FEDERAL COURT OF AUSTRALIA
Kostov (Bankrupt) v Australian Financial Security Authority, in the matter of Kostov [2020] FCA 1105
File number: NSD 30 of 2019 Judge: FARRELL J Date of judgment: 20 July 2020 Date of publication of reasons: 31 July 2020 Catchwords: BANKRUPTCY AND INSOLVENCY –application for annulment of sequestration order – where applicant claims to have been under legal incapacity at the time the costs order was made and unable to participate in assessment of costs leading to establishing the amount of the judgment debt which was the basis of the bankruptcy petition – where applicant failed to establish solvency – where applicant failed to file statement of affairs – order refused
BANKRUPTCY AND INSOLVENCY – application by bankrupt for removal of Official Trustee – where improper conduct of Official Trustee not established – where no consent from a qualified trustee to act as new trustee of bankrupt estate – order refused
ADMINISTRATIVE LAW – interlocutory application to convert annulment application to a judicial review application – where sequestration order made by a Registrar – where application for extension of time to file application to review Registrar’s order under s 35A of the Federal Court of Australia Act 1976 (Cth) dismissed by different Judge – whether decision of single judge capable of judicial review by another Judge of this Court – order refused
ADMINISTRATIVE LAW – interim application for judicial review of a decision of Official Trustee to discontinue separate proceedings – where applicant did not identify legal basis of the application – where any application under the Administrative Decisions (Judicial Review) Act 1977 (Cth) or the Insolvency Practice Schedule (Bankruptcy) 2016 (Cth) out of time – where any such application would lack merit – application refused.
PRACTICE AND PROCEDURE – application to stay delivery of judgment until applicant had an opportunity to view the transcript of final hearing and make written submissions – where applicant failed to appear at final hearing – consideration of the overarching purpose prescribed in s 37M of the Federal Court of Australia Act 1976 (Cth) – application dismissed
PRACTICE AND PROCEDURE – application by respondent under r 39.03(2) of the Federal Court Rules 2011 (Cth) – application granted
Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) s 11
Bankruptcy Act 1966 (Cth) ss 52, 54, 58, 60, 77CA, 80, 116, 149, 153B, 267B
Bankruptcy Act 1966 (Cth) Sch 2, Insolvency Practice Schedule (Bankruptcy) s 90-15
Federal Court of Australia Act 1976 (Cth) ss 24, 35A, 37M
Federal Court Rules 2011 (Cth) rr 3.11, 9.05, 20.31, 30.21, 39.03
Federal Court (Bankruptcy) Rules 2016 (Cth) rr 2.02, 7.06
Federal Court (Bankruptcy) Rules 2016 (Cth) Sch 1, Powers of the Court that may be exercised by a Registrar item 9
Insolvency Practice Rules (Bankruptcy) 2016 (Cth) s 90-80
Cases cited: Bird v Free (1994) 126 ALR 475
Cameron v Cole [1944] HCA 5; (1944) 68 CLR 571
D.M.W. v C.G.W. [1982] HCA 73; 151 CLR 491
Easton v Kostov [2018] FCA 2002
Francis v Eggleston Mitchell Lawyers Pty Ltd [2014] FCAFC 18
Kostov v Amelie Housing [2018] NSWSC 1800
Kostov v Amelie Housing (NCAT Appeal) [2019] NSWSC 16
Kostov v YPOL Pty Ltd [2018] NSWCA 306; (2018) 98 NSWLR 1002
Official Trustee in Bankruptcy v Nedlands Pty Ltd (in liq) [2000] FCA 599; (2000) 99 FCR 554
Rana v Musolino [2010] FCA 476
Re Jarman; Ex parte Cook [1997] HCA 13; (1997) 188 CLR 595
Re Macks; Ex parte Saint [2000] HCA 62; (2000) 204 CLR 158
Tang v Minister for Immigration and Citizenship [2013] FCAFC 139; (2013) 217 FCR 55
Date of hearing: 8 July 2020, 20 July 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 249 Counsel for the Applicant The Applicant did not appear on 8 July 2020
The Applicant appeared in person on 20 July 2020Solicitor for the Respondents: Mr S Hedge of Colin Biggers & Paisley ORDERS
NSD 30 of 2019 IN THE MATTER OF ADRIANA KOSTOV
BETWEEN: ADRIANA KOSTOV
Applicant
AND: AUSTRALIAN FINANCIAL SECURITY AUTHORITY
First Respondent
OFFICIAL TRUSTEE IN BANKRUPTCY
Second Respondent
JUDGE:
FARRELL J
DATE OF ORDER:
20 JULY 2020
THE COURT ORDERS THAT:
1.The application for a stay filed on 10 July 2020 is refused.
2.The proceedings, including all interlocutory applications made by the applicant, be dismissed.
3.The applicant pay the respondents’ costs as agreed or taxed.
4.Pursuant to r 39.03(2) of the Federal Court Rules 2011 (Cth), any further proceedings brought by the applicant against either of the respondents for some or all of the same or substantially the same causes of action or relief as those claimed in these proceedings be stayed until the costs the subject of order 3 have been paid.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
FARRELL J:
INTRODUCTION
On 18 July 2018, District Registrar Wall made a sequestration order against the estate of the applicant, Adriana Kostov, on the application of a creditor, Jeffrey Lind Easton. The Official Trustee in Bankruptcy was appointed as the trustee of Ms Kostov’s bankrupt estate. Ms Kostov did not appear at the hearing of the creditor’s petition before the District Registrar.
On 12 December 2018, an application made by Ms Kostov on 13 September 2018 for an extension of time and review of the orders made by the District Registrar on 18 July 2018 was dismissed by Robertson J. As noted by Robertson J, the bankruptcy proceedings arose out of costs orders made in proceedings in the Supreme Court of New South Wales against Ms Kostov and the certificate of the relevant judgment of that Court was in the total amount of $24,447.96. Ms Kostov did not appear at the hearing of her application: Easton v Kostov [2018] FCA 2002 at [1], [3], [18]-[20], [28].
In the proceedings before the Court for hearing on 8 July 2020, Ms Kostov’s applications were:
(1)An originating application filed on 3 January 2019 as amended on 23 April 2019. The Australian Financial Security Authority (AFSA) was named as the sole respondent. These applications sought:
(a)An order pursuant to s 153B(1) of the Bankruptcy Act 1966 (Cth) annulling the sequestration order made on 18 July 2018.
(b)If the annulment order was not made, Ms Kostov sought the discharge of her bankruptcy within 12 months.
(c)Orders removing AFSA as the trustee of her bankrupt estate and appointing a new trustee. The Court notes that the originating application filed on 3 January 2019 did not contain an application for removal the trustee of Ms Kostov’s bankrupt estate.
(2)A further amended application dated 27 April 2020. That application sought interim relief as follows:
(a)Review by the Federal Court of a decision made by the Official Trustee and notified to the New South Wales Civil and Administrative Tribunal (NCAT) in relation to proceedings NSW 2814/18/4 between Ms Kostov and Amelie Housing (formerly known as Ecclesia Housing Limited) in a letter from Terrence Arnold (a case manager acting for the Official Trustee) dated 15 November 2018 (November 2018 letter), (see [64(1)] below). The November 2018 letter was copied to Ms Kostov and Peterson Haines Lawyers on behalf of Amelie Housing. It is useful to note that Ms Kostov was locked out of social housing owned by Amelie Housing on 1 June 2018 (after proceedings brought by Ecclesia Housing Limited for Ms Kostov’s eviction arising from Ms Kostov’s failure to pay rent) and her chattels were placed in storage. A number of proceedings in NCAT and the Supreme Court of New South Wales related to that issue;
(b)Copies of all correspondence between Carrie Peterson of Peterson Haines Lawyers (the firm acting for Amelie Housing) and AFSA, and disclosure of any pre-existing commercial or personal relationship between AFSA and Ms Peterson or Amelie Housing; and
(c)That the Court direct that Ms Kostov be allocated a case manager within AFSA with legal qualifications.
(3)An interim application filed on 21 May 2020. Ms Kostov sought orders that the proceedings be stayed until AFSA itemised and proved the costs “declared” in Melissa Bondin’s affidavit sworn on 11 May 2020 and “if verified” the costs be “transferred to the Applicant’s claim [that] the Respondent be removed as Trustee”, that the annulment application be “transferred to a Judicial Review application before the Court, to avoid Respondents claiming costs for improper purpose”, judicial review of the decision notified in the November 2018 letter, and, that the respondent provide copies of all communications between AFSA and Ms Peterson, Peterson Haines Lawyers and Amelie Housing, and disclose any pre-existing personal or commercial relationship between AFSA and Ms Peterson or Amelie Housing.
(4)An application under r 20.31(3) of the Federal Court Rules 2011 (Cth) for the production of documents in categories 2 and 3 below which the respondents refused to produce under a document headed notice to produce given by Ms Kostov to AFSA on 9 June 2020 for:
1.Correspondence between Peterson Haines Lawyer and Amelie Housing, and Respondents in relation to Decision of Trustee of November 2018, pleaded in Paragraph 14 to 16 of Affidavit of Ms Melissa Bondin, dated 11 May 2020
2.Notes and proof of internal review of Decision of Trustee, and any communication between Mr Shaw, and Mr Matthew Osborne, Chief Legal Officer of the Respondent, to undertake a legal review of Decision, pleaded in Paragraph 16 of Affidavit of Ms Melissa Bondin, dated 11 May 2020
3.Proof of costs incurred, and costs estimated to be incurred by Respondent, pleaded in 21 and 22 of Affidavit of Ms Melissa Bondin, dated 11 May 2020
Ms Kostov did not appear at the hearing of her application on 28 October 2019. As Ms Kostov had refused to join the Official Trustee as a party, the Court made orders on that date joining the Official Trustee as a party and dismissed the amended application with costs. On 9 March 2020, the Court made orders setting aside the order dismissing Ms Kostov’s application in circumstances described further below and made timetabling orders for the provision of evidence and submissions prior to a hearing listed for 16 June 2020.
In their submissions filed on 4 June 2020, the respondents stated that they neither opposed nor consented to the annulment of Ms Kostov’s bankruptcy and otherwise gave notice that they sought the following orders from the Court:
(1)Dismissing the proceedings;
(2)Ordering that Ms Kostov pay the respondents’ costs; and
(3)Staying any further proceedings being commenced by Ms Kostov against the respondents until such time as the costs order has been satisfied.
Due to a death in Ms Kostov’s family in early June 2020, the hearing was deferred to 8 July 2020.
On 24 June 2020 a hearing for return of a subpoena issued to Peterson Haines Lawyers and production of documents under the notice to produce was held before Judicial Registrar Cridland. Peterson Haines Lawyers had answered the subpoena issued to it on 9 June 2020 and the respondents produced documents in the first category, despite contesting that they were obliged to do so. It appears from enquiries made by my chambers with the Court’s Registry that Ms Kostov has not sought to uplift any of the documents produced.
Ms Kostov and Scott Hedge of Colin Biggers & Paisley (who appeared for the respondents) attended the proceedings before Judicial Registrar Cridland on 24 June 2020. Shortly before that hearing, an employee of Global Skip Tracing Pty Ltd, on instructions from AFSA Enforcement, made a call to a telephone number of a relative of Ms Kostov seeking to obtain contact information relating to Ms Kostov. Ms Kostov raised this call at that hearing, seeking to know if Mr Hedge knew anything about it. Ms Kostov sent a number of emails on 24 June 2020 enquiring of Mr Hedge, Ms Bondin and others at AFSA and Global Skip Tracing about the reason for the call. On 25 June 2020, Ms Kostov was advised by an email from Ms Bondin that the contact was made as part of an enforcement program conducted by a separate part of AFSA directed to bankrupts who had not filed a statement of affairs or provided to the Official Trustee details of their residential address.
Ms Kostov filed written submissions dated 25 June 2020. Those submissions did not address the orders sought by the respondents.
Ms Kostov continued to make enquiries concerning the contact made by Global Skip Tracing on 24 June 2020. She ultimately refused to attend the hearing on 8 July 2020 if Mr Hedge appeared to represent the respondents until her allegations that Mr Hedge engineered the contact by Global Skip Tracing had been addressed. The Court did not accept that as a reasonable excuse for Ms Kostov to fail to attend the hearing.
