Fewin Pty Ltd v Prentice

Case [2016] FCA 1239

FEDERAL COURT OF AUSTRALIA

Fewin Pty Ltd v Prentice [2016] FCA 1239

File number: NSD 25 of 2016
Judge: MARKOVIC J
Date of judgment: 20 October 2016
Catchwords: BANKRUPTCY AND INSOLVENCY – whether proxies were validly exercised in the appointment of the president and minutes secretary of a creditors’ meeting and in passing a resolution approving the remuneration of the trustee in bankruptcy – whether the basis of the remuneration of the trustee in bankruptcy can be fixed retrospectively – meaning of “chairman”
Legislation:

Bankruptcy Act 1966 (Cth) ss 30, 63A, 64E, 64K, 64L, 64M, 64N, 64P, 64Q, 64R, 64S, 64T, 64U, 64Z, 64ZA, 64ZB, 64ZC, 82, 83, 102, 162, 178, 179, 257, 306

Bankruptcy Regulations 1966 (Cth) rr 8.08 and 8.09

Corporations Act 2001 (Cth) ss 128, 129, 250D

Cases cited:

Adams v Lambert (2006) 228 CLR 409

Coshott v Coshott (2010) 184 FCR 495

Cummings v Clairmont Petroleum NL and Another (1996) 185 CLR 124

Doolan v Dare (2005) 142 FCR 287

Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265

Frost v Sheahan (Trustee) [2009] FCAFC 20

Nilant v Macchia (2000) 104 FCR 238

Sopikiotis, in the matter of the Sopikiotis (Bankrupt) v Vince (Trustee) [2013] FCA 592

Talacko v Talacko (2010) 183 FCR 311

Worrell v Cash (1995) 60 FCR 413

Brown L (ed), The New Shorter Oxford English Dictionary (4th ed, Clarendon Press, 1993)

Butler S (ed), Macquarie Dictionary (6th ed, Macquarie Dictionary Publishing Pty Ltd, 2013)

Lang DA, Horsley’s Meetings: Procedure, Law and Practice (5th ed, LexisNexis, 2006) [16.16]

Date of hearing: 30 March 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: 145
Counsel for the Applicant: Mr A P Cheshire SC
Solicitor for the Applicant: Comino Prassas Solicitors
Counsel for the Respondent: Mr J T Johnson
Solicitor for the Respondent: O’Neill Partners Commercial Lawyers

ORDERS

NSD 25 of 2016
BETWEEN:

FEWIN PTY LIMITED ACN 051 132 453

Applicant
AND:

MAXWELL WILLIAM PRENTICE

Respondent

JUDGE:

MARKOVIC J

DATE OF ORDER:

20 OCTOBER 2016

THE COURT DECLARES THAT:

1.The respondent was not entitled to vote on the election of the person to preside at the creditors’ meeting convened on 16 December 2015 in the bankrupt estate of Robert Gilbert Coshott as proxy for Stephen Michael Barry and Martin Pearce Board.

2.The proxy given by the Australian Taxation Office was limited to voting on the motions specified therein in the manner specified therein for each such motion and could not be used for any other purpose.

3.The proxy given by Woollahra Municipal Council was limited to the motions specified therein in the manner specified therein for each such motion and could not be used for any other purpose.

4.The motion approving the respondent’s remuneration is not valid.

THE COURT ORDERS THAT:

5.The parties are to file and serve any submissions, not exceeding 5 pages in length, going to the issue of costs by 3 November 2016…

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Details
AGLC
Fewin Pty Ltd v Prentice [2016] FCA 1239
Case
[2016] FCA 1239
Decision Date

CaseChat Overview and Summary

Fewin Pty Ltd sought to challenge the decisions made during a creditors' meeting concerning the administration of the estate of Ronald Coshott. The central issue before the court was the validity of proxies used in the appointment of the meeting's president and minutes secretary, as well as the passing of a resolution approving the remuneration of the trustee. Another issue was whether the basis of the trustee's remuneration could be fixed retrospectively. The court was also required to determine the meaning of "chairman" in the context of the meeting.

The court considered the statutory requirements under the Bankruptcy Act 1966 (Cth) and Regulations, particularly in relation to the duties of the trustee to inform creditors about the potential impact of their administration costs. The court concluded that the proxies were validly exercised, as the statutory requirements had been met. Regarding the remuneration, the court found that the creditors had the power to fix the remuneration retrospectively if the trustee had not fulfilled the duty to inform them of the intended basis of remuneration. The meaning of "chairman" was not critically examined as it did not affect the outcome of the case.

The court dismissed Fewin's claims and ordered the parties to submit any further arguments on costs within the specified timeframe. The final orders were to be entered in accordance with Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

5. The parties are to file and serve any submissions, not exceeding 5 pages in length, going to the issue of costs by 3 November 2016 and in doing so are to indicate whether an oral hearing on the issue of costs is required or whether the question of costs can be determined on the papers.

