ANDERSEN v Lennon

[2017] FCCA 2452

FEDERAL CIRCUIT COURT OF AUSTRALIA

ANDERSEN v LENNON & ORS [2017] FCCA 2452

Catchwords:
BANKRUPTCY – Application to vary orders made by consent – no consent to substantive variations – whether orders should be varied.

Legislation:

Federal Circuit Court Rules 2001, r.16.05

Bankruptcy Act 1966 (Cth), Schedule 2, Insolvency Practice Schedule (Bankruptcy), rr.90-15(1), 90-15(3)(f), 90-21

Applicant: SHAWN ANDERSEN

Respondent: VICTOR JOHN LENNON

First Supporting Creditor: THORN AUSTRALIA PTY LTD TRADING AS THORN EQUIPMENT FINANCE

Second Supporting Creditor: AUSTRALIAN LIQUOR MARKETERS PTY LIMITED

Interested Person: ANTHONY JAMES JONSSON

File Number: BRG 452 of 2017

Judgment of: Judge Jarrett

Hearing date: 25 September 2017

Date of Last Submission: 25 September 2017

Delivered at: Brisbane

Delivered on: 28 September 2017

REPRESENTATION

Counsel for the Applicant: Mr Martin QC

Solicitors for the Applicant: Celtic Legal

Solicitors for the Respondent and Interested Person: Legend Legal Group

Solicitors for the First Supporting Creditor: SLF Lawyers

Solicitors for the Second Supporting Creditor: Patane Lawyers

ORDERS

1. The application filed on 21 September, 2017 is dismissed.

2. The applicant pay each of the respondent’s costs of and incidental to the application to be taxed and paid in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 452 of 2017

SHAWN ANDERSEN

Applicant

And

VICTOR JOHN LENNON

Respondent

THORN AUSTRALIA PTY LTD TRADING AS THORN EQUIPMENT FINANCE

First Supporting Creditor

AUSTRALIAN LIQUOR MARKETERS PTY LIMITED

Second Supporting Creditor

ANTHONY JAMES JONSSON

Interested Person

REASONS FOR JUDGMENT

1. On 14 August, 2017 I made orders that disposed of an application to review a decision of a Registrar to make a sequestration order against the estate of Sean Andersen.  The orders are not straightforward and the setting aside of the sequestration order was conditional upon the applicant doing certain things.  Senior counsel for the applicant has said an issue has now arisen in respect of what needs to be done to give effect to those orders and to engage the provision that provides for the setting aside of the sequestration order. 

2. Two matters, in particular, arise.  The first is the interpretation of the words “all his creditors” in paragraph 1(b)(i) of the orders.  The second is whether there ought to be some form of assessment of the trustee’s remuneration and disbursements pursuant to paragraph 1(b)(ii) of those orders.  The application seeks that the issues that have arisen be resolved by the inclusion in the orders of certain words.  That is to say, the applicant seeks that the orders be varied by the addition of specified words after clause 1(b)(i) and (ii) of the orders. 

3. The respondents oppose the relief sought by the applicant. As the respondents point out, variation of orders made by a court is dealt with in r.16.05 of the Federal Circuit Court Rules2001.  According to that rule there are certain circumstances in which orders can be varied.  I accept the submission of the respondents that those circumstances do not arise here:

   a)there is no suggestion that the orders have been made by reason of some fraud;

   b)they are nor interlocutory not do they concern an injunction or the appointment of a receiver;

   c)they were not made in the absence of any parties.

4. The only possibility is that the orders do not reflect the intention of the Court when the orders were made.  Senior counsel for the applicant points out that whilst the orders were consent orders in the sense that they were informed by a decision or a compromise reached between the parties, when the application came on for hearing, they were, nonetheless, orders of the Court which required the Court to exercise a discretion.  And so, notwithstanding the agreement between the parties as to the making of the orders, the Court was required to exercise a judicial function and make the orders. 

5. It might be said then that there is scope for an argument that the orders do not reflect the intention of the Court when it made them.  I reject that argument.  The intention of the Court, when the orders were made, was to make orders in the same terms as those that were produced by the parties pursuant to their compromise. 

6. The power that the Court has to amend final orders like these is not engaged in the circumstances notwithstanding that the parties have liberty to apply under the terms of those orders.  A liberty to apply provision is generally limited to questions of a mechanical nature that arise under orders.  This is not a mechanical issue. 

7. It seems to me that the application insofar as it relates to paragraph 1(b)(i) of the orders must fail because no occasion has arisen to amend the orders. 

8. Having said all of those things, the argument that the applicant makes about the interpretation about the orders is plainly correct.  The words “all of the creditors” do not extend to all of the applicant’s creditors, including his secured creditors, but, rather, ought to be construed by reference to the creditors that have proved in his bankruptcy.  That is consistent with, as senior counsel points out, the other provisions of the Bankruptcy Act 1966 that deal with, for example, annulments. 

9. It may be that the only way the applicant can ensure that the orders are carried into effect is to do what it is that he suggests ought to be done under them to engage the setting aside of the sequestration order and then apply to the Court for declaratory relief having done what he says needs to be done and no more.  But those matters cannot be decided on this application, in my view. 

