Cosenza v Duncan

Federal Court of Australia|2020-02-12|Before: Mr P, Charlesworth J

The application for leave to appeal is dismissed.
The applicant is to pay the respondent's costs of the application as agreed or assessed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

CHARLESWORTH J: 1 The applicant, Mr Dean Cosenza, applies for leave to appeal from a judgment of the Federal Circuit Court of Australia (FCCA): Cosenza v Stephen Duncan of Duncan Powell (Trustee in Bankruptcy) (No 2) [2018] FCCA 1749. Mr Cosenza is a proven creditor of a former bankrupt, Thomas Tigani, in the amount of $199,699.00. Mr Tigani was made bankrupt by a sequestration order made on his own petition on 20 November 2006. He was discharged from bankruptcy on 20 November 2009 by the automatic operation of s 149(3) of the Bankruptcy Act 1966 (Cth). 2 Mr Cosenza received no dividend from the administration of Mr Tigani's estate. Mr Cosenza is understandably sorely disaffected by that outcome. 3 On 3 May 2017 Mr Cosenza filed an application in the FCCA seeking an order setting aside Mr Tigani's discharge from bankruptcy on the basis of fraud. He also sought declaratory relief in terms that Mr Tigani "committed a Fraud upon his creditors and trustee in bankruptcy" and that Mr Tigani "not be released from bankruptcy for fraud or fraudulent breach of trust upon his trustee and creditors to which he was a party". He sought an interlocutory order restraining Mr Tigani from dealing with his assets or income until further order. The sole respondent joined on that application was the trustee of Mr Tigani's bankrupt estate, Mr Stephen Duncan. 4 On Mr Duncan's application, the primary judge made an order summarily dismissing the originating application in the exercise of the power conferred by s 17A of the Federal Circuit Court of Australia Act 1999 (Cth). That order was interlocutory: Creditors of Antal-Air Pty Ltd (ACN 007 213 738) v Antal-Air Pty Ltd (ACN 007 213 738) (admin apptd) & Anor [2004] FCAFC 303; 51 ACSR 473 at [14] - [15] (Ryan, Weinberg and Crennan JJ). An appeal cannot be brought from the order except with the leave of the Court: Federal Court of Australia Act 1976 (Cth), s 24(1A). 5 For the reasons that follow the application for leave to appeal should be refused.

