Re the Bankrupt Estate of Mark John Cosgrove and the Bankrupt Estate of Debra Joy Cosgrove;
[2013] FCCA 1110
•21 May 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RE THE BANKRUPT ESTATE OF MARK JOHN COSGROVE AND THE BANKRUPT ESTATE OF DEBRA JOY COSGROVE; EX PARTE PAUL ERIC NOGUEIRA AND MORGAN GERARD JAMES LANE | [2013] FCCA 1110 |
| Catchwords: BANKRUPTCY – Application for direction be trustees of two estates – debtors owing separate debts and joint debts – where separate assets of one debtor insufficient to discharge separate debts of that debtor – how separate assets should be applied. |
| Legislation: Bankruptcy Act 1966, ss.110(1), 110(2) |
| Re Holland; Ex Parte The Official Trustee in Bankruptcy (1985) 5 FCR 165 |
| Applicants: | PAUL ERIC NOGUEIRA AND MORGAN GERARD JAMES LANE AS TRUSTEES OF THE BANKRUPT ESTATE OF MARK JOHN COSGROVE AND THE BANKRUPT ESTATE OF DEBRA JOY COSGROVE |
| File Number: | BRG 195 of 2013 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 21 May 2013 |
| Date of Last Submission: | 21 May 2013 |
| Delivered at: | Brisbane |
| Delivered on: | 21 May 2013 |
REPRESENTATION
| Counsel for the Applicants: | Mr Coulsen |
| Solicitors for the Applicants: | Sajen Legal |
ORDERS
THE COURT DECLARES THAT:
The estate of Mark John Cosgrove in QUD 2359 of 2011 and the estate of Debra Joy Cosgrove in QUD 2360 of 2011, do not constitute a joint estate for the purpose of s.110 of the Bankruptcy Act 1966 (Cth) (“the Act”).
THE COURT ORDERS THAT:
The applicants shall treat the estates of Mark John Cosgrove and Debra Joy Cosgrove as separate estates for the purposes of s.110 of the Act.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 195 of 2013
| PAUL ERIC NOGUEIRA AND MORGAN GERARD JAMES LANE AS TRUSTEE OF THE BANKRUPT ESTATE OF MARK JOHN COSGROVE AND THE BANKRUPT ESTATE OF DEBRA JOY COSGROVE |
Applicants
REASONS FOR JUDGMENT
Ex Tempore
This is an application for directions by the trustees of the estate of Mark John Cosgrove and the estate of Debra Joy Cosgrove pursuant to the Bankruptcy Act 1966. The trustees seek directions in respect of the application of s.110 of the Bankruptcy Act.
On 17 May, 2011 Mark John Cosgrove and Debra Joy Cosgrove both separately executed debtor’s petitions pursuant to the Bankruptcy Act. Their debtor’s petitions set out the debts owed by each of the petitioners. Each debtor disclosed that he or she had debts that were owed in their own right and debts that were owed jointly one with the other. After the presentation of their petitions the trustees, Mr Nogueira and Mr Lane, were jointly appointed as trustees of both bankrupt estates.
It seems tolerably clear from the investigations carried out by the trustees and set out in their evidence in support of this application that the debtors carried on a partnership, the business of which was transport. Some of the debts owed jointly by the debtors related to the conduct of that transport business. Other debts they owed jointly seem to relate to real property that they owned and which was unconnected to their trading partnership.
It also seems clear from the trustees’ investigations that Mark Cosgrove has no assets or at least none which will be available to his unsecured creditors in the bankruptcy.
Debra Cosgrove has an interest in a deceased estate and the trustees have received one payment of $180,000 and a second payment of $65,894.20 in respect of that interest. The amount received in that regard will not be sufficient to meet all of her separate creditors, that is to say those debts of hers that are not jointly owed by she and Mark Cosgrove.
Whilst Mark Cosgrove and Debra Cosgrove owned real property together, that property was the subject of security for some of the joint debts owed by them and the secured creditors – because there may be more than one – have exercised their rights over the relevant property. There is now no joint property that might be available to meet their joint debts.
Against that background the applicants have applied for direction as to how to apply the amounts received in respect of Debra Cosgrove’s estate. Should it be applied first to the debts she owes in her own right, or should it be applied across all of her debts, including the debts she owes jointly with Mark Cosgrove?
The answer is, as the trustees recognised, supplied by s.110(1) of the Bankruptcy Act which provides:
In the case of joint debtors, whether partners or not, the joint estate shall be applied in the first instance in payment of their joint debts, and the separate estate of each joint debtor shall be applied in the first instance in payment of his or her separate debts.
Subsection 110(2) provides:
If there is a surplus in the case of any of the separate estates, it shall be dealt with as part of the joint estate, and if there is surplus in the case of the joint estate it shall be dealt with as part of the respective separate estates in proportion to the right and interest of each joint debtor in the joint estate.
The issue identified by the trustees for determination is whether the phrase joint estate where it appears in s.110(1) means the joint estate constituted by the two estates of each of the bankrupts in respect of their joint property and joint debts as well as their separate property and separate debts or whether the phrase joint estate relates solely to property owned by the debtors together.
In my view, it is the latter interpretation which is correct rather than the former. If that were not the case, it seems to me that the phrase:
…and the separate estate of each joint debtor shall be applied in the first instance in payment of his or her separate debts.
where it appears at the end of s.110(1) would have absolutely no work to do. To interpret the statute in a way in which that phrase would be superfluous would be to construe the statute contrary to the usual canons of construction. Similarly s.110(2) would have very little work to do.
The position taken by the trustees is consistent with the interpretation of ss.110(1) and 110(2) to which I have just referred. It is appropriate, therefore, to make a declaration that the estate of Mark John Cosgrove in QUD2359/2011 and the estate of Debra Joy Cosgrove in QUD2360/2011 do not constitute a joint estate for the purposes of s.110 of the Bankruptcy Act 1966.
I direct that the applicants treat the estates of Mark John Cosgrove and Debra Joy Cosgrove as separate estates for the purposes of that section. It seems to me the declarations in those terms are consistent with the approach taken by Federal Court in Re Holland; Ex Parte The Official Trustee in Bankruptcy (1985) 5 FCR 165.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 21 May 2013
Associate:
Date: 15 August 2013
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