Geron (Bankrupt) v Cull (Trustee), in the matter of Geron
[2025] FedCFamC2G 1044
•7 July 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Geron (Bankrupt) v Cull (Trustee), in the matter of Geron [2025] FedCFamC2G 1044
File number(s): MLG 1449 of 2025 Judgment of: JUDGE BINGHAM Date of judgment: 7 July 2025 Catchwords: BANKRUPTCY – Trustee’s application for security for costs – undischarged bankrupt residing overseas seeking annulment – no evidence Bankrupt could pay an order for costs – no identifiable sources of funds available to the Bankrupt in Australia – exercise of discretion warranted Legislation: Federal Circuit and Family Court of Australia Act 2021 (Cth) s 215
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 21.05
Cases cited: Australian Battery Distributors Pty Ltd v Robert Bosch (Australia) Pty Ltd [2015] FCA 1164
Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCA 34; 2 FCR 1
CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270
Cowell v Taylor (1885) 31 Ch D 24
Equity Access Ltd v Westpac Banking Corporation [1989] FCA 361; (1989) ATPR ¶40–972
KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; 56 FCR 189
Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; 20 VR 377
Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1
Melville v Craig Nowlan & Associates Pty Ltd & Anor [2002] NSWCA 32; 54 NWSLR 82
Moltoni v Macks as trustee for the Bankrupt Estate of Peter Moltoni [2020] FCA 577
Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289
Waters v Commonwealth of Australia (Australian Taxation Office) [2014] FCA 1107
Woodhouse v McPhee [1997] FCA 1509; 80 FCR 529
Division: Division 2 General Federal Law Number of paragraphs: 28 Date of last submission/s: 2 July 2025 Date of hearing: 2 July 2025 Place: Melbourne The Applicant: No appearance Counsel for the Respondent: Mr Segal Solicitor for the Respondent: Mann Lawyers Pty Ltd ORDERS
MLG 1449 of 2025 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF CHAIM GERON, BANKRUPT
BETWEEN: CHAIM GERON
Applicant
AND: INNIS ANTHONY CULL AS TRUSTEE OF THE BANKRUPT ESTATE OF CHAIM GERON
Respondent
ORDER MADE BY:
JUDGE BINGHAM
DATE OF ORDER:
7 JULY 2025
THE COURT ORDERS THAT:
1.Pursuant to section 215 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) and rule 22.01 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), the Applicant provide security for the Respondent’s costs of the proceedings by payment into this Honourable Court of the amount of $AUD121,440.00, such payment to be made by 4:00pm AEST on 21 July 2025.
2.In the event that the amount in Order 1 is not paid into Court by 4:00pm AEST on 21 July 2025, the proceedings be dismissed with costs.
3.The Applicant pay the Respondent’s costs of and incidental to the Application in a Proceeding filed on 10 June 2025 fixed in the amount of $AUD8,650.15.
4.Liberty to apply.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BINGHAM:
This matter comes before me by way of an Application in a Proceeding filed by the Respondent (Trustee) on 10 June 2025 seeking security for its costs (Security Application) in the proceedings initiated by the Applicant (Bankrupt) on 6 May 2025 (Initiating Application) in which the Bankrupt seeks an annulment of his bankruptcy.
On 29 May 2025 the matter came before me for Directions. Orders were made providing that (29 May 2025 Orders):
(a)The names of the applicant and respondent be amended.
(b)The affidavits filed by the Bankrupt were removed from the Court file and the Bankrupt was to file and serve affidavits in admissible form by 2 June 2025. If the Bankrupt failed to comply with this Order the proceedings would be dismissed. Affidavits in admissible form were filed by the Bankrupt in accordance with this Order.
(c)Subject to the Bankrupt filing the admissible affidavits, the Trustee file and serve an application for security for costs, outline of submissions and notice of grounds of opposition to the Initiating Application by10 June 2025 and the Bankrupt file material in response by 20 June 2025. The hearing of the Security Application was listed for 2 July 2025.
Based on the material before me it was apparent that this matter would involve substantial issues of credit. In these circumstances the parties were informed at the Directions hearing that the matter will proceed in person and leave will not be granted for online hearings or appearances by videoconference. I also recorded this in a Notation to the 29 May 2025 Orders.
The Trustee filed material in accordance with my 29 May 2025 Orders. By way of email to my Chambers, on 17 June 2025 the Bankrupt sought an extension of time for the filing of his material responding to the Trustee’s Security Application and an adjournment of the Security Application hearing. The Trustee opposed the Bankrupt’s request. I was not minded to extend the timetable and adjourn the hearing. The Bankrupt filed an outline of submissions and affidavit responding to the Trustee’s Security Application on 30 June 2025.
The Bankrupt also filed an Application in a Proceeding on 30 June 2025 seeking orders that the Security Application be dismissed and that he “be allowed to appear by himself via video link or any other mean from a distance as the court thinks fit” (30 June 2025 Application). The Bankrupt’s 30 June 2025 Application was listed before me also on 2 July 2025.