PROCEEDINGS IN THE FCCA 6 The proceeding at first instance was commenced more than seven years after Mr Tigani's discharge from bankruptcy. The originating application was expressed to have been: … brought pursuant to s 48 Limitation of Actions Act, sections 178, 176, 77, 81, 126, 127, 134, 149D, 152, 153, 263, 265 Bankruptcy Act Cth 1966 and sections 90-5, 90-10, 90-15, 90-20 Insolvency Law Reform Act 2016. 7 The latter provisions may be taken to be references to ss 90-5, 90-10, 90-15 and 90-20 contained in Pt 3 of Sch 2 to the Bankruptcy Act (the Insolvency Practice Schedule) introduced by the Insolvency Law Reform Act 2016 (Cth). Section 90-15 empowers the Court to make such orders as it thinks fit in relation to the administration of a regulated debtor's estate. Orders under s 90-15 may be made on the application of a creditor: s 90-20. On such an application, the Court may take into account the matters referred to in s 90-15(4): Matters that may be taken into account (4) Without limiting the matters which the Court may take into account when making orders, the Court may take into account: (a) whether the trustee has faithfully performed, or is faithfully performing, the trustee's duties; and (b) whether an action or failure to act by the trustee is in compliance with this Act and the Insolvency Practice Rules; and (c) whether an action or failure to act by the trustee is in compliance with an order of the Court; and (d) whether the regulated debtor's estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and (e) the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group. 8 Mr Cosenza's claim for relief was expressed as follows: (i) Insofar as is necessary, the applicant seeks an extension of time within which to issue these proceedings and any notice of objection to discharge the bankrupt from bankruptcy pursuant to s 48 of Limitation of Actions Act (SA); (ii) Application for order to set aside the notice of discharge from bankruptcy for fraud; (iii) A declaration that Thomas Tigani committed a Fraud upon his creditors and trustee in bankruptcy; (iv) A declaration that Thomas Tigani not be released from bankruptcy for fraud or fraudulent breach of trust upon his trustee and creditors to which he was a party; (v) Any other order deemed necessary by this Honourable Court. 9 As can be seen, the proposed orders were directed at Mr Tigani and did not did not include any orders against Mr Duncan as trustee. In written submissions before the primary judge, Counsel for Mr Duncan conveniently summarised the 17 provisions referred to in the originating application in table form as follows: Act Section Summary Bankruptcy Act 1966 (Cth) 77 Imposes obligation on the bankrupt. Grants no rights against trustee. 81 Empowers the Court to summons the bankrupt. Grants no rights against trustee. 126 Governs dealings between third parties and the bankrupt. Grants no rights against trustee. 127 Imposes time limit on steps taken by a trustee. Grants no rights against trustee. 134 Grants discretionary powers to trustee. Grants no rights against trustee. 149D Circumscribes the grounds of objection which may be set out in relation to a discharge from bankruptcy. Grants no rights against trustee. 152 Imposes obligation on the bankrupt. Grants no rights against the trustee. 153 Sets out the consequences of discharge from bankruptcy. Grants no rights against the trustee. 176 Repealed 178 Repealed 263 Creates criminal offences in relation to conduct of third parties in respect of the affairs of a bankrupt. Grants no rights against the trustee. 265 Creates criminal offences in relation to conduct of bankrupt. Grants no rights against the trustee. Insolvency Practice Schedule (Schedule 2 to the Bankruptcy Act) 90-5 Empowers the Court to take steps of its own initiative in relation to the administration of a bankrupt's estate. No relief sought in relation to this section. 90-10 Empowers the Court to enquire into the administration of an estate upon application by an interested party. No relief sought in relation to this section. 90-15 Empowers the Court to make orders in relation to the administration of an estate. No relief sought in relation to this section. 90-20 Concerns standing to seek order under 90-15.