At the hearing on 8 July 2020, the respondents pressed for the proceedings to be resolved and the Court proceeded to hear the matter in Ms Kostov’s absence. Following the hearing, the Court advised the parties by email that it would deliver judgment on Tuesday, 14 July 2020 at 9.30 am and would accept no further submissions.
On 10 July 2020, Ms Kostov filed an application to stay delivery of judgment until she had been provided with a transcript of the hearing conducted on 8 July 2020 and she was given an opportunity to provide written submissions.
For the reasons which follow, in particular under the heading “Resolution” which commences at [182] below, the stay on delivery of judgment was refused and the Court made orders generally of a kind for which the respondents had pressed in their written submissions filed on 4 June 2020.
As she has asked the Court for clear guidance, it is important for Ms Kostov to note the matters set out at [15]-[30] below.
First, it is a fact that, by the sequestration order made on 18 July 2018, Ms Kostov became bankrupt and she has remained bankrupt from that time because the sequestration order has not been set aside and she has not been discharged from bankruptcy by force of s 149 of the Bankruptcy Act.
Second, nothing has been brought to the Court’s attention which would indicate that the sequestration order was made in error or that Robertson J was wrong to refuse Ms Kostov an extension of time to review that sequestration order.
Third, the evidence indicates that Ms Kostov has not co-operated with her trustee by filing a statement of affairs or keeping the trustee advised of her residential address. The fact that a sequestration order was made on 18 July 2018 and it has not been set aside has the consequence that Ms Kostov has obligations under s 54 of the Bankruptcy Act to provide a statement of affairs within 14 days of becoming aware of the sequestration order and under s 80 of the Bankruptcy Act to update the Official Trustee about changes in her contact details, including her residential address.
Ms Kostov’s mistaken belief that her obligations under ss 54 and 80 of the Bankruptcy Act were somehow suspended until she attended a hearing at which the Court found that she is bankrupt does not justify her failure to observe those obligations or her conduct in these proceedings.
Aside from any other consideration, it is plain from the Court’s experience in these proceedings and the proceedings before Robertson J that, in the lead up to the final hearing of her applications, Ms Kostov finds reasons not to attend the hearing. The fact that Mr Hedge would represent the respondents at the hearing on 8 July 2020 was not a reasonable excuse for failing to attend that hearing, which was being conducted by electronic means and at which Ms Kostov would appear by telephone, nor was it a reason to adopt procedures whereby the parties would be heard in each other’s absence. Ms Kostov provided copies of correspondence between Robertson J’s associate and the parties in that matter in a chain attached to her email to my associate dated 9 August 2019. Discomfort about being cross-examined would not justify an ex parte hearing of her review application and late advice of work commitments and a medical appointment were not reasonable excuses to fail to attend the hearing before Robertson J on 12 December 2018 in circumstances where Ms Kostov had agreed to fix that date for hearing in November 2018.
The Court does not accept that Ms Kostov was harassed merely because an officer of AFSA, its solicitor or any person acting on its behalf states to her the effect of ss 54 and 80 of the Bankruptcy Act in written or oral communications or if it employs someone to seek to establish her current residential address for the purpose of AFSA taking enforcement action.
Fourth, this Court was not satisfied that Ms Kostov’s bankruptcy should be annulled even though the Court accepts that it is likely that she did not attend the hearing or participate in the assessment of costs giving rise to the judgment debt obtained by Mr Easton which founded the bankruptcy petition due to a mental illness which was diagnosed in 2017: see Kostov v YPOL Pty Ltd [2018] NSWCA 306; (2018) 98 NSWLR 1002 at [3]-[9]. Mr Easton’s judgment debt and a debt owed to Fairfax Media Publications Pty Ltd (Fairfax Media) remain in force and the information Ms Kostov has provided to the Court does not establish that she was able to pay those debts as at 18 July 2018 or at the time of the hearing on 8 July 2020.
Fifth, Ms Kostov’s undisciplined and repetitious correspondence with the Court and the respondents’ employees and solicitors has led to waste of the Court’s time and resources and to the respondents incurring substantial unnecessary legal costs. Ms Kostov cannot now rely on those costs being incurred as a reason to remove the Official Trustee as the trustee of her bankrupt estate. Further, in the Court’s view, the tenor of some of the communications to AFSA’s employees and their frequency amounted to harassment by Ms Kostov.
It is unacceptable that Ms Kostov has failed to comply with the Court’s orders in relation to the timing of filing evidence and submissions and that she has instead sent copious communications to the Court and chambers without leave in the face of directions not to do so. It is reprehensible that Ms Kostov routinely included the Court’s Registry and my chambers on email communications with non-parties (such as Global Skip Tracing), her inter partes communications with the respondents’ solicitors and emails sent by Ms Kostov to the respondents’ employees.
That is true, even though the Court accepts that Ms Kostov had a diagnosed mental illness in 2017 and she has clearly struggled since then. Her comments at the hearing of her stay application would indicate that she is gaining insight into her conduct, but she still has a way to go and her continued contact with her doctors is plainly important. The fact that incidents cause her to “go on a tangent” which causes her to lose sight of the main game, as she told the Court, is an explanation but not an excuse. It does not relieve her of the obligation to meet a costs order when proceedings brought by her are dismissed and the costs order is assessed. As I told Ms Kostov at the hearing of her stay application on 20 July 2020, it does not justify Ms Kostov taking action to deliberately mislead Judicial Registrar Cridland and me about who had taken the call from Global Skip Tracing on 24 June 2020. I would now add that Ms Kostov’s conduct after 25 June 2020, when Ms Bondin told her by whom the contact was made and why (see [110] below), was not justified, much of it was harassing in nature and involved AFSA incurring unnecessary cost. Ms Kostov’s explanation also does not excuse the fact that many of the communications copied to the Court made scurrilous claims and some appeared to have the purpose of using the contact with the Court as some form of threat to the people to whom the emails were addressed.
It is also of concern that Ms Kostov’s numerous applications to this Court and the course of litigation concerning Amelie Housing (effectively also raised in these proceedings) demonstrates that she will not accept determinations when they are made by a Court or the Official Trustee. That gives rise to the respondents’ legitimate concern about whether she will seek to re-litigate the issues in these proceedings.
Sixth, the Official Trustee had no obligation to consult Ms Kostov before issuing the November 2018 letter (see [64(1)] below) and the Official Trustee’s December 2018 letter (see [43] below) indicating that it would not prosecute proceedings commenced by Ms Kostov against Amelie Housing in NCAT and the Supreme Court of New South Wales. The fact that Ms Kostov has degrees in law and commerce makes no difference.
It was entirely open to the Official Trustee to conclude that it should not prosecute litigation commenced by Ms Kostov against Amelie Housing after she became bankrupt having regard to the fact that there appear to be no assets in Ms Kostov’s bankrupt estate, its duty to act commercially and in the interest of Ms Kostov’s creditors and legal advice concerning prospects of success. The fact that offers were made by Amelie Housing to Ms Kostov in August 2018 (for $8,000) and October 2018 (for $10,000) to settle litigation commenced by Ms Kostov against Amelie Housing is irrelevant not least because Ms Kostov refused to enter into a deed of settlement exonerating Amelie Housing and its staff against all claims, which was a condition of the offers. Those offers were plainly made to put a stop to Ms Kostov’s persistent litigation and not (as Ms Kostov has asserted) a reflection of the merit of the litigation. Ms Peterson had no obligation to advise the Official Trustee that those offers had been made and refused by Ms Kostov. This is the effect of Paul Shaw’s response to Ms Kostov’s complaints to the Inspector-General in Bankruptcy set out in Mr Shaw’s letter to her dated 15 February 2019 (see [46(6)] below) and he was not wrong.
Seventh, Ms Kostov is wrong in her belief that s 60(4) of the Bankruptcy Act applied to the conduct of proceedings she commenced against Amelie Housing on 3 October 2018. Those proceedings were commenced after she became bankrupt and they related to a tenancy agreement and removal of Ms Kostov’s chattels to storage. The proceedings were therefore clearly not commenced before she became bankrupt and they were not an action for “personal injury or wrong”, both preconditions to the operation of s 60(4) of the Bankruptcy Act. The fact that Ms Kostov was locked out from the premises the subject of the tenancy on 1 June 2018 and her chattels removed to storage before her bankruptcy has no bearing on the operation of s 60(4). Any right Ms Kostov had to commence proceedings arising out of events which occurred before her bankruptcy vested in the Official Trustee under s 58 of the Bankruptcy Act when the sequestration order was made so that she had no standing to commence those proceedings and her cause of action was not for “personal injury or wrong” within s 116(2)(g). Ms Kostov has already been told that by Fagan J in Kostov v Amelie Housing (NCAT Appeal) [2019] NSWSC 16 at [11]-[16] and in Mr Shaw’s letter (see [46(6)] below).
Eighth, having regard to these matters and the fact that Ms Kostov did not propose another trustee who had consented to act, the Court was not satisfied that the Official Trustee should be removed as the trustee of her bankrupt estate.
Ninth, the Court accepted that it was appropriate to make the order sought by the respondents that any other proceedings which Ms Kostov may bring against any of the respondents for causes of action or relief which are the same or substantially the same as that sought in these proceedings should be stayed until she has paid the costs of these proceedings. That order was made having regard to Ms Kostov’s conduct in these proceedings and a similar pattern of conduct which is evident when she litigated many of the same issues in proceedings before Robertson J and against Amelie Housing in NCAT and the Supreme Court of New South Wales (see Kostov v Amelie Housing [2018] NSWSC 1800 (Fagan J) and judgments cited therein and Kostov v Amelie Housing (NCAT Appeal) (Fagan J)).
Having regard to the nature of some of the relief sought, the Court has considered it necessary to set out many emails and other submissions made by Ms Kostov in relation to the conduct of a number of people, including but not limited to Mr Hedge, Ms Bondin and Ms Peterson, in which Ms Kostov has asserted serious misconduct or unethical conduct on their behalf. The fact that that material is set out should not be understood as acceptance by the Court of Ms Kostov’s assertions contained in it. In particular, the Court does not accept that there is any evidence before the Court on which it could reasonably be concluded that any of Mr Hedge, Colin Biggers & Paisley, Ms Bondin, Mr Arnold or Ms Peterson lied to or otherwise misled Ms Kostov or harassed her or that any of them otherwise engaged in any form of misconduct in relation to her, the administration of her bankrupt estate or these proceedings. Having regard to a number of statements made by Ms Kostov in her evidence and submissions concerning Mr Easton and his legal advisors, it should also be said that the facts that Mr Easton chose to file a creditor’s petition rather than garnish Ms Kostov’s wages, that his solicitors sought to establish her residential address for the purpose of personal service of that petition on her, and that his legal advisors indicated that she would be required for cross-examination on her evidence in the proceedings before Robertson J are not evidence of either improper purpose or harassment.
APPLICATIONS IN THIS PROCEEDING
Amended application
Ms Kostov sought the following relief by an application lodged in this Court on 3 January 2019 (accepted as filed on 15 January 2019), and subsequently amended with leave on 23 April 2019 (amended application), and supported by affidavits of Ms Kostov sworn on 14 December 2018, 8 February 2019 and 29 April 2019.
First, that the sequestration order made on 18 July 2018 be annulled pursuant to s 153B(1) of the Bankruptcy Act. Ms Kostov says she is entitled to that relief because she was diagnosed with a mental health condition in 2017 which she had suffered since 2015. Ms Kostov said that her medical records confirm that she was suffering from that condition when she commenced the proceedings which founded the judgment debt which was claimed in Mr Easton’s creditor’s petition. She said that she was too unwell to attend when those proceedings were dismissed in 2016 and a costs order made. She says she did not participate in the costs assessment process leading to the judgment debt for the same reason and that she “does not even know, if the amount, ordered to pay, is correct, and, it is likely inflated”. Ms Kostov provided no citation, but it appears she relied on the circumstances referred to in the New South Wales Court of Appeal’s decision in Kostov v YPOL Pty Ltd at [3]-[9].
Ms Kostov says that due to her inability to participate in the proceedings in which Mr Easton obtained the costs judgment on which the creditor’s petition relied, the sequestration order should be null and void. In her affidavit dated 29 April 2020 Ms Kostov said that she enquired with the Supreme Court of New South Wales as to any review options she had regarding the costs order and went on to say “however, the reality is, I have already now, lived as a “bankrupt”, for 12 months, and suffered the disadvantage of such – and a review of such, would only lead, to more costs”.
