Low v Barnet

Counsel for the Appellant: Mr B Coles QC with Mr S Aspinall and Ms J Muir

BETWEEN: LOW MOOI KWEE (ALSO KNOWN AS MONICA LOW) Appellant

AND: KATHERINE BARNET AS TRUSTEE OF THE BANKRUPT ESTATE OF MATHEW KARALAVAKAYIL MATHAI Respondent

JUDGES: FLICK, JAGOT AND GLEESON JJ DATE OF ORDER: 13 APRIL 2017

1. The appeal is dismissed.
2. The Appellant is to pay the costs of the appeal of the Respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT THE COURT: 1 In May 2004 a sequestration order was made against the estate of Mr Mathew Keralavakayil Mathai. He was discharged from bankruptcy in April 2008. Over the years there have been a number of trustees of the bankrupt estate. 2 The only creditor was Ms Low Mooi Kwee, also known as Ms Monica Low or Monica Leong. A bankruptcy notice was originally served in December 2003 founded upon a judgment obtained by Ms Low from the English High Court in 1998 and registered in Australia in February 2003. 3 One issue which arose in the administration of the bankrupt estate concerned the prospect of the trustee recovering two adjoining properties in Kew in Victoria - 68A Wellington Street (registered in the name of Mr Mathai's wife, brother in law and one other person) and 69 Wellington Street (registered in the name of Mr Mathai's son, Mr Michael Mathai). Differing legal opinions had been expressed as to the trustee's prospects of success. Ms Low agreed to fund the trustee's pursuit of those properties. The trustee was ultimately successful and an order was made vesting both properties in the trustee. 4 The property at 68A Wellington Street was sold at auction in September 2013 for $1,708,000. The property at 69 Wellington Street has not been sold. The value of that property is not known but may be assumed to be much the same as 68A Wellington Street. The precise value matters not. 5 Ms Low has been paid the entirety of the amount of her claims together with interest and has been fully reimbursed for the monies she advanced to the trustee to pursue the proceedings seeking the recovery of the two adjoining properties. 6 She now seeks to recover from the trustee what she regards as "a just and equitable amount as a reward for the assistance (both personal and financial)" which she provided to the trustee for the purposes of the recovery proceedings. Before this Court, her claim advanced by Senior Counsel was that a "just and equitable" amount was the balance of the proceeds of the sale of 68A Wellington Street and also the adjoining property. Such a claim is made pursuant to s 109(10) of the Bankruptcy Act 1996 (Cth) ("Bankruptcy Act"). Of potential relevance to the resolution of that claim was that Ms Low was the only creditor in the bankrupt estate. 7 The trustee has refused to pay any "risk premium" to Ms Low. In December 2015 the primary Judge agreed with the course taken by the trustee: Low v Barnet (Trustee); In the matter of Mathai [2015] FCA 1386. Orders for the payment of costs were made in June 2016: Low v Barnet (Trustee); In the matter of Mathai (No 2) [2016] FCA 736. 8 If the trustee's decision and that of the primary Judge is upheld, Mr Mathai will be entitled upon the annulment of his bankruptcy to the balance of any monies held by the trustee together with the 69 Wellington Street property. 9 Ms Low now appeals. 10 On the hearing of the appeal, leave was given by the Court for Mr Mathai to intervene pursuant to r 9.12 of the Federal Court Rules 2011 (Cth). It was certainly in Mr Mathai's interests that he be heard in opposition to the claim made by Ms Low which, if successful, would leave him with nothing, notwithstanding the fact that all monies payable in respect to his bankruptcy have been paid. His interests were "directly affected" and his submissions were to a limited extent different to those advanced by the trustee and did not extend the hearing of the appeal in any significant respect: cf. Roadshow Films Pty Ltd v iiNet Ltd [2011] HCA 54 at [2] to [3], (2011) 248 CLR 37 at 38 to 39. 11 The appeal is to be dismissed with costs.

The Bankruptcy Act - its purpose & ss 107, 108 and 109 12 Although the object and purpose of the Bankruptcy Act formed the backdrop to the question of statutory construction immediately posed for resolution, namely the operation of s 109(10), a number of other provisions of that Act assumed some importance. Those provisions were primarily ss 107 and 108. 13 As a very general proposition, and subject to the provisions of the Bankruptcy Act itself, the Act operates such that upon bankruptcy a bankrupt's property is vested in his trustee so as to be made available for the payment of his provable debts and thereafter to enable a bankrupt to "start afresh": Re McMaster; Ex parte McMaster (1991) 33 FCR 70 at 72 to 73. Hill J there summarised the approach as follows: The modern bankruptcy law serves three purposes. The first is to ensure that the assets of the bankrupt are distributed rateably among creditors. The second, which is interrelated with the first, is to ensure that one creditor does not obtain an undue advantage over other creditors. The third is to bring about the discharge of the debtor from future liability for his existing debts, so that the debtor may start afresh. The wife in that case sought to set aside a property settlement in contested proceedings in the Family Court and to claim instead a percentage of the bankrupt husband's superannuation entitlement. In refusing the application, Hill J concluded (at 73): A grant of leave in the present case would scarcely advance the third purpose of the legislation. What the wife seeks to do here is to seek the order of a court which will effectively defer the liability and take it out of the category of provable debts, so that the bankrupt, upon discharge, will continue to be liable for an equivalent amount. One of the authorities relied upon by Hill J was the earlier decision of Gibbs CJ in Storey v Lane (1981) 147 CLR 549. The Chief Justice (with whom Mason, Wilson and Brennan JJ agreed) had there observed (at 556): An essential feature of any modern system of bankruptcy law is that provision is made for the appropriation of the assets of the debtor and their equitable distribution amongst his creditors, and for the discharge of the debtor from future liability for his existing debts. Similarly, and in reliance inter alia upon Re McMaster, Mansfield J in Moore-McQuillan v Scott [2006] FCA 63, (2006) 149 FCR 486 at 490 observed: [14] The Act generally operates to divest a bankrupt of his or her property, to vest that property in a trustee, and through the trustee to make it available for the payment of provable debts. Creditors generally are disentitled by s 58 from pursuing proceedings against the bankrupt to recover debts, and the bankrupt generally is also restricted by s 60(2) from pursuing proceedings the bankrupt has commenced. Hence, the assets of the bankrupt are distributed rateably among creditors, so no creditor secures an advantage over the others. Ultimately, following the discharge of the debtor from bankruptcy, the debtor may face the future free of liability for the debts existing at the time of the bankruptcy… 14 Within that very generally expressed backdrop of legislative purpose, of present relevance are ss 107, 108 and 109. 15 Section 107 provides as follows: Creditor not to receive more than the amount of his or her debt and interest Subject to the operation of the provisions of section 91, a creditor is not entitled to receive, in respect of a provable debt, more than the amount of the debt and any interest payable to him or her under this Act. 16 Section 108 provides as follows: Debts proved to rank equally except as otherwise provided Except as otherwise provided by this Act, all debts proved in a bankruptcy rank equally and, if the proceeds of the property of the bankrupt are insufficient to meet them in full, they shall be paid proportionately. 17 Section 109 provides for the priority of payments from the proceeds of the bankrupt's estate and s 109(10) provides as follows: Where in any bankruptcy: (a) property has been recovered, realized or preserved under an indemnity for costs of litigation given by a creditor or creditors; or (b) expenses in relation to which a creditor has, or creditors have, indemnified a trustee have been recovered; the Court may, upon the application of the trustee or a creditor, make such orders as it thinks just and equitable with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving the indemnifying creditor or creditors, as the case may be, an advantage over others in consideration of the risk assumed by creditor or creditors. 18 Section 109(10), it should be noted, has as its counterpart s 564 of the Corporations Act 2001 (Cth) ("Corporations Act"), which provides as follows: Power of Court to make orders in favour of certain creditors Where in any winding up: (a) property has been recovered under an indemnity for costs of litigation given by certain creditors, or has been protected or preserved by the payment of money or the giving of indemnity by creditors; or (b) expenses in relation to which a creditor has indemnified a liquidator have been recovered; the Court may make such orders, as it deems just with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk assumed by them. 19 The confined question of statutory construction raised for resolution in the present appeal is the meaning of the phrase "over others", an expression used in both ss 109(10) and 564.

