Fletcher v Eebme Pty Ltd
[2008] FMCA 654
•22 May 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FLETCHER v EEBME PTY LTD | [2008] FMCA 654 |
| BANKRUPTCY – Notice to produce documents issued by trustee in bankruptcy – reasonable costs of compliance. |
| Bankruptcy Act 1966, ss.30, 32 |
| Applicant: | WILLIAM JOHN FLETCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROBERT JOHN COOKE |
| Respondent: | EEBME PTY LTD |
| File Number: | BRG 562 of 2007 |
| Judgment of: | Wilson FM |
| Hearing date: | 14 December 2007 |
| Date of Last Submission: | 14 December 2007 |
| Delivered at: | Brisbane |
| Delivered on: | 22 May 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Wilkins |
| Solicitors for the Applicant: | Thynne & Macartney |
| Counsel for the Respondent: | Mr Peden |
| Solicitors for the Respondent: | Hopgood Ganim |
ORDERS
The applicant trustee pay the respondent’s costs of complying with the notice to produce and orders made on 30 July 2007, fixed in the sum of $11,703.45.
The applicant trustee pay any GST lawfully imposed on the respondent’s said costs.
The applicant trustee pay the respondent’s costs of and incidental to the determination of the reasonableness of the respondent’s costs to be taxed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 562 of 2007
| WILLIAM JOHN FLETCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROBERT JOHN COOKE |
Applicant
And
| EEBME PTY LTD |
Respondent
REASONS FOR JUDGMENT
On 30 July 2007 I made orders compelling the respondent to produce certain classes of documents to the applicant, a trustee in bankruptcy. On 30 July 2007 I further ordered that the trustee pay the respondent’s reasonable costs of complying with the notice to produce. I did so under s.30 of the Bankruptcy Act 1966 (“the Act”). I note that any order for costs is also within the discretion of the court under s.32 of the Act.
The respondent has delivered a tax invoice to the applicant demanding payment of $20,489.65. There is a dispute as to whether such costs are reasonable. In excess of 4,300 pages of documents have been produced by the respondent.
The first issue that must be dealt with is whether the respondent should have produced the required information in a different format, obviating the need to reproduce a large number of individual invoices and expense vouchers. That is hinted at in the letter from the applicant’s solicitors dated 11 October 2007. However, that complaint falls flat when regard is had to the same solicitors’ letter of 28 August 2007, which demanded all invoices, all claims, all records of expenses etc. The respondent’s solicitors estimated the cost of producing the records on 21 September, and received no reply from the applicant’s solicitors until the day after the documents were supposed to be produced.
I reject the submission, faintly pressed by the applicant’s counsel, that the document should have been produced in a different, less expensive format. What was produced was what the applicant demanded.
The orders made by me contemplated the respondent undertaking a considerable amount of work, primarily to protect the confidentiality of its patient records. Because of the way that records were stored, it is contended by the respondent that it was necessary for the respondent to print out a ‘clean copy’ of a relevant document twice. One of those documents was then marked to delete any confidential and irrelevant (to the applicant) information. That marked up document was then photocopied so that the inspecting party could not examine what had been obliterated (which was possible on the original marked up copy: first affidavit of Bartlett paragraph 9). Thus, effectively three copies of each document were produced. The applicant was given one of the three. The respondent retained two copies – one in the same terms as had been provided to the applicant and the other a clean copy in case there was any dispute about what parts of the document had been obliterated.
Ms Short, one of the respondent’s employees, has explained at paragraphs 14 to 15 of her affidavit that there was a doubling up of some of the work undertaken because of the need for a change in colour of the marker pen used to obliterate certain information. The applicant should not have to pay for the duplication of work. No precise estimate is given for how much of the work had been done at the time it was noticed that a different coloured marking pen was needed, other than a reference to a large number of documents. On the other hand, as Ms Bartlett notes in her affidavit, the respondent’s employees spent more time than was actually recorded on the time sheets doing the work. I think that to be fair to both sides, a reduction of 20% to the component “erasing personal information” is called for.