10 The contention that the Limitation of Actions Act 1936 (SA) had no application in the proceedings is a matter of dispute on this application and will be dealt with in due course. A question arises as to whether s 178 of the Bankruptcy Act, although repealed, continued to operate in respect of certain acts, decisions or omissions of Mr Duncan as Trustee. More will be said on that question below. Otherwise, Counsel's brief summary of the provisions is correct. 11 Mr Cosenza was self-represented at the time that he commenced the proceedings before the primary judge, although he was legally represented at the hearing of Mr Duncan's application for summary dismissal. Mr Cosenza made no application to amend the originating application, notwithstanding that he had received correspondence from Mr Duncan warning that the action was liable to be summarily dismissed. 12 Instead, Mr Cosenza filed an application in a case. That was done after he was served with Mr Duncan's application for summary dismissal but before that application came on for hearing. The application in a case sought orders inter alia: (1) joining Mr Tigani as a party; (2) summoning Mr Tigani for examination pursuant to s 81 of the Bankruptcy Act; (3) compelling the production of documents by Mr Tigani; (4) compelling production of documents by third parties, including the District Court of South Australia; and (5) compelling Mr Duncan to "recover all assets and income that vests in the bankrupt estate for the benefit of creditors", to prosecute Mr Tigani for criminal offences and to pay Mr Cosenza's costs. 13 Paragraphs 13 and 14 of the application in a case were expressed as follows: 13. In the event that Stephen Duncan (trustee in bankruptcy) not recover all monies owed to the applicant inclusive of accrued interest to date, that an order be made pursuant to s.176 of Bankruptcy Act (Cth) 1966 (Repealed 1.3.17), Rule 164(1)(3) and Rule 45-1(1)(4)(5), 90-15(1)(2)(3)(a)(e)(3)(d)(4)(5)(6)(7) of Insolvency Law Reform Act 2016 for the benefit of the applicant; 14. Insofar as is necessary, the applicant seeks an extension of time within which to issue these proceedings and any notice of objection to discharge the bankrupt from bankruptcy pursuant to s.48 of Limitation of Actions Act (SA); (ii) Application for order to set aside the notice of discharge from bankruptcy for fraud; (iii) A declaration that Thomas Tigani committed a fraud upon his creditors and trustee in bankruptcy pursuant to s.153(2)(b) of Bankruptcy Act (Cth); (iv) A declaration that Thomas Tigani not be released from bankruptcy for fraud or fraudulent breach of trust upon his trustee and creditors to which he was a party; (v) In the alternative: A declaration that by way of operation of s.153(2)(b) of Bankruptcy Act (Cth), that the discharge from bankruptcy of Thomas Tigani does not release him from any debts so incurred; and as a consequence all rights of those claiming to have been defrauded are preserved as a matter of law; (vi) Any other order deemed necessary by this Honourable Court as it thinks fit. 14 Underlying Mr Cosenza's claim was a belief that Mr Tigani had committed fraud against his creditors and against Mr Duncan as trustee by failing to disclose assets that were owned and controlled by him and by engaging in certain business or commercial activities during the course of his bankruptcy. That belief was (and remains) informed by the complicated structure of Mr Tigani's financial affairs. More recently, the allegations of fraud are said to be supported by evidence emerging in the District Court of South Australia in proceedings between Mr Tigani and his father. 15 As has been mentioned, Mr Tigani was not joined as a party in the proceedings below, nor is he joined as a party on this application. In the present context, it is neither necessary nor appropriate to express any view or to make any findings about the merits of Mr Cosenza's allegations against him. 16 The primary judge made the following uncontentious findings: (1) Mr Cosenza first became aware of the District Court proceedings in 2016. Since that time he has remonstrated with Mr Duncan to take steps to investigate Mr Tigani's affairs, as he had repeatedly done before Mr Tigani's discharge from bankruptcy in 2009. In the course of administering the estate, Mr Duncan did not investigate the particular allegations advanced by Mr Cosenza, both because there were no funds to pursue them and because he took the view that pursuing the allegations would not be cost efficient. Mr Duncan formed the view that there was no utility in opposing Mr Tigani's discharge from bankruptcy under s 149A of the Bankruptcy Act. As a consequence, Mr Tigani was discharged by the automatic operation of s 149(3). At the time of Mr Tigani's discharge, no assets had been realised for the benefit of his creditors. (2) Mr Cosenza was aggrieved by Mr Duncan's decision not to object to Mr Tigani's discharge. He