Fewin Pty Limited v Prentice

Case [2016] FCA 1038

FEDERAL COURT OF AUSTRALIA

Fewin Pty Limited v Prentice [2016] FCA 1038

Appeal from: Fewin Pty Limited v Prentice (Federal Court of Australia, NSD 912 of 2016, Orders dated 27 May 2016)
File number: NSD 912 of 2016
Judge: GLEESON J
Date of judgment: 1 September 2016
Catchwords: BANKRUPTCY AND INSOLVENCY – application for leave to appeal from a consent order granting an extension of time to file a bill of costs – application dismissed
Legislation:

Federal Court of Australia Act 1976 (Cth)

Bankruptcy Act 1966 (Cth)

Bankruptcy Legislation Amendment Act 2010 (Cth)

Bankruptcy Regulations 1996 (Cth)

Bankruptcy Amendment Regulation 2010 (No. 2) (Cth)  
Cases cited:

Abeyratne v Trkulja (1998) 90 FCR 253

Adsett v Berlouis (1992) 37 FCR 201

Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher [2011] FCAFC 89; (2011) 281 ALR 38

Hawkins v Kingsway Group Ltd [2009] FCA 1073

House v The King [1936] HCA 40; (1936) 55 CLR 499

Inspector-General in Bankruptcy v Coshott [2014] FCA 42

Karam v ANZ Banking Group Ltd [2000] NSWSC 596; (2000) 34 ACSR 545

Mayne v Jaques [1960] HCA 23; (1960) 101 CLR 169

McDonald v Young [2012] FCAFC 137

McKinnon v Pattison [2009] FCA 1421

Sekigawa v Minister for Immigration and Border Protection [2016] FCA 127; (2016) 237 FCR 276

Shirlaw v Taylor [1991] FCA 415; (1991) 31 FCR 222

South Johnstone Mill Ltd v Dennis [2007] FCA 1448; (2007) 163 FCR 343

Wenkart v Pantzer (No 6) [2003] FCA 1210

Pearce DC and Geddes RS, Statutory Interpretation in Australia (8th ed, LexisNexis Butterworths, 2014)

Date of hearing: 3 August 2016
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 56
Counsel for the Applicants: Mr GW McGrath SC with Mr D Steirn
Solicitor for the Applicants: Comino Prassas
Counsel for the First Applicant: Mr JT Johnson
Solicitor for the First Applicant: O’Neill Partners incorporating Sally Nash & Co
Solicitor for the Second Applicant: Ms L Buchanan of Australian Government Solicitor

ORDERS

NSD 912 of 2016
BETWEEN:

FEWIN PTY LIMITED (ACN 64 051 132 453)

First Applicant

RONALD MICHAEL COSHOTT

Second Applicant

ROBERT GILBERT COSHOTT

Third Applicant
AND:

MAXWELL WILLIAM PRENTICE

First Respondent

THE INSPECTOR GENERAL IN BANKRUPTCY

Second Respondent

MICHAEL BARR

Third Respondent

JUDGE:

GLEESON J

DATE OF ORDER:

1 SEPTEMBER 2016

THE COURT ORDERS THAT:

1.The application for leave to appeal be refused.

2.The applicants pay the respondents’ costs of the application.

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


REASONS FOR JUDGMENT

GLEESON J:

  1. This is an application for leave to appeal from an order made in proceeding NSD 708 of 2016 (“proceeding below”) granting the first respondent (“Mr Prentice”) an extension of time to file a bill of costs for services (“extension of time order”). The intended bill of costs relates to Mr Prentice’s remuneration for acting as trustee of the…

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AGLC
Fewin Pty Limited v Prentice [2016] FCA 1038
Case
[2016] FCA 1038
Decision Date

CaseChat Overview and Summary

In the case of Fewin Pty Limited v Prentice, the applicants sought leave to appeal a consent order granting an extension of time to file a bill of costs. The applicants, Fewin Pty Limited and Ronald Coshott, were creditors of the bankrupt, and they were dissatisfied with the amount claimed for remuneration by the trustee, Mr. Prentice. The applicants argued that Mr. Prentice deliberately failed to comply with the relevant time limit to lodge a detailed bill of costs, resulting in a potential forfeiture of up to $1.3 million to the benefit of creditors. The applicants sought an extension of time to file their bill of costs, but the court granted the extension on the basis of the evidence before it.

