of the estate of the applicant, especially given that some of the parties involved were not officially parties to the proceedings. Additionally, the court needed to decide on the appropriate allocation of these costs among the parties, considering the applicant's previous legal actions against some of them. The court also had to address the argument that the costs should be reserved pending the outcome of any potential appeal by the applicant.

In its reasoning, the court confirmed its power to make a costs order in favor of a non-party under Section 32 of the Bankruptcy Act 1966 (Cth). It determined that certain parties, who were previously sued by the applicant, were entitled to some relief for the costs they incurred in participating in the hearing. The court ruled that these parties should be paid their costs from the estate, after the Official Trustee's costs were paid and before any distribution was made to creditors. Similarly, the parties against whom the applicant made complaints, but had not previously sued, were also granted a costs order on the same basis. The court declined to make a costs order in favor of the other represented parties who were not directly complained about by the applicant. The Official Trustee was also entitled to his costs for his participation in the proceedings.

In conclusion, the court ordered that the costs of the hearing on August 1 and 2, 1995, be paid from the applicant's estate, with priority given to the Official Trustee and other parties entitled to priority, before any distribution to creditors. The specific allocation of costs was determined based on the involvement of each party in the hearing and their prior relationship with the applicant.

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