Federal Court of Australia

Mann v Low (Trustee), in the matter of Gorman (No 2) [2026] FCA 713

ORDERS

THE COURT ORDERS THAT:

1.    The applicant pay 85% of the first respondent’s costs of the application for review, on a party and party basis, to be taxed by a registrar of this Court if not agreed.

2.    The applicant and first respondent by their legal representatives are to confer and attempt to agree the quantum of costs prior to engaging in any formal taxation of costs.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    These reasons address the costs orders that should follow the review of a decision of the trustee in bankruptcy, Ms Jennifer Low, in which I affirmed in part the trustee’s decision to accept Mr Alexander Philp’s proof of debt in the bankrupt estate of Ms Evelyn Gorman in the sum of $1,143,738: Mann v Low (Trustee), in the matter of Gorman [2026] FCA 42.

2    The applicant, Ms Phanna Mann, is a creditor of the bankrupt estate and had applied for an order under s 104(2) of the Bankruptcy Act 1966 (Cth) to reverse or vary the decision of the trustee to admit Mr Philp’s proof of debt. Despite the lack of any likely dividend in bankruptcy, Ms Mann pursued the application because she contended that the claim underlying Mr Philp’s proof of debt is not genuine and that she wished to ‘control’ the bankruptcy by holding a majority of the voting power: Mann at [10].

3    Ms Mann claimed that there was no or insufficient evidence to establish a loan agreement between Ms Gorman and Mr Philp, and that the trustee should not have admitted Mr Philp’s proof of debt.

4    Ms Mann was largely unsuccessful. She failed on the key and overarching aspect of her application. I determined that there was credible evidence to conclude that an oral contract was formed between Ms Gorman and Mr Philp, having regard to a number of matters including direct evidence given by Mr Philp of his initial conversations with Ms Gorman and the evidence of subsequent conduct, supported by documentation and bank records: Mann at [87]-[99].

5    Ms Mann admitted that Mr Philp made payments in the sum of $1,138,738 (that is, she excluded one payment of $5,000). I rejected the proof insofar as it extended to the $5,000 paid to Ms Gorman on 17 June 2022 as there was insufficient evidence to conclude that it fell within the terms of the agreement in place between Ms Gorman and Mr Philp: Mann at [36]. To this extent, Ms Mann was successful.

6    Ms Mann also objected to certain payments on the basis they were allegedly made to bribe public officials. The parties could not agree on the sum of payments said to have been provided for the purpose described by Ms Gorman to Mr Philp as ‘bribes’ or ‘kick-backs’. I considered on the evidence that there were potentially nine such payments in the sum of $146,100. Subject to further consideration, questions of public policy may have arisen. I ordered that the review of the decision to accept the proof of debt in relation to those payments be adjourned pending further order (order 5 of the orders made 4 February 2026). The purpose of the adjournment was to provide Mr Philp with the opportunity to be heard (if he wished) on the admission of that part of his proof before the issue was determined: Mann at [81]-[85], and orders 1, 6, 7 and 8 of the orders). On 28 April 2026, Mr Jonathan Shepherd, a solicitor from Blackwall Legal LLP, the solicitors on the record for the trustee, informed my Chambers that Mr Philp had told the trustee that he did not wish to become further involved in the proceedings and was content for the proof of debt to be admitted in the sum of $992,638, being the amount of the proof, less $5,000 as determined by the Court and less $146,100 as withdrawn by Mr Philp. As a result, it was not necessary for me to determine whether the purported kick-back payments should have been rejected by the trustee.

7    In summary, the trustee’s decision was varied in that Mr Philp’s proof of debt was admitted in the amount of $992,638.

Principles

8    The Court has a broad discretion under s 43(2) of the Federal Court of Australia Act 1976 (Cth) and s 32 of the Bankruptcy Act when determining appropriate costs orders. Such discretion must be exercised judicially: Oshlack v Richmond River Council (1998) 193 CLR 72 at [22] (Gaudron and Gummow JJ); Summers v Repatriation Commission (No 2) [2015] FCAFC 64 at [14] (Kenny, Murphy and Beach JJ).

9    In the ordinary course the discretion to award costs is exercised in favour of a successful party: Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 at [25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ). However, the authorities establish that whilst it is appropriate to treat the success or failure of a party as a starting point, it is appropriate to contemplate matters that might deprive a successful party of costs or result in them being ordered to pay costs. Such matters include where there has been only partial success, whether as to relief or in establishing the factual or legal basis upon which it sought to rely: Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158 at [9]-[11] (Greenwood, Rares and Moshinsky JJ); Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17; (2024) 302 FCR 375 at [208]-[211] (Banks-Smith, O’Sullivan and Feutrill JJ).

10    Having regard to such matters, the Court in the exercise of its discretion may (for example) order the parties to bear costs in specified proportions. Such an exercise was undertaken in the bankruptcy context by Stellios J in Rufford v Sheahan (as Trustee), in the matter of Rufford (No 2) [2026] FCA 213. His Honour usefully collected some of the authorities at [10]-[12]. As the cases cited in Rufford indicate:

(a)    the Courts have been increasingly concerned to use proper means to encourage parties to consider what matters they will put in issue in litigation, and such consideration may have costs consequences;

(b)    factors relevant to the exercise of the costs discretion include an assessment of whether one party has enjoyed practical success, a reluctance of the Court to assess costs on an issue by issue basis, and the diminishing returns in expending further time and costs in identifying the extent to which costs relate to particular aspects of the proceedings; and

(c)    where there has been a mixed outcome, it is appropriate to apportion costs as between different issues, on a relatively broad-brush basis.