The hearing of interlocutory application proceeded on 2 July 2025 (Hearing). The matter was called outside the courtroom at 10:05am AEST. There was no appearance by or on behalf of the Bankrupt. The Trustee tendered email correspondence from the Bankrupt time stamped 6:14am AEST informing the Trustee that he would not attend the Hearing that day.
I raised with Counsel for the Trustee the issue of the Applicant’s address for service not complying with the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules), the case management of the proceedings in circumstances of the Applicant’s non-compliance with Orders and rules of the Court and the Bankrupt’s 30 June 2025 Application.
I determined that it was in the interests of justice for the Security Application to be proceed before me at the Hearing. I made Orders providing that the Bankrupt file a notice of address for service that complied with the GFL Rules and supporting material if the Bankrupt pressed the 30 June 2025 Application.
The Trustee relied upon the Security Application, outline of submissions and affidavit of Dr Prawer filed on 10 June 2025, a further affidavit of Dr Prawer filed on 1 July 2025 and the affidavit of Dr Prawer filed 27 May 2025 with respect to the background it provided.
At the conclusion of the Hearing I made Orders for the Trustee to file an affidavit setting out the costs incurred in relation to the Security Application to assist me in the event I made an order for costs in his favour.
APPLICATION FOR SECURITY FOR COSTS
Section 215 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act) provides:
215Security for costs
[…]
(2)The Federal Circuit and Family Court of Australia (Division 2) or a Judge may order an applicant in a proceeding in the Court to give security for the payment of costs that may be awarded against the applicant.
(3)The security is to be of such amount, and given at such time and in such manner and form, as the Federal Circuit and Family Court of Australia (Division 2) or Judge directs.
[…]
(5)If security, or further security, is not given in accordance with an order under this section, the Federal Circuit and Family Court of Australia (Division 2) or a Judge may order that the proceeding be:
(a) dismissed; or
(b) stayed until security or further security is given in accordance with the first-mentioned order.
[…]
Under s 215(2) of the FCFCOA Act the Court has power to order an applicant to provide security for the costs the Court may order. Rule 22.01 of the GFL Rules provides that the Court may order an applicant to give such security for the respondent’s costs of the proceeding as it considers appropriate.
The party seeking security has the onus of persuading the Court that an award of security for costs should be made: CBS Records Australia Ltd v Telmak Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270 at 284 to 285. The onus does not shift.[1] There is an evidential burden on the party responding to the security for costs application to establish the reasons why security should not be granted where the responding party will be unable to pay costs if it is unsuccessful: Australian Battery Distributors Pty Ltd v Robert Bosch (Australia) Pty Ltd [2015] FCA 1164 (Edelman J) at [25].
[1] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; 20 VR 377, [18]-[24] (Maxwell P and Buchanan JA).
It is well accepted that an order for security is a discretionary matter for the Court. That discretion is unfettered and broad,[2] other than the requirement to act judicially.
[2] Bell Wholesale Co Ltd v Gates Export Corporation [1984] FCA 34; 2 FCR 1, 3; Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; 16 FCR 497, 510-511; Woodhouse v McPhee [1997] FCA 1509; 80 FCR 529 at 533; Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1, [6]; Waters v Commonwealth of Australia (Australian Taxation Office) [2014] FCA 1107, [36].
The factors which regularly arise for consideration in exercising the discretion to order that security be given for costs are generally accepted to be:[3]
[3] Equity Access Ltd v Westpac Banking Corporation [1989] FCA 361; (1989) ATPR ¶40–972 (Hill J), 50, 635; Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289, 299-300.
(a)Whether the applicant’s claim is made bona fide and has reasonable prospects of success;
(b)The extent of the risk that any adverse costs order made against the applicant may not be met;
(c)The extent to which it is reasonable to expect creditors or shareholders to make funds available;
(d)Whether an order for security for costs would be oppressive in that it would stultify a reasonably arguable claim;
(e)Whether the applicant is location in the jurisdiction or has assets in the jurisdiction;
(f)Whether any impecuniosity of the applicant arises out of conduct the subject of the proceeding;
(g)Whether the applicant’s financial difficulties were caused by the respondent;
(h)Whether the application for security was delayed;
(i)Any public interest matters which might weigh in the balance in relation to the making of an order for security; and
(j)Other particular discretionary matters specific to the circumstances of the case.
It has been long established poverty is no bar to a natural person litigant bringing a proceeding: Cowell v Taylor (1885) 31 Ch D 24 (Cowell). The rule in Cowell is not absolute and is a factor for consideration as to whether security should be granted: Justice Jagot in Moltoni v Macks as trustee for the Bankrupt Estate of Peter Moltoni [2020] FCA 577 at [7] (Moltoni) referring to Melville v Craig Nowlan & Associates Pty Ltd & Anor [2002] NSWCA 32; 54 NWSLR 82.
SHOULD AN ORDER FOR SECUIRTY FOR COSTS BE MADE?
