McKinnon v Pattison

Case [2009] FCA 1421

FEDERAL COURT OF AUSTRALIA

McKinnon v Pattison [2009] FCA 1421

PRACTICE AND PROCEDURE – appeal from refusal by Federal Magistrate to disqualify himself – where Federal Magistrate had previously heard proceeding involving appellants –no contested issues of facts or credibility in previous proceeding – no other grounds for disqualification – reasonable observer would not conclude that Federal Magistrate would not bring an unbiased mind to the application

BANKRUPTCY AND INSOLVENCY – taxation of trustee’s remuneration – application for taxation out of time – appeal from decision of Federal Magistrate refusing to extend time pursuant to s 33(1)(c) of the Bankruptcy Act1966 (Cth) – Federal Magistrate erred in solely considering the futility of any extension – no deliberate delay on the part of the appellants – public interest in enabling scrutiny of trustee’s remuneration

HELD – Appeal allowed

Bankruptcy Act1966 (Cth) s 33(1)(c)
Bankruptcy Regulations 1996 (Cth) reg 8.09(1)

McKinnon v Pattison [2009] FMCA 695 referred to
McKinnon v Pattison [2009] FMCA 696 referred to
McKinnon v Commonwealth Bank of Australia [2005] FCA 1898 referred to
Abeyratne v Trkulja (1998) 90 FCR 253 referred to
Vince v Sellers [2004] FMCA 564 discussed
House v The King (1936) 55 CLR 499 referred to
Draffin v Construction, Forestry, Mining and Energy Union [2009] FCAFC 120 applied
Wenkart v Pantzer (No 6) [2003] FCA 1210, referred to
Adsett v Berlouis (1992) 37 FCR 201 referred to
Pantzer v Wenkart (2006) 153 FCR 466 referred to

JEANETTE BEVERLY DAWN MCKINNON and DONALD NEIL MCKINNON v PAUL ANTHONY PATTISON

VID 513 of 2009

MARSHALL J
7 DECEMBER 2009
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 513 of 2009
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

JEANETTE BEVERLY DAWN MCKINNON
First Appellant

DONALD NEIL MCKINNON
Second Appellant
AND:

PAUL ANTHONY PATTISON
Respondent

JUDGE:

MARSHALL J

DATE OF ORDER:

7 DECEMBER 2009

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The appeal is allowed.

2.The orders of the Federal Magistrates Court of Australia of 25 May 2009 in proceeding MLG 369 of 2009 are set aside.

3.The orders of the Federal Magistrates Court of Australia of 19 June 2009 in McKinnon v Pattison [2009] FMCA 696 are also set aside.

4.The appellants’ time within which to request Insolvency and Trustee Services Australia (being the taxing officer pursuant to reg 1.03 of the Bankruptcy Regulations 1996 (Cth) and s 167 of the Bankruptcy Act 1966 (Cth)) to tax the respondent’s claim for remuneration pursuant to reg 8.09 of the Bankruptcy Regulations 1996 (Cth) is extended to the expiry of 28 days after the date of these orders.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


The text of entered orders can be located using eSearch on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 513 of 2009
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:

JEANETTE BEVERLY DAWN MCKINNON
First Appellant

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AGLC
McKinnon v Pattison [2009] FCA 1421
Case
[2009] FCA 1421
Decision Date

CaseChat Overview and Summary

In the case of McKinnon v Pattison, the appellants sought an extension of time to give notice to seek a taxation of the trustee’s remuneration, which was denied by the Federal Magistrates Court. The Federal Court of Australia reviewed the decision and found that the lower court had misapplied its discretion by focusing solely on the futility of the appellants’ application, without considering other relevant factors such as the reason for the delay and the public interest in adhering to statutory time limits. The Federal Court determined that the appellants had provided a reasonable explanation for their failure to comply with the statutory time limit and that the delay was relatively brief, both of which weighed in favour of granting an extension of time.

The court further held that the respondent, who was aware of the appellants’ intention to request a taxation of his remuneration, could not argue that he was prejudiced by the delay. Therefore, the Federal Court exercised its discretion afresh and allowed the appeal, setting aside the orders of the Federal Magistrates Court. The appellants were granted an extension of time to request the taxation of the trustee’s claim for remuneration.

The orders of the Federal Court were to allow the appeal, set aside the orders of the Federal Magistrates Court, and extend the time for the appellants to request the taxation of the trustee’s claim for remuneration to 28 days from the date of the Federal Court's orders.

Orders

Orders of the court

1. The appeal is allowed.

2. The orders of the Federal Magistrates Court of Australia of 25 May 2009 in proceeding MLG 369 of 2009 are set aside.

3. The orders of the Federal Magistrates Court of Australia of 19 June 2009 in McKinnon v Pattison [2009] FMCA 696 are also set aside.