complained to the then-named Insolvency and Trustee Service Australia (ITSA). It determined that Mr Duncan had discharged his obligations under the law by taking appropriate steps to identify the assets of the estate. (3) In 2016, Mr Duncan reviewed the pleadings and evidentiary material relating to the District Court proceedings. He formed the view that they did not disclose any asset of Mr Tigani that had not previously been identified. (4) Mr Duncan's associate, Mr Gyss, referred material relating to those proceedings to the Australian Financial Security Authority (AFSA). AFSA determined not to recommend proceedings against Mr Tigani for reasons that need not be detailed here. 17 The primary judge noted that Mr Cosenza's application had ostensibly been brought pursuant to s 178 of the Bankruptcy Act, a provision that had been repealed before the proceedings were commenced. Section 178 relevantly provided: 178 Appeal to Court against trustee's decision etc. (1) If the bankrupt, or a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable. (2) The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision. 18 Mr Cosenza urged the primary judge to exercise the broad powers under Div 90 of the Insolvency Practice Schedule. He submitted that the primary judge could and should enquire into the question of whether Mr Duncan could and should have taken action against Mr Tigani. He submitted that if, as a result of those enquiries, Mr Duncan was found to have acted inappropriately, the primary judge would have a wide discretion in respect of any consequential orders. 19 It was and remains Mr Duncan's position that there is no basis for a claim for relief against him. Whilst he presently has no intention to bring an application for an examination summons to issue against Mr Tigani pursuant to s 81 of the Bankruptcy Act, he submitted that it remains open to Mr Cosenza to do so. Consistent with that position, prior to the hearing of the summary dismissal application, Mr Duncan's solicitor wrote to Mr Cosenza in the following terms: If ... your objective is to establish that the bankrupt concealed property or otherwise did not disclose property that would have vested in the Trustee and delivered a return to creditors, then you are capable of pursing the matter simply by bringing an application to examine the bankrupt pursuant to s 81. It does not need to involve our client nor such an elaborate application (that is fundamentally flawed and misconceived) of this nature. 20 The primary judge had before him a lengthy affidavit of Mr Cosenza concerning the alleged business activities of Mr Tigani and companies with which he is said to be associated. His Honour summarised the effect of the evidence upon which Mr Cosenza sought to rely, including evidence of Mr Tigani given in the District Court proceedings to the effect that he had personally made investments of $500,000 in land forming the subject of the litigation with his father. The affidavit further alleged that Mr Tigani had committed criminal offences, although some of those offences were not offences against any law in relation to bankruptcy and their relevance to any duties Mr Duncan may have under the Bankruptcy Act was, his Honour said, unclear. 21 The statutory duties of the trustee of a bankrupt estate are set out in s 19(1) of the Bankruptcy Act. They were correctly summarised the by the primary judge (at [100]) to include (with original emphasis): • taking appropriate steps to recover property for the benefit of the estate; • taking whatever action is practical to try and ensure the bankrupt discharges duties arising under the Act; • considering whether the bankrupt has committed any offence arising under the Act; • referring to any relevant authority any evidence of a bankrupt having committed such an offence; • administering the estate as efficiently as possible by avoiding unnecessary expense. 22 His Honour correctly noted that s 19AA(1) of the Bankruptcy Act provided Mr Duncan with a discretion to investigate the affairs and conduct of a bankrupt, including by inspecting books or records. 23 The primary judge went on to consider s 178 of the Bankruptcy Act and the task of the Court in supervising the exercise of the trustee's powers under that provision. Citing Khadpekar v Official Trustee in Bankruptcy (No 2) (2009) 175 FCR 247 at 253 (Siopis J), his Honour said that the discretion conferred by s 178 was a very wide one and that it was not necessary for the applicant to show that an impugned decision of a trustee was absurd or unreasonable or taken in bad faith. His Honour said that in cases involving the exercise of a business or commercial judgment, the Court will place considerable weight on the trustee's decision. His Honour recognised (correctly) that on an application under s 178 the decision of a trustee may be successfully challenged on the basis of new material, even if the original decision was correct. 