Tapp v LawCover Insurance Pty Ltd [2013] FCA 35

FEDERAL COURT OF AUSTRALIA

Tapp v LawCover Insurance Pty Ltd [2013] FCA 35 Citation: Tapp v LawCover Insurance Pty Ltd [2013] FCA 35

Parties: KEITH TAPP and PETER TAPP v LAWCOVER INSURANCE PTY LTD, ROGER WINCHESTER GRAY and OFFICIAL TRUSTEE IN BANKRUPTCY

File number: NSD 1985 of 2012

Judge: RARES J

Date of judgment: 4 January 2013

Catchwords: BANKRUPTCY – when bankrupt's right to indemnity under insurance contract for outstanding judgment debt vests in Trustee in bankruptcy – where creditor had sole beneficial interest in proceeds of any right to indemnity held by the bankrupt under a contract of insurance vested in trustee under s 117 of the Bankruptcy Act 1966 (Cth) – whether preferential right to proceeds of right to indemnity imposed duty on the trustee to pursue proceedings against insurer or assign to preferred creditor right of action under policy vested in trustee by s 117 – where the creditor requested that the Official Trustee take proceedings to recover indemnity from the insurer – where the Official Trustee refused to commence proceedings or assign right to do so to creditor and suggested that preferred creditor commence separate proceedings against the insurer for declarations on the questions – whether insurer was liable to indemnify bankrupt's estate and whether trustee should assign right to indemnity to creditor BANKRUPTCY – effect on the estate of discharge of bankrupt under s 153 Bankruptcy Act 1966 (Cth) – whether the estate or the assets of the bankrupt vested in the trustee affected by a bankrupt's discharge under the Act TRUSTS AND TRUSTEES – DUTIES OF TRUSTEE IN BANKRUPTCY – duties of trustee in bankruptcy exercise powers and performance functions to recover property for the estate, pursue its efficient administration and in commercially sound manner created by s 19(1)(f), (j), (k) of the Bankruptcy Act 1966 (Cth) – where trustee in breach of its duties – where failure to ascertain trust assets and recover trust property – where failure to have regard to interest of statutorily preferred creditors – considerations relevant to whether trustee should assign rights to indemnity Held: the estate is not released when the bankrupt is discharged – discharge does not affect the creditors' rights to have the trustee realise and distribute assets of the bankrupt vested in the trustee – discharge of bankrupt had no effect on trustee's rights to realise for the benefit of the estate any property of the bankrupt vested in the trustee by ss 58 or 117 – no reason for trustee at any time to fail or refuse to assign to preferred creditor bankrupt's rights to seek indemnity from insurer vested in trustee by s 117 – Official Trustee in Bankruptcy failed to fulfil its obligations under s 19(1)(f), (j) and (k) or apply to the Court for directions – failure by the Official Trustee in Bankruptcy to co-operate with the applicants or seek directions caused unnecessary cost and expense in litigation