The Trustee submitted that my power to make an order for security is enlivened on the evidence before me as it establishes that the Bankrupt will be unable to pay the costs of the Trustee if the ultimate decision goes against him: Moltoni at [4] The evidence relied upon by the Trustee regarding this threshold question is that the Bankrupt:
(a)Is an undischarged bankrupt.
(b)Is a resident overseas.
(c)Does not attest sources of income or access to funds nor has the Trustee been able to identify any sources of income or access to funds.
(d)Except for a cost order due to him of $4,000.00 there is no identifiable sources of funds available to him in Australia.
(e)Has failed to provide the Trustee with information sought in relation to his assets or to permit the realisation of those assets.
Further the Trustee prior to issuing the Security Application made a request for security and the Bankrupt refused to consent to an order.
I have considered the affidavit of the Bankrupt filed 30 June 2025 and his submissions filed the same day. I note that there is real property in Israel the ownership of which is the subject of dispute that the Bankrupt contends is a source of security. This property no matter who owns it is not an asset located in Australia. Further the Bankrupt on his own evidence says that he is not in a position to pay for his own legal representation. There is nothing in the affidavit or submissions that would lead me to conclude that the threshold requirement has not been met.
I accept the Trustee’s submission that there is reason to believe that the Bankrupt will be unable to pay the Trustee’s costs if he is ordered by me to do so.
I now turn to the discretionary factors.
It was submitted by the Trustee that: the impecuniosity of a bankrupt is justification for making a security for costs order; the Security Application was made promptly; the Initiating Application was made four (4) and a half years after the insolvency; the Bankrupt seeks to rely upon his own fraud as a basis for the annulment; the Trustee was not the cause of the Bankrupt’s impecuniosity; and if the bankruptcy was annulled the Bankrupt’s indebtedness to the ANZ Bank would exceed one (1) million dollars and he would be liable for the Trustee’s costs and charges including remuneration exceeding $190,000.00 and legal fees exceeding $225,000.00. It was further submitted that the Bankrupt being a resident overseas is a matter upon which I should attach great weight.
I have considered the Bankrupt’s affidavit and submissions in the context of the discretionary factors. I note that the Bankrupt’s case is that the Trustee facilitated the fraud upon which he relies upon for the annulment. The Trustee denies and disputes that facilitation. The reality is that the Bankrupt seeks to rely on his own fraud for the annulment and in those circumstances his prospects of success based on the material presently before me appear to be somewhat limited. It is also asserted that disputed real property in Israel proves a source of security for the Trustee. As I have already observed this real property is not with in Australia and as such is not a source of security with respect to this proceeding. The Bankrupt also raised that the security for costs application is an abuse of process. In so far as this relates to the rule in Cowell I consider in line with the authorities that this is a matter for consideration in the exercise of discretion. I otherwise consider that the Security Application has been properly made and is in no way an abuse of process.
I consider, after weighing up the discretionary factors, that it is appropriate to make a security for costs order in favour of the Trustee.
The Trustee sought security in the amount of $180,000.00. The Trustee relied on the estimate of further costs to be incurred contained at paragraphs [27] to [33] of the Affidavit of Dr Prawer affirmed and filed 10 June 2025. The Bankrupt disputed this on the basis that Dr Prawer is not a costs lawyer nor has a bill of costs been presented and that some type of funding arrangement has been entered into by the Trustee. It is unnecessary for a formal bill of costs to be provided for the purpose of the Security Application.[4] Dr Prawer has set out the basis for the cost estimate in the paragraphs of his affidavit referred to above.
[4] Madgwick v Kelly [2013] FCAFC 61; 212 FCR 1; KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; 56 FCR 189.
What is not addressed by the Bankrupt is whether $180,000.00 is a reasonable amount to provide security. The object of the security is not to provide a complete indemnity but rather to provide reasonable security. On the evidence before me there is a rational and clear basis for the Trustee’s assessment of further costs to hearing being $184,000.00. I consider the security sought of $180,000 to be akin to an indemnity amount. I consider a reasonable amount would be $121,440.00. being two (2) thirds of the estimated costs. The Bankrupt did not address in either his affidavit or his submissions why the time frame for payment, in circumstances where I was minded to make such an order, was unreasonable. I accept the Trustee’s submission that 14 days from the date of my decision as proposed by the Trustee, being 21 July 2025, is a reasonable timeframe in which the security be paid..
COSTS OF THE SECURITY APPLICATION
The Trustee sought his costs of the Security Application and filed in accordance with my Orders an affidavit with respect to costs incurred. I have considered this affidavit and the application of Part 13 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) and Part 40 of the Federal Court Rules 2011 (Cth). I intend to exercise my discretion and make an order for costs in the fixed sum of $8,175.15 plus $475 representing the filing cost of the Security Application, being a total of $8,650.15 based on items 2, 3, 9(b) and 10 of Part 1, Schedule 2 of the GFL Rules.
CONCLUSION
I will make the orders sought by the Trustee subject to the amendments discussed herein and reflecting the amount of security I deem reasonable. I intend to award costs in favour of the trustee on scale in the amount of $8,650.15.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Bingham. Associate:
Dated: 7 July 2025
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