Re Zoccoli, R. Ex parte the Official Trustee in Bankruptcy

[1993] FCA 807

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT	)
OF THE STATE OF VICTORIA	) No. VB 1411 of 1992

Re : RACHAEL ZOCCOLI

the Bankrupt

EX parte:	THE OFFICIAL TRUSTEE IN BANKRUPTCY
(As trustee of the bankrupt estate of Rachael Zoccoli)

Applicant

- and -

RACHAEL ZOCCOLI

First Respondent

ANTHONY ZOCCOLI

Second Respondent

ROCCO ZOCCOLI

Third Respondent

Coram:	Olney J
Place :	Melbourne  RECEIVED
Date:	11 November 1993  15 NOV 1993

FEDERAL COURT OF

AUSTRALIA

MINUTE OF ORDERS

THE COURT ORDERS that the Official Trustee in ~ a n k r u ~ t c ~ pay the costs of the first and third respondents of the application filed on 15 April 1993 such costs to be taxed on a solicitor and client basis;

in Bankruptcy personally without recourse to the assets of the bankrupt estate of the first

AND THE COURT DIRECTS that:

1.    The aforesaid costs be paid by the Official Trustee

respondent.

2.   The Official Trustee in Bankruptcy's own costs of

the proceedings not be treated as an expense incurred in the administration of the bankrupt

estate of the first respondent.

NOTE:  Settlement and entry of orders is dealt with in rule
124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	)
BANKRUPTCY DISTRICT	)
OF THE STATE OF VICTORIA	) No. VB 1411 of 1992

Re :  RACHAEL ZOCCOLI

the Bankrupt

EX parte:	THE OFFICIAL TRUSTEE IN BANKRUPTCY
(As trustee of the bankrupt estate of Rachael Zoccoli)

Applicant

- and -

RACHAEL ZOCCOLI

First Respondent

ANTHONY ZOCCOLI

Second Respondent

ROCCO ZOCCOLI

Third Respondent

Coram:	Olney J
Place:	Melbourne
Date:	11 November 1993

SUPPLEMENTARY REASONS

By application filed on 15 April 1993 and amended by leave on	5 May 1993 the Official Trustee in Bankruptcy (the Official	Trustee) as trustee of the bankrupt estate of Rachael Zoccoli
(Rachael) sought directions pursuant to s 134(4) of the Bankruptcy Act as to whether Rachael's estate was indebted to the bankrupt estate of her brother-in-law Anthony Zoccoli (Anthony) or alternatively whether Anthony's estate has any interest in a business purchased by, and carried on by Rachael and her husband Rocco Zoccoli (Rocco). The application was
heard on 31 August and 2 September 1993. On 19 October 1993
I dismissed the application and reserved the question of
costs.
In my reasons published on 19 October 1993 I expressed the
following conclusions:

The application was brought by the applicant as trustee of Rachael's estate. In substance, the applicant seeks the court's imprrmatur in advance of a proof of debt berng submitted, to admrt lrabrlity to Anthony's estate. The applicant, as trustee of Anthony's estate, has not sought any guidance as to whether or not such a proof should be lodged.

The only potentral beneflclary of any relief sought in these proceedrngs would be Anthony's estate.

It is clear that the applicant rs in a hopeless posrtron of conflict. Had the two bankrupt estates been administered by trustees independent of one another, rt rs rnconceivable that Rachael's trustee would have brought thrs or any slmrlar appllcatron. Certainly not at the present state of the estate's administratron. Indeed, the appropriate procedure would have been for Anthony's trustee to exercise his proper

functions as trustee, make up hrs mind as to what claim should

be made and then to lodge a proof of debt. If the proof were admitted by Rachael's trustee there would be no occaslon for any proceedings at all. On the other hand, if the proof were to be rejected, it would have been for Anthony's trustee to seek any relref thought approprrate and if unsuccessful Anthony's estate would have to carry any costs burden assocrated therewrth. On the f~ndings I have made in thrs application, assumrng the evrdence to be the same, the re-~ectron of the proof would have been sustarned and rn the ordrnary course of events costs would have been ordered agarnst Anthony's trustee.