4. The appellants’ time within which to request Insolvency and Trustee Services Australia (being the taxing officer pursuant to reg 1.03 of the Bankruptcy Regulations 1996 (Cth) and s 167 of the Bankruptcy Act 1966 (Cth)) to tax the respondent’s claim for remuneration pursuant to reg 8.09 of the Bankruptcy Regulations 1996 (Cth) is extended to the expiry of 28 days after the date of these orders.

Note:

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

MARSHALL J
In early April 2009, the appellants applied to the Court below to extend the time for them to give notice to seek to have a taxation of the trustee’s remuneration.The judgment below Counsel for the respondent did not rely on any question of delay on the part of the appellants. At [8] of the Second Judgment, Phipps FM said:The argument which is put is that to order a taxation of costs here would be futile because it can have no benefit for the applicants, the bankrupts, because there will not be any money left over in this estate on any view, even if trustee’s remuneration is ignored. At [13], Phipps FM noted that there was no prospect of any return of funds to the appellants and said that “[t]herefore they have no financial interest in having the trustee’s remuneration taxed and possibly reduced”. His Honour went on at [14] to observe that there was no evidence before him that taxation would reduce the trustee’s costs. His Honour therefore concluded at [15] that:Justice is done between the parties if the application is refused because there is nothing to be gained by extending the time for giving notice for taxation and so allowing a taxation to proceed. The power to extend time under s 33(1)(c) of the Act is a broad discretionary power. It is unfettered and must be exercised with a view to doing justice between the parties; see Abeyratne at 262 and see also Vince v Sellers [2004] FMCA 564 at [6]. In order to evaluate whether it is just to grant an extension of time it is necessary to consider all the factors which militate for and against an extension in the circumstances of the particular case. Examples of relevant factors which may need to be taken into account include: the reason why the applicant did not perform the required act within the statutory time limit, the prejudice to other parties of allowing an extension of time and the public policy interest in allowing or refusing an application to extend time. In the exercise of his discretion pursuant to s 33(1)(c) his Honour focused solely on the question of whether the grant of an extension of time would be futile as it would not improve the financial circumstances of the appellants. His Honour did not appear to consider any other relevant factors in the exercise of his discretion. In denying an extension of time, on the ground of “futility” alone, his Honour erred in the exercise of his discretion by allowing one matter to guide the exercise of that discretion to the exclusion of other material considerations; see, by way of analogy, House v The King (1936) 55 CLR 499 at 504–5 per Dixon, Evatt and McTiernan JJ. It can be seen by the ensuing discussion at [33]–[42] below that “futility” was not the sole criterion for consideration. The discretion in the Court below having miscarried, it is appropriate that this Court should exercise that discretion afresh; see Draffin v Construction, Forestry, Mining and Energy Union [2009] FCAFC 120 at [5] per Goldberg, Jacobson and Tracey JJ.Consideration of the exercise of the discretion

Ratio Decidendi

Legal Principle Established

Established by: MARSHALL J

The discretion in the Court below having miscarried, it is appropriate that this Court should exercise that discretion afresh; see Draffin v Construction, Forestry, Mining and Energy Union [2009] FCAFC 120 at [5] per Goldberg, Jacobson and Tracey JJ.Consideration of the exercise of the discretion In determining whether to grant the extension of time requested by the appellants it is necessary to take into account a number of factors, in addition to the futility factor. First, the appellants’ failure to lodge their notice for taxation within the required time period does not appear to be due to deliberate delay on their part. The appellants were dissatisfied with the claim for remuneration by the trustee and gave early notice to him that they would seek a taxation of the claim. The appellants attempted to lodge a notice within the requisite time and appear to have made a genuine mistake about whom the notice should have been sent. They did not realise that they needed to apply to ITSA. The fact the appellants have provided a reasonable explanation as to why they failed to comply with the requirements of reg 8.09(1) is a matter which weighs in favour of granting an extension of time. Second, the time lapse between the date by which the appellants should have lodged their notice under reg 8.09(1) and the date by which they applied for an extension of time under s 33(1)(c) was only about three months. The appellants acted promptly once they became aware they had not lodged a notice in conformity with the requirements of reg 8.09(1) and could apply for an extension of time to comply with the terms of that provision. The fact that the delay was relatively brief and was not exacerbated by the appellants’ conduct again weighs in favour of granting the extension. The respondent stated before Phipps FM and at the hearing of this appeal that he takes “no issue on the question of delay”. The third factor which needs to be considered is that there is a public interest in ensuring that the time limits set out in the Regulations are adhered to. As has been noted 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; see Wenkart v Pantzer (No 6) [2003] FCA 1210 at [34] per Lindgren J. This would ordinarily militate against the granting of an extension of time. However, in the present case, the respondent was aware prior to the expiry of the statutory time limit in reg 8.09(1) that the appellants intended to request a taxation of his remuneration. The respondent cannot contend that he was surprised by the appellants’ request to be allowed to lodge a notice for taxation after the 28 day period. The respondent has also not argued that he made any arrangements relying on the fact that the appellants failed to lodge a notice in conformity with reg 8.09 which will be disrupted if an extension of time is granted. Consequently, this argument is of little weight in the context of this case.