Mailau v Kennards Hire Pty Ltd (No.2)
[2015] FCCA 3232
•4 December 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MAILAU v KENNARDS HIRE PTY LTD (No.2) | [2015] FCCA 3232 |
| Catchwords: BANKRUPTCY – Trustees – remuneration – whether Court has power to fix trustee’s remuneration. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30(1)(b), 153B, 154(1)(b), 154(2), 162, 162(1), 162(4), 178 |
| Pascoe v Liprini & Anor [2013] FCCA 1958 Re Walker [2005] NSWSC 557; (2005) 221 ALR 320 Young, In the matter of Macryannis [2011] FCA 1272 |
| Applicant: | TEVITA MAILAU |
| Respondent: | KENNARDS HIRE PTY LTD (ACN 001 740 727) |
| File Number: | SYG 1214 of 2014 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 20 February 2015 |
| Delivered at: | Sydney |
| Delivered on: | 4 December 2015 |
REPRESENTATION
| Solicitors for the Applicant: | Mr D Robens of Kamy Saeedi Law appeared by telephone |
| Counsel for the Respondent: | Mr D Robertson |
| Solicitors for the Respondent: | BBW Lawyers |
| Solicitor for the Trustees: | Ms B Saini |
ORDERS
The applicant (Tevita Mailau), pay the respondent creditor’s (Kennards Hire Pty Ltd) costs of the application filed on 1 October 2014.
The costs referred to in order 1 are set in the amount of $13,900.
Tevita Mailau’s application that Kennards Hire Pty Ltd pay the costs of the application filed on 1 October 2014 is dismissed.
Tevita Mailau pay the costs of:
(a)the application for costs Kennards Hire Pty Ltd filed on 3 February 2015; and
(b) the application for costs Tevita Mailau filed on 2 February 2015.
The application in a case filed by Andrew Aravanis and Ronil Prakash Roy is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1214 of 2014
| TEVITA MAILAU |
Applicant
And
| KENNARDS HIRE PTY LTD (ACN 001 740 727) |
Respondent
REASONS FOR JUDGMENT
Introduction
On 18 December 2014 I made an order that the bankruptcy of Mr Mailau, the applicant, be annulled pursuant to s.153B of the Bankruptcy Act 1966 (Cth) (Act).[1] I also granted the parties liberty to apply for an order for costs. Both Mr Mailau and the respondent (Kennards) have applied for orders for costs. In addition, the trustees seek an order that Mr Mailau pay to them $10,525, being fees the trustees claim they earned from 20 August 2014 to 18 December 2014.
[1] Mailau v Kennards Hire Pty Ltd [2014] FCCA 2959
The respective submissions in support of cost orders
Kennards seeks an order that Mr Mailau pay all of its costs, and that he pay Kennard’s costs on an indemnity basis. Kennards relies on two matters. First, Mr Mailau misconducted himself. Kennards submitted that his application was based on testimony which I did not accept, and my not accepting Mr Mailau’s evidence was tantamount to a finding that Mr Mailau lied. Second, based on the findings I made, it was Mr Mailau’s conduct that compelled Kennards to incur costs in resisting the application for an annulment. Third, although Kennards did not successfully resist the making of the annulment order, it substantially succeeded on the grounds on which it resisted Mr Mailau’s claim for annulment. Kennards further submits that it was reasonable for it not to accept that Mr Mailau was solvent. Mr Mailau did not provide to the trustees a statement of affairs; and the creditors report on which to a large extent I relied in finding Mr Mailau was solvent had been prepared without the benefit of any statement of affairs. Further, given I did not accept Mr Mailau’s evidence, it was not unreasonable for Kennards not to accept any part of Mr Mailau’s evidence, including evidence that was relevant to his insolvency.
Mr Mailau, on the other hand, not only submits he should not pay Kennard’s costs; he submits that Kennards should pay his costs. Mr Mailau submits he did not engage in any misconduct; my not accepting his evidence does not entail a finding of dishonesty. Mr Mailau also submits Kennards acted unreasonably to approaches Mr Mailau claims he made to Kennards. I was referred to correspondence between Mr Mailau’s solicitor, Mr Robens, and the solicitor for Kennards. First, there is the email Mr Robens sent to the solicitor for Kennards on 15 September 2014 stating that Mr Mailau disputed having being served with the Local Court statement of claim on the basis of which default judgment had been entered against him. Second, there is a letter dated 2 October 2014 Mr Robens sent to Kennards’ solicitors informing them that Mr Mailau had filed a notice of motion with the Balmain Local Court to set aside the default judgment. Third, there is the letter dated 3 October 2014 from Kennards’ solicitor to Mr Robens inviting Mr Mailau to withdraw his application for annulment and his motion to set aside the default judgment. Fourth, there is an email Mr Robens sent to Kennards’ solicitor on 13 November 2014 where Mr Robens takes issue with Kennards having served the creditor’s petition on an address without seeking confirmation from Mr Mailau. Fifth, there is a letter dated 28 November 2014 sent by Mr Robens to Kennards’ solicitor communicating that Mr Mailau was willing to pay $21,000 in full settlement of Kennards’ and the trustees’ costs. Mr Mailau also submits Kennards acted unreasonably in contesting Mr Mailau’s claim that he was solvent.
