FEDERAL COURT OF AUSTRALIA
Mokhtar v Piscopo (No 2) [2025] FCA 21
File number(s): NSD 611 of 2022 Judgment of: PERRY J Date of judgment: 28 January 2025 Catchwords: COSTS – applicant sought orders that the respondent trustee personally pay the applicant’s costs – respondent sought no order as to costs – where applicant was successful in application for removal of respondent as trustee of the applicant’s bankrupt estate – consideration of general principles applicable to the discretion to grant costs under s 32 of the Bankruptcy Act 1966 (Cth) – power to award costs to pro bono counsel where counsel and the party have entered into a costs agreement pursuant to r 4.19 of the Federal Court Rules 2011 (Cth) – costs awarded in favour of the applicant Legislation: Bankruptcy Act 1966 (Cth) ss 31, 139WA, Schedule 2 (Insolvency Practice Schedule Bankrtupcy), ss 2, 90-15
Federal Court of Australia Act 1976 (Cth) s 43
Federal Court Rules 2011 (Cth) rr 4.18, 4.19
Legal Profession Uniform Law (NSW)
Cases cited: Adsett v Berlouis [1992] FCA 549; (1992) 37 FCR 201
David Kennedy v Australian Mutual Provident Society (ARBN 008 387 371) [1996] FCA 1045
Forster v Farquhar (1893) 1 QB 564
Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; (1986) 8 ATPR 40-778
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
Mokhtar v Piscopo [2024] FCA 493
Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164
Official Trustee in Bankruptcy v Kent (No 2) [2023] FCA 1396; (2023) 301 FCR 212
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Re Principal Strategic Options Pty Ltd; Coshott v Coshott [2001] FCA 664
Robert Rafec Oayda v Mercantile Mutual Life Insurance Company Limited [1995] FCA 1077
Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 155 FCR 229
Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 36 Date of last submission/s: 19 July 2024 Date of hearing: Determined on the papers Counsel for the Applicant: Mr MA Karam and Mr M Noakhtar Counsel for the Respondent: Mr S Sher Solicitor for the Respondent: Drayton Sher Lawyers ORDERS
NSD 611 of 2022 BETWEEN: AHMAD SHIB MOKHTAR
Applicant
AND: SAMUEL PISCOPO
Respondent
ORDER MADE BY:
PERRY J
DATE OF ORDER:
28 JANUARY 2025
THE COURT ORDERS THAT:
1.Pursuant to s 90-15(3)(d) of Schedule 2 to the Bankruptcy Act 1966 (Cth) (Schedule) and/or s 43 of the Federal Court of Australia Act 1976 (Cth) (Act), the Respondent is to pay the Applicant’s costs of the proceedings.
2.Pursuant to s 90-15(3)(d) and/or (5)(a) of the Schedule, and/or s 43 of the Act, the Respondent is…
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- AGLC
- Mokhtar v Piscopo (No 2) [2025] FCA 21
- Case
- [2025] FCA 21
- Decision Date
CaseChat Overview and Summary
In Mokhtar v Piscopo (No 2), the applicant, Mr Ahmad Shaib Mokhtar, sought orders for the respondent trustee, Mr Samuel Piscopo, to personally pay the applicant’s costs, including those incurred by pro bono counsel. The respondent trustee sought no order as to costs. The case was heard following the applicant's successful application for the removal of the respondent trustee from the administration of the applicant’s bankrupt estate. The court was required to consider the legal principles governing the discretion to award costs under section 32 of the Bankruptcy Act 1966 (Cth), and whether the applicant’s pro bono counsel could be paid directly from the respondent’s personal funds.
The court examined the general principles applicable to the discretion to grant costs and the specific provisions of the Bankruptcy Act and Federal Court Rules that allow for costs to be awarded to pro bono counsel. It also considered the circumstances of the case, including the applicant’s financial position, the nature of the dispute, and the conduct of the parties. The court found that the applicant’s successful application for the removal of the respondent trustee warranted the award of costs to the applicant. The court concluded that the respondent should be personally liable for the applicant’s costs and that these costs should be paid directly to the pro bono counsel. The court certified two counsel for the hearing.
The court ordered that the respondent pay the applicant’s costs of the proceedings, be personally liable for these costs, and not be reimbursed from the applicant’s bankrupt estate. The court also ordered that the respondent pay the costs directly to the applicant’s pro bono counsel and certified two counsel for the hearing.
The court examined the general principles applicable to the discretion to grant costs and the specific provisions of the Bankruptcy Act and Federal Court Rules that allow for costs to be awarded to pro bono counsel. It also considered the circumstances of the case, including the applicant’s financial position, the nature of the dispute, and the conduct of the parties. The court found that the applicant’s successful application for the removal of the respondent trustee warranted the award of costs to the applicant. The court concluded that the respondent should be personally liable for the applicant’s costs and that these costs should be paid directly to the pro bono counsel. The court certified two counsel for the hearing.
