FEDERAL COURT OF AUSTRALIA
Hacker v Weston (No 2) [2015] FCA 521
Citation: Hacker v Weston (No 2) [2015] FCA 521 Parties: SUSANNE HACKER AKA SUSANNAH HACKER, SUSIE HACKER, SUSIE SHOSHAMMA GISELA & SUSANNAH SHOSHANNA GISELLA HACKER v PAUL GERARD WESTON File numbers: NSD 368 of 2014
NSD 1146 of 2013
NSD 750 of 2013Judge: FLICK J Date of judgment: 27 May 2015 Catchwords: PRACTICE AND PROCEDURE – costs – discretionary power – power to apportion costs for mixed results – misconduct of trustee – entitlement to indemnity from the estate
BANKRUPTCY – right of trustee to be indemnified for costs out of the estate – costs must be reasonably incurred
Legislation: Bankruptcy Act1966 (Cth), ss 153B, 183
Federal Court of Australia Act1976 (Cth), ss 43, 51ACases cited: Adsett v Berlouis (1992) 37 FCR 201
Re Beddoe; Downes v Cottam [1893] 1 Ch 547
De Alwis v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 77
Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400, (2005) 225 ALR 569
Donnelly v Maxwell-Smith [2010] FCAFC 154
Frost v Bovaird [2012] FCAFC 60, (2012) 203 FCR 95
Gladstone Park Shopping Centre Pty Ltd v Ross Wills (1984) 6 FCR 496
Hacker v Weston [2015] FCA 363
Re Hodgkinson [1895] 2 Ch 190
JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (No 2) [2007] FCAFC 6
Kirwan v Cresvale Far East Ltd [2002] NSWCA 395, 44 ACSR 21
Latoudis v Casey (1990) 170 CLR 534
Miller v Cameron (1936) 54 CLR 572
Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372
Ohn v Walton (1995) 36 NSWLR 77
Pattison v Bellin (No 2) [2000] FCA 1268Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213, (1979) 28 ALR 201
Date of hearing: 15 May 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant: Mr M Sneddon Solicitor for the Applicant: Carrolls Lawyers Counsel for the Respondent: Mr J Baird Solicitor for the Respondent: Goldrick Farrell Mullan
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 368 of 2014
BETWEEN: SUSANNE HACKER AKA SUSANNAH HACKER, SUSIE HACKER, SUSIE SHOSHAMMA GISELA & SUSANNAH SHOSHANNA GISELLA HACKER
ApplicantAND: PAUL GERARD WESTON
Respondent
JUDGE:
FLICK J
DATE OF ORDER:
27 MAY 2015
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The Respondent is to pay the Applicant the sum of $62,677 (representing $45,000 as to personalty and $17,677 as to reimbursement of the trustee’s remuneration), along with:
(a)pre-judgment interest on the sum of $45,000 from 9 April 2012 to 15 May 2015 in the sum of $9,645.71; and
(b)pre-judgment interest on the sum of $17,677 from 1 January 2011 to 15 May 2015 in the sum of $5,727.50.
2.The Respondent is to transfer to the Applicant within 28 days the balance of all monies held standing in the estate of the Applicant, along…
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- Hacker v Weston (No 2) [2015] FCA 521
- Case
- [2015] FCA 521
- Decision Date
CaseChat Overview and Summary
The key legal issues before the court included the proper allocation of costs for mixed results in litigation, the entitlement of a trustee to reimbursement from a bankrupt's estate, and the consequences of the trustee's misconduct. Specifically, the court needed to decide whether the trustee could claim full costs from the estate or if his misconduct warranted a reduction in the amount recoverable. The court also had to balance the general principles that litigation costs should be compensatory, not punitive, against the trustee's prima facie right to recoup costs from the estate.
The court concluded that the trustee, Mr Weston, should only be entitled to claim 50% of his costs as costs incurred in the administration of the estate due to his misconduct. The court reasoned that while trustees generally have the right to be indemnified for reasonably incurred costs, the trustee's actions in this case warranted a reduction. The court found that Mr Weston had failed to properly discharge his duties, acted in his own self-interest, and thereby caused loss to Ms Hacker. These findings justified a partial disallowance of his costs. The court also noted that the orders balanced the need for compensatory costs with the trustee's right to reimbursement, and that the orders should not be punitive.
The final orders of the court included the annulment of the sequestration order against Mr Weston, the release of Mr Weston from his trusteeship of Ms Hacker's estate subject to compliance with certain conditions, and the entitlement of Mr Weston to 50% of his costs as costs in the administration of the estate. The court also ordered that Ms Hacker pay Mr Weston certain sums representing personalty and reimbursement of his remuneration, along with pre-judgment interest on those sums. The orders were designed to appropriately balance the rights and obligations of the parties while addressing the misconduct of the trustee.