Findings
I do not accept Kennards’ submission that I made findings to the effect, or which necessarily implied, that Mr Mailau had lied in his affidavits and in the evidence he gave before me at the hearing. My not accepting Mr Mailau’s evidence was no more than the usual outcome of a court deciding between conflicting testimonial accounts of events. Mr Mailau, therefore, has not misconducted himself in bringing and conducting his application for an order annulling his bankruptcy.
I do not accept Mr Mailau’s submission that Kennards acted unreasonably to approaches Mr Mailau, through Mr Robens, made. In his correspondence, Mr Robens communicated a position about Mr Mailau’s not having been served which I did not accept. It was not unreasonable for Kennards not to accept Mr Mailau’s claims that he had not been served. Further, Kennards’ not accepting the offer of $21,000 was also not unreasonable. The amount was offered to pay the judgment debt, Kennards’ costs, and the trustees’ costs. That offer was hardly capable of being accepted, given it did not attempt to differentiate between the judgment debt, Kennards’ costs, and the trustees’ costs.
I do not accept Kennards acted unreasonably contesting Mr Mailau’s claim he was solvent. Although there was material on which I ultimately relied for concluding Mr Mailau was solvent, Mr Mailau had not prepared a statement of affairs; and his claim he was solvent was at least in part based on his evidence which, given I did not accept much of it, it was reasonable for Kennards not to accept. In any event, even if Kennards were to have accepted Mr Mailau were solvent, it is unlikely the matter would have been resolved by consent. Mr Mailau sought a review of the Registrar’s decision in addition to seeking an order annulling his bankruptcy. It is likely Mr Mailau would have submitted, as he in fact did, that the Court should set aside the sequestration order rather than make an order annulling his bankruptcy, even if Kennards were to have accepted Mr Mailau was solvent. Given that that would have necessitated the setting aside of the costs order that was made in favour of Kennards when the sequestration order was made, it is unlikely Kennards would have consented to that course. Thus, it is likely there would have been a hearing in any event even if Kennards had conceded Mr Mailau was solvent.
Given these findings, I am of the opinion that Mr Mailau should be ordered to pay Kennards’ costs of his application for an annulment, but on a party and party basis. Kennards’ actual costs and disbursements (including counsel’s fees) total $19,862.15. In my opinion, a fair estimate of Kennards costs assessed on a party and party basis would be 70% of that amount, namely $13,903.50. I propose, therefore, to order that Mr Mailau pay Kennards’ costs on a party and party basis set in the amount of $13,900.
Trustees’ application
In an application in a case filed on 10 February 2015, the Trustees seek three orders. The first is as follows:
Pursuant to section 154(1)(b) of the Bankruptcy Act 1966, the Trustees may apply the property of the Respondent still vested in the Trustees in payment of the costs, charges and expenses of the administration of the bankruptcy, including remuneration and expenses of the Trustees, totalling $10,525.00 plus the costs of this application.
Subsection 154(1)(b) of Act provides:
(1)If the bankruptcy of a person (in this section called the former bankrupt) is annulled under this Division:
.. .
(b) the trustee may apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee.
Subsection 154(1)(b) of the Act in effect provides that the property of the bankrupt that was vested in the trustee on the making of a sequestration order and which was vested as at the day on which the bankruptcy was annulled remains vested in the trustee for the purpose of the trustee applying that property in payment of the administration of the bankruptcy, including the remuneration and expenses of the trustee. To the extent, therefore, that s.154(1)(b) of the Act so provides, there is no need and, therefore, there is no utility in the Court in effect declaring that the property of Mr Mailau that was vested in the Trustees on the day a sequestration order was made against the estate of Mr Mailau, and which was vested in the Trustees on the day the bankruptcy was annulled, remains vested in the Trustees for the purpose of their applying that property towards their costs, charges, and remuneration.
