Nagalingam v MILGEA

[1992] FCA 470

Re: CAROL ROSEANNE POWELL
And: THE OFFICIAL TRUSTEE IN BANKRUPTCY
No. T G17 of 1990
FED No. 470
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIA DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson(1), Hill(2) and O'Loughlin(3) JJ.

CATCHWORDS

Bankruptcy - Discharge - Application that bankrupt be not discharged - Costs in the event that application dismissed - Whether applicant trustee should be ordered to pay bankrupt's costs.

Bankruptcy Act 1966 - s.149

HEARING

MELBOURNE

#DATE 3:7:1992

Counsel for the Appellant: Mr P.E. Rae

Solicitors for the Appellant: Bishop, Gunton Rae

Counsel for the Respondent: Mr A.G. Melick

Solicitors for the Respondent: Australian Government Solicitor

ORDER

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The respondent's costs of the appeal be paid by the appellant.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Appeal against an order with respect to costs.

1. A single judge of this court dismissed an application by the respondent for an order, of the kind for which s.149(12) of the Bankruptcy Act 1966 makes provision, that the appellant be not discharged from bankruptcy by virtue of that section. The learned judge made no order with respect to either party's costs of the application, thereby denying the proleptic application for an order that the respondent pay the appellant's costs which her counsel had made during his submissions on the hearing of the respondent's application, and which he renewed immediately after the judge had published his reasons both for dismissing the respondent's application and for denying the appellant an order that the respondent pay her costs. No reference to costs is contained in the order disposing of the respondent's application, but the appeal lies, it was common ground, against the learned judge's refusal to make the costs order sought by the appellant's counsel.

2. Sequestration orders were made against the estate of the appellant and against the estate of her husband on 6 May 1985. The respondent became the trustee of each estate. In that capacity he filed on 4 April 1990 the application for an order that the appellant be not discharged from bankruptcy by virtue of s.149. On 26 April the learned judge ordered, on the respondent's application, that the period be extended until 31 December 1990 at the expiration of which the respondent's objection to the discharge of the appellant from bankruptcy by force of s.149 would lapse. That order had the effect of preventing the discharge of the appellant on 6 May 1990, at the expiration of 5 years from the date of her bankruptcy, a discharge which other provisions of s.149 would have operated to effect if the order had not been made. The hearing of the application for an order that the appellant be not discharged from bankruptcy by virtue of that section occupied 5 days in August 1990. The dismissal of that application occurred on 13 November 1990. On that day the learned judge stated, immediately after that dismissal, that the order which he had made on 26 April had been made "to enable the Court to hear and determine the application under sub-section 149(12)". In those circumstances, his Honour considered, the power conferred by s.37(1) of the Bankruptcy Act 1966 should be exercised to vary the order of 26 April to provide that the objection to discharge lapse on 13 November instead of 31 December. Thereupon s.149(14) operated to discharge the appellant from bankruptcy. (Cf Powell v. Official Trustee (1990) 26 FCR 444.)

3. Turning to the question of costs, his Honour said:
   

"The dismissal of the application raises a nice question as to the costs of the application. Normally, costs should follow the event. However, in Re: Campbell; Ex parte Official Trustee (1987) 13 FCR 326 Jenkinson J. considered this question where an application by the Official Trustee under sub-section 149(12) of the Bankruptcy Act was dismissed. His Honour considered the nature of the function of the Official Trustee under the Bankruptcy Act and a number of earlier authorities and at p 329 said:-

`The trustee discharges an obligation to make the application under s.149(12) when he makes it in the conviction that it ought to be made, and made by him. And the discharge of the obligation is in my opinion correctly conceived as the performances of a public duty for the public welfare. If the trustee's decision to make an application under s.149(12) were considered by the court to have been unreasonable, or if the conduct of the application by the trustee were considered to have been unreasonable in some respect, that would be a consideration in favour of an exercise of the discretionary power to order the trustee to pay the bankrupt's costs of the application. But I do not consider that in this case there was anything unreasonable in the institution or the prosecution of the application. In those circumstances I do not consider that any order for payment of the bankrupt's costs by the applicant trustee ought to be made.'