Ms Kostov provided written submissions on 7 August 2019 (after the time provided in the Court’s orders for her to do so and without leave). Ms Kostov submitted as follows:
(1)She had not been provided with a hearing in relation to her bankruptcy as she was declared bankrupt in her absence and therefore had an automatic right of review.
(2)Due to illness, she did not participate in the costs assessment process relating to the judgment debt on which the bankruptcy petition was based.
(3)Apart from the judgment debt, she only had a credit card debt of $4,000, which she paid off monthly.
(4)She said that she had offered Mr Easton the opportunity to garnish her wages but that offer was “met with silence”.
(5)She expressed concern that she had been required for cross-examination (the Court infers, in the proceedings before Robertson J) “on a very basic matter” and characterised this as harassment.
(6)She complained that Mr Easton had spent more “to keep me bankrupt” than he was owed. She submitted that that was evidence that Mr Easton had pursued a sequestration order for an improper purpose and to assist one of his employees in a personal matter.
(7)Ms Kostov said:
I remind this court, that it is incredibly serious, for someone with Law/Commerce degrees, to be declared bankrupt – it in essence, thwarts many of my career opportunities, and I submit, to a certain degree, this is why, Mr Easton has been so aggressive also.
(8)Ms Kostov made a scandalous submission concerning the association between Mr Easton’s firm and a member of chambers staff of a Judge of the Supreme Court of New South Wales in connection with the making of a vexatious litigant order against her.
(9)Ms Kostov declined to file an amended application substituting the Official Trustee for AFSA as the respondent on the basis that she considered that AFSA was the appropriate respondent.
Without leave, on 9 August 2019, Ms Kostov sent to the Court emails containing assertions about the conduct of Mr Easton’s law firm and other lawyers instructed by him in connection with the allegations referred to above and in relation to her failure to obtain pro bono assistance pursuant to a referral made on 4 December 2018 in the proceedings for review of the sequestration order before Robertson J. The email chain included an email to Ms Kostov from Robertson J’s associate on 4 December 2018 in which Ms Kostov was advised that the hearing on 12 December 2018 would proceed. That email was sent in response to an email from Ms Kostov asking for an adjournment for a week due to “work commitments” and a medical appointment, or that she be given leave to appear by telephone between appointments. An affidavit attached to Ms Kostov’s email dated 9 August 2019 disclosed that the purpose of a law firm acting for Mr Easton in seeking to establish her residential address was so that the bankruptcy petition could be served on her.
It is also convenient to note at this point that in submissions dated 25 June 2020 (after the date specified in orders made on 9 March 2020 and without leave), Ms Kostov submitted that:
(1)She had applied to the Supreme Court of New South Wales for review of the costs order in Mr Easton’s favour and she believed that further documents “require to be submitted” which she would follow up “this week”. She submitted (without evidence) that the costs are “substantially inflated” and “actual costs, are likely closer, to under $20,000”.
(2)While she was being paid a weekly income, she suggested to Mr Easton that he could simply garnish her wages if money was what was required, because there was no benefit to anyone to bankrupt Ms Kostov. She says that, instead, Mr Easton briefed lawyers to “keep [her] bankrupt”, likely out of spite linked to his employee, and therefore his aggressiveness in bankrupting her was driven by an “ulterior purpose”. She says that she was solvent during those times and bankruptcy could have been avoided.
(3)Ms Kostov proposed that, to resolve the matter, costs should be reassessed by the Supreme Court of New South Wales. Once that had occurred, if the issue of payment is to be determined, in light of new COVID-19 relief, she should be given six months to pay, if the assessed costs exceed $20,000. Her bankruptcy should therefore be annulled.
(4)Other debts (being those referred to in Ms Bondin’s affidavit which are summarised later in these reasons) should be addressed as follows. The credit card debt to the National Australia Bank (NAB) was automatically cancelled when she became bankrupt and, before that time, she had never defaulted on payment. The Credit Corp debt related to a disputed Telstra debt which was waived in June 2019. In relation to the debt to Fairfax Media, it has since been acquired by Nine Entertainment and her initial discussions indicate that Nine Entertainment has no intention to pursue those costs.
This position was further addressed in an affidavit which was attached to an email which Ms Kostov sent to the Court without leave on 6 July 2020 (see [142] below) and in emails sent to the Court on 7 July 2020 which provided submissions concerning Ms Kostov’s solvency (see [146] below).
Ms Kostov also relied on a newspaper report published in the “Prince George Citizen” on 13 December 2014 concerning a decision by a Canadian court to discharge the bankruptcy of a woman who suffered from mental ill-health at the time she was made bankrupt.
Second, Ms Kostov sought an order that if the bankruptcy cannot be annulled, her bankruptcy be discharged after a 12 month period in accordance with recommendations made by Justice Connect on 27 May 2016 in response to the Improving bankruptcy and insolvency laws proposals paper issued by the Commonwealth Treasury. The Court notes that that recommendation was not taken up and the Bankruptcy Act was not amended in that manner.
Ms Kostov submitted that, although she has made enquiries with the Supreme Court of New South Wales about review options in relation to the costs judgment on which Mr Easton relied, in line with the Justice Connect submission, the reality is that she has already suffered the disadvantages of bankruptcy to the extent that she has not had access to credit and must use weekly income for all costs. Ms Kostov submitted that that hardship is not fair where, as here, she is not at fault due to the illness that she suffered. Ms Kostov says that her circumstances are exceptional enough to warrant an early discharge from bankruptcy. Ms Kostov did not identify the source of the Court’s power to make an order of that kind.
Third, Ms Kostov sought an order that AFSA be removed as trustee, and a new trustee be appointed. It is notable that this claim was not pleaded in the originating application filed in January 2019. It emerged from her affidavit sworn on 8 February 2020 and it was then pleaded in her amended application dated 23 April 2019. Ms Kostov did not identify the source of the Court’s power to make such an order.
Based on Ms Kostov’s affidavit sworn on 8 February 2019 and its attachments, it appears that this claim was based on the Official Trustee’s decision recorded in a letter dated 11 December 2018 on AFSA letterhead sent by Mr Arnold, an acting senior case manager for the Official Trustee, to Peterson Haines Lawyers who acted for Amelie Housing (Official Trustee’s December 2018 letter). That letter was attached to the affidavit and it stated:
Proceedings: Adriana Kostov v Amelie Housing (File No: 18/45987)
Bankrupt Estate of Adriana Kostov - NSW 2814/18/4
Adriana Kostov became bankrupt on 18 July 2018 and the Official Trustee in Bankruptcy is administering the estate. The Official Trustee's certificate of appointment is enclosed for reference.
I refer to Carrie Peterson's email to the Official Trustee of 26 November 2018, informing the trustee of the orders made by His Honour Fagan J in respect of the Official Trustee's position on Ms Kostov's appeal from the decision of the New South Wales Civil and Administrative Tribunal (NCAT). The Official Trustee was not a party to these proceedings, nor does it seek to be joined to the proceedings in any capacity.
Based on the nature of the claim upon which the proceedings at hand are founded upon, prospects of success and commercial interests of the bankrupt estate, the Official Trustee is not in a position to prosecute these proceedings.
In her affidavit sworn on 8 February 2019, Ms Kostov complains that, without consulting her, the Official Trustee made that decision and Mr Arnold provided documents to the Court. Ms Kostov also complains that the Official Trustee communicated with the lawyers for Amelie Housing “behind her back” and made the decision not to adopt the proceedings she had commenced against Amelie Housing. This was in circumstances where Ms Peterson of Peterson Haines Lawyers, acting for Amelie Housing, had made an offer to settle the proceedings by the payment of $10,000 to her by email sent on 8 October 2018, a copy of which was attached to the affidavit. Ms Kostov notes that she refused to sign a deed of release because it would exonerate Amelie Housing and its staff from further claims concerning how the staff dealt with her personal effects when she was locked out of the social housing she had been occupying on their premises on 1 June 2018. Ms Kostov alleged that the strike out of her claim was obtained by the manipulation of Amelie Housing’s lawyer who did not advise the Official Trustee of the offer of settlement it had made, and that AFSA failed in its duty to act fairly and impartially. Ms Kostov says that her claims against Amelie Housing did not vest in the Official Trustee as they were personal in nature so that s 60(4) of the Bankruptcy Act did not apply to them. Ms Kostov concluded her affidavit at [21]-[22] by saying:
In essence, I have been denied justice, my basic human rights affected, and my health, affected by the unconscionable conduct of AFSA.
Based on the conduct above, and the blatant breach of the Trustee’s duties, which has caused serious harm, I respectfully ask the Court, to allow me to appoint, a new trustee, with immediate effect.
Ms Kostov has not nominated a trustee to replace the Official Trustee.
Official Trustee’s original report
In anticipation that the Court would direct the provision of a report in relation to the conduct of the bankruptcy in accordance with r 7.06(2) of the Federal Court (Bankruptcy) Rules 2016 (Cth), on 6 March 2019, AFSA filed an affidavit sworn by Mr Arnold on 6 March 2019 (original report). The original report stated that:
(1)On 4 December 2018, Mr Arnold sent to Ms Kostov an email attaching correspondence in which her obligation to make out and file a statement of affairs under s 54 of the Bankruptcy Act was outlined. The Official Trustee requested the Official Receiver to issue a notice under s 77CA of the Bankruptcy Act relating to Ms Kostov’s failure to file a statement of affairs and on 22 January 2019, the Official Receiver informed the Official Trustee that the notice had been served on Ms Kostov.
(2)Ms Kostov had been a director of four companies.
(3)Enquiries with major financial institutions in July 2018 indicated that Ms Kostov held a visa card with a debit balance of $3,873.41 and a savings account with a balance of $53.23 at the date of her bankruptcy on 18 July 2018. Ms Kostov also had an account with ING with a balance of $5,396.52 which she had since withdrawn or spent.
(4)Real property searches, a personal name search at the Australian Securities and Investments Commission (ASIC) and a search of the Personal Property Securities Register had been conducted but did not reveal any further information in relation to Ms Kostov’s examinable affairs.
(5)On 1 February 2019, Fagan J of the Supreme Court of New South Wales dismissed Ms Kostov’s appeal from the NCAT Appeal proceedings relating to termination of a tenancy agreement between Ecclesia Housing Limited (which by then had come to be known as Amelie Housing) and Ms Kostov for non-payment of rent and the subsequent issue of a warrant authorising the Sheriff to obtain possession of the property the subject of the tenancy agreement: Kostov v Amelie Housing (NCAT Appeal).
(6)Ms Kostov made a complaint about the Official Trustee’s decision made on 15 November 2018 not to adopt Ms Kostov’s appeal in proceedings NSW 2814/18/4 in NCAT against Amelie Housing. A review of that decision was conducted by Mr Shaw, the National Manger of Regulation and Enforcement, on behalf of the Inspector-General. The review concluded that the Official Trustee acted appropriately. Mr Shaw advised Ms Kostov of the decision by letter dated 15 February 2019, a copy of which was annexed to the affidavit (Mr Shaw’s letter).
(7)The Official Trustee had not identified any realisable assets that would be adequate to support a dividend to creditors of the estate and consequently it had not taken steps to call for proofs of debt.
(8)The Official Trustee had incurred expenses of $127.67 and would incur a further $8,000 approximately in connection with Ms Kostov’s application to this Court. If Ms Kostov was successful in her application to annul her bankruptcy under s 153B of the Bankruptcy Act, the Official Trustee would be entitled to remuneration of $4,000 and a realisation charge of $280.
Case management hearings on 13 March 2019 and 2 May 2019
In correspondence concerning the timing of the first case management hearing in these proceedings, the Court made efforts to hold the case management hearing at a time suitable to Ms Kostov. The Court refused to allow Ms Kostov to appear by telephone as she had advised the Court that she worked in Sydney’s central business district. Ms Kostov did not attend the first case management hearing held on 13 March 2019. However, the Court provided a copy of the transcript of the hearing to her so that she could be made aware of the following matters:
(1)AFSA made submissions indicating that it was not the proper party to the proceedings but the Official Trustee was.
(2)The Court noted that it would be relevant to the Court’s consideration of whether to grant relief annulling Ms Kostov’s bankruptcy whether she had filed a statement of affairs (as required by s 54 of the Bankruptcy Act), which she had not yet done, and whether she was in a position to demonstrate that she was able to pay her debts as and when they fall due.
(3)The Court noted that Ms Kostov had not identified the source of the Court’s power to make an order discharging her bankruptcy after 12 months.