The decision of the primary Judge - s 109(10) confined to "over other creditors" 20 The primary Judge rejected Ms Low's claim. 21 There were two bases upon which his Honour proceeded, namely: Ms Low's claim did not fall within s 109(10) because, as a matter of statutory construction, that subsection was confined to circumstances in which there were competing creditors and not - as on the facts before his Honour - where Ms Low was the only creditor; and as a matter of discretion, the claim should be rejected. Of present concern is his Honour's conclusion in respect to s 109(10) and the phrase "over others" being confined to "over other creditors". 22 The primary Judge reached this conclusion as follows: [112] Here, Ms Low is the only creditor of the bankrupt. There are no other persons who have made any claims upon the estate. She is a judgment creditor of the bankrupt and a claimant for reimbursement of additional outlays said to be recoverable from the estate. [113] The only property of the bankrupt in the estate are the two Wellington Street properties and rent derived from one of those properties. 68A Wellington Street has been sold. The net proceeds of sale have fallen into the estate. [114] Ms Low provided funds and gave indemnities to Mr Ryan and to Mr Nelson in respect of the s 121 proceedings and the appeals which followed. [115] In the circumstances, it follows (and I find) that property (the two Wellington Street properties) were recovered under an indemnity for costs of litigation (the s 121 proceedings and the subsequent appeals) given by a creditor (Ms Low) to the trustee. Thus, s 109(10) is prima facie engaged in the present case because the threshold requirements specified in s 109(10)(a) have been satisfied. [116] Ms Low also contends that the terms of s 109(10)(b) have also been satisfied. [117] The questions which then arise are whether, having regard to the terms of the balance of s 109(10), the statutory discretion is engaged at all and, if so, whether and how it should be exercised in the present case. [118] The order which may be made by the court pursuant to s 109(10) is an order with respect to the distribution of the property which has been recovered by reason of the indemnity (here the two Wellington Street properties) with a view to giving the indemnifying creditor an advantage over others in consideration of the risk assumed by that creditor. That is, the purpose or intent behind making an order under s 109(10) must be to provide an advantage to the indemnifying creditor as a reward for taking the risk on the recovery litigation. [119] The use of the word "advantage" in this context connotes a comparison. The indemnifying creditor is to be given something more than the "others". The comparison invited by the subsection is a comparison between the position of the indemnifying creditor with respect to his proven debts and the position of the remaining creditors with respect to their proven debts. [120] In my opinion, s 109(10) contemplates that the indemnifying creditor is already a creditor with one or more provable debts at the time when the indemnity is given and the property is recovered. The subsection is directed to giving an "advantage" to the indemnifying creditor in respect of the payment of those provable debts. It does not operate as the basis for the creation of a new and independent liability in the estate in favour of the indemnifying creditor. [121] Section 109(10) appears in a part of the Act which addresses the order of the payment of proven debts. In particular, it is part of a section which, in terms, identifies the order in which those debts are to be paid thereby specifying a set of statutory rules for prioritising the payment of specified classes of proven debts. [122] The "advantage" to be given to an indemnifying creditor is designed to reward that creditor for taking the recovery risk. The intention is to encourage such indemnities to be given. Understood in this way, the preference or priority is over other creditors for it is they who would otherwise rank equally or proportionately (subject to s 109(1)) in the distribution of the recovered property. [123] Sections 108 and 109 are not concerned with claims by persons other than creditors. [124] In my view, the Trustee and the bankrupt were correct when they submitted that the word "others" in s 109(10) is a reference to "other creditors" and that the 1985 amendment to s 109(10) was never intended to bring about a substantive change to the definition of the class of persons over whom the advantage was to be given. [125] The "distribution" of the recovered property to which reference is made in s 109(10) is a distribution among creditors. The section simply does not speak to a circumstance where property might revert to the bankrupt upon annulment of the bankruptcy under s 153A and s 154 of the Act nor does it speak to the possibility of part of the recovered property being returned to the donee under an impugned transaction. [126] These conclusions are supported by the reasoning underlying the submissions made by the Trustee and by the bankrupt in relation the question of whether s 109(10) is engaged at all in the present case. Those submissions are correct and I accept them. His Honour then reviewed authorities going to the construction of s 109(10) and further concluded: [135] In light of the above conclusions, the question of discretion under s 109(10) does not arise. However, against the possibility that I am wrong in the conclusions which I have reached, I will briefly address discretion. [136] Here, most of the commonly found discretionary factors are not present (as to which, see [Woodgate, in the Matter of Eaton (a Bankrupt) [2010] FCA 550, (2010) 8 ABC(NS) 65] at 66 [5]). [137] Ms Low was the only person who would benefit from the recovery action which she undertook. She did not provide the indemnities which she gave in order to benefit the estate and thus the body of unsecured creditors generally - there were no other creditors. There was no possibility that the recovered property would ever have to be shared with any other creditor. As submitted by the Trustee, the funding of the investigations undertaken by the Trustee and the recovery litigation subsequently prosecuted served the self-interest of the creditor. [138] Ms Low is entitled to receive full reimbursement for all funds paid to the Trustee in connection with the recovery action undertaken by him and payment in full of her provable debts. She is also entitled to interest on those amounts where interest is properly payable. These are Ms Low's entitlements under s 82 and s 109(1)(a) of the Act. [139] Once Ms Low has been paid all of the amounts to which I have referred at [138] above, she will have been amply and appropriately rewarded for the risks which she took. She is not entitled to more than this. She is not entitled to any risk premium.

Section 109(10) - over others including the bankrupt 23 The conclusion of the primary Judge as to the proper construction of s 109(10), with respect, is correct. 24 The central question of importance is whether the phrase "over others" as employed in s 109(10) is confined to conferring an advantage "over other creditors" or whether that phrase should be construed as conferring an advantage "over all others, including the bankrupt". 25 The conclusion that the primary Judge's construction of s 109(10) was correct is primarily founded upon: what is considered to be the natural and ordinary meaning of the words employed in s 109(10); together with: an understanding of the statutory phrase "the risk assumed". That construction, it is further concluded, is also supported by: the legislative context in which s 109(10) appears; the authorities which have discussed s 109(10) or its predecessor provisions and those which have discussed the comparable terms employed in s 564 of the Corporations Act; and the legislative objective sought to be achieved by s 109(10). Albeit a matter which may be more relevant to the ambit of the discretionary power conferred, but nevertheless a matter which both assists the construction of the power conferred by s 109(10) and also the manner of the exercise of the discretion is: the power to make an order which is "just and equitable". Little (if any) assistance is to be gleaned from: the legislative history or evolution of s 109(10) and the fact that from 1966 to 1985 the predecessor provisions included the words "over other creditors".

