FEDERAL COURT OF AUSTRALIA

Aravanis (Trustee) v Twin Investors Pty Ltd, in the matter of the Bankrupt Estate of Kapp [2020] FCA 876

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application dated 18 May 2020 relating to the release of funds be dismissed.

2.    The respondents pay the applicant’s costs of and in connection with the interlocutory application dated 18 May 2020 as agreed or assessed.

3.    The applicant serve a copy of the originating application, statement of claim and affidavits in support of the statement of claim, including annexures, on the respondents by 25 June 2020.

4.    Pursuant to r 2.42(2)(a) of the Federal Court of Australia Rules 2011 (Cth), the sum of $430,477.61 held by the Court pursuant to orders made 8 April 2020 be transferred to an interest bearing account (the Account), which is to be maintained by O’Neill Partners – Commercial Lawyers.

5.    O’Neill Partners – Commercial Lawyers are to maintain the funds in the Account, including all interest accruing thereon from time to time, until further order.

6.    The time for compliance with paragraph 2 of the orders made 24 March 2020 be extended to 31 July 2020.

7.    The respondents are not entitled to rely on any affidavit evidence filed or served after 31 July 2020 except with leave of the Court.

8.    The applicant is to file and serve any affidavits in reply on or before 21 August 2020.

9.    The matter be listed for a further case management hearing at 9.30am on 25 August 2020.

10.    Liberty to restore on 3 days’ notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JAGOT J:

1    These reasons for judgment concern an interlocutory application by the second respondent to release certain funds held by the Court for the purposes set out in [1] of the interlocutory application dated 18 May 2020.

2    Following oral argument on 29 May 2020, I indicated to the second respondent that I was not prepared in the exercise of my discretion to release any funds to the respondents unless they were able to proffer security for the repayment of those funds in the event that their claims were unsuccessful. In circumstances where those funds represent funds that otherwise should be available to creditors, it seemed to me to be contrary to the interests of justice to allow the respondents to access those funds without having in place effective security.

3    On 29 May 2020, I adjourned the proceedings in order to provide to the respondents an opportunity to ascertain whether they could proffer any suitable security to secure the proposed release of funds and to negotiate with the applicant in order to ascertain whether the security was acceptable to the applicant.

4    At the further case management hearing today, 19 June 2020, the second respondent indicated that there was no security that could be proffered by the respondents or, at the least, by the first respondent. There is no evidence which discloses whether the second respondent (or, for that matter, the first respondent) is in possession of any asset which would enable security to be provided. In these circumstances, I consider that it would be contrary to the interests of justice to release funds to the respondents, being funds which would otherwise be available to the creditors, for the purpose of the respondents defending their proceedings.

5    In this regard, I have taken into account the following:

(1)    the affidavit evidence on behalf of the applicant about funds which have been paid into the National Australia Bank account of the first respondent between March and October 2019 totalling $1,045,835.46 (see [14] of the affidavit of Colin Brown dated 6 May 2020); and

(2)    the absence of information from the respondents as to the whereabouts of those funds and the lack of any explanation as to why none of those funds are available for the payment of the respondents’ ongoing legal costs.

6    I also note that I have consistently refused applications made by Mr Philip Kapp to appear on behalf of the first respondent. The first respondent is a company and needs to appear by a lawyer other than with leave of the Court. I have been unwilling to exercise any discretion to give Mr Kapp leave to appear in circumstances where he is not a lawyer, is not enrolled as a legal practitioner, and is an undischarged bankrupt. Mr Kapp has sought to avoid these consequences by arranging for him to be appointed as the trustee of the first respondent. However, in my view, the first respondent is the company itself, albeit in its capacity as trustee for the Twin Trust, and Mr Kapp’s apparent appointment as the trustee of the Twin Trust does not provide a sufficient basis to enable Mr Kapp, an undischarged bankrupt, to appear on behalf of the company which is the first respondent.

7    In these circumstances, my conclusion is that the interlocutory application dated 18 May 2020 should be dismissed with costs.

Associate:

Dated:    23 June 2020