In the present case, I have come to the view that this is not a case where the Court should order the trustee to pay Mrs Powell's costs. The reason given by Mr Harrison for bringing this application as set out earlier in these reasons, is based, obviously, on Campbell's case but its formulation appears to be defective. The Official Trustee should not make an application under sub-section 140(12) unless on the evidence available, the Official Trustee believes that an order should be made. An application under sub-section 149(12) is not analogous to an examination of a bankrupt under s.69 so as to enable the trustee to conduct an enquiry into the conduct of the bankrupt. It is for the trustee to lead evidence to justify the making of the order. The nature of this duty is referred to earlier in these reasons. Further, earlier in these reasons, reference was made to what appeared to be an obsession formed in the mind of Mr Harrison adverse to Mrs Powell. These factors suggest that the application might have been brought unreasonably. However, having regard to the unusual facts of this case, I have concluded that the normal practice should be followed and that there be no order as to the costs of the application."

1. The person to whom the learned judge refers in that passage as Mr Harrison was at material times acting as an Official Receiver on behalf of the respondent in relation to the appellant's bankruptcy.

2. Mr Rae of counsel for the appellant expressly disclaimed any submission that Re Campbell, supra, was wrongly decided. For the purposes of this appeal its correctness is to be assumed. He did, however, submit that, the general rule in litigation being, as he said, that costs follow the event, the respondent attracts in his favour the application of the principle stated in that case only if he persuades the court that the institution and prosecution of an application under s.149(12) were reasonable. In this case that had not been achieved, it was submitted. Nowhere had the learned judge expressed a conclusion that either the institution or the prosecution of the application had been reasonable. In the passage cited from his reasons for judgment the learned judge had conceded the possibility that the application might have been brought unreasonably, and observations made elsewhere in those reasons demonstrated that unreasonable conduct on the part of Mr Harrison in the institution and the prosecution of the application had been found to have occurred, it was submitted.

3. His Honour's reference to "the unusual facts of this case" in the passage cited may be inferred to comprehend what the judge found to have been the appellant's husband's "strange power to use and misuse not only Mrs Howell but also" her mother, and also to comprehend the appellant's "support of (the husband) in the sense of doing what he wanted her to do without any clear idea of the implications of those actions". (The quotations in the preceding sentence are from his Honour's reasons for judgment.) His Honour found that Mr Harrison had mistaken the appellant's passive co-operation with her husband for active participation in the husband's business activities which, as his Honour found, were "conducted by Mr Powell in the joint names of himself and Mrs Powell ...... without him telling Mrs Powell what he was doing". That "wrong impression" of Mr Harrison had in his Honour's view "so clouded his opinion that he became obsessed by the view that Mrs Powell should not be discharged from bankruptcy". Mr Rae characterised that judgment of the learned judge as necessarily involving a conclusion that Mr Harrison's conduct had been unreasonable. I doubt whether either etymology or semantics would justify that submission. However that may be, his Honour's reasons for judgment demonstrate that a tangled and protracted history required the careful scrutiny and analysis which he gave it to yield a confident determination of the question whether the respondent's application should be granted or dismissed. While those reasons expose errors in Mr Harrison's presentation of the question to the court, they give no ground for concluding that Mr Harrison's decision to submit the question to the court was wrong. The passage from the reasons first cited show that, having directed his mind specifically to the question whether the application had been brought unreasonably, the learned judge abstained from stating a finding that it had. It can safely be inferred that no such a finding was made. His Honour indicated his intention to apply Re Campbell, the correctness of which was not challenged by the appellant's counsel. The learned judge is not said to have overlooked any of the many circumstances, relevant to the exercise of his discretionary determination of the question of costs, which a long hearing would have disclosed. In my opinion no error in the exercise of that discretion has been shown. I would dismiss the appeal with costs.

JUDGE2

I have had the privilege of reading the Reasons for Judgment of His Honour Mr Justice Jenkinson and agree with the Reasons contained therein.

JUDGE3

I agree with the reasons for judgment of Jenkinson J. and with the orders which he proposes.