Federal Court of Australia

Yushkova v Johnston (Trustee) in the matter of bankrupt estate of King [2024] FCA 739

ORDERS

THE COURT ORDERS THAT:

1.    The application for orders in respect of costs, as foreshadowed by the trustee in the affidavit of Mr Charles Thomas Young filed on 31 May 2024, be deemed to be an application for such orders in respect of costs with the need for filing and service of a formal application in respect of those orders being dispensed with.

2.    The reference in the submissions of the appellant, as annexed to the affidavit of Mr Charles Thomas Young filed during the hearing today by leave, to the seeking of a stay of the respondent’s application for costs be deemed to be an application for a stay of that application with the need for filing and service of a stay application being dispensed with.

3.    The appellant’s application for a stay be dismissed.

4.    Pursuant to section 25(2B)(ab) of the Federal Court of Australia Act 1976 (the Act), Gavin Morton and Leon Lee in their capacities as statutory trustees for sale of the property at 13 Bairnsdale Court, Helensvale, Queensland (the Property):

(a)    deduct from the appellant’s share of the Property’s proceeds of sale (to which she would be entitled, if any, under paragraph 4(e) of the orders made by the Federal Circuit and Family Court of Australia (Division 2) on 13 October 2022), the costs payable to the respondent under:

(i)    the orders of the Court dated 2 May 2024;

(ii)    the orders of the Court dated 10 February 2023, as varied by this order;

(iii)    the orders made this day by the Court; and

(b)    pay the same to Bennett & Philp Lawyers on behalf of the appellant.

5.    Pursuant to section 25(2B)(ab) of the Act and rule 40.02(b) of the Federal Court Rules 2011, the costs payable under the order of the Court dated 10 February 2023 be fixed in a lump sum by a registrar, if not agreed.

6.    The appellant pay the respondent’s costs of and incidental to the application heard this day, including the appellant’s application for a stay, to be fixed in lump sum by a registrar, if not agreed.

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

REASONS FOR JUDGMENT

(REVISED FROM TRANSCRIPT)

LOGAN J:

1    On 2 May 2024, for reasons given that day, I dismissed an appeal by Ms Larisa Ivanovna Yushkova against orders made in the Circuit Court in respect of the interests as between her and the respondent trustee of the bankrupt estate of Mr Jeremy King (bankruptcy trustee) in a property at 13 Bairnsdale Court, Helensvale in Queensland: see Yushkova v Johnson (Trustee) in the matter of bankrupt estate of King [2024] FCA 454. As to costs, I then made an order that Ms Yushkova pay the bankruptcy trustee’s costs of and incidental to the appeal and the further evidence application, including reserved costs, to be fixed in lump sum by a registrar, if not agreed.

2    There was an earlier stage in the exercise of the Court’s appellate jurisdiction which saw an application unsuccessfully made by Ms Yushkova for a stay of the operation of the orders made in the Circuit Court: see Yushkova v Cook (Trustee), in the matter of the bankrupt estate of King [2023] FCA 77. At that time, the Court ordered that Ms Yushkova pay the bankruptcy trustee’s costs of the application.

3    These reasons for judgment must be read in conjunction with the reasons for judgment which disposed of the substantive appeal.

4    One sequel to the dismissal of the appeal and the making of the costs orders to which I have referred is that the Helensvale property has now been sold. There is, as a result, a surplus which is presently held by the appointed statutory trustee for sale which, barring an application by the bankruptcy trustee to which I shall shortly make reference, would be paid out to Ms Yushkova. In effect, that surplus is the sum net of the costs of sale and the proportion found to form part of the property of the bankrupt.

5    The bankruptcy trustee’s application is that the surplus be paid out to the bankruptcy trustee to the extent of the amount of the costs orders granted in the bankruptcy trustee’s favour in the appeal proceedings with only the balance, if any, then being paid to Ms Yushkova. That application was foreshadowed to Ms Yushkova, as was the bankruptcy trustee’s proposal, in order to reduce costs, that the Court be asked to dispense with the need for the filing and service of a formal notice of motion in that regard. I am well satisfied that the proposed application has been drawn to Ms Yushkova’s attention by the solicitors for the bankruptcy trustee, indeed, as is in keeping with the duties of the trustee as an officer of a court of bankruptcy.