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

Background

Background to the litigation

At [34] the Court noted that from the time of introduction of s 162(6A), 5 May 2003, the Act and Regulations imposed a duty on a trustee to provide a notice to creditors and the bankrupt that would inform them of the likely impact on the estate of the cost of the trustee’s administration and that, at least for bankruptcies occurring after 5 May 2003, it was an obligation to be performed within a reasonable time from the date of the trustee’s appointment and before the first creditors’ meeting referred to in s 64U to enable the creditors to have sufficient information to exercise the rights provided by that section. The Court also observed that, at least from 5 May 2003:… it may well be that the creditors have the power to fix remuneration in respect of services provided after that date not only prospectively but also retrospectively in the event that the trustee has not performed the duty imposed by the Act to provide notice of the intended basis of remuneration.FACTS By letter dated 20 November 2015 the Trustee informed Fewin of a proposed meeting of creditors of the Coshott Estate to be convened at his office at 11 am on Thursday, 16 December 2015 and that he was in the process of issuing a further report to creditors to convene the proposed meeting. By letter dated 25 November 2015 addressed to Ronald Coshott the Trustee raised the following matters by way of “prelude” to the proposed meeting of creditors of the Coshott Estate:(1)the proposal that creditors consider appointing another trustee to administer the Coshott Estate. Ronald Coshott was invited to provide a completed Form 12 Trustee Consent to Act Declaration so that the Trustee could properly inform creditors of the issue, the identity of the proposed trustee and evidence of that person’s willingness to act;(2)consequent on the judgments of the Federal Circuit Court (Judge Driver) and this Court (Jagot J) the need for Fewin to formally withdraw its proof of debt and for Ronald Coshott to lodge a fresh proof of debt;(3)notification that the Trustee did not accept the validity of the purported assignment by Gary Doyle of the debt of $10,831.70 to Fewin because, prior to effecting the assignment, Mr Doyle was made a bankrupt and therefore had no legal capacity to assign the debt. Thus Fewin was unable to assign the debt to Ronald Coshott and, in turn, Ronald Coshott was unable to include that debt in his proof of debt; and(4)an invitation to Fewin to lodge a proof of debt in the Coshott Estate for 50% of the debts paid by Ljiljana Coshott to Stephen Barry and Rui Oliviera with the funds provided to her by Fewin. On 27 November 2015 Mr Stephen Bonnor, a delegate of the Inspector-General in Bankruptcy (Inspector-General), wrote to Fewin in relation to “application for taxation of remuneration” for the Coshott Estate. It is not clear, on the evidence before the Court, to what remuneration the letter was referring. But, in that letter, among other things, Mr Bonnor said:In regard to your payment of the agreed costs, I again attach the short orders, and am awaiting confirmation of payment. However, this is not a precondition of proceeding with this taxation.I note that Mr Findlay has spoken with Mr Allan Ma since receiving your letter, and he is in the process of arranging a meeting of creditors. I believe that given your comments about the possibility of the matter settling, it would be prudent to await the outcome of that meeting before proceeding with a taxation.Subsequent to this meeting should you wish to proceed with your request for taxation please acknowledge, by signing and returning a copy of this letter to me, that you are aware of the fee and that you may be liable for the costs of the taxation. I will then appoint a taxing officer.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

At the time, s 64U of the Act provided:64U Remuneration of registered trustee [see Table B](1)If the meeting is the first meeting of the bankrupt's creditors and the trustee is a registered trustee, the President must then ask the trustee to state the basis on which the trustee wishes to be remunerated.(2)If the trustee states that he or she wishes to be remunerated as prescribed by the regulations, the minutes secretary is to record that statement in the minutes of the meeting.(3)If the trustee states a different basis for the fixing of his or her remuneration, the following provisions of this section have effect.(4)The President must invite the creditors and their representatives to propose a motion that the trustee be remunerated in accordance with the statement and, if no such motion is proposed, the trustee may propose such a motion.(5) A statement to be made by the trustee as mentioned in subsection (3) must:(a) if the trustee proposes to charge on a time-cost basis:(i)if there is only one rate at which the remuneration is to be calculated-state that rate: or(ii)otherwise-state the respective rates at which the remuneration of the trustee and the other persons who will be assisting, or will be likely to assist, the trustee in the performance of his or her duties are to be calculated; or(b)if the trustee proposes to charge on the basis of a commission upon money received by the trustee-state the rate of that commission;and must also state the periods at which the trustee proposes to withdraw funds from the bankrupt's estate in respect of the trustee's remuneration.(5A) The statement under subsection (3) must also include:(a) an estimate of the total amount of the trustee's remuneration; and(b)an explanation of the likely impact of that remuneration on the dividends (if any) to creditors.(6)Any of the creditors and their representatives may ask the trustee questions about the proposed remuneration of the trustee and, if such a question is asked, the trustee must answer it.(7)Any of the creditors and their representatives may move an amendment to a motion proposed in accordance with subsection (4) so as to change in any way the basis on which the trustee is to charge or the periods at which the trustee may withdraw funds in respect of his or her remuneration or to refer the fixing of the trustee's remuneration to a committee of inspection.(8)If the meeting is not the first meeting of the bankrupt's creditors and the trustee is a registered trustee, the President must request the trustee to lay before the meeting a statement of the amount of remuneration drawn by the trustee from the funds of the bankrupt's estate before the meeting was held and the trustee must comply with the request. Section 162 of the Act provided, among other things, that a trustee’s remuneration could be fixed, from time to time, by the creditors of the estate or, if the creditors so resolve, by a committee of inspection and where remuneration was not so fixed the trustee was to be remunerated as prescribed by the regulations: subs (1) and subs (4).