Vrsecky v Reaper and Anor (No.4)
[2015] FCCA 3067
•9 December 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VRSECKY v REAPER & ANOR (No.4) | [2015] FCCA 3067 |
| Catchwords: BANKRUPTCY – Ruling on costs. |
| Legislation: Bankruptcy Act 1966, s.116 |
| Bent v Gough (1992) (1992) 36 FCR 204; (1992) 108 ALR 131 Coshott v Prentice (2014) 221 FCR 450; (2014) 311 ALR 428; (2014) 100 ACSR 418; [2014] FCAFC 88 Yates Property Corp Pty Ltd v Boland (No.2) (1997) 147 ALR 685; [1997] FCA 760 |
| Applicant: | PETR VRSECKY (AS TRUSTEE OF THE BANKRUPT ESTATE OF BRETT VINCENT REAPER) |
| First Respondent: | BRETT VINCENT REAPER |
| Second Respondent: | SHARON FISHER |
| File Number: | MLG 931 of 2013 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 24 August 2015 |
| Date of Last Submission: | 21 September 2015 |
| Delivered at: | Melbourne |
| Delivered on: | 9 December 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Devanny |
| Solicitors for the Applicant: | Madgwicks |
| Counsel for the Respondents: | In person |
| Solicitors for the Respondents: | Not applicable |
ORDERS
The respondents be jointly and severally liable for the applicant’s costs of the proceeding, to be taxed on a party/party basis pursuant to the Federal Court Rules (2011).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 931 of 2013
| PETR VRSECKY (AS TRUSTEE OF THE BANKRUPT ESTATE OF BRETT VINCENT REAPER) |
Applicant
And
| BRETT VINCENT REAPER |
First Respondent
| SHARON FISHER |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This proceeding has involved a long and tortuous history. On
24 August 2015, I gave my second set of reasons for judgment. For these purposes, relevantly, I found that the figure that was just and equitable for the second respondent, Ms Fisher, to pay out the trustee’s interest in the bankrupt’s matrimonial home was $96,000. I dismissed the cross claims brought by the respondents against the applicant trustee. I ordered the applicant and the respondents to file proposed orders and submissions on costs. On 18 September 2005, I made what were necessarily interlocutory orders, bearing in mind that the timetable for costs submissions was not completed. Those orders were subsequently amended pursuant to the slip rule to include the formal dismissal of the cross claims filed on 12 November 2014 and 22 November 2014 by the respondents.
The written submissions of the parties have now been received and raise a myriad of different considerations.
Put shortly, the applicant trustee seeks a costs order on an indemnity basis against each of the respondents, jointly and severally, and seeks certainly ancillary orders to protect the trustee’s interest, whether the option to purchase the trustee’s share of the property is taken up or not.
The submissions of the respondents, like a number of other submissions already made, are by no means easy to construe but appear to suggest that the parties should bear their own costs.
For the reasons that follow, I am going to make an order that the respondents be jointly and severally liable for the applicant’s costs of the proceeding, to be taxed on a party/party basis. I do not propose to make any further orders but otherwise leave the parties to their remedies at law.
Some Background
As earlier indicated, the first application filed in the Court goes back as long ago as 27 June 2013. The trustee essentially sought an order for partition and sale of the respondents’ matrimonial home, half of which had vested in the trustee upon the bankruptcy of Mr Reaper. Following various difficulties as to service and delay caused by an annulment application unsuccessfully brought by Mr Reaper in the Federal Court and an injury to the judge who was first due to hear the matter, I gave judgment on 10 February 2015 (“first judgment”) in which I effectively dismissed the respondents’ assertion that the property was wholly or substantially bought with protected funds within the meaning of s.116(3) of the Bankruptcy Act 1966 (“the Act”). I determined that it was necessary to have valuations in 2007 and 2004 in order to value the bankrupt’s contribution (s.116(4) of the Act). I made orders accordingly.
I noted in the first judgment that on 12 November 2014, the day before the trial on 13 November 2014, the respondents filed an interlocutory application and a separate notice of cross claim. I pointed out that this was simply too late and that those matters would have to be heard separately.
Following that separate hearing on 5 June 2015, which was itself delayed as I found (see paragraph (5) of my second judgment delivered on 24 August 2015), by the intransigent non-cooperation of the respondents, I delivered my second reasons for judgment. As indicated, I dismissed the cross claims and isolated the sum that it would be necessary for Ms Fisher to pay the trustee to purchase out the trustee’s interest.
Following, as indicated, further disputes, I made a number of orders on 18 September 2015 (amended as indicated pursuant to the slip rule thereafter). It should be noted that those orders did not reflect exactly either the draft orders proposed by the applicant or the respondents.