11    In Rufford, costs were apportioned in circumstances where the applicant was ‘largely unsuccessful in discharging his onus of establishing that the debts forming the basis of the Proofs of Debts [were] not owing’. Stellios J stated (at [14]):

Applying a broad-brush and rough and ready approach to the apportionment of costs, I consider that the respondent’s proposal to recover 80% of their costs on a party/party basis is reasonable and fair. The reduction in the Proofs of Debt to be admitted represented approximately 15% of the total debts the subject of the proceeding. Roughly tethering the percentage of recoverable costs to the proportion of the Proofs of Debt that have been admitted provides a broad-brush measure of the degree of the applicant’s success and the likely extent of costs associated with the favourable outcome.

Respective positions on costs

12    Ms Mann contended that the trustee should pay her costs of the proceeding, or alternatively, the parties should bear their own costs. In summary, Ms Mann submitted that:

(a)    it was reasonable to bring the application in the circumstances;

(b)    she was successful in the proceeding, in that Mr Philp’s proof of debt was reduced by $151,100;

(c)    given she has been successful, the ‘general rule’ should apply and the trustee should pay for her costs on a party and party basis; and

(d)    even if the Court is not satisfied that it was reasonable to bring the proceeding, she has been successful, there is still a possibility that there may be a dividend payable to unsecured creditors, and there is utility in varying the debts which have been admitted to the extent that they could or would otherwise reduce the dividends payable.

13    On the other hand, the trustee contended that Ms Mann should pay her costs of the proceeding, or alternatively costs should be apportioned based on the relative success of the parties. In summary, the trustee submitted that:

(a)    the application was largely based on a challenge to the trustee’s findings that there existed an oral contract between Ms Gorman and Mr Philp, and that as the Court found that there was sufficient evidence that an oral contract was formed, Ms Mann was mostly unsuccessful in her application;

(b)    while Ms Mann was partially successful in reducing the amount of Mr Philp’s proof of debt, this is not a case in which the dividend payable to the creditors will increase;

(c)    as Ms Mann challenged Mr Philp’s proof of debt to ‘control’ the bankruptcy, she did not achieve this goal and an application for this stated purpose should not be condoned;

(d)    the Court has found that the trustee acted appropriately; and

(e)    there are no funds in the bankrupt estate from which the trustee can be reimbursed for her legal fees.

Determination

14    I do not accept Ms Mann’s submission that she has been ‘successful’ in the application, a submission that appears to be tethered to the fact that her prayer for relief included variation of the trustee’s decision. Ms Mann sought ‘an order under [the] Bankruptcy Act 1966 (Cth) s 104(2) reversing, alternatively, varying the [trustee’s] decision to admit [Mr] Philp’s proof of debt in whole’.

15    It is true that in the end I have varied the trustee’s decision. However, Ms Mann’s case was run on the basis that the whole of the claim should be rejected. It was primarily based on a challenge to the trustee’s acceptance that there existed an oral contract between Ms Gorman and Mr Philp, and on that central issue, Ms Mann failed. It was a matter that occupied a substantial part of the hearing and the reasons. Accordingly, I consider the trustee ought properly be considered the successful party.

16    I accept that Ms Mann had some limited success, in that Mr Philp’s proof of debt was reduced by 15%. Although the majority of this reduction resulted from Mr Philp’s voluntary withdrawal of part of his proof after the main hearing, I accept that Ms Mann’s challenge to ‘kick-back’ payments may have been one reason for Mr Philp’s decision to do so. I am therefore prepared to take into account this level of success in reducing the amount of costs that I would have otherwise ordered Ms Mann to pay to the trustee.

17    Using this reduction as a rough measure of Ms Mann’s success in the proceeding, and consistent with the approach in Rufford, I consider the trustee’s alternative proposal that she recover 85% of her costs on a party and party basis is reasonable and fair in the circumstances. In utilising this approach, I do not suggest that assessing the proportion of a reduction of costs by mathematical reference to the monetary diminution in the claim is some form of rule. It is but one means of assessing the appropriate level of apportionment that takes into account partial success. Just as Stellios J considered it appropriate in the circumstances of Rufford, I consider it appropriate in this case.

18    I do not consider that Ms Mann’s submission that it was reasonable to bring the application, nor the trustee’s contrasting submission, have any real bearing in the circumstances of this case on the exercise of the discretion. The position may have been different if I were considering an application by either party for indemnity costs, or an application that the trustee might be personally liable for costs. The parties both referred in general terms to the potential for a trustee to be held personally liable for costs, however, Ms Mann did not seem to pursue such an argument. Even if I found in favour of Ms Mann, pursuant to s 105 of the Bankruptcy Act Ms Mann would have needed to establish that there are ‘special circumstances’ that justify an order that the trustee be personally liable. I do not consider there are any special circumstances, and I would not have found the trustee to be personally liable in any event.

19    For completeness, and in response to Ms Mann’s ‘utility’ submission, I note that there is no evidence that any dividend will be paid. Ms Mann’s submission that Ms Gorman’s mother is still alive (no finding has been made in this regard) serves to reinforce the unlikelihood of there being any dividend. On such premise there is no existing inheritance fund to be received by Ms Gorman or her trustee. I do not accept the proceeding had any real utility, but as appears from the above reasons, that view has not been determinative of the question of who should bear the costs of the proceeding.

Orders

20    There will be an order that Ms Mann pay 85% of the trustee’s costs on the standard party and party basis.

Associate:

Dated:    9 June 2026