24 The primary judge then turned to consider Mr Cosenza's prospects of successfully challenging Mr Duncan's decision in 2009 not to object to Mr Tigani's discharge, noting that the events in question had occurred almost a decade ago. His Honour said that s 178 "(as it previously applied to this period) is subject to a time limit" requiring that any application challenging an act, omission or decision must be made not later than 60 days after the day on which the person became aware of the relevant act, omission or decision. His Honour referred to an earlier judgment of a Federal Magistrate to the effect that the time limit fixed by s 178(2) of the Bankruptcy Act was not one that could be extended by the Court: Heshmati v Paul Burness and Morgan Lane as Trustees of the Bankrupt Estate of Bijan Heshmati [2012] FMCA 884 at [48] (Driver FM). 25 The primary judge continued: 111 In all these circumstances, in my view, Mr Cosenza faces insuperable difficulties in respect of his proposed action against Mr Duncan. I do not consider that any provisions of the South Australian Limitation of Actions Act 1936 can assist him. In addition, in my view, there are significant public policy considerations, which militate against the reopening of a trustee's administration of a bankruptcy, many years after that administration has been concluded. 112 In these circumstances, I consider that Mr Cosenza has no reasonable prospects of success in his efforts to invoke the court's supervisor jurisdiction, pursuant to section 178 of the Act, in respect of decisions made by Mr Duncan in respect of his actual administration of Mr Tigani's estate and his decision not to oppose Mr Tigani's automatic discharge. 26 As to the information that Mr Cosenza alleged had subsequently come to his attention by reason of the District Court proceedings in October 2016, the primary judge identified that Mr Duncan, through his associate Mr Gyss, had referred that information to AFSA in November 2016 and that Mr Duncan, having considered AFSA's advice, determined not to take any action. The primary judge said Mr Cosenza's application insofar as it complained of that decision was "also out of time". The primary judge said that Mr Cosenza had not established an arguable claim for relief under either s 178 of the Bankruptcy Act or s 90-15 of the Insolvency Practice Schedule. His Honour did not specify which of those provisions was applicable to the act, omission or decision complained of. 27 The primary judge said that Mr Cosenza had been unable to point to any actual physical asset that had been concealed by Mr Tigani, and that the case relied on "conjecture and innuendo arising from the uncertain medium of court pleadings". The matter raised in the District Court documents had been investigated by Mr Gyss who had sought advice from AFSA regarding the trustee's duties under s 19(1)(h) and (i) in relation to whether Mr Tigani had committed an offence under the Bankruptcy Act. His Honour concluded: 123 The advice received by Mr Gyss was that there was insufficient evidence available to conclude that any such offence had been committed. In addition, Mr Gyss exercised his professional judgement, based on the trustee's investigation into Mr Tigani's affairs, over several years, to form the view that there were no options open to the trustee to recoup any further moneys from Mr Tigani. In my view, there is currently no evidence available to me to indicate that this conclusion was capricious or otherwise legally unreasonable. 124. More significantly, at this juncture, Mr Cosenza has not provided any further evidence, which was not available to Mr Duncan, and his staff, to call into question this decision. To adopt the phraseology of Mr Bullock, Mr Cosenza has not been able 'to put any flesh on the bones' of his various assertions against Mr Duncan and his staff. 125 For all these reasons, I have reached the conclusion that Mr Cosenza has no reasonable prospects of success in his application against Mr Duncan. For these reasons, the application filed on 3 May 2017 must be dismissed. 28 As to Mr Cosenza's application in the case, the primary judge said: 128. With the failure of his substance application against Mr Duncan, in my view, there are now no-longer any proceedings on foot to which this application in a case can apply. In addition, in my view, for the reasons outlined above, if Mr Cosenza does wish to bring proceedings against Mr Tigani personally, he should do so in the manner envisaged by the Court's rules. 129. Pursuant to Rule 4.05 of the Federal Circuit Court Rules 1999, an applicant must ordinarily file an affidavit stating the facts relied upon together with an application in approved form. However, pursuant to rule 4.05(2), an affidavit is not required if, in a general law proceeding, a statement of claim or points of claim are filed. So far as Mr Tigani is concerned, I do not consider that Mr Cosenza has done so.