I do not accept that the work should all have been undertaken by employees paid the lowest hourly rate. The task of locating, and producing marked up copies of the records of the respondent, fell onto the respondent’s administrative staff. It was not something that could be done by a commercial copier (save perhaps for the production of the last photocopy in each case) because of the need to carefully examine each document and delete sensitive and irrelevant material. The respondent has sought to recover the actual cost paid to its staff for undertaking the work to comply with the order. The respondent’s employees kept time sheets for the work undertaken by them that have been produced. No “on-costs” have been claimed, just the wages that would otherwise have been paid to the employees. As Ms Bartlett explains in her affidavit, the task involved was one that required particular attention. I think it reasonable that the task was shared. After all, if it was all done by the least qualified person there would be a case for a charge being levied for supervision, to ensure the task was done correctly.
Exhibit 1 sets out the applicant’s view of what costs are reasonable. Some components of the respondent’s claim are not disputed.
As I have said, there will be a 20% reduction to the claim for the cost of erasing personal information.
I consider the claimed costs of producing the printed documents (20 cents per page) to be reasonable. At paragraphs 21 to 22 of her second affidavit Ms Bartlett explains the basis for the charge for printing computer documents. However, it was not a necessary cost of printing the documents for a back up copy to be held by the respondent in case its computer system crashed. That cost should not be passed on to the applicant. Ms Short would have spent the same time producing one copy of each document as two, given the description by Ms Bartlett of what Ms Short was required to do. I would therefore not reduce the claim for the cost of Ms Short’s time to print out the documents, but would reduce the cost of printing by 50% as asserted by the applicant.
The respondent also claims the cost of printing 14,101 documents by a commercial printer. As I understand, the respondent had copied each of the marked up copies twice. It is not clear why this had to be done. If one of the copies was provided to the respondent’s solicitors (as appears from paragraph 34 of Ms Bartlett’s second affidavit) then it is not reasonable to pass that cost onto the trustee. The respondent could have retained its original marked copy of each document, and then given one copy the applicant. I consider this amount should be reduced by 50%.
The trustee complains that there has been a doubling up in the claim for miscellaneous expenditure, in that a separate claim has been made for the cost of marking pens and toner for the printer, whereas these charges should be picked up in the cost of printing at 20 cents per page, and in reimbursing the staff wages.
The respondent concedes that GST should not be claimed on the miscellaneous expenses, as the various invoices sought to be passed on to the trustee already include GST. I will reduce the amount claimed for the cost of toner ($438). I do not propose to make any further adjustment for the claim for miscellaneous expenditure, as the evidence does not permit me to distil exactly how many marker pens and other items of stationary were required to do the job correctly the first time. In my view, challenges of this sort are nitpicking in the extreme.
In my view, the taking of legal advice on compliance with the order is not a charge that falls within the concept of reasonable costs of complying with the orders. In my view the orders, when read with my reasons for judgment, were quite explicit in what was required of the respondent. If the applicant had challenged what was produced, and it was then necessary to obtain legal advice, the respondent could have claimed those costs. But that is not what occurred. I would decline to allow the claim for legal advice.
In making the adjustments to which I have referred the respondent’s claim is reduced to $11,703.45.
The respondent claims to be entitled to charge GST on these amounts. The trustee asserts that GST is not to be charged. I think the easiest way to resolve that dispute is to require the trustee to pay any GST lawfully imposed on the reasonable costs of complying with the trustee’s notice to produce.
Finally, it is necessary to deal with the question of costs. The respondent originally sought $20,489.65. I have assessed its reasonable costs at $11,703.45, plus some potential GST.
The respondent initially thought its costs would be in the order of $15,397.24. The break up of that figure appears in a letter dated
21 September 2007, ex JXI-03 to the affidavit of Mr Ivanisevic. The applicant in correspondence asserted that the claim for costs was “excessive in the extreme”. It initially offered $4,000. By its counsel, the trustee submitted that reasonable costs were $7,548.78. The respondent has succeeded in proving an entitlement to greater than this sum.
Given the attitude of the applicant, and having regard to the success of the respondent (in terms of achieving more than the trustee was prepared to allow) I accept that the respondent was forced to come to court to obtain an order fixing its costs. It follows that the applicant trustee should pay the respondent’s costs of and incidental to the determination of the reasonableness of the respondent’s costs, to be taxed.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Wilson FM
Associate: Lynnette Chin
Date: 22 May 2008
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