6    The bankruptcy trustee has expressly drawn to my attention, by a supplementary affidavit of his solicitor, a submission received by the trustee from Ms Yushkova in respect of today’s proceeding. That submission does not so much contest the Court’s power to make the orders sought by the bankruptcy trustee in respect of costs as opposed to notifying that an application has been made to the High Court to challenge the orders made on 2 May 2024. The bankruptcy trustee’s solicitor confirmed in submissions today that the bankruptcy trustee had been served with an application for special leave to appeal to the High Court by Ms Yushkova. In turn, that engages with a submission she has made that:

[t]he disbursement moneys from the sale of the property, 13 Bairnsdale Court, Helensvale, Gold Coast, to be held in trust pending, the decision of the High Court.

7    The basis for that submission rehearses issues which were dealt with by me on the hearing of the appeal and were found to be without merit.

8    It is as well to approach the bankruptcy trustee’s application on the basis that there is, in substance although not in form, a cross-application for a stay of further proceedings pending the hearing and determination of an application for special leave to appeal. This Court does have jurisdiction to stay an order made in the exercise of appellate jurisdiction pending such an application. So too, of course, does the High Court.

9    In relation to applications for a stay, reference is frequently made to a summary helpfully offered by Jagot J, when a judge of this Court, as to principles in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) (2010) 88 IPR 633, at 638, at [15]. Although the following is not exhaustive, these considerations are apparent from her Honour’s summary:

(1)    a successful party is presumed to be entitled to the benefits of the judgment obtained;

(2)    an applicant for a stay has the burden of persuading the court that it should be granted, although it is not necessary to show special or exceptional circumstances;

(3)    the court, in the exercise of its discretion, will not hesitate to stay proceedings when it is necessary to preserve the subject matter or integrity of the litigation, nor will the court hesitate to grant a stay where the refusal of a stay could create practical difficulties in terms of relief which the court could grant;

(4)    it is relevant to consider whether there is a real risk that it will not be possible for a successful appellant to be restored substantially to the former position if the judgment against him is executed;

(5)    another relevant consideration is whether the proposed appeal is genuine and based on reasonable grounds;

(6)    relevant, also, is the willingness or not of a party to give an undertaking as to damages.

[citations omitted]

10    Here, there is no reference to any undertaking in Ms Yushkova’s submission. The proposed grounds of challenge include the pressing of a ground which has, as its foundation, the fact that Ms Yushkova was carrying on a business on the Helensvale property. That ground, with respect and for reasons which are set out in the appeal judgment at [30] and [31], entails a misunderstanding of the Queensland case Re Bolous [1985] 2 Qd R 165.

11    Of course, hindsight might prove otherwise, but as presently advised, what seem to be the proposed grounds for special leave do not strike me as terribly compelling. However that may be, in the event that the bankruptcy trustee succeeds on the application for the particular costs order, it seems inherently unlikely that Ms Yushkova would have particular difficulty in securing the disgorging of whatever funds flow to the trustee or the trustee’s solicitors pursuant to that order. So the case does not strike me as one where there is a risk of denying Ms Yushkova the benefit of the subject matter of the proceedings in the High Court in the event that she secures special leave and succeeds on the appeal. There is no reason to think that either the bankruptcy trustee or the trustee’s solicitors would do anything other than faithfully refund any amount which has flowed to them from the surplus presently held by the statutory trustee for sale. For these reasons, I am not disposed to grant any stay of the appeal judgment orders.

12    I have, nonetheless, considered whether the bankruptcy trustee’s application should be adjourned pending the hearing and determination of the special leave application. It seems to me that it is desirable that all issues attending the exercise of this Court’s appellate jurisdiction be completed before the special leave application is heard. Influential in that regard is the desirability of the determination of the costs sequel whilst there is a good recollection of the issues which were at large in the substantive appeal and, for that matter, whilst the judge who heard the appeal me is still a judge of this Court. There is a contingency, given a not so distant mandatory retirement, that that may not be so, in the event that I defer dealing with the costs sequel today.