The court was required to determine whether the applicants' case required consideration of the evidence of the circumstances in which Mr. Prentice failed to comply with the relevant time limit. The court also had to decide whether there was evidence that could have justified a decision to refuse to extend the time to file the bill of costs. The court found that the applicants' case did not require consideration of the evidence of the circumstances in which Mr. Prentice failed to comply with the relevant time limit. The court also found that there was no evidence that could have justified a decision to refuse to extend the time to file the bill of costs. The court dismissed the application for leave to appeal, stating that the relevant amounts were Mr. Prentice's claim for remuneration of $372,196.50 and his disbursements and expenses of $18,636.12. The court concluded that the application for leave to appeal must be dismissed with costs.

The court's reasoning was based on the evidence before it and the provisions of regulation 8.09 of the Bankruptcy Regulations 1996. The court found that the applicants had not provided any evidence that could have justified a decision to refuse to extend the time to file the bill of costs. The court also found that the relevant amounts were Mr. Prentice's claim for remuneration and his disbursements and expenses, and it was not clear what amount, apart from regulation 8.09(4), would have been applied as the trustee's remuneration. The court concluded that the application for leave to appeal must be dismissed with costs.

Orders

Orders of the court

1. The application for leave to appeal be refused.

2. The applicants pay the respondents’ costs of the application.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The applicants’ case therefore requires consideration of the evidence of the circumstances in which Mr Prentice failed to comply with the reg 8.09(2) notice.IS THERE EVIDENCE THAT COULD HAVE JUSTIFIED A DECISION TO REFUSE TO EXTEND THE TIME TO FILE THE BILL OF COSTS? The applicants’ case is that Mr Prentice deliberately failed to comply with the relevant time limit with knowledge of the legislation and with the benefit of legal advice. The reg 8.09(2) notice to Mr Prentice was not in evidence. However, based on the correspondence between Mr Prentice and his firm and Australian Financial Security Authority (“AFSA”), described below, such notice was probably given shortly before 17 February 2016 and it probably required Mr Prentice to lodge a detailed bill of costs with the taxing officer within 28 days, being the period stipulated in reg 8.09(2). Therefore, the deadline for lodgement of a detailed bill of costs would have been shortly before 17 March 2016. By letter dated 17 February 2016 from Mr Prentice to AFSA referred to a “recent email communication” and sought confirmation that Mr Barr’s role was “restricted to taxing my remuneration as detailed in my Remuneration Report to creditors dated 4th December 2015 and consequently does not include the taxation of any professional fees, non-professional disbursements and non-professional expenses incurred by me in the administration of” the bankrupt estate. Mr Prentice expressed “serious concerns concerning the capacity and willingness of Ronald Coshott and his company Fewin Pty Ltd to pay the costs of the taxation if required”. Mr Prentice also stated that:… the funds in the estate have been depleted to the point that there will be no dividend to creditors nor will there be sufficient funds to pay in full my remuneration, John Burke’s remuneration and the Official Trustee’s remuneration after payment of legal expenses.Therefore, even if my remuneration was reduced on taxation by 15% or more, the resulting amount of my remuneration would still far exceed the actual amount which I would receive from the estate.Accordingly, the taxation process would not serve any useful purpose and in my view, it would be futile and a further uneconomical use of resources which regrettably, has been a common occurrence in this administration because of the obstructive actions of the members of the Coshott family.Incidentally, as mentioned above because there are insufficient funds held in the estate to meet the remuneration and expenses of all the trustees in full, section 164 of the Bankruptcy Act will apply. Whilst the successive trustees will easily reach an agreement as to the division of the available funds, section 164 requires such agreement must be endorsed by a resolution passed at a meeting of creditors.Given their past actions, it is most likely that Ronald Coshott and Fewin will vote against an endorsement by creditors as to the agreed division of remuneration and expenses by the three successive trustees, which will require the trustees to apply to the Court for directions and will be a further unnecessary expenses to be borne by me and the other Trustees.It can easily be seen that Ronald Coshott and Robert Coshott plus members of Robert Coshott’s family have deliberately embarked on a “scorched earth mission” to use up all the funds in the bankrupt estate on unnecessary litigation to the point that the three successive trustees will probably receive at best only 50% of their remuneration.It is considered that the request for the taxation of my remuneration is only a further example of that scorched earth mission and accordingly, I request that you seriously consider the issues I have detailed above with a view to staying the taxation process until those issues have been resolved.It should also be noted that Ronald Coshott and Fewin Pty Ltd recently lodged an application in the Federal Court of Australia under sections 178 and 179 of the Bankruptcy Act which has been set down for hearing on 30 March 2016. The application seeks various declarations and orders which mainly centre of [sic] the validity of my actions and decisions at the meeting of creditors held on 16 December 2015 at which, Mr Findlay attending by telephone.Therefore, should the Inspector-General still consider it necessary to proceed with the taxation notwithstanding the concerns I have detailed above, I request that the taxation be deferred until such time as the above proceedings have been determined. (Emphasis in original.)