The court ordered that the respondent pay the applicant’s costs of the proceedings, be personally liable for these costs, and not be reimbursed from the applicant’s bankrupt estate. The court also ordered that the respondent pay the costs directly to the applicant’s pro bono counsel and certified two counsel for the hearing.
Orders
Orders of the court
1. Pursuant to s 90-15(3)(d) of Schedule 2 to the Bankruptcy Act 1966 (Cth) (Schedule) and/or s 43 of the Federal Court of Australia Act 1976 (Cth) (Act), the Respondent is to pay the Applicant’s costs of the proceedings.
2. Pursuant to s 90-15(3)(d) and/or (5)(a) of the Schedule, and/or s 43 of the Act, the Respondent is personally liable for the costs in order 1.
3. Pursuant to s 90-15(3)(d) and/or (5)(b) of the Schedule, and/or s 43 of the Act, the Respondent is not entitled to be reimbursed from the Applicant’s bankrupt estate in relation to the costs in order 1.
4. Pursuant to rule 4.19(3) of the Federal Court Rules 2011 (Cth), the Respondent is to pay the costs in order 1 herein, including any disbursements under rule 4.18, directly to Pro Bono counsel for the Applicant.
5. The Court certifies for two counsel.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
For the reasons set out below, I consider that it is appropriate for orders to be made in the terms proposed by the applicant. 2. BACKGROUND The proceedings were commenced on 26 July 2022 by the applicant, who was unrepresented at the time. By orders dated 1 September 2022, Markovic J noted that a certificate for pro bono legal assistance would be provided to the applicant by the Court. A formal referral certificate pursuant to r 4.12 of the Federal Court Rules 2011 (Cth) was issued on the same day. By letter dated 23 September 2023, the Court was informed that Mr Karam of counsel had accepted the referral in accordance with the referral certificate. By orders dated 18 October 2022 and 11 November 2022 by consent, the proceedings were adjourned to allow new counsel time to prepare for the matter. On 7 December 2022, the applicant and counsel entered into a conditional costs agreement pursuant to s 180(1)(a) of the Legal Profession Uniform Law (NSW) and rr 4.18 and 4.19 of the Rules. Around this time, the applicant approved Mr Noakhtar being engaged by Mr Karam to assist in the matter as junior counsel. The hearing took place from 18–20 July 2023. By orders dated 13 May 2024, I found in favour of the applicant by ordering that the respondent cease to be the trustee of the applicant’s bankrupt estate. In summarising my findings in the first Mokhtar judgment, I set out at [19]–[22]: First, this is not (as I have said) a case where it was alleged, or I have found, any misconduct on the part of the Trustee. Secondly, I have not accepted that the 17 Objection Notices which were filed by the Trustee between December 2021 and October 2022 were filed for an improper purpose. Thirdly, it is evident that the bankruptcy has caused profound bitterness and stress for all concerned. More fundamentally, however, I have found that there is an irretrievable breakdown in the relationship between Mr Mokhtar and the Trustee. While I have found that Mr Mokhtar’s repeated failure to grasp or comply with basic aspects of his obligations as a bankrupt was not intended to engineer the Trustee’s removal, it has unquestionably contributed and contributed substantially to the irretrievable breakdown in the relationship. However, there were other material contributing factors. These include that Mr Mokhtar genuinely and reasonably misunderstood correspondence from the Trustee on 3 May 2021 and the associated calculator to mean that a payment of $66,000 would suffice for him to be discharged from bankruptcy. I have also formed the view that the Trustee has developed a lack of objectivity during the course of administering the bankruptcy and that this has exacerbated the situation. That lack of objectivity is perhaps understandable in light of Mr Mokhtar’s conduct, including Mr Mokhtar’s completely inappropriate, and at times vicious, language and allegations in later correspondence with the Trustee. I also did not consider that the Trustee’s delay in, among other things, undertaking investigations into aspects of the bankruptcy, taking steps to protect the assets of the bankrupt’s estate and, in particular, in garnisheeing Mr Mokhtar’s income, were satisfactorily explained, especially in circumstances where the Trustee was aware even before the bankruptcy of Mr Mokhtar’s gambling, drinking, and inability to control his spending. These matters show, respectfully, deficiencies in the Trustee’s judgement which have impacted adversely on the administration of the bankrupt estate. It is the combination of these factors in particular which have led me ultimately to the view that it would not, be in the best interests of the bankruptcy for the Trustee to continue. Finally, this outcome should not be understood in any way as a vindication of Mr Mokhtar’s conduct during the bankruptcy. It needs to be said in no uncertain terms that Mr Mokhtar needs to start accepting responsibility for his actions including: ensuring that he fully understands and complies with his obligations as a bankrupt; ensuring that he fully cooperates with the new trustee; and ensuring that he acts at all times with respect and courtesy towards the new trustee and towards Mr Piscopo to the extent to which they may have contact during the handover period.3. THE DISCRETION TO AWARD COSTS: RELEVANT PRINCIPLES
