Re Edelsten, G.W. Ex Parte Donnelly, M.C. as trustee for the estate of Edelsten, G.W.

[1992] FCA 838

IN THE FEDERAL COURT OF AUSTRALIA

EXERCISING FEDERAL JURISDICTION	NO NB 497 of 1988
IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN

CAPITAL TERRITORY

RE:  GEOFFREY WALTER EDELSTEN

Bankrupt

EX PARTE:  MAX CHRISTOPHER DONNELLY

AS TRUSTEE FOR THE ESTATE OF

GEOFFREY WALTER EDELSTEN

Applicant

AND:  GEOFFREY WALTER EDELSTEN AND OTHERS

Respondents

COURT :  NORTHROP J

/$PTQ$ RECEIVED

PLACE :	MELBOURNE
m:

On 11 September of this year I published my reasons in

relation to what might be described as the issues of the
declarations being sought in the application brought in this
matter being the only matters then being considered for
determination, the substantive items of relief being deferred
until the questions of the declarations had been determined.
In the reasons published on that day the Court announced that
it proposed to make certain orders being the declarations
corresponding to declarations 1, 2, 3 and 5 of the
declarations contained in the further amended application.
The Court also said in those reasons that it refused to make

the declarations set out in paragraphs 6, 7, 8, 10, 11 and 14

of the further amended application. The Court then continued:

"In these circumstances it is proposed to make the
declarations 1, 2, 3 and 4 , as set out in these reasons
and to adjourn the further hearing of the application to
a date to be fixed to enable the parties to make
submissions as to what further orders should be made and
what orders should be made in relation to the costs of

the application."

The further hearing of the matter has come on this

morning. Initially counsel for the applicant handed to the

Court what are described as short minutes of order to be made by the Court in conformity with the reasons given. The declarations 1, 2, 3 and 4 of those minutes are in conformity with the proposed orders mentioned previously and the Court makes those declarations in the form as set out in the short minutes of order. It is noted that some questions may have arisen as to when these declarations were made and in my opinion it is quite clear that they were not made when I published my reasons. They are being made today. If any appeal is to be taken from orders made today the time for

making the appeal runs from today. In the circumstances I see

no reason at all why I should express any views as to whether
leave should be granted to extend the time to appeal to 21

1

days from today. The Act and the Rules operatf.

The short minutes also seek an order in the form numbered 5 in the minutes as follows:

"A declaration that any interest contingent or otherwise

the Tenth and Twelfth Respondents have in any of the shares of the VIP companies is held on trust for the First Respondent."

This order corresponds to order 4 as contained in the

further amended application and did not form any part of the
proposed orders referred to in the reasons for decision given
on 11 September. The order as sought in order 4 was not made
the subject of express submissions during the hearing of the
matter and arises from some of the material before the Court
which suggests that one of the shareholders in one or more of
the companies had signed declarations that shares held by that
person were held in trust or some part in trust for the tenth
or twelfth respondents. In view of the declarations made I
see no basis for making the declaration numbered 5 in the

short minutes. It had not been argued before me during the

course of the hearing and in any event the declaration that at
all material times the persons named in declarations 1, 2, 3
and 4 held the shares in trust for Dr Edelsten make it quite
clear that they held the shares in the companies in trust for
Dr Edelsten and that as a result they are now held by the

trustee-in-bankruptcy. If either the tenth or twelfth

respondents desire to take the matter further they should be
free to do so, but the impression I have is that they would
have a difficult task ahead of them. I propose not to make

the declaration sought in order 5 of the short minutes.

Because of the large number of claims that have been made

in the further amended application and in view of the large number of respondents to the application and in view of the complexity of the matter, this is a case where I am of the

opinion that there should be a further order to the effect that apart from those declarations made the application is otherwise dismissed. I make that order accordingly.