Sectron 134(1) of the Act authorrses a trustee, inter alra, to prove rn respect of any debt due to the bankrupt and pursuant to s 134(4) a trustee may at anytrme apply to the court for

drrectrons rn respect of a matter arising in connection wlth the administration of the estate. Whether or not the Court	should give directions 1s a matter of discretion (Re Drrller
j1972) 21 FLR 159). In my oprnion at would have been more approprrate for the applicant as trustee of Anthony's estate if rn doubt as to whether a proof should be lodged for the clarmed debt in Rachael's estate, to have sought drrections as to that matter. It is, ~n my opinion, entirely rnappropriate that thrs application should have been made "in respect of a matter arrsrng m connexion wrth the adminrstration of Rachael's estate". Indeed, I do not think that the matter whrch has been lrtrgated has arisen m connexion wrth Rachael's estate.
It has arrsen rn the admrnrstration of Anthony's estate but at this stage, not rn Rachael's.
In my opmron, the facts as proved do not justify the exercise of the court's discretron in favour of making elther of the
declarations sought. The applicatron will be drsmissed.
My present view, wrthout havrng heard argument, is that the costs of the flrst and thlrd respondents should be paid by a the applicant personally without recourse to Rachael's estate. I am further of the vlew that the applicant's costs have not been properly lncurred in the admlnistratron of Rachael's estate and should not be charged against the assets of same.
However, to give the parties an opportunity to be heard, I propose to reserve the questlon of costs. The respondents
will have l~berty, wlthln 7 days, to make wr~tten submlsslons
on any costs order sought. The applicant has liberty to make
written submlss~ons in reply withm a further 7 days.

On 19 October 1993 orders were made in the terms indicated in the final paragraph quoted above. Since then written submissions have been made on behalf of Rachael and Rocco and on behalf of the Official Trustee. Anthony did not appear in the proceedings.

On behalf of Rachael costs are sought on an indemnity basis against the Official Trustee personally. Further, she seeks orders for the payment of certain costs and expenses she claims to have incurred by reason of the Official Trustee's conduct in relation to the administration of her estate.

In my opinion it is entirely inappropriate to treat as costs,
outlays which are unconnected with the proceedings.

Accordingly, no order will be made concerning the claimed

costs and expenses incurred in relation to the administration	of the estate.
There are no features of this matter which would justify departure from the ordinary rule that the costs should follow the event and there wlll be an order that the Official Trustee pay Rachael's and Rocco's costs.
Consistent with the views expressed above it is my view that

- 4 -

the application was wholly unjustlfled. The matters litigated did not arise in connexlon with the administration of Rachael's estate. Rachael is at present bankrupt and has no resources under her control. It would be unjust that she should have been put to personal expense by reason of the Official Trustee taking these proceedings and she should be indemnified for the amount of her costs taxed on a solicitor and client basis.

Rocco was made a party to the proceedings by the Official Trustee. It is unlikely that any substantial extra costs were incurred by him over and above the cost of Rachael's representation as both were represented by the same solicitor and counsel, but to the extent that any extra costs were involved, they too should be paid by the Official Trustee on a solicitor and client basis.

In Anthony's estate there are liabilities amounting to a sum in excess of $3m and there are virtually no assets. The case

that there is a significant surplus of assets over	is somewhat different in Rachael's estate in which it appears
liabilities. This fact was, no doubt, the reason why the Official Trustee was keen to establish a liability by Rachael to Anthony. There are obviously no funds in Anthony's estate to finance any proceedings on behalf of the estate and it seems to be beyond question that the Official Trustee took proceedings in the capacity of trustee of Rachael's estate in anticipation that the estate would have the resources to meet the costs involved. If the trustee's own costs and the costs ordered against the trustee ln these proceedings are regarded as being properly incurred In the administration of Rachael's estate, the net result would be that the amount of the surplus that will ultimately be distributed to Rachael will be reduced
accordingly, meaning in effect that Rachael will finish up
paying the whole of the costs herself.
In the application the Official Trustee has sought such further or other directions as the Court may consider appropriate. In the circumstances of the case I propose to direct that the Official Trustee pay Rachael and Rocco's costs personally and further that the Official Trustee not have recourse to the assets of Rachael's estate either for his own costs or those of Rachael and Rocco.

I certify that this and the preceding 4 pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice

Olney

Associate: K&$

.ate.:  I[ a-be/ l493

Substantive application heard:	31 August 1993 and
2 September 1993
Place	: Melbourne
Judgment ln substantive application:	19 October 1993
Judgment in relation to costs:	11 November 1993

Mr R. Frazzetto (instructed by Australian Government
Solicitor) appeared for the applicant.

Mr B. Sweeney (instructed by Mr G.D. Effron) appeared for the first and third respondents.

The second respondent did not enter an appearance.