(4)The Court noted that Ms Kostov’s application sought removal of the Official Trustee as her trustee but she had not nominated another trustee to fulfil that role.
Following that hearing and after consultation with Ms Kostov in relation to the form of orders, the Court made orders on 15 March 2019 granting leave to Ms Kostov to amend her application by 2 April 2019 and for notification of her application to all known creditors. Ms Kostov did not notify her creditors, but AFSA did. Ms Kostov filed her amended application on 23 April 2019.
On 2 May 2019, a further case management hearing was held. At that hearing, a Ms J Lau appeared “as agent for the applicant”, a somewhat surprising outcome since it did not appear that Ms Kostov then held a practising certificate. Ms Lau indicated that she was not aware that Ms Kostov did not hold a practising certificate and that she did not intend to go on the record as acting for Ms Kostov. Ms Selim, who appeared for AFSA, advised that creditors had been notified of the proceedings and were observing but did not intend to appear. The Court again gave Ms Kostov leave to amend her originating application to substitute the Official Trustee for AFSA as the respondent and made timetabling orders for the filing of submissions (Ms Kostov by 1 July 2019 and AFSA by 8 July 2019) and listed the hearing of Ms Kostov’s application for 16 July 2019 at 10.15 am.
AFSA submissions
AFSA filed submissions on 8 July 2019 indicating that it neither consented to nor opposed the orders sought by Ms Kostov and that it appeared to assist the Court in a non-partisan way, relying on Yi v Chan & Li Trading Pty Ltd [2003] FMCA 95 at [7]. AFSA’s submissions noted that Ms Kostov had not filed a statement of affairs as required under the Bankruptcy Act nor had she filed a further amended originating application naming the Official Trustee rather than AFSA as the respondent.
Between 12 July and 16 July 2019 by email correspondence with the Court and at a case management hearing attended by Ms Kostov by telephone, Ms Kostov sought orders adjourning the hearing for a short time and granting her leave to file submissions before the adjourned hearing. This was on the basis that she had been physically unfit to file submissions before then, for which she provided some evidence.
Case management hearing on 16 July 2019
Ms Kostov attended the case management hearing on 16 July 2019 by telephone. This was permitted on the basis that Ms Kostov was physically unwell and attending medical appointments on 16 July 2019. The Court explained to Ms Kostov the relevance to her application of whether or not she had filed a statement of affairs, the automatic discharge that flows under s 149(4) of the Bankruptcy Act three years after a statement of affairs is filed, and the importance of evidence as to her solvency. Ms Kostov explained that she had not filed the statement of affairs because she wished to be assured that the sequestration order was valid before she put information into the public domain by filing the statement of affairs. The Court re-emphasised the importance of whether or not she had filed a statement of affairs and evidence of her solvency to the exercise of the discretion to annul her bankruptcy. At that hearing the Court also raised with Ms Kostov the need to provide materials in evidentiary form, not simply in email correspondence, and to meet timetables for filing of submissions.
On 16 July 2019, and on the basis of Ms Kostov’s assurances that she would need an adjournment of only four to five days and that she wanted “this matter resolved as soon as possible”, the Court adjourned the hearing until 10.15 am on 23 July 2019 and gave leave to Ms Kostov to file any further evidence and submissions by noon on Friday 19 July 2019.
Adjournment application, submissions and hearing
However, on 22 July 2019, Ms Kostov again sought adjournment of the hearing on the basis of a medical certificate dated 21 July 2019 indicating that she would not be fit to attend a hearing between that date and 26 July 2019.
On 23 July 2019, the Court made orders: (a) that Ms Kostov provide a certificate from her doctor as to when, in the doctor’s view, Ms Kostov would be able to participate in a hearing of her application; (b) giving Ms Kostov leave to file an amended originating application to name the Official Trustee as the respondent in lieu of AFSA by 31 July 2019; and (c) giving Ms Kostov leave to file further evidence and submissions by 31 July 2019.
Ms Kostov filed submissions on 7 August 2019 and made further submissions by an email sent to the Court on 9 August 2019 (see [35] and [36] above).
On 13 September 2019, Ms Kostov provided a medical certificate indicating that she would be fit to participate in proceedings from 24 September 2019. On 23 September 2019, Ms Kostov advised the Court’s Registry that she would participate in a hearing on 28 October 2019 or later. The matter was listed for hearing at 10.30 am on 28 October 2019.
By emails between Ms Kostov, the Court’s Registry and Mr Hedge on 23 and 24 October 2019:
(1)Ms Kostov sought a stay of the proceedings on the basis that the Attorney General of New South Wales had, by notice of motion filed on 21 May 2019 in the Supreme Court of New South Wales, sought orders that Ms Kostov be declared a “person under a legal incapacity” within the meaning of Part 7, Div 4 of the Uniform Civil Procedure Rules 2005 (NSW) and that a tutor be appointed. As a result she had decided to seek treatment and settle elsewhere “pending a few factors”. Ms Kostov sought a “stay” of her proceedings and foreshadowed the need to transfer the proceedings to another registry.
(2)The Court’s Registry advised Ms Kostov that if she sought to stay the proceedings she should file an interlocutory application. No such application was filed but Ms Kostov asked that her application to this Court be transferred to the Melbourne Registry of the Court and that it be set down for hearing in November 2019.
(3)Mr Hedge advised the Court and Ms Kostov that the respondent opposed any adjournment and that if Ms Kostov did not appear at the hearing on 28 October 2019, the respondent would “ask the court to either dismiss the Proceedings or otherwise refuse the adjournment and deal with the matter to bring it to finality”.
(4)The Court advised the parties that it refused to adjourn the hearing, noting that Ms Kostov had provided evidence that she was fit to participate in a hearing on that date. The Court advised that arrangements could be made for Ms Kostov to participate by video-conference from the Melbourne Registry. On 25 October 2019, Ms Kostov advised that “she cannot commit to such”.
Ms Kostov failed to appear at the hearing on 28 October 2019. On 28 October 2019, the Court made orders under r 9.05 of the Federal Court Rules joining the Official Trustee as a party and dismissing the proceedings pursuant to r 30.21, with orders that Ms Kostov pay the respondents’ costs and that a copy of the transcript which disclosed the Court’s reasons for making those orders be made available to Ms Kostov upon her application. A copy of those orders was provided to Ms Kostov by email.
Reinstatement of proceedings
On 20 February 2020, Ms Kostov filed an interlocutory application and supporting affidavit sworn on 13 February 2020 seeking orders setting aside the orders made on 28 October 2019 and that a “re-hearing” be ordered on the basis that she had been “very ill” and was “still unwell, and not in Sydney” at the time of the hearing.
On 9 March 2020, following a case management hearing held on 5 March 2020 which Ms Kostov attended by telephone, the Court made orders setting aside the order made on 28 October 2019 dismissing Ms Kostov’s application, granting Ms Kostov leave to file a further amended originating application to particularise any causes of action against the Official Trustee and separately any causes of action against AFSA by 4 pm on 27 April 2020, for the parties to file and serve any further evidence by 27 April 2020 (Ms Kostov) and 11 May 2020 (the respondents) and submissions by 28 May 2020 (Ms Kostov) and 4 June 2020 (the respondents) and reply submissions by 11 June 2020. The matter was listed for hearing at 10.15 am on Tuesday 16 June 2020. The Court notes that the respondents filed submissions on 4 June 2020. Ms Kostov filed submissions on 25 June 2020.
On 1 April 2020, the Court’s Registry sent an email to the parties having regard to the implementation of procedures adopted by the Court to address the COVID-19 pandemic. The email advised that it was envisaged that, in accordance with orders made on 9 March 2020, the hearing on 16 June 2020 would proceed either by telephone or video-conference. The parties were provided with a copy of an information note titled “Special Measures in Response to COVID-19 (SMIN-1)” issued by the Court, drawing attention in particular to section 3 (electronic filing of documents), section 4 (signatures on documents and affidavits) and section 7 (Court listings and events, including hearings and mediations).
Further amended application
On 28 April 2020, Ms Kostov sent an email to the Court’s Registry which was copied to Mr Hedge and my associate. Attached to the email was (among other things) an unsealed amended application naming only AFSA as a respondent (further amended application). The further amended application was uploaded to the Court’s electronic court file on 25 May 2020 Among other things, the email stated that:
I could not find my original word version of my application, as I no longer have my computer I previously used, so, per ATTACHMENT 1, I have drafted a new Amended Application, to supplement that already filed, which I hope will suffice in these circumstances.
…
Her Honour will note I have asked for Interim Relief on my Amended Application, and I suggest perhaps a Directions Hearing be scheduled for such next week, if Her Honour feels appropriate.
Also attached to the email were:
(1)A copy of the November 2018 letter. The letter was copied to Ms Kostov and Amelie Housing care of Peterson Haines Lawyers. On behalf of the Official Trustee, Mr Arnold said (as written):
Adriana Kostov became bankrupt on 18 July 2018 and the Official Trustee in Bankruptcy is administering the estate. The Official Trustee’s certificate of appointment is enclosed for reference.
The Official Trustee is aware of the proceedings initiated by Ms Kostov regarding alleged breaches of the Residential Tenancies Act 2010 (NSW) by the respondent in this matter. The Official Trustee is not a party to these proceedings, nor does it seek to be joined as a party to these proceedings.
As Ms Kostov’s claim is not a “personal injury or wrong” for the purposes of exempting the claim under s 116(2)(g) of the Bankruptcy Act 1966 (Cth), Ms Kostov’s claim is in substance, a chose in action which vested in the Official Trustee as after-acquired property.
Consequently, the Official Trustee’s position is that Ms Kostov cannot, whilst she remains undischarged from bankruptcy, initiate or continue the proceedings.
The Official Trustee further notes that because the proceedings were initiated after Ms Kostov’s bankrutptcy, s 60(4) of the Bankrutpcy Act 1966 (Cth) is not applicable, and therefore the Official Trustee is not required to make an election whether to abandon or continue the proceedings. Nevertheless, in light of the nature of Ms Kostov’s claim, and the statutory duty of the Official Trustee to act in the interests of the estate in a commercially sound manner, the Official Trustee is not in a positon to continue or maintain the proceedings. This decision is made with a view to minimise the costs, not only to creditors of the bankrupt estate, but also of the other parties to these proceedings. No disrespect is intended towards the Tribunal or those other parties.
A copy of this letter has been issued to the Applicant and Respondent, who are at liberty to make further submissions in respect of the trustee’s position letter and the proceedings generally.
Should the Tribunal consider it necessary for the Official Trustee to make an appearance by telephone with respect to the proceedings or the content of this letter, please do not hesitate to contact me on the details listed below.
(2)Email correspondence on 9 November 2018 between Mr Arnold and Ms Peterson in which Ms Peterson queried when the Official Trustee would make a decision in relation to the proceedings NSW 2814/18/4 and Mr Arnold indicated that he would revert as soon as possible with the Official Trustee’s position. Also attached was an email dated 21 November 2018 in which Ms Peterson advised Mr Arnold of orders made by Fagan J in proceedings in the Supreme Court of New South Wales and asked Mr Arnold to advise whether the Official Trustee wishes to prosecute those proceedings (November 2018 emails). Copies of these emails and the Peterson December 2018 letter referred to below had also been attached to Ms Kostov’s affidavit sworn on 8 February 2019.
(3)A copy of a letter dated 11 December 2018 from Ms Peterson on behalf of Amelie Housing to the Official Trustee in relation to NCAT proceedings NSW 2814/18/4 (Peterson December 2018 letter). The letter noted that the proceedings were commenced after Ms Kostov became bankrupt and asked the Official Trustee to indicate in writing whether it intends to “prospect” or discontinue the action.
(4)A copy of the Official Trustee’s December 2018 letter (see [43] above).
(5)A letter dated 1 August 2018 from Ms Peterson to Ms Kostov containing an offer of settlement of Ms Kostov’s claim against Amelie Housing for $8,000 provided a deed of settlement was signed before their next appearance in the Local Court of New South Wales on 2 August 2018 (Peterson August 2018 letter).
The further amended application claimed that “the Respondent” had breached its duty to act in a proper manner and should therefore be removed as trustee should “the Applicant’s bankruptcy be upheld”. In what might be regarded as particulars of this claim, Ms Kostov relied on:
(1)The November 2018 letter. Ms Kostov said this was an “improper application of bankruptcy law” by the Official Trustee’s wrongful interference with a personal injury claim.