The natural and ordinary meaning of the words used 26 It was common ground that a process of statutory construction must begin with a consideration of the text itself: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41, (2009) 239 CLR 27 at 46 to 47. Hayne, Heydon, Crennan and Kiefel JJ there observed: [47] This court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy. (Citations omitted) 27 It was also common ground that the words of a statute are to be given their natural and ordinary meaning and are to be construed by reference to the object and purpose of the legislation as a whole: Mills v Meeking (1990) 169 CLR 214. Mason CJ and Toohey J there observed (at 223): Later, reference is made to the difficulties associated with an argument which relies upon discerning the intention of Parliament with respect to the operation of the provisions in issue, other than that which may be inferred from the statute itself. For the present, there is no need to have resort to extrinsic material; the provisions may be given their ordinary grammatical meaning. If the language of a statute is ambiguous or uncertain, a risk of injustice will bear upon the construction to be given to words used. But, if the language is not ambiguous or uncertain, a court will apply its ordinary and grammatical meaning unless to do so will give the statute an operation which obviously was not intended. Justice Dawson further observed (at 235): However, the literal rule of construction, whatever the qualifications with which it is expressed, must give way to a statutory injunction to prefer a construction which would promote the purpose of an Act to one which would not, especially where that purpose is set out in the Act. … Reference to the purposes may reveal that the draftsman has inadvertently overlooked something which he would have dealt with had his attention been drawn to it and if it is possible as a matter of construction to repair the defect, then this must be done. However, if the literal meaning of a provision is to be modified by reference to the purposes of the Act, the modification must be precisely identifiable as that which is necessary to effectuate those purposes and it must be consistent with the wording otherwise adopted by the draftsman. 28 That which divided the parties was what was the natural and ordinary meaning of the words employed in s 109(10). 29 If reference is made simply to the terms in which s 109(10) is expressed, it will be noted that the subsection relevantly confers a power upon the Court: to make an order upon an application being made by either the trustee or a creditor, that power being conferred "with a view to giving the indemnifying creditor … an advantage over others in consideration of the risk assumed"; and confers that power in discretionary terms, the limits to that power being to make such order "as it thinks just and equitable with respect to the distribution of that property". The discretion conferred, it will be noted, may only be exercised "with a view to giving the indemnifying creditor … an advantage over others in consideration of the risk" assumed by that indemnifying creditor. 30 If attention is presently confined to the power conferred by s 109(10), the conclusion of the primary Judge as to the construction of s 109(10) is dictated by the concern of the subsection being directed to: the relationship between creditors in circumstances where one creditor has (for example) indemnified a trustee in the "recovery" of property which would otherwise be distributed rateably between creditors; and the legislative recognition that it may be appropriate to make an order to confer an "advantage" on the indemnifying creditor which would be other than a rateable distribution between creditors notwithstanding the "risk" assumed by the indemnifying creditor. Such, it is respectfully concluded, is the natural and ordinary meaning of the words employed in s 109(10). 31 The two primary reasons relied upon by Senior Counsel for Ms Low to suggest that the natural and ordinary meaning of the words employed by s 109(10) were as was advanced on her behalf seized upon: the opening words of s 109(10) itself, namely "[w]here in any bankruptcy"; and the terms "others". The former submission was that the opening words were equally capable of applying to bankruptcies where all the creditors and the costs of administering an estate could be paid in full and where there was a surplus remaining to be thereafter transferred to the bankrupt as to those circumstances where there was an inadequacy of funds. So much may be accepted. But, with respect, the fact that a trustee may be called upon to vest surplus monies in the bankrupt after all creditors and other expense have been paid says nothing as to the ambit of the power to give one creditor an "advantage" over another. As to the latter submission, it may again be accepted that the term "others" is a word of potential width of meaning. It may also be accepted that it is questionable whether words should be "read into" a statute, such as - as Ms Low would have - "over other creditors". The width of the term "others", it was submitted on her behalf, should not be confined by a process of reading the word "creditors" into what would otherwise be a word or phrase of unqualified width. But that term and the phrase "over others" remains a phrase to be construed by reference to the meaning that that phrase assumes in the specific context of s 109(10) itself and the Bankruptcy Act more generally. 32 The submissions advanced on behalf of Ms Low as to the natural and ordinary meaning of the words employed in s 109(10) are rejected.

In consideration of the risk assumed 33 This natural and ordinary meaning of the words employed in s 109(10) being a comparison between creditors is only reinforced when attention is focussed upon the concluding words of s 109(10). 34 Section 109(10) recognises that when making an order for the "just and equitable" distribution of property, a Court may give "consideration of the risk assumed". The "risk" there referred to is that the monies advanced by an indemnifying creditor to fund (for example) speculative litigation may be lost and the prospect that an order for costs may be made against the trustee. 35 Section 109(10), it is concluded, should be confined to conferring a comparative "advantage" in respect to the "risk" assumed by the indemnifying creditor. It may not be "just and equitable" for one creditor to assume the "risk" of funding speculative litigation which ultimately proves successful and thereby increases the pool of property but to nevertheless leave that pool available for rateable distribution. But for the "risk" assumed by the indemnifying creditor, the pool of property may well be less than would otherwise be the case. 36 Section 109(10), it is concluded, should not be construed as conferring a "windfall" upon an indemnifying creditor beyond that which is necessary to give effect to the "advantage" of the indemnifying creditor over other creditors. 37 The concern of s 109(10) is to confer that "advantage" by reference to that "risk"; the concern of s 109(10) is not to confer an "advantage" upon the indemnifying creditor beyond the "risk" assumed. 38 This approach to the construction of the term "risk" is supported by the following observations of Campbell JA in Green v CGU Insurance Ltd [2008] NSWCA 148, (2008) 67 ACSR 105 at 127 to128: [83] The background against which courts developed a policy of usually not requiring liquidators to provide security for costs when suing in their own name included: … (e) Even when the liquidator is being funded by a creditor, in circumstances where the creditor is entitled to a preferential dividend under s 564 Corporations Act by reason of having funded the litigation, the most that the creditor can recover for its own benefit is a return of its outlay for costs, and a 100% dividend on its proved debt. A creditor who funds the litigation in those circumstances is thus doing nothing more than protecting its own legal right to be paid its debt by the company. Such observations, it must be recognised, were obiter. Also, his Honour was there addressing the terms of s 564 of the Corporations Act and in the context of resolving an application for security for costs. 39 It may be that in more recent times the discretion has been exercised not by reference to the "risk" assumed by an indemnifying creditor but by reference to providing the indemnifying creditor with an indemnity and the public interest in stripping a wrongdoer of his "ill-gotten gains" so that they would be available for distribution between creditors: Re Cartco Pty Ltd (1994) 14 ACSR 357 at 358. Young J there observed in respect to s 564 of the Corporations Act: An earlier form of this section was reviewed by A H Simpson J in Re Manson; Ex parte Official Assignee (1897) 18 LR (NSW) B & P 38 at 46, where his Honour said that one considers whether it is appropriate to give creditors funding or indemnifying the liquidator an advantage by "weighing all the circumstances, the amount of risk run, the amount recovered, the proportion between the debts of indemnifying creditors, and those non-indemnifying creditors and all other matters." It would seem from later cases, such as Re Geoghegan; Ex parte Official Assignee (1897) 18 LR (NSW) B & P 47; Re Ried (1946) 13 ABC 287; Re Bavistock (1946) 14 ABC 30, that up to the 1940s courts took the view that where the risk was relatively nominal the court often considered it fair to give to the funding creditors 25% of the value of their debt over and above their normal dividend. In more recent cases courts have adopted a more liberal attitude in favour of creditors giving indemnity and are not as influenced by the risk factor. Courts tend to be more liberal towards creditors who, had they not intervened, would have left the officers of the company who were guilty of misfeasances to enjoy their ill-gotten gains; see Re Passmore; Ex parte Official Receiver (1984) 56 ALR 181 at 186. See also Re Allied Glass Manufacturers Ltd (1936) 36 SR (NSW) 409, Re Ivermee (1974) 36 FLR 187 and Re Clarke; Ex parte Deputy Commissioner of Taxation (1980) 51 FLR 220 at 229; 12 ATR 130. These authorities should be applied to s 564 of the Corporations Law. In the instant case the amount involved is relatively small, the creditors put up some 35% of the value of the amount recovered and it seems to me that it is just, within the meaning of the section, that the order sought should be made and they receive the whole of the benefit of the amount recovered in proportion to their contribution for funding the action. The decision there referred to by Young J, namely Re Passmore; Ex parte Official Receiver in Bankruptcy (1984) 56 ALR 181, only reinforces the conclusion that any distribution of monies from a bankrupt estate it to be by reference to the "risk" assumed. Although the entire "balance" of monies recovered was there distributed amongst the indemnifying creditors, the facts were such that that amount largely went to pay proved debts. Northrop J there said (at 186): The condition precedent having been established, the court is empowered to make "such order as it thinks just and equitable with respect to the distribution of the proceeds of that property with a view to giving the indemnifying … creditors an advantage over other creditors in consideration of the risk run by … them in giving the indemnity". It is not necessary to refer to the many authorities dealing with the nature of the discretion conferred by s 109(6) and its application to particular facts; it is sufficient to refer to Re Ivermee; Ex parte Official Receiver (1978) 36 FLR 187 [sic]. A consideration of the authorities discloses that over the years the courts have tended to adopt a more liberal approach in favour of creditors giving indemnities. There has been a tendency to depart from the earlier approach of attempting to balance finally the degree of risk incurred by the indemnifying creditors and the proportion of the proceeds of the property recovered to determine what amount should be paid in priority among the indemnifying creditors: compare, for example, Re Reid (1946) 13 ABC 287 . Nevertheless, as a first step, it is necessary to consider the risk incurred by the creditors who gave indemnities. In order to consider the risk, it is necessary to refer to the Supreme Court proceedings. After having considered the "risk", his Honour concluded as follows (at 187): In its application, the applicant is seeking an order that the net amount of the sum of $12,780.87, after deduction of certain expenses, should be distributed among the indemnifying creditors. All creditors knew that the applicant was seeking that order, but none has appeared to oppose the making of an order in that form. Having regard to all the circumstances, in my opinion it is just and equitable that the court should order that of the balance remaining of the sum of $12,780.87 received by the applicant by means of indemnities for costs given by the four indemnifying creditors after the deduction of the necessary disbursements and fees referred to in the order and the applicant's taxed costs of this application, two-thirds be distributed preferentially pro rata among the indemnifying creditors. This should enable each of those creditors to receive a substantial payment if not payment in full of their proved debts. 40 Section 109(10), like s 564 of the Corporations Act, should not be construed as conferring a power to distribute more than "a return of [a creditor's] outlay for costs" (and possibly a "dividend") involved in the recovery of property. Even if the more recent authorities may quantify the amount of recovery by reference to providing an indemnity, any payment must forever remain a payment made "in consideration of the risk assumed". Re Cartco is no authority for any contrary conclusion such that an indemnifying creditor is entitled to strip a bankrupt of the entirety of his "ill-gotten gains" beyond the payment of proved debts. Such gains can only become available to the extent to which a Court gives "consideration of the risk assumed".

