Draper v Official Trustee in Bankruptcy (No 2) [2006] FCAFC 194 (22 December 2006)

Last Updated: 11 January 2007

FEDERAL COURT OF AUSTRALIA

Draper v Official Trustee in Bankruptcy (No 2) [2006] FCAFC 194

KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER v OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER




SAD 268 OF 2005




MANSFIELD, RARES & BESANKO JJ
22 DECEMBER 2006
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 268 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER Appellants
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER Respondents

JUDGES:	MANSFIELD, RARES & BESANKO JJ
DATE OF ORDER:	22 DECEMBER 2006
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1. Each party bear his or her costs of the appeal.
2. The costs of the proceedings before the Federal Magistrates Court as between Keith Lawrence Draper and Barbara Olive Draper and the Official Trustee in Bankruptcy be as follows:

(a) Keith Lawrence Draper and Barbara Olive Draper pay to the Official Trustee in Bankruptcy one half of the costs of the Official Trustee in Bankruptcy;
(b) the other half of those costs be reserved to the Federal Magistrate who re-hears and determines the issues in respect of which the Court has ordered a new trial.

3. There be no order for the costs of the proceedings before the Federal Magistrates Court as between Keith Lawrence Draper and Barbara Olive Draper and Bruce James Carter as Trustee of the Bankrupt Estate of Keith Lawrence Draper.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 268 OF 2005

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER Appellants
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER Respondents

JUDGES:	MANSFIELD, RARES & BESANKO JJ
DATE:	22 DECEMBER 2006
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

MANSFIELD & RARES JJ

1 The Court delivered judgment on this appeal on 10 November 2006: Draper v Official Trustee in Bankruptcy [2006] FCAFC 157. The effect of the orders then made was as follows:

1. The appeal be allowed in part.
2. The orders made by the Federal Magistrates Court on 23 September 2005 and 14 October 2005 respectively were set aside.
3. There be a new trial in the Federal Magistrates Court, differently constituted, limited to the Drapers’ claims concerning the property at Lot 202 Heaslip Road, MacDonald Park, or the application of its proceeds of sale, but not including their claims based on disclaimer or estoppel.
4. The appeal be otherwise dismissed.
5. Each party has leave to make written submissions as to the costs of the appeal and of the hearing before the Federal Magistrates Court in accordance with the following timetable:

(i) The Drapers may file and serve written submissions on the costs orders (if any) which they seek within 10 days of the date hereof.
(ii) The Official Trustee and Mr Carter may file and serve written submissions in response within 17 days of the date hereof.
(iii) The Drapers may file and serve written submissions in reply within 20 days of the date hereof.

2 The Drapers duly made their submissions on costs, as did the Official Trustee and Mr Carter. The Drapers made submissions in reply. It is therefore now appropriate to deal with the costs issues arising from the appeal.

3 The Drapers submit that there should be no order for costs of the hearing at first instance and of the appeal. Mr Carter agrees that there should be no costs at first instance and of the appeal. The Official Trustee seeks costs of both the hearing at first instance and of the appeal.

4 The Official Trustee submits that, in substance, on all the issues raised in the hearing at first instance, and on appeal, which directly concerned the Official Trustee, the Drapers were unsuccessful. She correctly points out that the Drapers have not succeeded on the appeal in reversing a number of the conclusions of the Federal Magistrate. Those conclusions were that the Official Trustee had not disclaimed the property at Lot 202 Heaslip Road, MacDonald Park; that the Official Trustee was not estopped from claiming any interest in the MacDonald Park property or in the proceeds of its sale; that the joint interest of the Drapers in the MacDonald Park property was severed by operation of s 58 of the Bankruptcy Act 1966 (Cth) (the Act) upon Mr Draper’s bankruptcy; that the sequestration order in respect of Mr Draper’s estate was valid and that his bankruptcy should not be annulled; that the Official Trustee was not negligent in the way the Marleston property was dealt with in the bankruptcy administration; and that the more general allegations of impropriety against the Official Trustee and others were not made out.

5 At the hearing before the Federal Magistrate, the Official Trustee and Mr Carter were separately represented. Both the Drapers were cross-examined at the trial by counsel for the Official Trustee and for Mr Carter. Although Mr Carter’s counsel cross-examined first in each instance, and focused mainly on the claim that Mrs Draper held all the interest in, or was entitled to, the MacDonald Park property, counsel for the Official Trustee touched upon those issues. That arose because counsel for the Official Trustee properly addressed issues arising from her early communications with the Drapers.

6 However, the Official Trustee also contends that the orders of the Full Court mean that the Drapers cannot contend at the rehearing that Mr Draper held his legal interest in the MacDonald Park property on some form of trust for Mrs Draper. That is not the effect of the Full Court’s orders. Nor does it reflect the views of Mansfield J at [16]-[39] especially at [31], and of Rares J at [76], [78]-[84] especially at [84].