(2)The November 2018 emails, the Peterson December 2018 letter, the Official Trustee’s December 2018 letter and the Peterson August 2018 letter. Under the heading “Excluding Applicant from Material Legal Communications”, Ms Kostov submitted that, due to AFSA’s “wrongful interference in personal injury proceedings, which occurred prior to the 18 July bankruptcy, and should have been captured by s 60(4) exclusion, the Respondent” had caused her “substantial financial loss, exceeding the $10,000 offered on 8 October 2018”. Ms Kostov further submitted that this loss was compounded by the Official Trustee’s failure to include her in key communications and “liaising only with an external solicitor, who had an interest, in having the Official Trustee, interfere, in the personal injury matter”. Ms Kostov submitted that that was a “serious breach of duty by the Respondent, warranting their removal as Trustee”. Ms Kostov complained that:
(a)She had not been copied into the correspondence between Mr Arnold and Ms Peterson in November and December 2018 and she was unsure whether there had been telephone communications between Mr Arnold and Ms Peterson.
(b)Ms Peterson did not, in her direct communications with “the Respondent” disclose that, such was the seriousness of Ms Kostov’s “personal injury claim”, that Ms Peterson offered $8,000 on 1 August 2018 and $10,000 on 8 October 2018 in an attempt to resolve those proceedings. Ms Kostov said that she “could not accept such funds, as far more expenses and damage had been incurred”.
(3)The “respondent’s” refusal to conduct an internal review of the Official Trustee’s decision made on 15 November 2018 (which the Court takes to be the decision notified to NCAT in the November 2018 letter) and the respondent’s decision to engage Colin Biggers & Paisley to act on its behalf in proceedings commenced by Ms Kostov in the Administrative Appeals Tribunal (AAT) in February 2020 and to make submissions that Ms Kostov had no right to a review of that decision by the Official Trustee and that the AAT had no jurisdiction. This complaint was made under the heading “Respondent Rejection of Review Request and Forced Litigation”. Ms Kostov submitted that “this behaviour by the Respondent, and the breakdown of the relationship of trust and transparency between the parties, warrants the removal, of the Respondent, as Trustee, should the bankruptcy be deemed valid”.
(4)The failure of “the respondent” to respond to requests made by Ms Kostov to provide copies of all correspondence between “themselves and Ms Peterson” including telephone notes and confirmation of whether a pre-existing commercial or personal relationship exists between the respondent and Ms Peterson.
(5)The respondent’s failure to appoint a case manager with a legal background in relation to Ms Kostov’s matter on the basis that the current case manager had “no understanding, of how serious, the Applicant being excluded from legal communications, is”.
The interim relief sought by Ms Kostov was:
(1)The Federal Court set a hearing to review the respondent’s decision made on 15 November 2018.
(2)The respondent provide copies of all communications between Ms Peterson and the respondent and disclose any pre-existing personal or commercial relationship with Ms Peterson or Amelie Housing.
(3)The Court direct that Ms Kostov be allocated a case manager within the respondent with legal qualifications.
By a further email dated 28 April 2020 to the Court and copied to the respondents’ solicitors, Ms Kostov also sought to rely on two statements which she says were made by Ms Peterson denying any fraud in relation to the removal of Ms Kostov’s personal effects from the premises at the time of her eviction which were put in storage. Ms Kostov has not put into evidence any primary document from which such comments might have been sourced.
Updated report
On 11 May 2020, the solicitor for the respondents filed an affidavit sworn by Melissa Bondin, a senior case manager at AFSA. Ms Bondin noted AFSA’s receipt of the further amended application and the fact that it had not been filed (the amended application was uploaded to the Court’s electronic file and became accessible on 25 May 2020).
Ms Bondin stated that the affidavit responded to the Court’s order made on 9 March 2020 that the Official Trustee file an updated report pursuant to r 7.06(2) of the Federal Court (Bankruptcy) Rules by 11 May 2020. By way of update, Ms Bondin deposed in her affidavit that (as at that date):
(1)Ms Kostov had failed to file her statement of affairs in accordance with s 54(1) of the Bankruptcy Act;
(2)The Official Trustee had conducted further property searches, ASIC personal name searches and Personal Property Securities Register searches which did not reveal any additional information;
(3)Ms Kostov did not hold any credit cards with banks apart from those noted in the original report;
(4)The bankrupt estate currently had four creditors which were owed as follows:
(a)Credit Corp Group, owed $837.00 (Veda Search);
(b)Fairfax Media, owed $38,653.00;
(c)Jeffrey Lind Easton, owed $24,754.40; and
(d)NAB, owed $3,873.00.
(5)Ms Kostov made an application to the AAT on 20 February 2020 to overturn the decision made by Mr Shaw set out in Mr Shaw’s letter. The Official Trustee provided written submissions to the AAT on 26 March 2020. Ms Kostov withdrew that application on 26 March 2020 by email.
(6)The Official Trustee had not identified any realisable assets that would be adequate to support a dividend to creditors of the estate and it had therefore not taken steps to call for proofs of debt.
(7)The Official Trustee had incurred general expenses of $187.68 and legal expenses of $41,007.78 in the administration of the bankrupt estate. It estimated that a further $15,000 (exclusive of GST) will be incurred in relation to Ms Kostov’s application, assuming a hearing occurs on the scheduled date and the matter is dealt with at that time.
(8)The Official Trustee would also be entitled to remuneration of $25,862.49 and realisation charges of $10,174.46 (in aggregate $36,036.95).
On 14 May 2020, the Court sent an email to the parties, noting that Ms Kostov had recently sent a number of emails to the Court which would be treated as submissions and confirming that Ms Kostov had until 28 May 2020 to file her submissions. On the same day, Ms Kostov responded by email addressed to the Court’s Registry and copied to AFSA’s lawyers saying (as written):
Can you please advise Her Honour, that in light of the serious issues to which I have raised, and further, my request for interim relief, which further has been ignored by this Court, there will be no further submissions from me on this matter.
I most certainly am not so foolish as to be used as a cash cow for AFSA, which is evidently what has occurred in this matter.
The Federal Court of NSW, twice, has denied myself, the basic procedural right, to have an Annulment Application heard, both orders, made in my abscence.
The Federal Court of NSW, in denying myself this basic right, further placing myself in an erroneous position, of copies costs, being claimed, in a matter where, this Court is at fault, by making Sequestration Orders, in my abscence.
Therefore, an alternative approach, will be taken, in relation to the Bankruptcy Annulment.
I still however do wish to remove AFSA as Trustee for the reasons contained in my filed submissions.
My view on this, is such should also be determined in an alternative forum.
As such, I propose this matter be stayed, so as to cease AFSA continuing to use this Court as a joke.
There will be no further correspondence from myself on this matter, I will leave such in Her Honour's hands to determine what is appropriate in terms of the application to remove AFSA as Trustee.
Interim application
On 21 May 2020, Ms Kostov sent a document entitled “interim application” to the Court’s Registry which was accepted as filed on 23 May 2020 and an unexecuted affidavit of Ms Kostov dated 18 May 2020. The interim application was given a return date of 16 June 2020 at 10.15 am, being the same time as Ms Kostov’s other applications.
By the interim application, Ms Kostov sought orders as follows (as written):
1. Proceedings stayed as an abuse of process by the Respondent until:
a) Respondent Itemize and prove costs declared in Affidavit of Ms Melissa Bondin of 11 May 2020;
2.The costs noted in 1 above, if verified, be transferred to the Applicant’s claim the Respondent be removed as Trustee for the purposes of bankruptcy.
3.Applicant’s Bankruptcy Annulment, be transferred to a Judicial Review application before the Court, to avoid Respondents claiming costs for improper purpose
4.The Respondant provide:
a) All communications between Ms Carrie Peterson (and Peterson Haines Lawyers) and Amelie Housing, with the Respondent, and the Official Trustee;
b) A declaration as to any commercial or personal relationship between Ms Carrie Peterson and/or Amelie Housing;
5.The Decision dated November 2018, of the Official Trustee in relation Amelie Housing and the Respondent be submitted for Judicial Review, as it involves a decision-maker, by an officer of the Commonwealth, and therefore reviewable as an error of law.
The interim application was supported by an unsigned affidavit of Ms Kostov dated 18 May 2020 and filed on 21 May 2020. In the Court’s view, the content of the affidavit is not evidence, but rather submissions and the Court considered it on that basis. The document provided as follows (as written):
Conduct of Respondent: Abuse of Process of Court, Exorbitant Costs
3.I am very concerned, at the conduct of the Respondent, and the conduct of the proceedings on general, something, which should be very simple, is turning into, an overly expensive exercise, the Respondent, abusing the Court.
4.I simply, had attended the Registry in 2019, to explain my predicament, and ask the Court, what was the most simple, and cost effective way, to review the sequestration orders made in my abscence.
5.I was advised, that an application, with AFSA as Respondent, was the correct approach, so I followed such.
6.On 12 May 2020, I received an Affidavit from the Respondent employee, Ms Melissa Bondin, alleging, the Respondent had spent nearly $40,000 in legal costs to date, and further, would spend, another $15,000 if the matter would progress to Hearing.
7.I am perplexed how such is possible, when, Mr Easton himself, who aggressively sought to bankrupt myself, only claimed costs, of over $5000.
8.Further, the alleged amount of bankruptcy, was only $24,000, and, will likely be less, as such costs, were unverified by me, as I did not participate in the costs assessment process.
9.What AFSA have done, is attempt to claim $70,000 in a matter, of which, they were simply meant to be a “friend” of the Court, and claimed costs, which exceed the amount of bankruptcy, and further, that of the petitioners costs.
10.Such is absurd, and contradicts the advice I was given by the Registrar, that having AFSA as Respondent, was the most cost effective, a d simple way, to manage proceedings.
Request for matter to be stayed, costs assessed, and Annulment Application heard by way of Judicial Review
11.In light of the above, I ask these proceedings be immediately stayed, so AFSA do not claim further extortionate costs.
12.I also ask, the Court order AFSA provide proof of such costs, which can be verified by the Court.
13.I further submit, the question as to the review of my bankruptcy, should have been a Judicial Review application, because, the former Judicial Officer, had made no assessment of my case, in my abscence.
14.Such, having the Federal Court as Respondent, likely would have been the cost effective and simply way to review my bankruptcy, as I highly doubt, the current position, of AFSA claiming 10 times the original costs of the petioner, and further, costs which exceed the purported debt owed, would be foreshadowed by the Court.
15.I also believe it important the Court ascertain who is giving instructions in this matter, as I highly doubt, such is being claimed by the AFSA Executive.
16.I submit once these costs are assessed as true and correct, such, can be transferred to the separate matter, of removing AFSA as Trustee.
17.Whilst this occurs, it is important, my bankruptcy annulment, be properly heard by this Court, by way of Judicial Review, which is simple, cost effective, and will not place me in the position I am now, where a Government department, is abusing the process of the Courts.
Request for Further Information from AFSA:
18.I also request all communications, between AFSA and Ms Carrie Peterson, Solicitor did Amelie Housing, if which, I am not privy to. I ask for such, because, it was brought to my attention, after the fact, that Ms Carrie Peterson, had been communicating direct with Case Manager for AFSA, Mr Terence Arnold, without including myself in communications.
19As a result of such, a decision was made, to my detriment, by the Official Trustee, and to the benefit of Amelie Housing, the Official Trustee, not communicating with, or consulting me, throughout the decision making process. Amelie Housing, had a vested interest in having a particular decision made, I should have been included in this process, as my rights were affected, I was not.
20.I also ask the Court, for a declaration from AFSA, of any personal or commercial relationship between themselves, and Ms Carrie Peterson. I understand Ms Peterson had written papers on bankruptcy law in the past, do sydp6, she does have a pre-existing relationship with AFSA.
Request for Judicial Review of Trustee Decision
21.I ask this Court note, that I intend to file a Judicial Review Application, to review the decision of the Official Trustee made in November 2018. My reason for asking such, is, that I had sought to review the said decision in the Administrative Appeals Tribunal, only, to have the Respondent use CBP Lawyers, to aggressively strike out, what should have been, a very simple, and no cost review of a decision. I therefore advised the AAT that in light of the conduct of the Respondent, the appropriate course to take, was to have this decision reviewed, by the Federal Court.