The legislative context 41 The construction of s 109(10) as conferring a discretionary power to give an indemnifying creditor an "advantage" over "other creditors" is also supported by the context in which s 109(10) appears. 42 Section 109(10) appears in Div 2 of Pt VI of the Bankruptcy Act, the Division dealing with the "[o]rder of payment of debts". Within that Division is also to be found s 108 which provides for - subject to the Act itself - all debts that have been proved to "rank equally" and to be "paid proportionately". 43 Within that Division, s 109 deals with "priority payments". One aspect of priority of payments is to provide, as s 109(10) does, for the payment of an "advantage" - and hence a departure from what would otherwise be the equal ranking of provable debts and for such debts to be paid proportionately. 44 To construe s 109(10) as conferring a discretionary power to make an order of the kind now sought by Ms Low would not sit comfortably with: the starting point set forth in s 108; and section 109 being but a provision which otherwise addresses the priority of payments to be made in the administration of a bankrupt estate. Placed where it is within Pt VI Div 2 of the Bankruptcy Act, s 109(10) confers a discretionary power whereby an indemnifying creditor may receive more than a proportionate amount of the available funds and to that extent a priority over other creditors. It provides an "exception" to the prima facie equality of all unsecured creditors affected by s 108: cf. Jarbin Pty Ltd v Clutha Ltd (in liq) [2004] NSWSC 28 at [68], (2004) 180 FLR 393 at 412 per Campbell J. 45 A discretionary power of the kind now advocated for on behalf of Ms Low would not sit comfortably within that legislative context.