APPLICATION FOR LEAVE 29 On an application for leave to appeal from an interlocutory judgment it is relevant to consider whether, in all of the circumstances, the decision is attended with sufficient doubt to warrant it being reconsidered and whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Antal-Air at [18] - [20]. These considerations are not unrelated. As Burchett J said in Sharp v Deputy Commissioner of Taxation (Cth) [1988] FCA 76; 19 ATR 908 at 910: In my opinion, the sufficiency of the doubt in respect of the decision and the question of substantial injustice should not be isolated in separate compartments. They bear upon each other, so that the degree of doubt which is sufficient in one case may be different from that required in another. Ultimately, a discretion must be exercised on what may be a fine balancing of considerations. 30 See also Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 399. 31 Whilst the order summarily dismissing Mr Cosenza's originating application is properly categorised as interlocutory, its practical effect was to bring an end to the proceedings in the FCCA. The grant of leave to appeal would not have the effect of fragmenting the administration of justice at the trial or pre-trial stage. I have afforded substantial weight to that consideration in determining whether leave to appeal should be granted.

THE PROPOSED GROUNDS OF APPEAL 32 The draft Amended Notice of Appeal contains five grounds: 1. The learned Judge erred in dealing with the Respondent's application for summary judgment before dealing with the Appellant's application to join and examine Mr Thomas Tigani. 2. The learned Judge erred in finding that it was appropriate to enter summary judgment against the Appellant. The learned Judge ought to have adjourned the application for summary judgment until after Mr Tigani had been joined to the proceedings and cross examined. 3. The learned Judge erred in finding that the Appellant could not rely on the South Australian Limitation of Actions Act and or s33 of the Bankruptcy Act. 4. The learned Judge ought to have found that it was reasonably arguable that the Appellant could obtain orders after a trial directing the Trustee to take action against Mr Tigani, including pursuant to s178 of the Bankruptcy Act 1966, and or under the Insolvency Reform Act 2016. The learned Judge erred in finding that such causes of action had no reasonable prospects of success. 5. The learned judge erred in finding that the appellant had not complied with the Courts rules when joining Mr Tigani to the existing application as opposed to bringing a further separate proceeding against Mr Tigani personally. It was available for the learned judge to have found that the court is able to take a liberal approach as to compliance of the rules to ensure efficient use of the Courts resources. The emphasis is mine. 33 On occasion, Mr Cosenza's submissions in relation to the merits of the proposed appeal alleged appealable errors that do not find expression in any of the proposed grounds. It is neither necessary nor appropriate to detail those arguments here or to comment on their merits. Mr Cosenza was provided with ample opportunity to amend the proposed grounds, which he has done. Although self-represented on the appeal it is apparent that he has sought and obtained some legal assistance in preparing his case. Whilst self-represented, he is not an inexperienced litigant. It is appropriate that he be held to the case outlined in the proposed notice of appeal. 34 The Court heard submissions as to the substantive merits of the proposed grounds so that, should leave to appeal be granted, the appeal may be finally determined without a further hearing.