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Following my judgment in Mokhtar v Piscopo [2024] FCA 493 (Judgment), the parties sought to be heard separately on the question of costs. By orders dated 5 June 2024, the parties consented to the issues as to costs being determined on the papers. The applicant, Mr Ahmad Shaib Mokhtar, seeks orders in the following terms:(1)Pursuant to s 90-15(3)(d) of Schedule 2 to the Bankruptcy Act 1966 (Cth) (Schedule) and/or s 43 of the Federal Court of Australia Act 1976 (Cth) (Act), the First Respondent is to pay the Applicant’s costs of the proceedings.(2)Pursuant to s 90-15(3)(d) and/or (5)(a) of the Schedule, and/or s 43 of the Act, the First Respondent is personally liable for the costs in order 1 herein.(3)Pursuant to s 90-15(3)(d) and/or (5)(b) of the Schedule, and/or s 43 of the Act, the First Respondent is not entitled to be reimbursed from the Applicant’s bankrupt estate in relation to the costs in order 1 herein.(4)Pursuant to rule 4.19(3) of the Federal Court Rules 2011 (Cth), the First Respondent is to pay the costs in order 1 herein, including any disbursements under rule 4.18, directly to Pro Bono counsel for the Applicant.(5)The Court certifies for two counsel. By contrast, the respondent, Mr Samuel Piscopo, (the trustee) is seeking an order that each party pay their own costs. For the reasons set out below, I consider that it is appropriate for orders to be made in the terms proposed by the applicant. 2. BACKGROUND The proceedings were commenced on 26 July 2022 by the applicant, who was unrepresented at the time. By orders dated 1 September 2022, Markovic J noted that a certificate for pro bono legal assistance would be provided to the applicant by the Court. A formal referral certificate pursuant to r 4.12 of the Federal Court Rules 2011 (Cth) was issued on the same day. By letter dated 23 September 2023, the Court was informed that Mr Karam of counsel had accepted the referral in accordance with the referral certificate. By orders dated 18 October 2022 and 11 November 2022 by consent, the proceedings were adjourned to allow new counsel time to prepare for the matter. On 7 December 2022, the applicant and counsel entered into a conditional costs agreement pursuant to s 180(1)(a) of the Legal Profession Uniform Law (NSW) and rr 4.18 and 4.19 of the Rules. Around this time, the applicant approved Mr Noakhtar being engaged by Mr Karam to assist in the matter as junior counsel. The hearing took place from 18–20 July 2023. By orders dated 13 May 2024, I found in favour of the applicant by ordering that the respondent cease to be the trustee of the applicant’s bankrupt estate. In summarising my findings in the first Mokhtar judgment, I set out at [19]–[22]: First, this is not (as I have said) a case where it was alleged, or I have found, any misconduct on the part of the Trustee. Secondly, I have not accepted that the 17 Objection Notices which were filed by the Trustee between December 2021 and October 2022 were filed for an improper purpose. Thirdly, it is evident that the bankruptcy has caused profound bitterness and stress for all concerned. More fundamentally, however, I have found that there is an irretrievable breakdown in the relationship between Mr Mokhtar and the Trustee. While I have found that Mr Mokhtar’s repeated failure to grasp or comply with basic aspects of his obligations as a bankrupt was not intended to engineer the Trustee’s removal, it has unquestionably contributed and contributed substantially to the irretrievable breakdown in the relationship. However, there were other material contributing factors. These include that Mr Mokhtar genuinely and reasonably misunderstood correspondence from the Trustee on 3 May 2021 and the associated calculator to mean that a payment of $66,000 would suffice for him to be discharged from bankruptcy. I have also formed the view that the Trustee has developed a lack of objectivity during the course of administering the bankruptcy and that this has exacerbated the situation. That lack of objectivity is perhaps understandable in light of Mr Mokhtar’s conduct, including Mr Mokhtar’s completely inappropriate, and at times vicious, language and allegations in later correspondence with the Trustee. I also did not consider that the Trustee’s delay in, among other things, undertaking investigations into aspects of the bankruptcy, taking steps to protect the assets of the bankrupt’s estate and, in particular, in garnisheeing Mr Mokhtar’s income, were satisfactorily explained, especially in circumstances where the Trustee was aware even before the bankruptcy of Mr Mokhtar’s gambling, drinking, and inability to control his spending. These matters show, respectfully, deficiencies in the Trustee’s judgement which have impacted adversely on the administration of the bankrupt estate. It is the combination of these factors in particular which have led me ultimately to the view that it would not, be in the best interests of the bankruptcy for the Trustee to continue. Finally, this outcome should not be understood in any way as a vindication of Mr Mokhtar’s conduct during the bankruptcy. It needs to be said in no uncertain terms that Mr Mokhtar needs to start accepting responsibility for his actions including: ensuring that he fully understands and complies with his obligations as a bankrupt; ensuring that he fully cooperates with the new trustee; and ensuring that he acts at all times with respect and courtesy towards the new trustee and towards Mr Piscopo to the extent to which they may have contact during the handover period.3. THE DISCRETION TO AWARD COSTS: RELEVANT PRINCIPLES
Ratio Decidendi
Legal Principle Established
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