The authorities - obiter but persuasive comments 46 Counsel for none of the parties was able to point the Court to any authority in which the phrase "over others" had to be construed in circumstances such as the present, namely where there was only one creditor. Nor were they able to point to any authority where the section had been invoked where all creditors had been paid in full and there remained a surplus after all other costs and expenses had been paid. 47 Such cases as did express views as to the phrase "over others" as meaning "over other creditors", Senior Counsel for Ms Low contended, should be construed as laying down no general principle of law but only expressing the application of that phrase to the facts there presented where there were a number of creditors. The views expressed as to the phrase meaning "over other creditors", so the submission went, were purely obiter and not binding on this Court. This Court, it was stressed, was being called upon to resolve the present question of statutory construction for the first time. 48 These submissions of Senior Counsel for Ms Low may be accepted. They nevertheless do not prevail. 49 Such obiter views as have been expressed with respect to the phrase "over others" in the context of s 109(10) of the Bankruptcy Act and s 564 of the Corporations Act (and their predecessors) are nevertheless considered to be persuasive. Such obiter views are, perhaps, no more than a reflection by earlier courts as to what each thought was the natural and ordinary meaning of the statutory words. 50 Albeit in obiter comments, all prior judicial observations to which the Court was taken favoured the view that the phrase appearing in both s 109(10) of the Bankruptcy Act and s 564 of the Corporations Act was to be construed as meaning "over other creditors" (or shareholders). No case supported the broader construction advanced on behalf of Ms Low. 51 It is unnecessary to attempt an exhaustive analysis of the authorities. But a few should be mentioned. 52 The first of these authorities chronologically is Re Ried (1946) 13 ABC 287. There in issue was a forerunner to the present s 109(10), being s 84(2) of the Bankruptcy Act 1924 (Cth). Section 84(2) was expressed simply in terms of "over others" and did not include the term "over other creditors". And Re Ried was a case in which there were a number of creditors. Within that context, Clyne J observed (at 289): Some brief analysis of this sub-section may not be out of place. The advantage which may be given thereunder to indemnifying creditors is a right to a preference over other creditors in the distribution of the assets recovered by means of the indemnity. In the next place the other creditors are I think all creditors other than the indemnifying creditors entitled to share in the distribution of the bankrupt's estate. Mr. Mitchell contended that the word "others" in the sub-section meant other creditors who had the opportunity of indemnifying and did not indemnify. I am not able to accept this contention. (See Re Lance; Ex parte The Official Assignee (1900) 21 L.R. (N.S.W.) B. & P. 29 ; 17 W.N. (N.S.W.) 201). Again, the advantage given to the indemnifying creditors is given in consideration of the risk run by them in giving the indemnity. It is difficult to find any guiding principle on which the Court should act in dealing with applications under this sub-section : see Re Manson ; Ex parte The Official Assignee (1897) 18 L.R. (N.S.W.) B. & P. 45). In this case A. H. Simpson J., in considering s. 10 of the Bankruptcy Act Amendment Act, 1896 (N.S.W.), which in substance is similar to s. 84 (2), said : "The section itself leaves the matter entirely in the discretion of the Judge, and does not indicate in any way what the extent of the advantage given to indemnifying creditors should be. Each case must, therefore, stand on its own footing, and the Judge must arrive at the best conclusion he can after weighing all the circumstances, the amount of risk run, the amount recovered, the proportion between the debts of indemnifying creditors, and these non-indemnifying creditors and all other matters." While it may be said that creditors entitled to seek an advantage under s. 84 (2) are possibly moved by that sort of charity which begins at home, they deserve to receive some advantage for the risk they run in endeavouring to recover assets which properly belong to the bankrupt estate, but the extent of this advantage is often not easy to assess. Of assistance in interpreting the current s 109(10) is not only his Honour's reference to "other creditors" but also his difficulty in finding any "guiding principle" in applying the section. Although his Honour accepted that the section left "the matter entirely in the discretion of the Judge", his Honour also settled on the matter being resolved by reference to the "advantage" being linked to "the risk … run in endeavouring to recover assets". The "extent of this advantage", his Honour observed, "is often not easy to assess". Ultimately his Honour awarded the applicant creditor a "dividend of 5s. in the £ on their respective debts" to the indemnifying creditor and ordered that the balance was thereafter to be distributed to the remaining creditors. 53 Comparatively more recently, the question was again touched upon in Australia and New Zealand Banking Group Ltd v TJF EBC Pty Ltd [2006] NSWSC 25, (2006) 224 ALR 490 at 493 to 494. That was a case concerning s 564 of the Corporations Act. Barrett J there observed: [9] Section 564 contemplates that assisting or indemnifying creditors within its purview may be given "an advantage over others". The section does not say "all others" or "some others" or "any others". In referring to "others" generally, it contemplates, in my view, that the court may, by its order, give the assisting or indemnifying creditors "an advantage over" any one or more of the other creditors or all of them, with the result that the court may, as a matter of jurisdiction, cause the debts of the creditors in question to be placed on any of the rungs of the ladder of priority created by s.556(1) (and, within a particular rung, above, below or beside the creditors with claims that s.559 causes to rank equally inter se), above the topmost of those rungs or below the bottom rung (yet ahead of "all other unsecured debts and claims"). In short, s.564 is cast in terms giving the court a complete discretion regarding positioning of the whole or any part of the debts of the assisting or indemnifying creditors on the scale of priorities in the winding up and the opening words of s.556(1) cause any such positioning ordered by the court to have effect despite what would otherwise be the order of priority under s.556(1). Again, those comments were made in a context where there were a number of creditors in the winding up of a company. The question to be resolved was whether the liquidator had priority over all other creditors, including the Commonwealth of Australia, which had advanced funds in respect of employees' entitlements. 54 Subsequently, in Deputy Commissioner of Taxation v Vintage Gold Investments Pty Ltd (In Liquidation) [2009] FCA 967, (2009) 27 ACLC 1393 Greenwood J was again considering s 564 of the Corporations Act and the entitlement of an indemnifying creditor to priority over the liquidator. In that context his Honour observed (at 1397): [12] … The paramouncy of those expenses conveys a clear statutory intention that the liquidator is entitled to recoup out of the property of the company, the costs and expenses "properly" incurred in taking the relevant steps that meet the statutory description in s 556(1)(a). However, that claim nevertheless remains a claim within s 556(1) and is subject to a power in the Court conferred by s 564 to adjust the order of priority including the paramouncy of such a claim, as appears just in all the circumstances, as between an indemnifying creditor and others. In that sense, the reference to others must be taken to be a reference to any other person (or entity) that has a debt or claim to be paid in the winding up of a company whatever the priority of that debt or claim may be according to the proper operation of the relevant provisions of the Corporations Act. These observations were endorsed by Redlich JA in ATCO Controls Pty Ltd (In Liquidation) v Stewart [2013] VSCA 132 at [253]. 55 The statutory phrase "over others" has thus consistently been regarded by prior courts as meaning "over other creditors". 56 Albeit not binding upon the present Court for the purposes of Ms Low's application, these earlier authorities express views which are considered to be persuasive.