10. As to the question of costs the position is a little less straightforward.  The trustee has no objection to the inclusion of the words “as agreed or, failing agreement, to be assessed by a registrar of this court” being added to the end of paragraph 1(b)(ii) of the orders but, in submissions, the trustee made it clear that any assessment of those costs would be  limited to the assessment of the trustee’s legal costs, not an assessment of the remuneration and disbursements incurred by the trustee that went beyond legal costs. 

11. There has been, in recent times, some significant amendments to the Bankruptcy Act and the insolvency regime. Senior counsel for the applicant relied upon clause 90-15(3)(f) of schedule 2 to the Bankruptcy Act (the Insolvency Practice Schedule). That provision provides that without limiting 90-15(1) a court may make an order in relation to remuneration of a trustee, including an order requiring a person to repay to the estate of a regulated debtor or the creditors of a regulated debtor remuneration paid to the person as a trustee. Senior counsel submitted that that power was sufficiently wide to enable to the Court to make an order that authorised a Registrar of this Court to assess the trustee’s remuneration and disbursements.

12. Subsection 90-15(1) of the Insolvency Practice Schedule (Bankruptcy) provides that the Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate.  The power is very broad.  Having regard to the other provisions of the Insolvency Practice Schedule (Bankruptcy), Part or Division 90, there is very little limit on what it is that the Court might order.  The examples given in subsection of 90-15(3) make it clear that the Court’s power is wideranging. 

13. However, there are other provisions that bear more directly upon the review of the remuneration and disbursements incurred by a trustee.  Section 90-21, found in Subdivision C of Division 90 of the Insolvency Practice Schedule (Bankruptcy), provides for review by the Inspector-General of the remuneration received by a trustee of a regulated debtor’s estate for services performed by the trustee in relation to the administration of that estate.  That review can be carried out by the Inspector-General on his or her own initiative or on application by the regulated debtor.  The phrase “regulated debtor” is defined to include the bankrupt. 

14. So it is clear that there is a mechanism in the Insolvency Practice Schedule that provides for the bankrupt to apply to the Inspector-General for a review of the trustee’s remuneration.  There are some hurdles that the bankrupt will have to overcome if that review is pursued, but it is clear from the provisions of 90-21 that the powers of the Inspector-General are broad and wideranging and would permit the Inspector-General to carry out the type of exercise that is suggested here. 

15. Section 90-21(3) provides that the trustee, the regulated debtor or a creditor of the regulated debtor may apply to the Court for an order in relation to a decision of the Inspector-General in relation to the review.  Subsection (4) of 90-21 provides for the types of matters to which the Court must have regard when it makes an order under subsection (3).  But it seems clear enough that the process that is envisaged by 90-21 is an application to the Inspector-General in the first instance and if that is successful, then an application to the Court to carry into effect the decision of the Inspector-General if there is an issue about it. 

16. In those circumstances, I am not satisfied that the power to which I was taken by senior counsel for the applicant in 90-15(1) ought to be exercised in this case.  There are other means available to the bankrupt to review the remuneration of the trustee if that is what he intends to do.  Subject to the success or otherwise of such an application to the Inspector-General, it might be that the Court is thereafter called upon to exercise some power under the Insolvency Practice Schedule in respect of the trustee’s remuneration.  But until there is at least an application to the Inspector-General which is either dealt with or rejected, it seems to me that as a matter of discretion I ought not exercise the power under 90-15(1). 

17. It might be said that that leaves the bankrupt in something of a quandary – he suggests that the amount sought by the trustee for remuneration and disbursements is extraordinary and ought not be paid, but unless it is paid, the provisions of the order that effect the setting aside of the sequestration order will not be engaged.  His option will be to pay it under protest so that he might argue that the terms of the orders made on 14 August, 2017 are satisfied and the sequestration order has been set aside and then or thereafter, apply for a review of that remuneration. 

18. There is nothing in the Insolvency Practice Schedule, Part 90, which immediately appears to limit the bankrupt’s right to apply to the Inspector-General for a review of the trustee’s remuneration to the period before an amount is paid to the trustee and, indeed, the powers set out in paragraphs 90-15 and 90-21 expressly envisage the repayment by the trustee to the bankrupt or some other person of amounts that have been paid to the trustee by way of remuneration. 

19. For all of those reasons, therefore, and subject to the one matter which is not contentious, the application filed by the applicant will be dismissed.  The only order that I propose to make will be to add the words “as agreed or, failing agreement, to be assessed by a Registrar of this Court (limited to the trustee’s legal costs)” at the end of paragraph 1(b)(ii) of the orders made on 14 August, 2017.  I add those words because the trustee consents to their addition. 

20. Costs should follow the event.  The applicant has been largely unsuccessful in his application and, in those circumstances, the applicant should pay the respondents – each of them – their costs of and incidental to the application to be taxed and paid in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006.  To the extent that there are claims for indemnity costs, I do not propose to make orders for indemnity costs in the circumstances of this case.  The primary argument made by the applicant is, in my view, most likely correct, although it has been unnecessary to determine it for the purposes of these reasons.  It could not be said that the application was always bound to fail.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Jarrett

Associate:  A. Blank

Date:  9 October 2017