Orders
Orders of the court
1. The Respondent is to pay the Applicant the sum of $62,677 (representing $45,000 as to personalty and $17,677 as to reimbursement of the trustee’s remuneration), along with:
(a) pre-judgment interest on the sum of $45,000 from 9 April 2012 to 15 May 2015 in the sum of $9,645.71; and
(b) pre-judgment interest on the sum of $17,677 from 1 January 2011 to 15 May 2015 in the sum of $5,727.50.
2. The Respondent is to transfer to the Applicant within 28 days the balance of all monies held standing in the estate of the Applicant, along with any and all accrued interest on such sum(s) on deposit.
3. The Respondent is entitled to claim 50% of his costs in this proceeding as costs in the administration of the Applicant’s bankrupt estate.
4. Other than Order 3, there be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1. Pursuant to s 153B of the Bankruptcy Act 1966 (Cth) the Sequestration Order made against the Applicant on 5 December 2008 be annulled.
2. The Respondent’s costs in this proceeding be costs in the administration of the Applicant’s bankrupt estate.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1. Subject to the Applicant – Paul Gerard Weston – complying with orders made in the related proceeding No NSD 368 of 2014, pursuant to s 183 of the Bankruptcy Act 1966 (Cth) the Applicant be released from his trusteeship of the Respondent’s estate.
2. The Applicant’s costs in this proceeding be costs in the administration of the Respondent’s bankrupt estate.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
The orders which should be made in proceeding No NSD 750 of 2013 are: (1)Subject to the Applicant – Paul Gerard Weston – complying with orders made in the related proceeding No NSD 368 of 2014, pursuant to s 183 of the Bankruptcy Act 1966 (Cth) the Applicant be released from his trusteeship of the Respondent’s estate.(2)The Applicant’s costs in this proceeding be costs in the administration of the Respondent’s bankrupt estate.An annulment of the sequestration order – proceeding No NSD 1146 of 2013 It is submitted on behalf of Ms Hacker, the Applicant in this proceeding, that there be no order as to costs. The effect of such an order would be to deprive the trustee of his prima facie entitlement that costs be paid out of the estate: Re Hodgkinson [1895] 2 Ch 190 at 194. Lindley LJ there observed: It seems to me that this is a common form of order perfectly familiar to all of us, and it means that the judge, having had his attention called to the matter, and being asked to make an order for payment of the costs, declines to do so. It is not the same as if he said nothing: the effect is that each party must pay his own costs. If so, how is that consistent with the retainer by the trustee of his costs out of the estate? I cannot think it is. We must remember that this was an action between a trustee and his cestui que trust, and if the judge says, “I make no order as to costs,” that negatives the primá facie right of the trustee to take his costs out of the estate. Moreover, the judge has himself said he meant that to be the effect of the order. Whether the order disallowing costs was in itself right or wrong we cannot now inquire …These observations were approved by Bennett, Rares and McKerracher JJ in Donnelly v Maxwell-Smith [2010] FCAFC 154 at [23]. Counsel for the trustee again submits that an order for costs should be made in favour of the trustee. The proceeding having been commenced by Ms Hacker seeking an order pursuant to s 153B of the Bankruptcy Act, the trustee properly responded – so it was said – by placing before the Court that material relevant to the issues posed for resolution. Again the submission advanced on behalf of the trustee is accepted. Whether or not a sequestration order ought initially to have been made, that order was made and the trustee then appointed. Although the time expended during the hearing directed to the question of whether an order ought to be made was again comparatively short, the trustee is nevertheless entitled to an order for the payment of his costs. Accordingly, the orders to be made in proceeding No NSD 1146 of 2013 are:(1)Pursuant to s 153B of the Bankruptcy Act 1966 (Cth) the Sequestration Order made against the Applicant on 5 December 2008 be annulled. (2)The Respondent’s costs in this proceeding be costs in the administration of the Applicant’s bankrupt estate.The relief ordered against the trustee – proceeding No NSD 368 of 2014 The principal factual issues pursued at the hearing focussed upon the manner in which the trustee had administered the bankrupt estate of Ms Hacker. In very summary form, it was concluded that:·the trustee had failed properly to discharge the duties imposed upon him and as a result Ms Hacker had suffered loss or damage;·the trustee was not entitled to remuneration as from 1 January 2011; and ·the trustee had become conscious that he was acting in his own self-interest from about the beginning of 2011 – if not earlier. In seeking to have a Deed of Release executed, it was concluded that as from October/November 2011 the trustee was acting not for the purpose of protecting the estate for the benefit of Ms Hacker but rather for the purpose of protecting his own self-interest.