The legislative objective 57 The legislative objective sought to be pursued by the Bankruptcy Act more generally - and s 109(10) more specifically - also support the conclusion that s 109(10) should not be construed more broadly than a power to confer an "advantage" on an indemnifying creditor "over other creditors". The legislative objective does not permit the power to be exercised so as to divest a bankrupt of any interest in the residual estate upon his discharge and to make any residual estate available to an indemnifying creditor who has otherwise been paid the entirety of all provable debts, any "advantage" to be paid over "other creditors" and all costs incurred in providing funding to a trustee to pursue what may be speculative litigation. 58 To so construe s 109(10) would run counter to the object and purpose of the Bankruptcy Act: Re McMaster (1991) 33 FCR 70 at 72 to 73 per Hill J; Scott [2006] FCA 63 at [14], (2006) 149 FCR 486 at 490 per Mansfield J. After having made his general observations as to an essential feature of "any modern system of bankruptcy law" being the appropriation and distribution of assets and the subsequent discharge of a bankrupt, the Chief Justice in Storey (1981) 147 CLR 549 went on to further observe (at 557): … the provisions of s. 60 (1) (b) are designed to assist in ensuring that the assets of the insolvent debtor are distributed in the interests of creditors generally, to prevent one creditor obtaining an undue advantage over the others, and to prevent the scheme of the Bankruptcy Act from being defeated. They are provisions with respect to "bankruptcy and insolvency" within s 51(xvii) [of the Constitution]. Moreover, the bankruptcy law has long been concerned to mitigate the severity of the primitive rules which gave creditors the power to secure the imprisonment of their debtors. In England, in 1719 provision was made for the release of bankrupts from prison after they got their certificates of discharge, arrest of debtors on mesne process was abolished in 1838 and finally by s. 4 of the Debtors Act 1869 (U.K.) imprisonment for debt was abolished subject to specific exceptions. (Citations omitted) The construction of s 109(10) urged on the Court on behalf of Ms Low would run counter to the entitlement of a bankrupt to have any residual estate transferred back upon discharge and would, with respect, operate with such "severity" that it should not be entertained. It may also be queried whether such a construction could be characterised as a law with respect to "bankruptcy and insolvency" within the meaning of s 51(xvii) of the Constitution. 59 It is, in particular, no purpose of the Bankruptcy Act to punish a bankrupt, even a bankrupt who has engaged in transactions where property is transferred without valuable consideration (Bankruptcy Act s 120) and where a bankrupt has pursued fraudulent conduct with a view to concealing assets from his creditors (Bankruptcy Act s 121). 60 Even in the case of a bankrupt who has engaged in fraudulent conduct, no legislative objective of punishing such conduct is to be discerned in the Bankruptcy Act. The legislative objective is to ensure that the property of a bankrupt is made available for distribution to creditors. 61 Fraudulent transactions are made void as against the trustee by s 121(1) of the Act which provides as follows: A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and (b) the transferor's main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor's creditors; or (ii) to hinder or delay the process of making property available for division among the transferor's creditors. Subsequent subsections of s 121 address (for example) the circumstances in which a transfer of property took place in good faith and for the refund of consideration given by a transferee. 62 Provisions such as s 121 were intended "to reflect generally the principles which have been worked out over the centuries, in relation to fraudulent dispositions, since the enactment in 1750 of 13 Eliz 1 c 5 (the Statute of Elizabeth)": Official Trustee in Bankruptcy v Mitchell (1992) 38 FCR 364 at 368 per Burchett, French and Einfeld JJ. More generally expressed, Kirby J in Cannane v J Cannane Pty Ltd (In Liquidation) [1998] HCA 26, (1998) 192 CLR 557 at 588 to 589 observed: [87] It is a common experience of life that, in the face of the prospect of bankruptcy, persons affected will quite frequently endeavour to put their assets out of the reach of creditors. Often they will attempt to do so with the assistance of their spouses, family members or other trusted persons with whom they are connected. To discourage such conduct or to redress it when it occurs, statutes in our legal tradition, since the Statute of Elizabeth, have provided for the avoidance of such transactions once the purpose of defrauding or delaying creditors is proved. They have also added a proviso to exempt transfers of property which may be shown to have qualities entitling them to such exemption. Relevantly, those qualities required proof that good consideration was given and that the property was lawfully conveyed bona fide, that is, with good faith. It is not so remarkable that these concepts should have survived more than 400 years. They represent the endeavour of the law to afford recoupment by creditors of impermissible dispositions but protection of those dispositions deemed proper and innocent of a fraudulent design. But once a transaction has been made void as against the trustee, provisions such as s 121 do not evidence any further legislative intent to go further and punish the bankrupt and to strip him of any entitlement to any surplus monies that may be available after all debts and expenses in the administration of his estate have been met. 63 Indeed, s 153 of the Bankruptcy Act provides that, subject to its terms, a discharge from bankruptcy "operates to release [the bankrupt] from all debts … provable in the bankruptcy". The exceptions to this general rule include an exception in the case of "fraud or a fraudulent breach of trust": s 153(2)(b). 64 The point remains, however, that (even in the case of fraud) the Bankruptcy Act does not evince any legislative intent to strip a bankrupt of the right to a discharge from bankruptcy and the transfer to him of any residual estate. The fact that a discharge from bankruptcy does not "release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust" evinces only a contrary legislative intent, namely a legislative intent that a bankrupt remains entitled upon discharge to the transfer of any residual estate. 65 There is no legislative intent to withhold unto the trustee what would otherwise be the balance of a bankrupt's residual estate such that it can be transferred to an indemnifying creditor as a means of stripping the bankrupt of whatever monies or property are not required to satisfy all provable debts and expenses. 66 To construe s 109(10) in such a manner as to permit Ms Low to recover much more than all of her provable debts, interest and payments made to the trustee to pursue litigation to recover the two Wellington Street properties, it is respectfully considered, would serve no legislative purpose to be discerned from the Bankruptcy Act itself and would serve only an impermissible purpose, namely the punishment of Mr Mathai. 67 Section 109(10) should not be construed so as to permit a creditor to recover the entirety of the balance of a bankrupt's estate. To so construe s 109(10) would neither be "just" nor would it be to confer an "advantage" upon Ms Low "in consideration of the risk assumed". 68 This more limited object and purpose of s 109(10) has been explained by Mansfield J in Official Trustee in Bankruptcy v Pastro [2004] FCA 713, (2004) 2 ABC(NS) 257 at 262 to 263 as follows: [20] … The discretion under s 109(10) is unqualified. In Re the Estate of Lawrence Robert Connell (Deceased) [2001] FCA 51, Carr J at [24] described the policy behind s 109(10) as being at least twofold: to encourage creditors to indemnify trustees in bankruptcy who wish to pursue claims in the administration of bankrupt estates, and to reward creditors who bear the burden and take the risks of litigation. See e.g. Re Glenisia Investments Pty Ltd (In Liquidation) (1996) 14 ACLC 237. It is in the public interest that the property of a bankrupt should be available to the creditors of the bankrupt, including where the property of the bankrupt may be secured only through litigation. There is no presumption that the indemnity creditors should not receive the full benefit of the net proceeds of the property or expenses recovered under an indemnity for costs of litigation: see the remarks of Barrett J in Re Home Corp Projects [2002] NSWSC 879 (Re Home Corp Projects) at [12]. That case concerned the provisions analogous to s 109(10) of the Act in s 564 of the Corporations Act 2001 (Cth). [21] The way in which the discretion should be exercised is of course dependent upon the facts of the particular case, and is often ultimately a matter of impression: see per Paine J in Re Bavistock (1946) 14 ABC 30 at 32. The object of s 564 of the Corporations Act is much the same as s 109(10) of the Bankruptcy Act: State Bank of New South Wales v Brown [2001] NSWCA 223, (2001) 38 ACSR 715. Hodgson JA there expressed the object of s 564 by reference to the facts of that case as follows (at 728): Object of section [91] I accept that it is not the object of the section to encourage litigation for the sake of litigation, or for the private benefit of creditors who provide the indemnity or the funds. In my opinion, there are two public purposes involved in the encouragement of pursuit of claims by liquidators, namely to benefit creditors and shareholders generally, and to recover property from wrong-doers and thus discourage misconduct in relation to corporations. [92] In my opinion, both purposes may be advanced by the grant of an advantage of 100 per cent of the recovered funds to supporting creditors in appropriate cases. Plainly, such a benefit can support the objective of recovering property from wrong-doers. In my opinion also, the grant of a 100 per cent advantage in cases where recovery turns out to be relatively small can also support the objective of benefiting creditors generally, by encouraging the support of litigation in cases where there is a prospect of a large recovery which would inure for the benefit of all creditors, but which may in certain eventualities result only in a small recovery. Of course, if a 100 per cent advantage is too readily granted in such cases, this could unduly encourage the settling of claims for less than their reasonable value; but this risk can be taken into account when settlements are approved, as well as in applications by supporting creditors to be given an advantage.

Just and equitable 69 The conclusion that the natural and ordinary meaning of the phrase "over others" is confined to "over other creditors" is also supported by reference to the ambit of the discretion conferred by s 109(10). 70 The discretionary power conferred upon the Court by s 109(10) is to "make such orders as it thinks just and equitable". 71 Irrespective of such other terminology as may be employed in the text of s 109(10), the phrase "just and equitable" also supports the conclusion reached. Although an individual exercise of the discretion conferred by one or other judge may reach a different quantification of what in the circumstances of an individual case may be regarded as "just and equitable", it is difficult to envisage any circumstances where it would be "just and equitable" to make an order of the kind now sought by Ms Low. 72 Albeit far from conclusive, it is not without relevance that in Woodgate, in the Matter of Eaton (a Bankrupt) [2010] FCA 550, (2010) 8 ABC(NS) 65, Nicholas J listed a "number of matters" of relevance to the exercise of the discretion conferred by s 109(10). But none of those matters went to the conduct of the bankrupt in concealing assets and none of those matters was relevant to any consideration other than the risks involved in the litigation and the interests of other creditors. In addressing the "matters" of relevance, his Honour said (at 66): [5] There are a number of matters that are of significance in an application of this kind which are weighed up when deciding whether to make an order under s 109(10). These include: • the risk run, and costs incurred, by the indemnifying creditor; • the complexity of the proceedings in respect of which the indemnity is given; • the sum recovered (or the value of the property recovered); • the opportunity afforded to other creditors to provide indemnity; • the failure of other creditors to provide indemnity; • the proportions between the debts of the indemnifying creditor and the other debts; • the opposition or support of other creditors to the application for priority; and • the public interest in encouraging creditors to provide indemnities so as to enable assets to be recovered.