22.The decision related to the Trustee, wrongly interfering in a personal injury matter, of which, had commenced in June 2018, prior, to the purported bankruptcy which occurred in my abscence on 18 July 2018. Therefore, Section 60(4) of the Bankruptcy Act, should have applied, whereby, such a personal injury matter, was exempt, from interference by the Respondent, as The matter, was a serious matter, with Ms Carrie Peterson, offering myself $8000 on 1 August 2018 to settle the matter, and then $10,000 on 8 October 2018, both amounts, I could not accept, as the costs and damage, far exceeded, those amounts.
23.Without my knowledge, as pleaded in paragraph 18 and 19 above, Ms Carrie Peterson, had been liasing direct with the Respondent on this matter, not including me in communication, which is a breach of the basic practice of the Courts, of which, Ms Peterson, a Solicitor, and AFSA, a government entity, would know. She did not disclose, that she had offered myself, the sums of compensation, pleaded in 22 above.
24.The Respondent (and Official Trustee) came to the decision, that this matter was not exempt pursuant to Section 60(4). They came to this decision, after consulting direct with Ms Peterson, and excluding myself.
25.As I detail above, my simple attempt to have the decision reviewed in the AAT had been aggressively attacked by the Respondent, for reasons unknown. It is highly improper conduct on behalf of the Respondent, which had caused myself significant financial harm, exposure to fraud and loss of property, and I therefore seek relief from these Courts, to have such a decision, reviewed
26The misconduct of the Respondent is serious, and it is entirely inappropriate these current proceedings continue, until the interim relief I ask, is dealt with.
The issue of my purported bankruptcy, most certainly should not have resulted in myself now being exposed to extortionate and unverified cost claims, which far exceed, the initial claim, of the petitioner.
Notice to produce and subpoena requests
On 22 May 2020, Ms Kostov filed requests for subpoenas to be issued to Peterson Haines Lawyers and AFSA seeking correspondence and a list of calls between any employee of AFSA and the Official Trustee and Ms Peterson in relation to any matter involving Ms Kostov. Ms Kostov also sought from AFSA proof of costs and estimated costs referred to in Ms Bondin’s affidavit. The Court indicated that it did not grant leave to issue a subpoena to AFSA, as it was a party to the proceedings and that it would grant leave to issue a subpoena to Peterson Haines Lawyers in slightly different terms. A subpoena in the form requested on 27 May 2020 was authorised for issue to Peterson Haines Lawyers with a return date of 10 June 2020.
The correspondence referred to below was either attached to an affidavit by Mr Hedge dated 7 July 2020 and filed with the Court or from email correspondence which Ms Kostov sent to the Court.
Tuesday, 9 June 2020
At 11.47 am, the Court’s Registry sent an email to the parties advising that this matter was listed at 9.30 am on 10 June 2020 in the return of subpoena list. The email said that it attached a screenshot of material produced “as of 9 June 2020 at 11.34 am”. The “screenshot” is from a page of the Court’s electronic filing system that advised that the documents were produced on a USB stick which was held in Registry.
At 6.07 pm, Ms Kostov sent an email to the Court’s Registry, copied to Mr Hedge and my associate as follows (as written):
I refer to this email.
I apologize this email is late.
There was a death in the family on Thursday 4 June, a shock, as only the week earlier, we were advised their was a hope of recovery.
The funeral, is on 17 June, Interstate, per below, quarantine issues, remain.
It is simply innappropriate for me, to be involved in these proceedings at this time, between a family passing, and funeral.
I had proposed to send the Respondents a Notice to Produce re: matter in Affidavit, of which, I have not had a chance to draft, however Her Honour was aware of, however will do later this evening.
May I respectfully ask two things:
1) This Subpoena issue be deferred to 24 June
2) The Hearing for this matter be adjourned to week thereafter.
As the below reveals, it is a very difficult time.
In any event, may I please be provided with a scanned copy of S1 produced.
The “scanned copy of S1 produced” is a reference to documents produced by Peterson Haines Lawyers in response to the subpoena.
At 11.14 pm, Ms Kostov sent an email to the Court’s Registry, copied to Mr Hedge and Marie Selim (Ms Selim was then an employed solicitor at Colin Biggers & Paisley), attached to which was a document headed “notice to produce a document in a pleading or affidavit”. Ms Kostov said that the attachment was sent “by way of Service”. The materials sought in the notice to produce are described at [3(4)] above.
At 11.36 pm, Ms Kostov sent an email addressed to Ms Bondin and copied to Matthew Osborne, Mr Shaw, Hamish McCormick and Paul Eric at AFSA email addresses and the email addresses at AFSA for “servlegdoc”, “regulation” and “LG-Legal” (AFSA receiver addresses). The “notice to produce” to AFSA was attached. The email stated:
Dear Ms Bondin
I trust you have been well.
I refer to your Affidavit of 11 May 2020, of which, you allege to be true and correct, at ATTACHMENT 2.
At ATTACHMENT 1, I have asked you produce:
a) All communications between AFSA, the Official Trustee, and Peterson Haines Lawyers, related to the Trustee decision of November 2018, per paragraph 14 to 16
b) Proof of Mr Shaw, liasing with your legal team, in relation to my requested review of the said decision, per paragraph 16
C) Proof of the $45,000 costs AFSA allege they are owed, and proof of the estimated further $30000 you allege, you will be owed, per paragraph 21 and 22.
I look forward to receiving this information from you, given you purportedly authored the Affidavit, and, had authorisation, from your employer to do so.
Mr Hedge, has been provided a copy of this document, however I thought important, AFSA is aware, if what is requested.
Wednesday, 10 June 2020
At 11.15 am, Ms Kostov sent an email to the Court’s Registry copied to Mr Hedge and Ms Selim as follows (as written):
I refer to this matter, next listed, for 16 June 2020.
Per below, there has been a death in the family, on 4 June 2020, absolutely devestating.
The funeral in Australia, is scheduled for 17 June, and a service will follow overseas.
I am in no position to run a Hearing, and culturally, when a death occurs, it is entirely innappropriate to do so.
Yesterday, I provided the Respondents with the Notice to Produce, ATTACHED,Her Honour was aware of, in light of personal matters, I had forgotten to do so, so did so last night.
I have asked the Respondent for a short two week adjournment, to July, to allow the funeral and mourning period, to end, after 4 July 2020.
May I ask if Her Honour can approve such.
Attached to the email was part of an email chain in which Ms Kostov appeared to have been seeking an exemption to enter the Northern Territory, an email to Mr Hedge sent at 8.35 am on that day in similar terms to that sent to the Court, and Ms Kostov’s email sent to the Court at 6.07 pm on 9 June 2020.
By email dated 12.01 pm, the Court enquired of the parties as to whether 8 July 2020 at 10.15 am would be appropriate for the hearing of Ms Kostov’s applications. All parties agreed to that date and the hearing was listed for that time.
At 2.13 pm, in response to Judicial Registrar Cridland’s email sent at 11.59 am on that day which asked if the respondents had any objection to the “notice to produce”, Ms Selim sent an email to Judicial Registrar Cridland indicating that the “notice to produce” was objectionable and Colin Biggers & Paisley would shortly write to Ms Kostov in relation to the respondents’ position.
By an email sent by Mr Hedge to Ms Kostov at 5.45 pm, Mr Hedge said the following (as written):
We refer to the attached “Notice to Produce” addressed to the Respondents, dated 9 June 2020 (Notice).
The Notice is invalid.
A Notice of Produce issued under Rule 20.31 of the Federal Court Rules 2011 (Cth) can only call for the production of documents that have been mentioned in the Respondents' pleadings or affidavits.
None of the requested documents in the Notice were referred to in Ms Bondin’s Report to the Court of 11 May 2020.
We further note that the Notice is seeking the production of privileged documents. Privilege has not been waived.
You have in any event issued a subpoena to a third party asking for the same documents requested in paragraph 1 of the Notice. As such you have access to the documents you seek and face no disadvantage.
The Notice appears to be in effect an attempt to obtain discovery which is only available in the Federal Court with leave. Any application for discovery in these proceedings will be opposed. This correspondence simply adds again to the unnecessary costs generated by the manner in which you have conducted these proceedings.
In respect of the Proceedings generally, you remain in breach of the Court's directions made on 9 March 2020.
Please immediately provide submissions setting out the evidence you rely upon, the relief you seek from the Court and the basis upon which you say that the Court has power to grant that relief
We also again note that you are yet to file your Statement of Affairs. As such you remain in breach of Section 54 of the Bankruptcy Act 1966 (Cth).
We reserve the right to seek costs consequent upon the Notice and your failure to comply with the Court’s directions of 9 March.
Thursday, 11 June 2020
Following advice from the parties that they had no objection to the hearing being adjourned to 10.15 am on 8 July 2020, the Court’s Registry sent the following email to the parties at 10.50 am:
Her Honour is satisfied that the hearing on 16 June 2020 should be vacated and the matter be listed for hearing at 10.15 am on Wednesday, 8 July 2020. Should Ms Kostov seek a further adjournment of the hearing she must do so by filing and serving an interlocutory application together with a supporting affidavit by no later than 4.00 pm on Friday, 3 July 2020. Her Honour has made the attached orders in chambers.
Her Honour notes that the respondent has indicated that it will write to Ms Kostov in relation to the notice to produce referred to in Mr Hedge’s email copied to NSWDR sent on 10 June 2020 at 2:09 pm.
At 4.05 pm, Ms Kostov sent an email to Mr Sellars (who appears to be an employee of AFSA) as follows:
Dear Mr Sellars
Please see stamped Notice to Produce ATTACHED for AFSA.
Please ensure your staff, being Ms Melissa Bondin, Mr Paul Shaw, Mr Paul Eric provide material as requested, as I understand Ms Bondin has the authority of the CEO to write her Affidavit of 11 May 2020.
Thankyou
Kind regards
Adriana Kostov
Mr Hedge responded to that email at 4.17 pm on the same day reminding Ms Kostov that she had, “on numerous occasions” been advised that any communications about the proceedings should be sent to Colin Biggers & Paisley “and no one else”.
Monday, 22 June 2020
At 12.24 pm, Mr Hedge sent an email to Ms Kostov as follows:
We refer to your “Notice to Produce” dated 9 June and filed with the Court on 11 June 2020.
We wrote to you on 10 June informing you of our objections to the document and of our view that it is invalid
Notwithstanding our email, to which you have not replied, you filed the Notice to Produce with the court. This is not the proper procedure in respect of Notices to Produce.
We will not repeat the matters set out in our earlier email. That email is attached below.
Our clients will be pressing the court at the hearing of this matter on 8 July to finalise these proceedings.
Our client wish to avoid you further wasting the court’s time and our client incurring further unnecessary costs by arguing irrelevant issues.
For this reason, and this reason only, our client will allow you to inspect the correspondence between it and Peterson Haines Lawyers.
The Court Rules only provide our client is obliged to make any documents produced in response to a Notice to Produce available for inspection. Given the current situation with Covid 19 which makes an attendance by you to inspect unavailable our client will produce those documents to the Court and you can make arrangements to access them in the usual way
Our client will not be producing any documents other than the above in response to this Notice. The reasons are made clear in our email of 10 June
The above will be noted to the Registrar when the matter is next listed on 24 June 2020.
We will seek the costs of the appearance be paid by you as Notices to Produce un Rule 20.31(1) are not documents that should be filed nor be the subject of any court attendances.
We again note that you remain in breach of the directions made by Justice Farrell for the preparation of this matter for hearing.
Our client will oppose any further attempts by you to adjourn the hearing date.
We also again note that you remain in breach of the legal obligation under Section 54 of the Bankruptcy Act to file a Statement of Affairs.
Tuesday, 23 June 2020
First, there is no reason to “stay” Ms Kostov’s own application (in itself a novel concept) until the respondents itemise the “costs” referred to in Ms Bondin’s affidavit as pleaded in the interim application at [1].
Second, the Court understands the plea at [2] of the interim application to be a request that the costs disclosed in Ms Bondin’s affidavit be taken into account in considering Ms Kostov’s application to remove the trustee. Having regard to the way Ms Kostov conducted herself in these proceedings and the AAT proceedings which she commenced, and the barrage of correspondence directed to employees of AFSA and its solicitors in these proceedings, it is unsurprising that the Official Trustee might have incurred substantial legal costs and accrued the right to remuneration. The Court is not satisfied that costs incurred and the remuneration as disclosed in Ms Bondin’s affidavit would justify the Official Trustee’s removal either alone or in conjunction with the other matters raised by Ms Kostov.