The Power to Order Costs
This Court’s general power to order costs arises under s.79 of the Federal Circuit Court of Australia Act1999. The discretion is unfettered but must be exercised judicially and in the context of the relevant rules (Yates Property Corp Proprietary Limited v Boland (No.2) (1997) 147 ALR 685; [1997] FCA 760).
In this case, the matter is further touched on by s.32 of the Act, which relevantly provides that:
The Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit.
Neither party has made any submissions as to the extent to which the power given under s.32 of the Act may authorise an order against the bankrupt personally.
Although it might seem counter-intuitive, because the bankrupt’s property all vests in the trustee save for protected moneys and the like, it seems axiomatic that an order can, in appropriate circumstances, be made against a bankrupt personally. The decision of Black CJ in Bent v Gough (1992) (1992) 36 FCR 204; (1992) 108 ALR 131 suggests that the power to award costs in proceedings under the Act (which these clearly are) is exceptionally broad.
There is clearly power to order costs against a party to proceedings other than the bankrupt, although the power to order costs from the non-party’s interest in a property is open to considerable doubt (see as to both these matters, Coshott v Prentice (2014) 221 FCR 450; (2014) 311 ALR 428; (2014) 100 ACSR 418; [2014] FCAFC 88)
Who should pay the costs of this proceeding
This proceeding has been defended by the respondents in a number of ways. First, they sought to persuade the court that, in effect, the trustee had no interest in the property. In this, they manifestly failed.
When that argument was lost, the respondents sought to suggest that the percentage payable to the trustee was far lower than that which I was prepared to find, although it should be noted that the percentage figure I finally arrived at was lower than that sought by the trustee.
The cross-claims had been comprehensively dismissed. In truth, the cross-claims were, in a very real sense, as a matter of proper analysis, the respondents’ defence to the primary application.
The respondents have been manifestly unsuccessful in almost every aspect of the proceeding. While the trustee did not persuade me to make exactly the orders he sought, the trustee’s success in an overall sense has been clearly sufficient to justify a costs order in his favour.
The question then becomes who should pay these costs. In my view, the interests of the two respondents have been more than just closely entwined. They have been effectively one interest throughout. The respondents have conducted their proceeding as a unit and I accept the submissions from the applicant that in the circumstances, the respondents should be jointly and severally liable.
Where this leaves the enforcement of any such orders as against the property of the bankrupt is open to question, and I note that the decision of the Full Court of the Federal Court in Coshott suggests that the trustee may not be entitled to his costs out of Ms Fisher’s share of the former home.
I will return to this later.
Should costs be on an indemnity basis
While the conduct of the respondent has been at times, as I have earlier indicated, intransigent, the fact is that they have at all times been self‑represented with all the difficulties to which that gives rise. I have also no doubt that although some of the assertions made by Mr Reaper in particular have been outlandish, they are made from a misguided but sincere basis of opinion.
The question of indemnity costs is one that falls to be considered in the light of the particular circumstances of each case and I do not think that, taken overall, the conduct of the respondents has about it that quality of the reprehensible that would ground an indemnity costs order in this instance.
Where to from here
I have determined that the respondents should pay the applicant’s costs of the proceeding jointly and severally to be taxed on a party/party basis. Taxation will be pursuant to the Federal Court Rules 2011 given the complexity of the matters raised in the proceeding.
I have also, at the applicant’s particular request, already made orders requiring Ms Fisher to either purchase out the trustee’s interests within 90 days or to provide vacant possession. There will be the sale in the event that this does not occur.
The trustee says and I accept that if the option to purchase is exercised then the trustee loses the security of the property. The trustee seeks, in effect, that his costs and disbursements be paid, prior to the option being effected.
Given that the applicant trustee has, in my view reasonably, sought that this matter progress in a timely way, it is immediately apparent that the trustee’s proposal is unworkable. The process of taxation of the trustee’s costs would itself take a not inconsiderable time in all probability and is likely to be strongly resisted, if past experience is anything to go by, by the respondents in any event.
Furthermore, the authority of the Full Court seems to stand squarely in the way of the orders that the trustee seeks as to taking his costs out of Ms Fisher’s part of the property.
While I readily acknowledge the practical difficulties that it may create, it seems to me that the only proper order is for me to make the costs orders indicated and to leave their parties to their remedies it at law as they may arise. This is a peculiarly complicated and difficult situation but the orders I am going to make seem to me to represent the best outcome that reflects the justice and equity of the case.
It should be noted that in my first judgment I observed inter alia at [76], “self-evidently no costs order could be made against Mr Reaper.” It will be readily apparent that I have reconsidered that opinion and decided that it was erroneous.
The submissions of the respondents
I have not dealt with the written submissions of the respondents in any detail. A number of the matters that they raise are irrelevant (for example, the reference to the failure to hold another creditors meeting) or misconceived (the allegation of bias). It is sufficient to say that like a number of the submissions made throughout the proceeding, Mr Reaper’s written submissions were of no assistance to the court.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 9 December 2015
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