The evolution of s 109(10) 73 Both parties made reference to the legislative history of s 109(10) and its predecessor provisions. 74 The predecessor provision to s 109(10) from 1966 to 1985 included the words "over other creditors". The counterpart provision to s 109(10), as presently found in s 564 of the Corporations Act, has never contained those words. 75 But the reasons why s 109(10) flirted with the additional words remained obscure. The additional words were inserted following the Report of the Clyne Committee, Clyne J being the judge who decided Re Ried. But the Report is silent as to why the additional words were inserted. It remains mysterious why the additional words were inserted, especially given the views expressed by Clyne J in Re Ried. 76 No relevant explanation, it was jointly submitted by the parties, was provided as to why the additional words were inserted in 1966. 77 Nor was any relevant explanation given as to why the words inserted in 1966 were deleted in 1985. The Explanatory Memorandum to the Bankruptcy Amendment Bill 1985 (Cth) provides no insight. That Memorandum only unhelpfully states as follows: Sub-Clause 23(j); Priority Payments: Property Recovered Following an Indemnity for Costs from the Creditors 92. Sub-clause 23(j) proposes a new sub-section 109(10). The new sub-section will more closely approximate the situation applying in the winding up of a company. Section 450 of the Companies Act is as follows: "Where in any winding up - (a) property has been recovered under an indemnity for costs of litigation given by certain creditors, or has been protected or preserved by the payment of moneys or the giving of indemnity by creditors; or (b) expenses in relation to which a creditor has indemnified a liquidator have been recovered. the Court may make such orders as it deems just with respect to the distribution of that property and the amount of those expenses so recovered with a view to giving those creditors an advantage over others in consideration of the risk assumed by them." 93. The net result of the amendment is that when a creditor indemnifies a trustee, and property and/or expenses are recovered, the Court may make an order that the indemnifying creditor(s) receives a priority in the distribution of the expenses as well as in the distribution of the property. 78 The fact that s 109(10) was amended as between 1966 and 1985, it is respectfully considered, throws no light upon how that subsection should now be construed. Consistent with the observations of Hayne, Heydon, Crennan and Kiefel JJ in Alcan [2009] HCA 41 at [47], (2009) 239 CLR at 46 to 47, the two statutory amendments "cannot be relied on to displace the clear meaning of the text". 79 The fact that the predecessor provisions to s 109(10) from 1966 to 1985 contained these additional words nevertheless provides obvious reason why care should be exercised when considering judicial observations made in earlier cases: Jarbin [2004] NSWSC 28 at [49] to [57], (2004) 180 FLR 393 at 408 to 410. Campbell J there set forth the legislative background to the current s 109(10), starting with s 10 of the Bankruptcy Acts Amendment Act 1896 (NSW). His Honour nevertheless commenced that analysis with the following words of caution (at 408 to 409): [49] There have been provisions somewhat analogous to s.564 Corporations Law in Australian insolvency law since 1896. However the precise form of the section has changed with time. Broadly, the pattern of the changes has been to widen the circumstances in which the court's power to make an order can be exercised, but to leave the same both what the court is empowered to do in exercise of its power, and the "consideration" relevant to the exercise of that power. Care needs to be exercised in placing reliance on cases concerning the earlier versions of the provision, because some are influenced by limitations in the then current form of the provision, which do not appear in s.564 Corporations Law.