In any event, the Official Trustee’s remuneration and expenses are a charge on her bankrupt estate, which appears to have no assets. Ms Kostov will only be liable to pay costs of these proceedings ordered by the Court and those costs must either be agreed by her or taxed before the amount of those costs will be ascertained. The facts that Mr Easton based the creditor’s petition on a judgment debt of approximately $24,000 which he obtained in the Supreme Court of New South Wales and that he obtained a costs order for $5,000 as petitioning creditor says nothing of any relevance concerning the appropriateness of costs incurred or remuneration accrued by the Official Trustee in the administration of Ms Kostov’s bankrupt estate.
Third, the plea at [3] of the interim application is that Ms Kostov’s application to annul her bankruptcy under s 153B of the Bankruptcy Act might be converted to an application for judicial review to avoid the respondents incurring costs “for an improper purpose”. The Court notes the submissions made in Ms Kostov’s affidavit dated 18 May 2020 at [13]-[17] in this regard (see [73] above).
It is unclear from the terms of item [3] of the interim application whether Ms Kostov is seeking judicial review of the decision of District Registrar Wall who made the sequestration order on 18 July 2018 or the decision made by Robertson J on 12 December 2018 to refuse an extension of time for Ms Kostov to apply for review of the sequestration order. In the Court’s view, Ms Kostov’s pleading at [3] is embarrassing in the technical sense.
For completeness the Court notes that, in Ms Kostov’s 18 May 2020 affidavit at [13], she refers to the decision of a “Judicial Officer” which would imply that she is referring to the decision of Robertson J. Ms Kostov has not identified any basis on which Robertson J’s decision is susceptible of judicial review in this Court. There is no such basis. The exercise of jurisdiction by Robertson J was an exercise of jurisdiction by this Court. This Court cannot grant prerogative relief directed towards itself: see Bird v Free (1994) 126 ALR 475 (Drummond J); Re Jarman; Ex parte Cook [1997] HCA 13; (1997) 188 CLR 595 at 603 (Brennan CJ), 610 (Dawson J), 616-617 (Toohey and Gaudron JJ), 636-637 (Gummow J) and 647 (Kirby J), Tang v Minister for Immigration and Citizenship [2013] FCAFC 139; (2013) 217 FCR 55 at [10] (Rares, Perram and Wigney JJ).
The appropriate course for review by a Judge of this Court of the sequestration order is by way of an application under s 35A of the Federal Court of Australia Act. Ms Kostov sought to go by that route previously, but Robertson J did not grant an extension of time which was required before Ms Kostov was in a position to pursue that application. The only available course in this Court for judicial consideration of the correctness of Robertson J’s decision made on 12 December 2018 would be by way of an appeal. Such an appeal would now be out of time and Ms Kostov would require the Court to extend time for her to file a notice of appeal. Such an appeal would need to be by way of a separate proceeding, which would need to be heard by a Full Court: see s 24 of the Federal Court of Australia Act. In any event, the Court as currently constituted sees no error in the approach adopted by Robertson J in reaching the conclusion that Ms Kostov’s application should be dismissed. There is nothing in evidence which demonstrates any irregularity in the proceedings before District Registrar Wall.
Accordingly, the only course available to Ms Kostov in these proceedings is by pursuing the annulment application under s 153B of the Bankruptcy Act. It is clear that Ms Kostov still wants to pursue that application since the submissions which she filed on 25 June 2020 indicate that she continued to press for an order that her bankruptcy be annulled given the submissions made under the heading “b) Proposed – Annulment of Bankruptcy, Costs, Re-assessment, COVID19 Relief”. That application is considered below.
Fourth, in relation to the plea at [4] of the interim application, as noted above, Peterson Haines Lawyers has responded to Ms Kostov’s subpoena for communications between that firm and the respondents. Ms Kostov’s request for disclosure of any pre-existing personal or commercial relationship between AFSA and Amelie Housing is simply fishing. There is nothing in the evidence which would suggest that the Official Trustee’s decision notified in the November 2018 letter or the Official Trustee’s December 2018 letter was made with an ulterior purpose and any such request should not be allowed.
Fifth, the plea at [5] of the interim application is that the decision in the November 2018 letter (see [64(1)] above) be submitted for judicial review. Ms Kostov’s affidavit dated 18 May 2020 contains submissions in relation to this plea at [21]-[26] (see [73] above).
Ms Kostov did not identify the legal basis on which the Official Trustee’s decision advised to NCAT, Ms Kostov and Amelie Housing in the November 2018 letter might be subject to judicial review. Ms Kostov merely noted that it was a decision of a Commonwealth body and reviewable as a matter of law which would indicate that Ms Kostov might be seeking review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act). Such a decision might also be subject to review by the Court under s 90-15(1) of Sch 2 to the Bankruptcy Act (the Insolvency Practice Schedule (Bankruptcy)).
In the absence of argument from either party about the legal basis on which such a review might be conducted, including whether a decision of the Official Trustee of the kind reflected in the November 2018 letter falls to be reviewed under the ADJR Act, it is inappropriate to consider this matter in any depth. It is sufficient to note that, as the decision was made on or around 15 November 2018, Ms Kostov would require an extension of time to file her application under either the ADJR Act or the Insolvency Practice Rules (Bankruptcy) 2016 (Cth). Section 11(3)(a) of the ADJR Act requires the application to be filed within 28 days after the November 2018 letter was given to Ms Kostov and s 90-80 of the Insolvency Practice Rules requires an application made under s 90-15 to be made no later than 60 days after the day on which the person making that application became aware of the trustee’s act, omission or decision giving rise to the application.
Such an extension should not be granted because any application to review the decision recorded in the November 2018 letter would lack merit.
The proceedings to which the November 2018 letter related were commenced in the Supreme Court of New South Wales on 3 October 2018, some months after the sequestration order was made against Ms Kostov’s bankrupt estate. Those proceedings were the subject of a judgment published by Fagan J on 1 February 2019 as Kostov v Amelie Housing (NCAT Appeal). At [11]-[14], Fagan J found that, as Ms Kostov was bankrupt at the time she commenced the proceedings, she had no standing to commence them since that right was “property” (within the definition in s 5 of the Bankruptcy Act) which had vested in her trustee under s 58 of the Bankruptcy Act and the right to bring proceedings is included within the concept of divisible property within s 116(1)(b). In drawing that conclusion, Fagan J relied on (among other authorities) the decision of McKerracher J in Rana v Musolino [2010] FCA 476 at [47]. Further, at [15]-[16], Fagan J found that the exception to “divisible property of the bankrupt” created by s 116(2)(g) of the Bankruptcy Act for any right of the bankrupt to recover damages for “personal injury or wrong” was not engaged by the proceedings, contrary to Ms Kostov’s submissions. Justice Fagan’s reasoning reflects the reasoning in the November 2018 letter and I perceive no error in it so that no error of law is revealed in the November 2018 letter.
Contrary to Ms Kostov’s beliefs as reflected in the materials before the Court, it is irrelevant for the purposes of s 60(4) of the Bankruptcy Act that Amelie Housing locked her out of premises she occupied and her personal effects were sent to storage before her bankruptcy and her view that her cause of action based on those events was for a “personal injury or wrong” is wrong in law.
Ms Kostov has already availed herself of a complaint to the Inspector-General about the Official Trustee’s failure to consult her before issuing the November 2018 letter. It was the subject of Mr Shaw’s letter to Ms Kostov dated 15 February 2019. In that letter, Mr Shaw concluded that as the proceedings to which the November 2018 letter related were commenced after Ms Kostov became bankrupt, s 60(4) of the Bankruptcy Act, which permits a bankrupt to continue proceedings commenced before he or she became bankrupt where the proceedings are in respect of “any personal injury or wrong done to the bankrupt”, had no relevance. The Court perceives no error in that conclusion for reasons previously given.
Mr Shaw further said that a trustee in bankruptcy had no obligation to consult a bankrupt before making such a decision and the Official Trustee had taken legal advice on the basis of which it made its decision. Mr Shaw also noted that the fact Ms Kostov had failed to file a statement of affairs some seven months after becoming bankrupt “makes it harder for the Official Trustee to administer your estate effectively, and is prolonging the period of your bankruptcy”. The Court agrees.
For completeness, in the Court’s view it was entirely open to the Official Trustee to form the view that it should not prosecute the proceedings commenced by Ms Kostov having regard to its duty to act in the interests of the estate in a commercially sound manner and to seek to minimise the costs, not only for the benefit of creditors of the bankrupt estate, but also for the benefit of the other parties to those proceedings in circumstances where those proceedings sought to recover only a small amount of damages and had no reasonable prospect of success.
Further amended application
The Court was not satisfied that it should grant any of the interim relief sought in the further amended application (see [66] above), not least because Ms Kostov did not appear on 8 July 2020 to prosecute that application.
For the reasons set out above, Ms Kostov has no reasonable prospect of success in any hearing before the Federal Court for review of the Official Trustee’s decision memorialised in the 15 November 2018 letter for the reasons set out above.
As noted above, Peterson Haines Lawyers has answered the subpoena issued to it by Ms Kostov, the substance of which was also sought in the notice to produce issued by Ms Kostov to AFSA for the materials sought by Ms Kostov in the further amended application. On the basis of the materials before the Court, the Court is not satisfied that it is necessary to seek confirmation from either Ms Peterson or AFSA in relation to whether there is any pre-existing relationship; as noted above, the request is just fishing. The materials that Ms Kostov has put before the Court are communications between a bankrupt’s trustee and a solicitor acting for a party in litigation with the bankrupt and are not indicative of any improper conduct by either Ms Peterson or any person employed by AFSA.
There is no identified basis on which the Court may make an order that the Official Trustee should appoint a case manager with legal qualifications in relation to Ms Kostov’s bankrupt administration. There is nothing in evidence which suggests that Ms Bondin is not an appropriate case manager, notwithstanding that she is not legally qualified. Ms Kostov’s legal qualifications do not entitle her to the belief that Ms Bondin will do as Ms Kostov directs or that Ms Bondin lacks competence when she declines to do so.
As noted above, the further amended application contained assertions by Ms Kostov that relate to her applications for annulment of her bankruptcy and to remove and replace the Official Trustee and they will be considered in that context.
Amended application and further amended application
Annulment application
The Court was not satisfied that it should make orders annulling Ms Kostov’s bankruptcy.
Ms Kostov says that, as a result of a mental health condition diagnosed in 2017 but which affected her from 2015, she was not present when the proceedings in which Mr Easton obtained the costs order which founded the bankruptcy petition were dismissed, and she did not participate in the cost assessment process leading to the judgment debt for the same reason. This appears to relate to circumstances the subject of the decision in Kostov v YPOL Pty Ltd, and in particular, orders made on 11 July and 22 August 2017 by Fagan J.
On 29 April 2019, Ms Kostov filed evidence listing medical appointments with doctors whose expertise was not evident and some certificates indicating that she was not fit to attend work for short periods in 2017 “due to a medical condition”. That evidence does not establish that Ms Kostov had a diagnosed mental illness which would have precluded her participating in those proceedings. However, having regard to the matters set out in the Court of Appeal’s judgment in Kostov v YPOL Pty Ltd at [3]-[9] the Court accepts that Ms Kostov was materially affected by a mental illness in the period up to 2017 when the costs order in Mr Easton’s favour was made. Ms Kostov also filed some evidence of correspondence with the Senior Deputy Registrar and Manager of Costs Assessment of the Supreme Court of New South Wales in March 2019 in relation to Mr Easton’s judgment debt and evidence of an application for review of the determination of costs which underlies Mr Easton’s judgment debt, but that process has not proceeded to date.
It is not inconceivable that the fact that a person who laboured under a mental illness which affected her conduct and ability to participate in proceedings leading up to a judgment debt might be relevant to an annulment application. However, it is relevant, and weighs most heavily, that:
(1)Ms Kostov has provided no evidence that she was unaware of the proceedings before District Registrar Wall at which the sequestration order was made. She plainly was aware of the hearing of her application for an extension of time to review that order: see [19] above.
(2)She has not demonstrated any degree of co-operation with her trustee in bankruptcy by filing a statement of affairs or details of her current residential address. To the contrary, Ms Kostov has refused to co-operate with her trustee and sometimes responded rudely to notifications by AFSA staff and Mr Hedge or Ms Selim that she was under obligations imposed by the Bankruptcy Act to do so.