7 In our view, there should be no costs ordered on the appeal. By reason of the Official Trustee’s role in the overall events, she was a necessary respondent to the appeal. The Drapers have been successful in part, including on certain issues which directly concerned the Official Trustee. The matters upon which the Official Trustee succeeded on the appeal, bearing in mind the relatively brief period that they occupied in the course of the hearing, can be fairly set off against the time occupied on the hearing of the appeal on those points on which the Drapers succeeded. As noted, the Drapers and Mr Carter are agreed that there should be no costs ordered on the appeal.

8 The Drapers have, in effect, submitted that there should be no costs of the hearing before the Federal Magistrate. So too does Mr Carter. For the same reasons as those referred to above, the Official Trustee submits that she should recover the costs of the hearing at first instance (which, her submission says, have already been taxed and paid).

9 We agree with the Drapers and Mr Carter that, as between themselves, there should be no order for the costs of the hearing at first instance.

10 The position of the Official Trustee is somewhat different. There were significant allegations of negligence and impropriety made against her concerning her administration of the estate of Mr Draper. They were rejected by the Federal Magistrate, and on appeal. In addition, the claim at first instance to have the sequestration order set aside was successfully resisted by the Official Trustee. That issue at trial involved exploring the basis of the judgment upon which the sequestration order was based. Unlike on the appeal, it took a significant part of the hearing before the Federal Magistrate.

11 In our view, the appropriate order as between the Drapers and the Official Trustee in respect of the costs of the hearing in the Federal Magistrates Court is that the Drapers should pay one half of the costs of that hearing to be taxed. That represents a balancing of the extent to which the Drapers failed on issues at first instance (and on appeal) and the extent to which those issues remain alive for further determination. To that extent, the resolution of those remaining issues will lead to a determination of costs on them, so the costs of the further hearing on those issues in the Federal Magistrates Court will be in the discretion of the Federal Magistrate who hears that matter. Accordingly, even though the Drapers appeared in person so that their costs in any event would not include any professional fees, it is also appropriate that one half of the costs of the decision of the Federal Magistrate at first instance be reserved to the discretion of the Federal Magistrate who re-hears and determines the remaining issues.

12 The Drapers’ submission points out that the Official Trustee’s full costs of the hearing at first instance have been taxed and allowed at $11,515.90. On that basis, the effect of the order is that the Drapers pay to the Official Trustee one half of her costs of the hearing in the Federal Magistrates Court, namely $5,758. If the Drapers have already paid those taxed costs, an appropriate refund will need to be paid by the Official Trustee.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Mansfield & Rares.

Associate:

Dated: 22 December 2006

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 268 OF 2006

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	KEITH LAWRENCE DRAPER AND BARBARA OLIVE DRAPER Appellants
AND:	OFFICIAL TRUSTEE IN BANKRUPTCY AND BRUCE JAMES CARTER AS TRUSTEE OF THE BANKRUPT ESTATE OF KEITH LAWRENCE DRAPER Respondents

JUDGES:	MANSFIELD, RARES AND BESANKO JJ
DATE:	22 DECEMBER 2006
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

BESANKO J

13 I have had the advantage of reading the draft reasons for judgment of Mansfield and Rares JJ. I agree that as between Keith Lawrence Draper and Barbara Olive Draper (‘the appellants’) and Bruce James Carter as trustee of the bankrupt estate of Keith Lawrence Draper, there should be no order as to the costs of the proceedings before the Federal Magistrates Court and that each of those parties should bear his or her costs of the appeal.

14 I differ from Mansfield and Rares JJ in relation to the costs of the proceedings before the Federal Magistrates Court and of the appeal as between the appellants, and the Official Trustee in Bankruptcy. In my opinion, this Court should make an order that the Official Trustee in Bankruptcy have all its costs of the proceedings before the Federal Magistrates Court and of the appeal.

15 For the purpose of considering the question of costs I have again perused the transcript of the proceedings before the Federal Magistrates Court and the transcript of the hearing on the appeal. I have also perused the written submissions of the parties on the hearing of the appeal. The question of costs turns on the conduct of the respective parties in the proceedings and the outcome of the proceedings. I accept that it is difficult to ‘compartmentalise’ issues, but as far as I can see, the Official Trustee in Bankruptcy took no active role in the Federal Magistrates Court or on the appeal in relation to those issues upon which the appellants have succeeded in obtaining an order that they be remitted to the Federal Magistrates Court. I do not think it can be suggested that the Official Trustee should have absented itself during the hearing of those particular issues. The Official Trustee has succeeded on the issues in which it took an active part. In those circumstances, I see no reason why the Official Trustee should not have its costs of the hearing before the Federal Magistrates Court and on the appeal.

I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Associate:

Dated: 22 December 2006

Counsel for the Appellants:	The first appellant appeared in person and with leave on behalf of the second appellant
Counsel for the Official Trustee:	G Gretsas
Solicitor for the Official Trustee:	Gretsas & Associates
Counsel for Mr Carter:	P Britten-Jones
Solicitor for Mr Carter:	Cowell Clark
Date of Final Submissions:	7 December 2006
Date of Judgment:	22 December 2006