McKinnon v Pattison (No.2)
[2009] FMCA 696
•19 June 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| McKINNON & ANOR v PATTISON (No.2) | [2009] FMCA 696 |
| BANKRUPTCY – Whether time extended for notice of taxation. |
| Bankruptcy Act 1966 (Cth) ss.33(1)(c), 64ZBA, 162, 167 Supreme Court Act 1986 (Vic) s.101 Penalty Interests Rate Act 1983 (Vic) s.2 Bankruptcy Regulations 1996 (Cth) r.8.09 |
| Aparatne v Tredula VG 7894 of 1998 (North J, unreported 18/12/1998) Vince v Sellars (2004) FMCA 564 |
| First Applicant: | JEANETTE BEVERLY McKINNON |
| Second Applicant: | DONALD NEIL McKINNON |
| Respondent: | PAUL ANTHONY PATTISON |
| File Number: | MLG 369 of 2009 |
| Judgment of: | Phipps FM |
| Hearing date: | 19 June 2009 |
| Date of Last Submission: | 19 June 2009 |
| Delivered at: | Melbourne |
| Delivered on: | 19 June 2009 |
REPRESENTATION
| The Applicants: | Appearing in person |
| Counsel for the Respondent: | Mr M. Black |
| Solicitors for the Respondent: | TurksLegal |
ORDERS
The application filed 6 April 2009 is dismissed.
The Applicant’s pay the Respondent’s costs of the Application to Review fixed at $5,000 and the costs of $4,710 ordered by Registrar Moore on 25 May 2009.
The operation of order 2 be stayed for 30 days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 369 of 2009
| JEANETTE BEVERLY MCKINNON & DONALD NEIL McKINNON |
Applicants
And
| PAUL ANTHONY PATTISON |
Respondent
REASONS FOR JUDGMENT
The applicants Mr and Mrs McKinnon apply for an extension of time in which they can give notice to a taxing officer to have their trustee in bankruptcy costs and expenses taxed. The applicants were made bankrupt by sequestration order made on 26 August 2005. The respondent Mr Pattison is the trustee in bankruptcy.
In December of last year, Mr Pattison, pursuant to s.64ZBA of the Bankruptcy Act 1966 (Cth) set in train the process by which the creditors of the estate might pass a resolution approving the trustees' remuneration without a meeting being held. Under s.162 of the Bankruptcy Act, the remuneration of the trustee may be fixed by resolution of creditors and s.64ZBA provides a process by which that resolution can be passed without the need for a meeting to be held.
There are two creditors, according to Mr Pattison. They are the Commonwealth Bank of Australia and the Australian Taxation Office. There is no doubt about the Commonwealth Bank of Australia as a creditor because it obtained a judgment in the Supreme Court of Victoria on 27 June 2001 for an amount of $222,985.29. By the time a bankruptcy notice was issued on the 10 October 2009, interest had accrued of $59, 009.06. That is interest calculated in accordance with s.101 Supreme Court Act 1986 (Vic) at the rate prescribed by s.2 Penalty Interests Rate Act 1983 (Vic).
The Australian Taxation Office is accepted by Mr Pattison at $20,951. Ms McKinnon, who speaks for both applicants, says that they dispute that amount, but the trustee has accepted it. He has received approval of the resolution approving his remuneration. He has received that approval from both Commonwealth Bank of Australia and the Australian Taxation Office. The amount is $137,000.
On 8 December Mr Pattison sent the applicants, the bankrupts, a letter which contained the summary of his fees. It was a document which had also gone to the creditors. Under r.8.09 Bankruptcy Regulations 1996 (Cth) trustees' remuneration can be taxed. Notice has to be given. The regulation provides:
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.
The taxing officer is defined in the regulation as having the same meaning as s.167 of Bankruptcy Act. Under that section, the taxing officer is a person appointed by the Inspector General in Bankruptcy.
The applicants, the bankrupts, gave notice to the trustee that they wished to have his costs taxed, but they did not give notice to a taxing officer. Annexed to Ms McKinnon's affidavit sworn on 14 May 2009 are emails and correspondence which show that they then learnt through the office of the Inspector General in Bankruptcy or through the Insolvency and Trustee Service of Australia what they should have done. Section 33(1)(c) of the Bankruptcy Act gives the court power to extend any time limited by the act. That power extends to regulations.