The Trustees, however, seek more than a declaration that they are entitled to apply property of Mr Mailau that remains vested in them; they seek a declaration they are entitled to apply property that remains vested in them to pay costs and expenses of the administration of Mr Mailau’s bankruptcy, including the Trustees’ remuneration, in the amount of $10,525. That assumes the Court has jurisdiction to fix the Trustee’s remuneration, and that the Court should exercise its jurisdiction by fixing the Trustees’ expenses and remuneration in the amount of $10,525.
The remuneration of trustees in bankruptcy is regulated by s.162 of the Act . Subsection 162(1) provides that a trustee’s remuneration may be fixed, from time to time, by resolution of the creditors or, if the creditors so resolve, by the committee of inspection. If a trustee’s remuneration is not fixed by resolution of the creditors or by the committee of inspection, the matter is governed by s.162(4) of the Act. That subsection provides that the trustee may, in the circumstances prescribed by the Bankruptcy Regulations 1996 (Cth) (Regulations), make an application, in accordance with the Regulations, to the Inspector General for the Inspector General to decide the trustee’s remuneration. The relevant regulations are reg.8.09, reg.8.10, and reg.8.11 of the Regulations.
The current scheme for the remuneration of trustees, and the background to that scheme, were considered in some detail by Stone J in Young, In the matter of Macryannis.[2] The upshot of her Honour’s discussion is that the Court does not have jurisdiction under s.162 of the Act to fix a trustee’s remuneration, but the Court does have power under s.30(1)(b) and s.178 of the Act to do so. However, that power is generally to be exercised where “the prescribed statutory mechanism for deciding quantum proves unworkable in practice”.[3] The position was more recently stated by Judge Raphael in Pascoe v Liprini & Anor as follows:[4]
[2] [2011] FCA 1272 at [148]-[170]
[3] [2011] FCA 1272 at [165] citing a passage from the reasons for judgment of Barrett J in Re Walker [2005] NSWSC 557; (2005) 221 ALR 320 at [6]
[4] [2013] FCCA 1958 at [11]
The trustee made reference to a decision of Driver FM as his Honour then was in McDonald v Sanders [2007] FMCA 649. His Honour considered the authorities including Patterson (as trustee of the bankrupt estate of Bellin) v Bellin [2000] FCA 1167 per Goldberg J, Dare, Jefferson v Official Trustee in Bankruptcy [2000] FCA 990, Brake v Townsend [2006] FCA 1156 per Greenwood J and Re Walker and Anor (as liqs of One.Tel Ltd) (in liq) [2005] NSWSC 557; [2005] 221 ALR 320 per Barrett J noting at [20] and [21] of Driver FM’s Judgment:
“[20] Barrett J concluded (at [33]) that if it were to be ultimately shown that the statutory means to set the liquidator’s remuneration were unworkable the parties could apply to the court to itself determine the quantum of remuneration pursuant to s.511(1)(a).
[21] I draw the following conclusions from the authorities:
a) the Court has no power pursuant to s.162(4) of the Bankruptcy Act to fix the remuneration of a trustee. However, the Court does have power to assess and determine a trustee’s remuneration pursuant to ss.30 and 178 of the Bankruptcy Act; and
b) the exercise of the Court’s power to intervene is only enlivened when the prescribed statutory mechanism for dealing with a trustee’s remuneration proves unworkable.”
There is nothing before me that suggests the prescribed statutory mechanism for dealing with the Trustees’ remuneration has proved or will prove unworkable. I do not propose, therefore, to make an order to the effect of the first order the Trustees seek in their application in a case.
The second order the Trustees seek is:
Pursuant to section 154(2) of the Bankruptcy Act 1966, if the property of the Respondent referred to in order 1 above, is insufficient to meet the costs, charges and expenses of the Trustees, the amount of the deficiency is a debt due by the Respondent to the Trustees and is recoverable by the Trustees.
This proposed order reflects that which is provided by s.154(2) of the Act. Given that the Act already provides for what the Trustees seek by this order, there would no utility in the Court making the order the Trustees seek.
The third order the Trustees seek is:
Alternatively, the Respondent pay the Trustees the costs, charges and expenses of the administration of the bankruptcy, including remuneration and expenses of the Trustee, totalling $10,525.00 plus the costs of this application.
Given there is nothing before me that suggests the prescribed statutory mechanism for dealing with the Trustees’ remuneration has proved or will prove unworkable, I do not propose to make an order to the effect of this order.
The Trustees’ application, therefore, must be dismissed.
I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 4 December 2015
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