Decision

Reasons for decision

Thus, there is no substance the submission that as much as $1.3 million might have been forfeited to the benefit of creditors by reason of Mr Prentice’s non-compliance with the requirement to lodge a detailed bill of costs. The relevant amounts are Mr Prentice’s claim for remuneration of $372,196.50 and his disbursements and expenses of $18,636.12. Whether there would have been any amount to be applied for the benefit of creditors must depend upon the amounts payable as priority payments. On the evidence before me, it is not clear what amount, apart from reg 8.09(4), would have been applied as the trustee’s remuneration.CONCLUSION The application for leave to appeal must be dismissed with costs.

Ratio Decidendi

Legal Principle Established

Regulation 8.09 of the Regulations provided:8.09 Taxation of trustee’s remuneration and costs - preliminary(1)Where the trustee of the estate of a bankrupt claims remuneration under section 162 of the Act, the bankrupt or a creditor who is dissatisfied with the amount of the claim may, by notice in writing lodged within 28 days of being notified in writing or becoming aware of the amount of the claim, request a taxing officer to tax the claim.(2)The taxing officer must, promptly after receiving a request in accordance with subregulation (1), give notice in writing to the trustee to lodge a detailed bill of costs, in accordance with regulation 8.10, with the taxing officer within 28 days or such further period as the taxing officer may, in writing, allow.(3)On receiving the bill of costs, the taxing officer must give notice in writing of the date, time and place for the taxation, at least 5 days before the taxation, to the trustee and the person requesting the taxation.(4)Subject to subregulation (5), if the trustee fails to comply with a notice given under subregulation (2):(a)the trustee forfeits his or her right to disbursements and expenses; and(b)any amount that, apart from this subregulation, would have been applied as the trustee’s remuneration is to be applied for the benefit of the creditors.(5)A trustee who is aggrieved by the operation of subregulation (4) in respect of his or her claim, or intended claim, for costs may apply to the Court for relief, and the Court may:(a) grant such relief; and(b)grant the relief on such terms, if any; as it thinks fit. In Wenkart v Pantzer (No 6) [2003] FCA 1210, Lindgren J stated that the purpose of the time limit in reg 8.09(1) “is to ensure that finality and certainty are brought to the quantification of a trustee’s remuneration within a relatively short period of time” (at [34]). While regulation 8.09(1) applies in relation to a claim for remuneration (as opposed to a claim for approval for expenses or costs), there is no reason to think that the time limit in reg 8.09(2) has a different purpose. It is not disputed that:(1)Mr Prentice claims remuneration under s 162 of the Act;(2)Fewin and Ronald Coshott are creditors who are dissatisfied with the amount of the claim and who, by notice in writing lodged within 28 days of being notified in writing or becoming aware of the amount of the claim, requested a taxing officer to tax the claim pursuant to reg 8.09(1) of the Regulations;(3)The third respondent, Mr Barr, as taxing officer, gave notice in writing to Mr Prentice to lodge a detailed bill of costs, in accordance with reg 8.10, with Mr Barr within 28 days or such further period as the taxing officer may, in writing, allow, pursuant to reg 8.09(2) (“reg 8.09(2) notice”);(4)Mr Prentice failed to comply with the reg 8.09(2) notice;(5)Being aggrieved by the operation of reg 8.09(4) in respect of his claim, or intended claim, for costs, Mr Prentice was entitled to apply to the Court for relief pursuant to reg 8.09(5).REQUIREMENT FOR LEAVE TO APPEAL