The general principles in considering applications for extension of time to do acts under rules or regulations is first to look at the explanation for the delay and secondly to see whether there is any efficacy in granting the order. Mr Black, counsel for the trustee, says that trustee takes no issue on the question of delay. 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. The other interested parties do not want taxation. They have approved the amount.
Exhibited to an affidavit by Mr Pattison of the 12 June 2009 is a summary of the financial position of the estate. The assets are two parcels of real estate, Koorong Swamp and Oddcamps Road Koorumbie via Murtoa in Murtoa, and 166 Bellalan Saleyards Road, Bellalan. Both of those have now been sold. The exhibit sets out a summary of the adjustments to be made, deductions against that sale price, costs and expenses of the sale, costs of repairing the property for sale, adjustments for rates and various other expenses. That results in a net amount of $540,752.82.
There are the further costs incurred prior to the sale, or not as part of the sale process, or adjustments in settlement of the sale. The further costs are $44,021.23. The net amount available to creditors is $496,731.59. Then under the heading Possible Creditor Claims there are these amounts: Commonwealth Bank Judgment Debt $222,985.29, interest applicable to debt up to the date of the bankruptcy notice on 10 October 2003, $59,009.06, estimated judgment debt interest on Commonwealth Bank debt to date $111,000, Australian Taxation Office, $20,951. The trustee’s remuneration and costs are $137,000; the Commonwealth Bank's legal fees, $48,222.74; the trustees' estimated legal fees $40,000, and the Commonwealth Bank of Australia's legal costs for the court proceedings estimated at $300,000. The estimated costs and claims are $939,668.09. The anticipated net deficit is $442,936.50.
Ms McKinnon, on behalf of the applicants, puts it that they want to see the debt reduced as much as possible. Mr Black argues the only people who have a financial interest in reducing the trustee's costs are the creditors. They have approved the trustees' remuneration pursuant to the relevant provision of the Bankruptcy Act.
Mr and Mrs McKinnon dispute the Australian Taxation Office debt. They may well still dispute the Commonwealth Bank debt, but it is the subject matter of a judgment which has gone through the appeal process leading up to dismissal of an application by Mr and Mrs McKinnon to the High Court for special leave to appeal. There can be no argument about the Commonwealth Bank debt of $222,985.29 nor judgment interest on that debt. Although there is no evidence before me that the Commonwealth Bank of Australia's legal costs arising out of that proceeding have been taxed, an estimate by Mr Pattison of $300,000 is a reasonable amount. There was a contested hearing before Byrne J. Although I do not, in this proceeding, have the details it is clear that there was an appeal to the Victorian Court of Appeal. That must have occurred if there was an application for special leave. Then there was an application for special leave to appeal to the High Court. That the Commonwealth Bank incurred costs in the process of $300,000 is a reasonable estimate.
If the Commonwealth Bank amounts are taken, that is the $222,985.29 of the judgment debt, the interest which in round terms is $160,000 and the costs are $300,000 there is an amount not far short of $700,000, which is in excess of the net amount the trustee has available for creditors, $496,731.59. There is no prospect of any return to the applicants. Therefore they have no financial interest in having the trustee’s remuneration taxed and possibly reduced. Those that do have an interest in having the remuneration reduced do not wish to pursue taxation. To the contrary, they have approved the trustee’s remuneration.
There is no evidence before me that taxation would reduce the trustee’s costs, if there is anything charged not in accordance with the relevant scale and not fair and reasonable. I do not need to consider this issue, because the applicants have no interest in taxation. To extend the time to permit them to give notice to the taxing officer for taxation would be futile and serve no useful purpose.
I have been referred by Mr Black to two decisions, Aparatne v Tredula (North J 18 December 1998, VG 7894 of 1998), and a decision McInnis FM, as he then was, Vince v Sellars (2004) FMCA 564. They are both concerned with applications to extend time in different circumstances. North J at [35] described the power to extend time as a broad discretionary power which is unfettered and must be exercised with a view to doing justice between the parties. 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 application before myself is a review of the decision of Registrar Moore on 25 May 2009 dismissing the application. The application is a hearing de novo. The order I make is that the application is dismissed.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Phipps FM
Associate: Paul Moss
Date: 22 July 2009
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