Discretion 80 No occasion thus arises for any exercise of the discretion conferred by s 109(10). 81 But even had such an occasion arisen, the appeal would nevertheless have been dismissed as a matter of discretion. 82 The reasons for decision of the primary Judge addressed the question of discretion upon the assumption that his Honour was "wrong" in the conclusion he had reached as to the correct construction of s 109(10): [2015] FCA 1386 at [135]. If the exercise of that discretion did not involve any error of the kind envisaged by House v The King (1936) 55 CLR 499 at 504 to 505, no occasion would arise for this Court to exercise the discretion afresh. 83 But, even assuming that an error of such a kind could be established, no different result would be reached. 84 Ms Low referred to numerous factors which were said to make it "just and equitable" that she be given an "advantage", including - on the assumption made that her construction of s 109(10) be correct - "over" Mr Mathai in respect of the surplus funds in his bankrupt estate. But, on analysis, none of those factors are persuasive such that this Court would exercise the discretion in any manner any different from that of the primary Judge. 85 Even had Ms Low's construction of s 109(10) prevailed, and even had the exercise of the discretion by the primary Judge miscarried, no order would be made by this Court of the kind now sought by Ms Low. 86 In the exercise of the discretion conferred by s 109(10), it may be accepted that Ms Low accepted significant risk in funding the litigation and indemnifying the trustee on account of costs, including an adverse costs orders. She has spent a substantial sum ($720,633 by early 2014) in pursuing the bankrupt, albeit that only a proportion of this was by way of payments to the trustee to fund the litigation. True it is as well that the value of property already recovered was substantial, $1,708,000 for 68A Wellington Street, with the remaining property at 69 Wellington Street as yet unsold. But for Ms Low's funding and indemnity of the trustee, there would have been no funds available to pursue claims for property which were properly part of the bankrupt estate and which the bankrupt sought to put beyond the reach of his trustee and thus any potential creditor. 87 It may also be accepted that there had been discussions between a former trustee and the appellant's representative, summarised by the primary Judge as follows: [44] Ms Low led evidence from Mr Ryan. At par 28 of Mr Ryan's affidavit, Mr Ryan gave evidence of a conversation he had with Mr Leong during a meeting with Mr Leong which took place in about mid August 2007. Mr Ryan said that, at that meeting, Mr Leong handed to him a copy of Ms Low's letter dated 12 August 2007. Mr Ryan testified that Mr Leong agreed, on behalf of Ms Low, that Ms Low would fund the s 121 proceedings which were then under way and would indemnify Mr Ryan against any adverse costs order which the Court might make in those proceedings. Mr Ryan said that he told Mr Leong at this meeting that the costs of running the recovery proceedings could be as much as $100,000. Mr Leong wanted Mr Ryan to agree to pay a risk premium of 80%-85% to Ms Low. Mr Ryan said that he could not agree to pay such a premium as, under s 109(10) of the Act, the payment of such a premium was a matter for the Court. He suggested that 75% might be "… more acceptable". [45] Evidence to substantially the same effect was given by Mr Leong. [46] The terms of the indemnity provided by Ms Low to Mr Ryan in respect of adverse costs are set out in the letter from Ms Low to Mr Ryan dated 12 August 2007 as follows: In this litigation against the respondents for assets recovery for the bankrupt's estate we agree to: - (a) indemnify you for any adverse costs awarded against you by the court; (b) provide as part of that indemnity a cash cover equal to A$8,000 per property pursued after - payable 50% (A$4,000) on commencement of litigation action on that property and 50% (A$4,000) 4 weeks before the trial date; it being further agreed that you will place such funds in a distinctly separate account and on time deposit to earn interest thereon as it is not known when the trial would take place. It is agreed, of course, that if no trial takes place or the litigation matter has been amicably settled, such funds placed on deposit should be returned to us together with the interest earned. To put into effect the above we attach herewith: (a) cheque #100047 for A$8,000 dated today (12th August) for initial cash cover for 68A and 69 Welling [sic] Street, Kew as referred to above and (b) cheque #100048 for A$20,000 to fund the sec. 81 examination should it be deemed warranted; cheque is dated 29th August, 2007 to allow us sometime to assess the respondents' replies due on 20th August. Kindly sign the attached copy of this letter and return it to Philip as acknowledgment of the above and the attached cheques. [47] Mr Ryan acknowledged receipt of two cheques totalling $28,000 and accepted the indemnity offered by Ms Low in her letter dated 12 August 2007 by signing and returning to Ms Low a copy of that letter. 88 It is also the case that Ms Low made the first payment to the trustee in 2006 and has been out of her money for many years, in circumstances where she could have invested the funds and potentially reaped substantial rewards from the investment. At the same time Mr Mathai sought to stymie her recovery by his conduct and, in so doing, ensured that he and his family had the benefit of property and any increase in its value - a benefit which, on one view, ought to have been available immediately to the trustee of the bankrupt estate. 89 Also, as Ms Low noted, no other creditor proved in the bankruptcy and thus, unsurprisingly, no potential creditor objects to the order the appellant seeks. 90 She has, on her case, suffered financial and emotional hardship as a result of Mr Mathai's conduct. 91 As the primary Judge rejected many of Ms Low's claim for reimbursement as part of the debt due to her ([2015] FCA 1386 at [140] to [162]), Ms Low is also out-of-pocket in respect of these costs, despite the fact that she incurred them in pursuing her debt (for example the appellant's travel costs to and from Australia). 92 While Ms Low ran her case before the primary Judge on the basis that she was the sole creditor of the bankrupt estate, it may be accepted that at the time she gave the indemnity to the trustee, there were other potential creditors. Further, as was submitted on her behalf, it is possible that other creditors may still emerge. 93 All of these matters (including all of the evidence which the primary Judge rejected) may be accepted. But the facts are these. The prospect of any other creditor emerging is highly speculative. She is currently the sole creditor. The bankrupt estate is solvent. She will be paid 100% of her proved debt, interest and costs. This is a result of the indemnity she gave. 94 But the payment to her of more than her proven debt, interest and costs, by way of an order under s 109(10), thereby giving her an "advantage over" the bankrupt, would not be "just and equitable" in all of the circumstances for a number of reasons. 95 First, the only person who ever lodged a proof of debt was Ms Low. As such, the overwhelming likelihood always was (and remains) that she alone was to be the beneficiary of the risks she took. It must be inferred that she acted in her own interests at all times. 96 Second, the purpose of s 109(10) cannot be to compensate a creditor for incurring costs in pursuing a debt that are not otherwise recoverable pursuant to the provisions of the Bankruptcy Act. To permit the appellant to recover by way of an order under s 109(10) that which could not be recovered under s 109(1)(a) would be inappropriate. It would render meaningless the primary Judge's unchallenged reasons and orders in respect of the application under s 178 of the Bankruptcy Act which are not the subject of this appeal. 97 Third, it is not in dispute that Ms Low will obtain not only 100% of the proven debt, but also interest and costs. It is not the case that her efforts have not resulted in any "reward". She has been rewarded by ultimate success in her claims to be paid her proven debt. 98 Fourth, Ms Low was and is only an unsecured creditor of the bankrupt estate. She was and is not an investor in the assets of the bankrupt estate. As was submitted on behalf of Mr Mathai, it is not a purpose of the Bankruptcy Act to enable a creditor to make a profit out of the bankruptcy, in return for "investing" funds and "taking risks". 99 Fifth, the exercise of discretion which the appellant seeks would be contrary to the purpose disclosed by s 107 of the Bankruptcy Act which provides that: Subject to the operation of the provisions of section 91, a creditor is not entitled to receive, in respect of a provable debt, more than the amount of the debt and any interest payable to him or her under this Act. Section 91 permits a secured creditor to require the trustee to elect whether or not to redeem the security. It does not apply in the present case. 100 Ms Low's submission about s 107, which focuses on the creditor's entitlement "in respect of a provable debt", misses the point. The only relevant right the appellant had was to prove in the bankruptcy. All other rights in the present case were dependent on that right, including the right to invoke s 109(10) (assuming that right exists by reason of the appellant's construction). These circumstances inform the assessment in the present proceeding of whether it is "just and equitable" to make an order favouring Ms Low over "others" (in reality, Mr Mathai). 101 Sixth, s 154(1)(c) of the Bankruptcy Act exposes a clear tension between the order sought by Ms Low and the stated legislative objective of ensuring that on annulment of a bankruptcy and after payment of all costs and expenses under s 154(1)(b), "the remainder (if any) of the property of the former bankrupt still vested in the trustee reverts to the bankrupt". If s 109(10) were to operate in the manner contended for by Ms Low, the entirety of the "remainder" would vest in her and not the bankrupt. The "advantage" sought by Ms Low, it is respectfully considered, would neither be "just and equitable" nor consistent with the legislative objective of ensuring that the "remainder" of Mr Mathai's estate, after payment of all debts and expenses and any "advantage" to be ordered, revert to the bankrupt. Similarly, under s 153(1) a discharge from bankruptcy releases the bankrupt from all debts. 102 Seventh, it is not the case that the purpose of the Bankruptcy Act is best served by construing s 109(10) in a manner which discourages a bankrupt from attempting to defraud creditors by exposing the entirety of the bankrupt estate to an order under that section. That submission overlooks the fact that the relevant "advantage" with which s 109(10) is concerned is in "consideration of the risk assumed". The risk assumed is the risk of costs and adverse cost orders. These matters are not rationally connected to the size of the bankrupt estate. The size of the bankrupt estate, insofar as any creditor is concerned, is a matter of mere chance. 103 Further, the discouragement of fraud is achieved by the simple fact that, as in the present case, the fraud has been defeated. The appellant's claims have been vindicated. To the extent she has a proven debt, she will be paid 100% of that debt plus interest and costs. Beyond this, the purpose would not be to discourage fraud by assuring that it does not succeed, but to punish the bankrupt. Nothing in s 109(10) indicates that a relevant statutory purpose is to punish a bankrupt. As such, the comments in State Bank of New South Wales v Brown [2001] NSWCA 223 at [91] to [92], (2001) 38 ACSR 715 at 728 per Hodgson J do not assist the appellant. 104 Eighth, Ms Low has not satisfactorily explained how it could be "just and equitable" for her to obtain a windfall. No doubt she contends that there is no windfall given all of the circumstances. But, in the context of the Bankruptcy Act, the orders she seeks could not be characterised as anything other than a windfall. Nothing in the scheme of the Bankruptcy Act (including s 109(10)) indicates that a creditor has any right to obtain anything more than the proven debt plus interest and costs, let alone a windfall which is not quantified by reference to any "risk" assumed. By reason only of the fact that in this case the bankrupt estate is in surplus, the appellant would have it that she should be advantaged over Mr Mathai by obtaining either the whole of the surplus (an entirely arbitrary windfall because it is a result of the rising property market which could just as well have been falling) or a proportion thereof (a somewhat lesser windfall, but still a windfall). Either way, the appellant would be the beneficiary of the mere happenstance that the bankrupt estate is in surplus. 105 All of these discretionary considerations support the wisdom of the observations of Barrett J in Australia and New Zealand Banking Group Ltd v TJF EBC Pty Ltd [2006] NSWSC 25 at [9], (2006) 224 ALR 490 at 493 to 494 that the provision (or the equivalent provision in s 564 of the Corporations Act) is concerned with advantage of a creditor in terms of "positioning" on the "ladder of priority". The bankrupt has no claim on the "ladder of priority" created by ss 108 and 109. 106 The right of the bankrupt is to have the balance of the bankrupt estate which reverts to the bankrupt on annulment of the bankruptcy under s 154(1)(c) (or on discharge, which operates to release all debts under s 153(1)). It is not "just and equitable" to make an order which would have a contrary effect to that which the Bankruptcy Act contemplates. This rather suggests that the primary Judge's construction of s 109(10) was correct, but it is unnecessary to decide the appeal on that basis.

CONCLUSIONS 107 The decision of the primary Judge that s 109(10) was to be construed as meaning "over other creditors" clearly meant that Ms Low could not bring herself within the ambit of the discretionary power there conferred. That conclusion of the primary Judge, with respect, was correct. 108 No occasion thus arises as to what "advantage" Ms Low may otherwise have been entitled to had there been other creditors. No occasion arises to resolve any lesser claim than that advanced on her behalf in this proceeding. 109 Having failed at first instance on the question as to the construction of s 109(10) and on discretion, there should be no order that Ms Low be paid her costs of the appeal out of the bankrupt estate. There should be no order for costs in her favour. But, having again lost on those same two issues before this Court, she should be ordered to pay the costs of this appeal. 110 The appeal should be dismissed.

The OrderS of the Court are:

1. The appeal is dismissed.
2. The Appellant is to pay the costs of the appeal of the Respondent. I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Flick, Jagot and Gleeson.