(3)Ms Kostov did not file evidence of her solvency in accordance with the timetable for provision of evidence. Shortly before the hearing, Ms Kostov filed an affidavit without leave and sent a number of emails to the Court and others in which she sought to address the debts identified in the original and updated reports filed by AFSA. That evidence does not establish that Ms Kostov was in a position to pay her debts as they fell due as at 18 July 2018 or as at 8 July 2020.
Ms Kostov’s evidence and submissions, that she offered Mr Easton the option of having her wages garnished in order to pay the judgment debt, indicates that she was not in a position to pay that judgment debt in July 2018.
The fact that she was absent when the orders were made by the Supreme Court of New South Wales and during the assessment process is not relevant while Mr Easton’s judgment debt stands and she has no apparent means of meeting that debt or other extant debts. Having regard to Ms Kostov’s submissions, it is necessary to say the following: The Court is not in a position to direct the Supreme Court to conduct a reassessment. Ms Kostov has not made progress in her attempts to have Mr Easton’s costs reassessed. Ms Kostov has only asserted that upon reassessment, Mr Easton’s costs entitlement would be less but she has provided no evidence to support that assertion. There is no reason, two years after the sequestration order was made, to wait for any reassessment to be undertaken, as Ms Kostov has requested. Further, the fact that measures to address the effects of COVID-19, being to make the period for compliance under a bankruptcy notice six months from a date in March 2020 and to lift the minimum amount of the debt which must be owed from $5,000 to $20,000, do not apply to Ms Kostov as she had already been made bankrupt well before March 2020 so that her proposal for “resolution” and annulment cannot be accepted.
Ms Kostov has not established that she is now in a position to pay Mr Easton’s judgment debt or the judgment debt in favour of Fairfax Media. Ms Kostov did not provide evidence that either Mr Easton or Fairfax Media had agreed to waive those debts. Ms Kostov says that her source of income is a disability pension. On that basis, she is currently not in a position to pay those debts which are due. She is therefore insolvent. The Court accepts Ms Kostov’s submission that her capacity to earn a substantial income in the finance industry is affected by her bankruptcy. However, that is not a reason to annul her bankruptcy where she has not demonstrated that she is solvent.
The Court is therefore not satisfied that it should order that Ms Kostov’s bankruptcy be annulled under s 153B of the Bankruptcy Act.
Discharge
Ms Kostov relied on a newspaper report published in the “Prince George Citizen” on 13 December 2014 concerning a decision by a Canadian court to discharge the bankruptcy of a woman who suffered from a mental illness when the sequestration order was made. She now also seeks to rely on the existence of the “Brunner test”, under which people in the United States of America are discharged from liability from student loans. However, Ms Kostov has not identified any basis in Australian law for the Court to make an order for her early discharge from bankruptcy where the Court considers it inappropriate to make an annulment order and the Court is not aware of one. Further, as noted at [40] above, the recommendation made by Justice Connect that the Bankruptcy Act be amended to permit discharge after 12 months has not been adopted. Accordingly, this plea must fail.
While s 149 of the Bankruptcy Act provides for automatic discharge from bankruptcy three years after a statement of affairs has been filed (unless that period is extended), as Ms Kostov has not filed the statement of affairs, that time has not yet commenced to run. Had she filed a statement of affairs in July 2018, there would only be a year to go from now.
Application to remove trustee
The Court is not satisfied that Ms Kostov has demonstrated that the Official Trustee’s conduct in the administration of her bankrupt estate warrants its removal or that the conduct has been inappropriate. She has also not provided consent from a qualified trustee to act as trustee of her bankrupt estate. No creditor has indicated that it supports her application.
For reasons previously given:
(1)Neither the November 2018 letter nor the Official Trustee’s December 2018 letter represents an improper application of bankruptcy law or a “wrongful interference in personal injury proceedings”.
(2)The Official Trustee was not obliged to consult Ms Kostov or involve her in communications with Peterson Haines Lawyers or Amelie Housing concerning its attitude to the further conduct of proceedings commenced by Ms Kostov against Amelie Housing in circumstances where there was no assets to fund the litigation and no apparent prospects of success based on legal advice. There is nothing in the correspondence between the Official Trustee and Peterson Haines Lawyers which demonstrates improper purpose or conduct. Ms Kostov had no right to demand access to that correspondence in the ordinary course of the administration of her bankrupt estate. Accordingly, Ms Bondin did not err in failing to provide that correspondence to Ms Kostov and her failure to do so does not justify Ms Kostov’s demand to have a person with legal qualifications appointed as her case manager.
(3)The fact that, had the Official Trustee consulted Ms Kostov, she might have advised that Amelie Housing had made offers to settle the proceedings for $8,000 (in August 2018) and $10,000 (in October 2018) is irrelevant. Ms Kostov’s evidence is that she was not prepared to enter into a deed of settlement with Amelie Housing which exonerated it and its staff, a condition of those offers. Accordingly, those offers were no longer available. Ms Peterson had no obligation to tell the Official Trustee that those offers had been made and rejected.
(4)Insofar as Ms Kostov complains that the Inspector-General refused to conduct an internal investigation into the Official Trustee’s decision set out in the November 2018 letter, the Court accepts the respondents’ submission that Mr Shaw’s letter to Ms Kostov dated 15 February 2019 provided a detailed response to her complaints. The fact that Ms Kostov did not accept what Mr Shaw said does not mean that her complaints were not addressed.
(5)It was appropriate for the Official Trustee to file submissions to assist the AAT by discussing whether or not it had jurisdiction to entertain Ms Kostov’s complaint concerning the decision reflected in the November 2018 letter. It was appropriate for the Official Trustee to engage lawyers for that purpose. Ms Kostov’s submissions that that conduct was inappropriate and incurred unnecessary cost and her apparent belief that the Official Trustee should have left her application unaddressed on the matter of jurisdiction so as to avoid cost are entirely misconceived.
(6)The costs incurred and remuneration incurred by the Official Trustee as disclosed in Ms Bondin’s affidavit is unsurprising given Ms Kostov’s conduct in these and other proceedings.
(7)Although the coincidence of timing of Global Skip Tracing’s contact with Ms Kostov on 24 June 2020 was unfortunate, the Court does not accept that it was deliberately timed to occur before Ms Kostov appeared before Judicial Registrar Cridland or that any of Mr Hedge, Colin Biggers & Paisley or Ms Bondin knew that any contact would be made with Ms Kostov pursuant to the enforcement program being run by a different area within AFSA.
COSTS AND STAY ON FURTHER PROCEEDINGS
As Ms Kostov was unsuccessful in all of her applications it is appropriate that they be dismissed and that she be ordered to pay the respondents’ costs. At the hearing on 8 July 2020, Mr Hedge submitted that Ms Kostov’s conduct would have justified an order being made on an indemnity basis but the respondents elected not to make that claim on the basis that Ms Kostov is unlikely to be able to meet any order as to costs.
In their submissions filed on 4 June 2020, the respondents made the following submissions:
49.The Respondents will be pressing for the matter to be heard in a final manner and to be dealt with and dismissed with finality in the event that Ms Kostov does not appear.
50.His Honour Justice Robertson made an order that, pursuant to rule 39.03(2) of the Federal Court Rules, any further proceedings brought by Ms Kostov against the petitioning creditor in the bankruptcy proceedings, Jeffrey Lind Easton, be stayed. Those costs have not been paid. This annulment application is to all intents and purposes a further attempt to review the sequestration order and significant costs have been incurred.
51.In the event that the Court is not satisfied that Ms Kostov has met the necessary onus to establish that her bankruptcy should be annulled and as a consequence these proceedings are dismissed, then the Respondents seek a costs order and also an order that any further proceedings brought by Ms Kostov against the Respondents relating to her bankruptcy be stayed until such time as such costs orders are paid. This order is sought pursuant to Rule 39.03(2) of the Federal Court Rules.
Ms Kostov did not address these matters in her submissions dated 25 June 2020 or in any of her correspondence sent to the Court.
At the hearing on 8 July 2020, Mr Hedge indicated that the respondents had contemplated whether they should seek an order declaring Ms Kostov to be a vexatious litigant, but had decided not to do so. The Court considers that that was appropriate, given the Official Trustee’s continuing role as trustee of Ms Kostov’s bankrupt estate and the fact that, as a trustee in bankruptcy, it is subject to the Court’s supervision.
Having said that, the Court accepts that by these proceedings, Ms Kostov did, in effect, seek to review the sequestration order by her suggestion that the proceedings should be converted into judicial review proceedings. By seeking review of the decision advised in the November 2018 letter, Ms Kostov has sought to re-litigate issues decided by Fagan J in Kostov v Amelie Housing (NCAT Appeal) at [11]-[16]. Indeed, in the proceedings with Amelie Housing in NCAT and the Supreme Court of New South Wales which are the subject of many judgments, Ms Kostov demonstrated persistence of an unusual order and a frequent failure to attend at hearings to prosecute her applications indicative of a vexatious litigant.
The Court also accepts that Ms Kostov’s correspondence with employees of the respondents and their lawyers has been harassing and contrary to a direction given to her on 29 April 2020 to communicate with AFSA through Ms Bondin pursuant to AFSA’s Unreasonable Complaint Conduct Policy. Even though, at the hearing of her stay application on 20 July 2020, Ms Kostov demonstrated that she has some insight in relation to her conduct, that insight has not been sufficient to prevent her making unjustified demands on the respondents’ staff and legal representatives and it has resulted in unnecessary applications to this Court. It is notable that, despite the energy Ms Kostov put into obtaining correspondence between Peterson Haines Lawyers and the fact that both Peterson Haines Lawyers and AFSA have responded to a subpoena and a notice to produce by producing documents, enquiries with the Court’s Registry indicate that she has not sought to uplift them to date, even though it is clear from the transcript of the proceedings on 24 June 2020 that Judicial Registrar Cridland indicated that they would be made available to Ms Kostov electronically if she applied to the Registry for them.
Accordingly, the Court determined that it was appropriate make orders under r 39.03(2) of the Federal Court Rules limiting Ms Kostov’s capacity to bring further proceedings for some or all of the same causes of action or relief as that sought in these proceedings until she has paid the respondents’ costs. The Court appreciates that that would be a substantial limitation, given Ms Kostov’s financial situation, but the Court considers it justified by the Ms Kostov’s conduct of these proceedings and the lack of merit of her applications.
I certify that the preceding two hundred and forty-nine (249) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Farrell. Associate:
Dated: 31 July 2020
- AGLC
- Kostov (Bankrupt) v Australian Financial Security Authority, in the matter of Kostov [2020] FCA 1105
- Case
- [2020] FCA 1105
- Decision Date
CaseChat Overview and Summary
The court found that Kostov failed to establish his legal incapacity or his inability to participate in the assessment of costs that led to the judgment debt forming the basis of the bankruptcy petition. Furthermore, Kostov's failure to establish solvency and file a statement of affairs rendered his application for annulment unsuccessful. The court also concluded that the conduct of the Official Trustee did not warrant removal, and no qualified trustee had consented to act as the new trustee of the bankrupt estate. As for the interlocutory application to convert the annulment application to a judicial review application, the court held that the decision of a single judge was not capable of judicial review by another judge of the court. The court further found that the application to discontinue separate proceedings was out of time and would lack merit. Lastly, the application to stay the delivery of the judgment was dismissed due to Kostov's failure to appear at the final hearing.
The court dismissed the application for a stay filed on 10 July 2020 and dismissed the proceedings, including all interlocutory applications made by Kostov. The court ordered Kostov to pay the respondents' costs as agreed or taxed. Pursuant to r 39.03(2) of the Federal Court Rules 2011 (Cth), any further proceedings brought by Kostov against either of the respondents for some or all of the same or substantially the same causes of action or relief as those claimed in these proceedings be stayed until the costs the subject of order 3 have been paid.
Orders
Orders of the court
1. The application for a stay filed on 10 July 2020 is refused.
2. The proceedings, including all interlocutory applications made by the applicant, be dismissed.
3. The applicant pay the respondents’ costs as agreed or taxed.
4. Pursuant to r 39.03(2) of the Federal Court Rules 2011 (Cth), any further proceedings brought by the applicant against either of the respondents for some or all of the same or substantially the same causes of action or relief as those claimed in these proceedings be stayed until the costs the subject of order 3 have been paid.
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
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Ratio Decidendi
Legal Principle Established
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