CONSIDERATION 35 It is convenient to deal first with proposed Ground 3.

Proposed Ground 3 36 There is merit in this ground. 37 The primary judge understood Mr Cosenza's originating application to complain of two decisions by Mr Duncan. The first was Mr Duncan's failure to object to Mr Tigani's automatic discharge from bankruptcy (the 2009 decision). The second was a decision not to take steps to recover Mr Tigani's assets following the provision of information to him by Mr Cosenza in or around 2016 (the 2016 decision). 38 Mr Cosenza complained that the primary judge had made no definitive finding as to whether the 2016 decision was subject to s 178 of the Bankruptcy Act or whether it was subject to s 90-15 of the Insolvency Practice Schedule. That is an unusual complaint given that it was Mr Cosenza who had specified those provisions in his originating application without identifying which of them was applicable. He did not commit to a fixed position as to which of them applied at the hearing of this application, nor did he take this Court to any transitional provisions that might assist the Court to determine the question. 39 Counsel for Mr Duncan submitted that s 178 of the Bankruptcy Act applies to both decisions. I accept that submission. Both the 2009 decision and the 2016 decision occurred before the commencement of Pt 3 of the Insolvency Practice Schedule on 1 September 2017: Insolvency Law Reform (Transitional Provisions) Regulation 2016 (Cth). The new provisions have application to administrations commencing after that date, although they may also apply to certain events occurring in an "ongoing administration". For the purposes of Div 90, an "ongoing administration" is defined in r 4 of the Regulation as follows: ongoing administration of a regulated debtor's estate means an administration of a regulated debtor's estate that has started before 1 September 2017 and ends after that day. 40 Mr Tigani was discharged from bankruptcy on 21 November 2009. On 31 May 2011, Mr Duncan served notice on ITSA pursuant to s 8.14 of the Bankruptcy Act informing it that the estate was finalised. ITSA confirmed the finalisation on 1 June 2011. Accordingly, the administration of Mr Tigani's estate does not fall within the definition of an "ongoing administration". 41 The primary judge was correct to conclude that the time limit prescribed in s 178(2) conditioned Mr Cosenza's right to appeal in relation to the 2009 decision. However, his Honour was in error to conclude that the time limit was not able to be extended. 42 Section 33(1)(c) of the Bankruptcy Act conferred jurisdiction on the primary judge to: extend before its expiration or, if this Act does not expressly provide the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time. 43 That power permitted an extension of the time prescribed in s 178(2) of the Bankruptcy Act: Kerr (Trustee), in the matter of Cross (Bankrupt) v Bechara [2015] FCA 284 (Jagot J). No occasion arose for the primary judge to consider whether s 48 of the Limitation of Actions Act could or should apply. As Mr Cosenza correctly submitted, s 79 of the Judiciary Act 1903 (Cth) does not operate to pick up a State law where a law of the Commonwealth otherwise provides: Chapman v Luminis Pty Ltd (No 4) (2001) 123 FCR 62 at [222]. 44 As to the 2016 decision, the primary judge did not specify whether it was s 178 (as previously in force) or s 90-15 of Sch 2 (as now in force) that applied. As it happens, his Honour's conclusion that the appeal in relation to that decision was "out of time" was correct: it was a decision to which the time limit in s 178(2) of the Bankruptcy Act applied. For the purposes of this application for leave to appeal, it is arguable that the primary judge erroneously considered that the time limitation presented an "insurmountable hurdle" of the same kind his Honour had identified in respect of the 2009 decision, because the time could not be extended. 45 In relation to both decisions, whether Mr Cosenza's originating application had reasonable prospects of success depended in part upon his prospects of obtaining an order under s 33 extending the period prescribed in s 178(2) in which the appeal could be commenced. Whilst it is true that Mr Cosenza had not made an application for an extension of time on the face of his originating application, he did seek that order in his application in a case. It is fair to infer that the primary judge did not consider the exercise of the discretion to extend the time because of his Honour's erroneous view that no extension could be granted on an appeal commenced pursuant to s 178 in any event. 46 It follows that the correctness of the judgment is attended with some doubt in respect of the questions raised in the third proposed ground of appeal. However, as will become apparent, I am not satisfied that Mr Cosenza had reasonable prospects of successfully answering Mr Duncan's summary judgment application in respect of either the 2009 decision or the 2016 decision in any event, even if he were to be granted an extension of time under s 33. 47 Before proceeding further it should be emphasised that nothing in s 178 or s 90-15 precludes the Court from hearing an appeal (or application as the case may be) relating to a decision made in the administration of a bankrupt estate that has come to an end before the proceeding is commenced. Nor do those provisions prevent the appeal (or application) being brought in relation to an act done or decision made after the administration has been finalised. 48 On the evidence before me, it appears that Mr Duncan may have been released from office as trustee of Mr Tigani's bankrupt estate on 1 June 2018 by the operation of s 184 of the Bankruptcy Act. Whether or not an appeal can be brought at a time when the trustee of a bankrupt estate is automatically released (and so discharged from office pursuant to s 184 of the Bankruptcy Act) is a different question that was not addressed in submissions before me. I make no finding in respect of it.

