Owens v Lofthouse - [2007] FMCA 238

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OWENS v LOFTHOUSE

[2007] FMCA 238

BANKRUPTCY – Interim Injunction against Trustee – attempt to delay taxation of Trustee’s costs – whether power of Court to grant injunction – Injunction power pursuant to s.30 of the Bankruptcy Act 1966 – whether necessary for the purpose of giving effect to (the Bankruptcy Act) – alternative review procedure of taxation pursuant to s.167(8) of the Bankruptcy Act – whether Administrative Decisions (Judicial Review) Act applies – application dismissed.

Bankruptcy Act 1966, ss.30, 167
Administrative Decision (Judicial Review) Act 1977

Hepburn; Ex parte Deputy Commissioner of Taxation (Unreported FCA Hill J, 10 July 1989)

Applicant Debtor:

SUE OWENS

Respondent Trustee:

DAVID LOFTHOUSE

File number:

MLG 1436 of 2004

Judgment of:

McInnis FM

Hearing date:

8 February 2007

Delivered at:

Melbourne

Delivered on:

8 February 2007

REPRESENTATION

Applicant:

In person

Counsel for the Respondent:

Mr M O'Brien

Solicitors for the Respondent:

Aitken Walker & Strachan

ORDERS

The Interim Application filed 23 October 2006 be dismissed.
The Applicant Debtor shall pay the Respondent Trustee's costs in relation to the Interim Application to be taxed in default of agreement pursuant to the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLG 1436 of 2004