The short minutes of order also contain what might be

said to be complementary orders to give effect to the
declarations contained in paragraphs 1, 2, 3 and 4. I propose
and do make those orders as set out in the short minutes of
order. Questions arose whether those orders are appropriate
insofar as they apply to the respondent, VIP Health
Corporation Pty Limited (in liquidation), but I propose to
make those orders and let the course then be taken that if
there are problems they can be resolved, I would have thought,

by other means.

The main issues argued this morning have related to the

relevant orders for costs that should be made since the orders

which have been made otherwise finally determine the

application before the Court.	In this matter it is noted that
at this stage I am not making any comments in relation to the

order for costs insofar as they affect the fourteenth
respondent but propose to make orders in relation to the costs
of the other parties.

It must be remembered that in this case the applicant is the trustee of Dr Edelsten's estate, a trustee-in-bankruptcy, and in the circumstances it is quite apparent the trustee was not able to get full assistance from the bankrupt as to the

details of the assets or property of Dr Edelsten, and what
property should vest in the trustee, either initially upon the
bankruptcy order being made, or subsequently by way of assets
coming into the ownership of Dr Edelsten, being after acquired
property. To that extent the application to this Court did
include in it a large number of respondents. To a large
extent, the application had the appearance of an inquiry as to
what were the assets of Dr Edelsten and what was the after

acquired property of Dr Edelsten. During the course of the

hearing it was claimed at various times by counsel for the
applicant, that the declarations being sought were part of a
process by which the substantive orders should be made in
relation to the property of the VIP companies, which in truth
was held by Dr Edelsten, and thus constructed after acquired
property and, therefore, vested in the trustee.

In order to establish that final position, it was said

that the declarations as to the ownership of shares was a
necessary step as was the declaration as to the ownership of
the assets of the company, as was also the declaration sought

as to the agreement between the ninth respondent and the
fourteenth respondent being void.	In the result very few

declarations were made, declarations in relation to shares only, which shares are said to be of little wor~il'or value. The declarations in relation to the assets of the companies were refused for the reasons given on the earlier occasion. With that background information I propose to deal with the question of costs.

Counsel for Dr Edelsten has submitted detailed

contentions as to the order to be made for costs against Dr Edelsten, or in his favour. He referred to the two central issues in the application, the ownership of the shares and the

ownership of the assets. He said, in substance, that the
ownership of the assets was the really important issue; that
the ownership of shares was only of minor importance, and that
to some extent it was not necessary to have Dr Edelsten

present as a party for that application.

This did arise several times during the course of the

hearing and on each occasion in the course of hearing, I made

the comment that I considered it was important that Dr

Edelsten be a party. I still adhere to that view both in

relation to the shares and to the assets of the companies. In
the present case the applicant has succeeded in the orders in
relation to the shares and normally would be entitled to his

costs of that application.

At the same time the applicant has failed in relation to

the claims relating to the assets of the VIP companies. On

one view, in those circumstances, there should be an order

that the applicant pay Dr Edelsten's costs on that part of the

case. I repeat the view, that this applicatior cannot be

broken up in that way from the costs point of view. The

de~larations relating to the ownership of the shares formed an

essential step in the overall application.

>lr Fajgenbaum QC, for Dr Edelsten, also referred to the

various orders made in interlocutory matters where costs were

reserved by the Court dealing with those interlocutory
matters. He argued that having regard to the nature of those
interlocutory orders, some of which were in substance, it was
said, not affecting Dr Edelsten; some of which, it was said,
were made in favour of Dr Edelsten, and some of which, it was
said, were made against the interests of Dr Edelsten, the
Court should go through and deal with each of those cases of
reserved costs and make decisions in relation to each one of
them. The purpose of reserving costs is to enable that to be
done. In the present case, it is my opinion that they all
formed part of the overall case, and there is no sufficient
separateness in relation to any one of them to take any

outside the general order I propose to make.

