Trkulja v Morton (No 2) - [2005] FCA 1044

FEDERAL COURT OF AUSTRALIA
Trkulja v Morton (No 2) [2005] FCA 1044
COSTS – trustee in bankruptcy – application to remove – dismissed – form of costs order – whether against bankrupt personally or to be paid out of the bankrupt estate of the bankrupt
BANKRUPTCY – trustee – application to remove – dismissed – form of costs order – whether against bankrupt personally or to be paid out of the bankrupt estate of the bankrupt
Bankruptcy Act 1966 (Cth) ss 179(1), 32, 109(1)(a)
Federal Court of Australia Act 1976 (Cth) s 43(1)
Bankruptcy Regulations 1996 (Cth) reg 6.01, sch 3
Re Aley; Aley v Sweeney (unreported, Cooper J, Federal Court of Australia, 12 February 1996) cited
Re Carlos: Ex parte Official Trustee in Bankruptcy (unreported, Spender J, Federal Court of Australia, 14 April 1997) cited
Wallin v MJB Building Services Pty Ltd [2002] FCA 1355 cited
Coyne v Douglas-Brown [2002] FCA 1324 cited
Hughes v Holbrook [2002] FCA 920 cited
Re: Fuller; Fuller v Wily (unreported, Full Court, Federal Court of Australia, 28 June 1996) cited
MICHAEL TRKULJA v ROBERT MORTON
V 614 of 2004
GRAY J
22 AUGUST 2005
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 614 of 2004

BETWEEN:

MICHAEL TRKULJA
APPLICANT

AND:

ROBERT MORTON
RESPONDENT

JUDGE:

GRAY J

DATE OF ORDER:

22 AUGUST 2005

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT the respondent’s costs, except for the costs of the respondent’s application for a costs order different from that first pronounced on 30 May 2005, be taxed and paid out of the bankrupt estate of the applicant in accordance with the Bankruptcy Act 1966 (Cth).
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

V 614 of 2004

BETWEEN:

MICHAEL TRKULJA
APPLICANT

AND:

ROBERT MORTON
RESPONDENT

JUDGE:

GRAY J

DATE:

22 AUGUST 2005

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

On 30 May 2005, I dismissed an application by the applicant, who is a bankrupt, seeking an order removing the respondent as his trustee in bankruptcy, pursuant to s 179(1) of the Bankruptcy Act 1966 (Cth) (‘the Bankruptcy Act’). The orders I then pronounced were in the following terms:
‘1. The application be dismissed.
2. The respondent’s costs be taxed and paid out of the bankrupt estate of
the applicant in accordance with the Bankruptcy Act 1966 (Cth).’
After I had pronounced these orders, counsel for the respondent requested that he be given an opportunity to make submissions to the effect that I should make an order that the applicant pay the respondent’s costs of the unsuccessful application. Accordingly, I recalled par 2 of the order and, in substitution for that paragraph, made the following orders:
‘2.       The respondent file and serve any written submissions on the question
of costs on or before 6 June 2005.

3.        The applicant file and serve any answering written submissions on that
question on or before 14 June 2005.

4.        The…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Trkulja v Morton (No 2)

Details

AGLC: Trkulja v Morton (No 2) [2005] FCA 1044
Case: [2005] FCA 1044
Decision Date: 22 AUGUST 2005

CaseChat Overview and Summary

Michael Trkulja sought to have Robert Morton removed as his trustee in bankruptcy, and the application was dismissed. The central issue was the appropriate form of order for the respondent's costs of the unsuccessful application. The Court has a discretion as to whether to make any order for costs, and as to the nature of any order it makes. In proceedings under the Bankruptcy Act, it is necessary to recognise that a bankrupt has no assets vested in him or her; the bankrupt’s estate is vested in the trustee in bankruptcy. Thus, where a sequestration order is made on a creditor’s petition, it is usual to order that the taxed costs of the petitioning creditor be paid out of the bankrupt estate. When a trustee in bankruptcy is involved in a proceeding against the bankrupt, it is also common for the Court to make an order to the effect that the trustee’s costs of the proceeding be paid out of the bankrupt estate. However, an order that the bankrupt pay the respondent’s costs of the proceeding would create an unacceptable conflict of interest. It would place the respondent in an impossible situation of conflict in deciding whether to treat assets as part of the bankrupt estate, or to execute his judgment for costs against them. In this light, an order that the trustee be entitled to costs out of the estate is plainly the lesser of the evils. Accordingly, the appropriate order is the order that was pronounced initially on 30 May 2005. The only difference is that, having been unsuccessful in his application for a different costs order, the respondent ought not to have his costs of that application. An exception will be made in the order.

The court ordered that the respondent’s costs, except for the costs of the respondent’s application for a costs order different from that first pronounced on 30 May 2005, be taxed and paid out of the bankrupt estate of the applicant in accordance with the Bankruptcy Act 1966 (Cth).

Orders