SUE OWENS

Applicant Debtor

And

DAVID LOFTHOUSE

Respondent Trustee

REASONS FOR JUDGMENT

The application before this court is an interim application filed on 23 October 2006 by Ms Owens (the Debtor) against David Lofthouse, the trustee in bankruptcy (the Trustee). The interim application seeks interim orders as follows:
“1.The taxation of costs of the trustee be adjourned to a date after the determination of the applications currently before the court.
2.The trustee provide an affidavit of documents and inspection of all records in his possession.”
The Debtor relies upon affidavits affirmed by her on 23 October 2006 and on 4 February 2007. The Trustee essentially seeks to rely upon an affidavit of Richard John Cauchi who is duly authorised by the respondent to make the affidavit. Mr Cauchi's affidavit sworn 7 February 2007 sets out in brief form the relevant chronology, to which I shall refer presently.
There are a number of preliminary issues however that arise for the court in dealing with this application. The first and most obvious is the basis upon which the interim order is sought. The Applicant has indicated that she seeks to rely upon s.30 of the Bankruptcy Act 1966 (the Bankruptcy Act) and the powers of the court to grant injunctive relief.
The orders sought which I have set out earlier in this judgment however do not make it clear that an injunction is actually sought against the Trustee; rather the order sought is that a taxation of the Trustee’s costs be adjourned. To understand the nature of that application it is necessary to appreciate that at the request of the Debtor the Insolvency Trustee Service of Australia has had appointed a taxing officer, Ms Harris, to undertake a taxation of the costs of the Trustee for a period of approximately three months.
It appears from the affidavit material that Ms Harris, upon being appointed on 4 April 2006, has then proceeded to hold directions in relation to the taxation and indeed has made certain orders on 4 December 2006. Those orders referred to in the affidavit of Mr Cauchi include the following:
“1.Ms Owens to file and serve specific particularized objections on or before 19 January 2007, in default of which the taxation will proceed solely on the basis of objections raised by Ms Owens in her letter of 1 August 2006.
2.In relation to objections 1 and 2 raised in Ms Owens' letter of 1 August 2006, I hold the bill of costs is in a form capable of being taxed.
3.The taxation be adjourned to Tuesday, 13 February 2007 at 10 am and Monday, 19 February 2007 at 10 am, such taxation to be conducted at the offices of CJL Partners, Level 3, 180 Flinders Street, Melbourne, Victoria.
4.The application by Ms Owens to inspect the file prior to the preparation of objections is denied.
5.Ms Owens to pay the Trustee's costs of today's directions hearing on a party and party basis, irrespective of the final award on costs in this proceeding.”
It is further relevant in considering the preliminary issues to note according to the affidavit material that there has been correspondence passing between the parties which may be relevant to these proceedings.
Ultimately, it appears that the taxing officer has provided reasons for the decision and the orders made on 4 December 2006. In part, it is also noted that the taxing officer refers to receiving this current interim application together with what is described as "the short affidavit sworn by the applicant".
Hence, in trying to understand the nature of this interim application and doing the best I can, it seems that in reality what the Debtor is seeking to do is to effectively call upon the court to exercise its injunctive powers to perhaps restrain the Trustee from further participating in the taxation of costs to be undertaken by Ms Harris. By doing that, the Debtor indicates that that would effectively result in the scheduled taxation now to commence on 13 February 2007 effectively being adjourned.
There are a number of issues that were raised by the court which, in my view, are problematic in this application. The first, as I have indicated, is the question of what power and what orders are sought to be made pursuant to any relevant power in this instance. If what is sought is an injunction against Ms Harris, then clearly Ms Harris should be named as a Respondent.
If what is otherwise sought is effectively an attempt to interfere with the scheduling of a taxation by an appointed taxing officer by mean of the exercise of the court's injunctive power pursuant to s.30 of the Bankruptcy Act 1966 (the Bankruptcy Act) as against the Trustee to thereby effectively prevent indirectly the taxation from proceeding, then, in my view, the application is misconceived.
Section 30 of the Bankruptcy Act certainly provides for this court to exercise a power to grant injunctions. However, it is relevant to note, the emphasised words of s.30 which are appropriate in this application and that the court's power to grant injunctions which is given to the court pursuant to the Bankruptcy Act is a power given to the court as follows:
“30(1) The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
(2) The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.
(3) If in a proceeding before the Federal Court under this Act a question of fact arises that a party desires to have tried before a jury, the Federal Court may, if it thinks fit, direct the trial of that question to be had before a jury, and the trial may be had accordingly in the same manner as if it were the trial of an issue of fact in an action.
(5) Where:
(a) a bankrupt, a debtor or any other person has failed to comply with an order or direction of a Registrar, or with a direction or requirement of an Official Receiver or trustee, under this Act; or
(b) a trustee has failed to comply with an order, direction or requirement of a Registrar, or with a requirement or request of the Inspector‑General, under this Act;
the Court may, on the application of the Registrar, Official Receiver, trustee or Inspector‑General, as the case requires:
(c) order the person who has failed to comply with the order, direction, requirement or request, as the case may be, to comply with it; or
(d) if it thinks fit, make an immediate order for the committal to prison of that person.
(6) The power conferred on the Court by subsection (5) is in addition to, and not in substitution for, any other right or remedy in respect of the failure to comply with the order, direction, requirement or request, as the case may be.” (emphasis added)
Hence, in my view, the court when considering an application of this kind, even if interpreted as an application for an injunction, which