The remaining proposed grounds of appeal 49 A telling feature of grounds 1, 2 and 4 is their reference to time. The grounds do not allege that Mr Cosenza had an arguable case for relief against Mr Duncan on the basis of material in Mr Duncan's possession at the time the decisions were made. Nor is it suggested that Mr Cosenza is presently in the possession of evidence demonstrating the actual existence or actual location of assets that may have vested in Mr Duncan in his capacity as trustee. 50 Mr Cosenza's oral submissions at times asserted a present obligation on Mr Duncan to take further steps to investigate Mr Tigani's affairs. However, when pressed, Mr Cosenza acknowledged that the question of whether steps should be taken by Mr Duncan (at his own risk and expense) involved the exercise of a commercial judgment which necessarily included an assessment of the costs of the steps and the likelihood that they would ultimately result in the recovery of any assets for distribution among Mr Tigani's creditors after the deduction of the trustee's own expenses. 51 Mr Cosenza's principal contention is that there is, at present, sufficient evidence to warrant the examination of Mr Tigani under s 81 of the Bankruptcy Act. He complains that the summary dismissal of his originating application deprived him of the opportunity to cause an examination summons to be issued against Mr Tigani within the same proceeding in which he then might, following that examination, obtain orders requiring Mr Duncan to take steps to recover assets based on the further information he obtained. His stated intention was to conduct the examination himself in his capacity as a creditor of Mr Tigani. These submissions proceeded from an optimistic assumption that the examination would disclose the existence and whereabouts of assets that had hitherto been concealed. 52 To that end, Mr Cosenza sought orders of this Court allowing his appeal and remitting the action to the primary judge on terms mandating the joinder of Mr Tigani as a party, the issue of an examination summons against him and the adjournment of Mr Duncan's summary judgment application to an undefined time in the future. He submitted that Mr Duncan would be a necessary party to the examination proceeding, albeit a party who would not be obliged to substantively participate in it. He said that Mr Duncan should remain as a party so that orders could later be made dictating his next steps. It would be a waste of resources and costs, Mr Cosenza submitted, for him to commence a new proceeding for the examination of Mr Tigani because he had already made an application under s 81 in his application in the case before the primary judge. 53 Mr Cosenza's position on this application is reflective of his correspondence to Mr Duncan's solicitors in the course of the proceedings below. In an email dated 19 September 2017 he said: The position is that I will be pursuing the matter against Tigani pursuant to s.81 application to examine. Within these circumstances that the Trustee undertake no steps pending the application to examine Tigani. 54 It was not suggested then, nor is it suggested now, that Mr Duncan should conduct the examination at his own expense and risk. When invited to discontinue the originating application against Mr Duncan, Mr Cosenza responded (21 September 2017): As advised within my earlier communication, I will not be proceeding against Mr Duncan and that I will be conducting a s.81 examination. That process is in train. 55 As a creditor, Mr Cosenza has standing to bring an application for Mr Tigani to be summoned for examination in relation to the bankruptcy: Bankruptcy Act, s 81(1)(a). However, it is not correct to say that Mr Duncan is a necessary party to any such proceeding. Mr Duncan, as trustee, would be entitled to take part in the examination (and to be legally represented for that purpose), but he cannot be compelled to apply to be joined as a party: Bankruptcy Act, s 81(8). Whether or not he did so would be a matter for him to decide, having regard to the commercial reality that there are presently no funds available for the reimbursement of his fees and his assessment of the likelihood that any further investigation of Mr Tigani's affairs might ultimately benefit his creditors. 56 The principal difficulty for Mr Cosenza is that the proceeding he commenced in the FCCA was (or at least purported to be) an appeal brought pursuant to s 178 of the Bankruptcy Act against Mr Duncan in respect of decisions that had been made in the past. That was the application to which the summary dismissal application was directed. Quite apart from the fact that the originating application did not seek orders in terms against Mr Duncan, Mr Cosenza was found to have an insufficient evidentiary basis to support an arguable case for interference with Mr Duncan's past decisions. There is insufficient doubt attending that particular conclusion to warrant the grant of leave to appeal. The grounds of appeal assert no error of that kind in any event. 57 Whilst it is true that Mr Cosenza filed an application in a case seeking orders joining Mr Tigani as a respondent and an order requiring him to attend for examination, Mr Cosenza did not amend the originating application to which the summary judgment application was directed. In the absence of an application to amend the originating application, the question of whether Mr Duncan's summary judgment application should be deferred was a discretionary matter for the primary judge to determine. The question gave rise to case management issues in respect of which reasonable minds may differ. On appeal, it would not be sufficient to show that a different judge might have exercised the discretion differently. Having regard to the principles stated in House v The King (1936) 55 CLR 499, the correctness of that aspect of the decision is not attended with sufficient doubt to justify its reconsideration on an appeal. 58 The summary dismissal of Mr Cosenza's originating application would not, of itself, give rise to any estoppel of a kind that would prevent him from appealing from any subsequent decision of Mr Duncan not to act upon additional evidence that Mr Cosenza might obtain in relation to Mr Tigani's financial affairs. However, as Counsel for Mr Duncan submitted (correctly) Mr Cosenza is not presently entitled to "maintain a 'floating' claim against the respondent while he casts about for a legal or factual foundation to sustain it". Notwithstanding the apparent error in the judgment in connection with the limitation of time, no substantive injustice would result if leave to appeal were refused. 59 The application should accordingly be dismissed. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Charlesworth.

Section Summary Bankruptcy Act 1966(Cth)

Bankruptcy Act 1966(Cth)ss 8.14, 19, 19AA, 33, 81, 149, 149A, 178, 184, Sch

At a glance

Court

Decision date

Before

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (8)

Cases Cited (8)