In all the circumstances this is a case where, pursuant

to the power conferred by section 32 of the Bankru~tcv Act

1966 which enables a Court to make such order as to costs as

it thinks fit, I propose to make an order directing that Dr

Edelsten pay a proportion of the applicant's costs of the

whole application, including the costs reserved at the various

times. I do this on the basis that the whole application

should be treated as one, including the specific matters dealt

.I

with on the reserved costs matters. This is a >dse where,

from an overall consideration of the evidence, the question of

t h ~ ownership of the shares and the way in which the VIP

companies operated and who, in fact, controlled them, formed a
very important part, and a very difficult part, to untangle
during the course of the hearing; that the applicant, of
necessity, had to engage in what might be said to be, to some
extent, a fishing expedition, which arose because of the

unusual features of this case. In all the circumstances, it

is a case where I should not make any order that Dr Edelsten's
costs be paid by the applicant.

I propose, in the exercise of my discretion, rather than

try and deal with each separate matter, to deal with it
globally and order that one-half of the applicant's costs,
including reserved costs, be taxed and paid by Dr Edelsten.

The other respondents come in a slightly different

category. Counsel appeared for a group of respondents being
the 2nd, 4th, 6th, 7th, 8th, loth, llth, 12th and 13th. To
some extent these matters were dealt with in the reasons for

judgment where reference is made to the representation of the

parties. Ian Goodman did not appear except on the first day

when it was announced he would not take part in the
proceedings. He was a person against whom a declaration was

made and orders have been made. He did not give evidence and

in those circumstances in my opinion there should be no order	for costs of either the applicant or the respondent in
relation to Ian Goodman. The same should apply in relation to

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Esther Edelsten who was in the same category aF Ian Goodman. Also, as far as the llth respondent is concerned, Ruth Rowena Dayoren, she did give evidence, did claim in the course of giving evidence that she was the owner of the shares but she played no part in the proceedings as a party and in the circumstances there should be no order that she pay costs or be entitled to costs.

They are the three persons against whom declarations have been made but, having played no part in the proceedings, it is my oplnion that there should be no order for costs agalnst any of those persons, nor should there be any order that they

receive costs from the applicant.

As far as the third respondent is concerned there is no appearance for that person and no order for costs is made in relation to Dianne Joy Adams.

As far as the 6th, 7th and 8th respondents, being three

of the VIP companies, are concerned, it is said that they were
necessary parties in relation to the declarations as to the
ownership of shares. I am not satisfied of that. In my
opinion they were certainly necessary parties in relation to
who owned the assets of those companies. On that matter the
applicant has failed and in those circumstances it is ordered
that the applicant pay the taxed costs, including reserved

costs, of VIP Management Pty Limited, VIP Health Care Pty

Limited and VIP Holdings Pty Limited.

The 10th and 12th respondents are in a very similar .-

position to the companies and in my opinion thjz again is a
case where the applicant should pay their costs, including

reyerved costs. The same may be said in relation to the 13th

. I

respondent, Christine Wenberg.

Counsel appeared for the respondent Raymond Bartlett and

in this case there was evidence put before the Court by way of
affidavit as to what had transpired between the solicitors in
relation to discontinuance of the proceedings against Raymond
Bartlett. The evidence shows that there may have been some
doubt as to whether in fact he was a shareholder or not, but
in my opinion this is a case where the applicant should pay
Raymond Bartlett's costs, including reserved costs.

The 9th respondent, VIP Health Corporation Pty Ltd (in

liquidation) in reality is in the same position as the other VIP companies and this is a case where the applicant, having failed on the question of the assets, should pay the costs,

including reserved costs, of VIP Health Corporation Pty

Limited (in liquidation).

I certify that this and the preceeding nine (9) pages are a
true copy of the Ex Tempore Reasons for Judgment of the

Honourable Mr Justice R.M. Northrop.

/

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Date:  // , I / ~ . t . e - ~ ~ ~ /?C//