13    That the Court has the power to make an order in respect of costs as a sequel to the dismissal of the appeal and the particular costs order already made is, I consider, certain having regard to s 25(2B)(ab) of the Federal Court of Australia Act 1976 (Cth). That empowers the Court to make, amongst other things, an interlocutory order after the determination of an appeal to the Court. That the Court should, as the bankruptcy trustee foreshadowed to Ms Yushkova, dispense with the need for the filing of a formal notice of motion and service thereof is, I consider, desirable for just the reason given by the trustee. It will save costs associated with the filing of the notice of motion.

14    The question then becomes whether to make the order sought? The solicitors for the bankruptcy trustee recalled that an order of the kind sought had been made by the Queensland Court of Appeal as part of the exercise of that court’s jurisdiction to order the appointment of trustees for sale under s 38 of the Property Law Act 1974 (Qld) (Property Law Act). Unfortunately, the trustee’s solicitors were unable to cite the case concerned.

15    However, in the course of the hearing of the application, it was possible to find a judgment given in the Trial Division by the present Queensland Chief Justice, Bowskill CJ which offers support by analogy for the order sought by the bankruptcy trustee: McPaul v Massignani (No 2) [2023] QSC 118. In that case, as in the present, the respondents had strenuously opposed the making of an order under s 38 of the Property Law Act on bases which were found at trial to be neither cogent nor persuasive. In deciding that case, her Honour applied, by analogy, reasoning adopted by Jagot AJ, then of the New South Wales Supreme Court, in Spathis v Nanos (No 2) [2008] NSWSC 470. In that case, at [13] and [14], Jagot AJ stated:

13    … [T]he defendant did strenuously oppose any orders being made at all under s 66G on grounds which, in my reasons, I found not to be cogent or persuasive. ….

14    …[T]he inescapable reality is that the plaintiff needed his interest in the property to be sold, and the defendant opposed any steps that, in effect, would authorise a sale, other than to the defendant herself. …

16    Section 66G of the Conveyancing Act 1919 (NSW) (Conveyancing Act) is the analogue of s 38 of the Property Law Act. The usual order in relation to costs of an application for the appointment of statutory trustees for sale under such legislation is, as was exemplified in Stibbard-Leaver v Leaver [2021] NSWSC 65, that all parties’ costs of such an application be paid out of the proceeds of sale before distribution of the balance. In the present case, the order for the appointment of statutory trustees for sale was made not under State legislation but under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), as a means of placing in the hands of the bankruptcy trustee part of what the trustee succeeded in proving to be property of the bankrupt which had passed to the trustee pursuant to s 58 of the Bankruptcy Act. In my view, authority for the making of such an order was found in the general powers of a court of bankruptcy, as found in s 30 of the Bankruptcy Act.

17    Those powers, in my view, also extend to the making of an order of the kind sought by the bankruptcy trustee in respect of the costs of the appeal. The long and the short of it is that Ms Yushkova, both in the original jurisdiction and in this Court’s appellate jurisdiction, strenuously opposed the making of any order in favour of the trustee in bankruptcy for the sale by a statutory trustee for sale of the Helensvale property on grounds which have wholly failed. In those circumstances, there is an analogy to be drawn with the position which has come to be applied in the exercise of jurisdictions such as that conferred by s 38 of the Property Law Act or s 66G of the Conveyancing Act. The costs of and incidental to the appeal and the stay application should come out of the proceeds of the sale of the Helensvale property before any balance is paid to Ms Yushkova.

18    Another order sought by the trustee is to the end that the costs ordered in respect of the dismissal of the stay application also be fixed in a lump sum by a registrar, if not agreed. It is desirable, in my view, to align the process for the determination of those costs with the process already ordained in respect of the disposal of the substantive appeal. For these reasons, I shall also order that the costs, as ordered by the Court on 10 February 2023, be fixed in lump sum by a registrar, if not agreed.

Associate:    

Dated:    8 July 2024