Re Foster, J.L. v Ex parte Foster, J.L.

[1994] FCA 186

JUDGMENT No. ........ ........ .. ..... ...... 106

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE )	NO. QB 368 of 1993
QF OUEENSLAND	1

Re r JOHN LEWIS FOSTEq

Bankrupt

EX parte:  jom LEwIS FOSTER Applicant

RECEIVED

And :  R ANDREW DUUS

FEDERAL COURT OF ~rustee/Respondent

AUSTRALIA PRINCIPAL -ISTRY

" 1

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EINPELD a BRISBANE 14 APRIL 1994

(Judgment delivered in Sydney)

On 8 March 1994 I dismissed an application by the bankrupt to invalidate a resolution passed at a meeting of creditors on 18 March 1993 to remove the trustees of his estate. The substitute trustee who opposed the bankrupt's application sought an order for costs against both the bankrupt and Mrs Foster his wife. I

that costs be awarded against the estate. No evidence or

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adr~u3ned that application to permit evidence to be led on the subject and for written submissions. I observed at the time that it is now settled law that the Court may make orders for costs against non-parties but that I was unwilling to do so without giving the person concerned an opportunity to be heard.

The present trustee has filed an affidavit and has also asked

submissions have come from Mrs Foster but the bankrupt has now sought an order for costs against the trustee "on the basis that Mrs Foster was not a party to the litigation" and that accordingly the calling of her solicitor during the hearing was "highly irregular". This contention provides no basis for an order that the trustee pay the bankrupt's costs and this application is dismissed.

The affidavit of the present trustee establishes that Mrs Foster has been financially supporting her husband since his bankruptcy. Together with the evidence in these proceedings of Mrs Foster's solicitor who also representedMr Foster, the trustee's affidavit leads to the strong inference that Mrs Foster is funding this application by her husband and that she has an active interest in the outcome of the litigation. There is evidence that the bankrupt and his wife have jointly been engaged in manipulating events calculated to deprive the bankrupt estate of assets that might otherwise be available for distribution to creditors, to mislead the trustee or deprive him of relevant information and

documentation, and to use any available procedure to frustrate	the due administration of the estate.
The bankrupt argues that some remarks of members of the High Court in Kniaht to which I referred in the judgment on 8 March and by Mason CJ in Devenish v Jewel Food Stores Ptv Ltd [l9901 64 ALJR 533 mean that the trustee should have made an application for security for costs prior to the hearing rather than apply for the order now sought against Mrs Foster. Those remarks in the

High Court are not in point here. I cannot see that justice would have been served here by the trustee requiring the bankrupt to provide security for the costs of this application. On the evidence this would have led to one of two results: either that the application would have been stayed because the bankrupt could not have provided security or Mrs Foster would have provided the security with the same result as is now sought.

In my opinion, an order that Mrs Poster pay the costs of the application is required for "the just disposal" of these proceedings: see Caboolture Park Sho~pina Centre Ptv Ltd (in liquidation) v White Industries (Old) Ptv Ltd [l9931 117 ALR 253 at 258. I think it likely that the application to defeat the resolution (actually there were two resolutions) to change trustees was designed to be part of the campaign to keep assets in the hands of the Fosters that ought, at least arguably, be available to creditors. The application was quite misconceived and had no prospects of success. In my opinion Mrs Foster would never have agreed to fund it unless she had something significant

to gain from its success. This was the hope if not likelihood

that without the present trustee a less rigorous and impartial approach to the administration of the estate would mean more assets and income remaining in her and her husband's hands and unavailable to creditors than would otherwise be the case.

I order that the bankrupt and Rita Mary Foster pay the trustee's costs of and incidental to the application to be taxed and paid forthwith. For the reasons given on 8 March, I do not see the

need for a present order that the costs be paid out of the estate but will reserve liberty to apply in the event that it becomes necessary.

There is a further application by the bankrupt for the costs involved in the attendance on subpoena by the trustee of his wife's solicitor, Mr Bax. Mr Bax's evidence was relevant to the issue of costs. He was the instructing solicitor for the bankrupt's counsel. He was in and in the vicinity of the Court before and after giving evidence for this purpose as well as to answer the subpoena. His brief evidence added an insignificant amount of time to the hearing and could have cost little or nothing. This application is trivial and will be dismissed.

preceding pages are a true COPY of the