I regard as a generous interpretation, and even if the application could be brought against the Trustee as a Respondent and not against the taxing officer, and after making due allowance for those assumptions, the court is still faced with the issue of considering whether or not this injunctive power, could properly be regarded as an injunction which the court would consider necessary for the purposes of carrying out or giving effect to this act in any such case or matter.
In considering the word "necessary" it is important to note that an applicant needs to show that the injunctive relief is necessary in the interests in justice, having regard to the purposes of the bankruptcy law, including such things as the preservation of assets and the property of the bankrupt so the assets may be distributed rateably amongst creditors (see Hepburn; Ex parte Deputy Commissioner of Taxation (Unreported FCA Hill J 10 July 1989) (Hepburn).
In the present case it is argued by the Debtor that the relief sought, if it be injunctive relief, is relief of a kind that is appropriate for the court to exercise under s.30 of the Bankruptcy Act. As I understand it, the taxation procedure, though instigated by the Applicant, is now sought to be delayed on the basis of pending proceedings in this court now fixed for final hearing on 19 March 2005 whereby the Trustee is seeking orders in relation to certain properties which the Trustee is seeking to argue are properly part of the bankrupt estate.
That matter is a separate and discrete matter from the taxation which is now scheduled for hearing before a properly‑appointed taxation officer to be heard on 13 February 2007. In my view, applying the relevant authority of the decision of Hill J in Hepburn and having regard to the meaning of s.30 and in particular consideration of what is necessary for the purpose of carrying out or giving effect to this Act in any case or matter, I do not regard the orders sought before me today as falling within the ambit of the court's powers pursuant to s.30 of the Bankruptcy Act.
It is not necessary for the court to interfere in a process instigated by the Applicant, attended to by way of directions by the appropriately‑appointed taxing officer who will consider the matters raised by way of objections clearly evident in the affidavit material before the court.
This is indeed a matter appropriately to be dealt with by the taxing officer who will be in the best position to make an assessment of the objections and indeed also be in a position to consider, to the extent that it is relevant, any further applications by either party to adjourn the taxation process. There is no prohibition on the Debtor from seeking a further adjournment of the taxation nor seeking to bring to the attention of the taxing officer other matters in support for the further application for an adjournment.
I have also considered also in this judgment the other options which may be available to the Applicant. It is clear to me, as I have indicated, that it is not appropriate for the court to exercise its powers pursuant to s.30 of the Bankruptcy Act. I am strengthened in that conclusion by noting in passing that there are indeed other provisions in the Bankruptcy Act which adequately apply in circumstances of this kind; in particular, s.167 of the Bankruptcy Act provides for taxation of costs and specifically provides as follows:
“(8)A person interested may appeal to the Court from a decision of the taxing officer in allowing or disallowing a bill of costs or bill of charges or an item in such a bill.”
In this case it is clear to me that, if the taxation proceeds in a manner which either party chooses to challenge, then either party has the right under that subsection to bring an application to the court. In bringing an application to the court under that provision, it is clear to me the part of the material which may be raised may well be an application seeking to review any decision by the taxing officer, including a decision refusing an application for an adjournment.
Nevertheless, it is equally clear to me that that provision provides an adequate process by which the taxing officer's decisions may be reviewed by this court.
It has also been noted that there may, theoretically, be an option to consider review of any decision to refuse an adjournment by the taxing officer pursuant to provisions of the Administrative Decision (Judicial Review) Act 1977 ("the ADJR Act").
In my view, where there is an alternative enactment, and specifically in this case s.167 of the Bankruptcy Act which provides, as I have found, an appropriate remedy for both parties, then it is not appropriate to consider an application under any provision of the ADJR Act. To that extent, no criticism therefore is made of the Debtor in seeking to invoke the powers this court has under s.30 of the Bankruptcy Act, as

I am satisfied that, apart from the provisions of s.167 of the Bankruptcy Act, in reality there are probably few other alternative avenues open to the Applicant.
However, this court must deal with the application that is before it. As I have indicated, I am satisfied that the interim application is misconceived. I am satisfied that on the face of it the interim application does not seek injunctive relief of the kind referred to by the applicant in support of her application.
The Applicant during the course of submissions at one point indicated to the court that she was "asking the court to fix what is fair and reasonable and whether there should be any costs paid at all to the trustee". The Applicant was then relying upon the Bankruptcy regulations which provide for fair and reasonable costs and disbursements for the Trustee.
This application does not in fact seek to involve the court in that process, and nor should it, as there is ample provision, and indeed an adequate process in place, instigated by the Applicant where the taxation of costs can be dealt with in an appropriate manner by a properly‑appointed taxing officer. I am satisfied that process is in place and I can see nothing in the material before me which would justify this court in exercising its power, indeed if it has a power in this instance, pursuant to s.30 of the Bankruptcy Act.
After delivery of my oral reasons for judgment the Debtor, quite properly, brought to the court's attention that the interim application seeks a further order that the Trustee provide an affidavit of documents and inspection of all records in his possession. No basis for that application has been suggested. It may well be an application that could be brought in other proceedings as a general application for discovery. However, as a second order sought on this interim application and given that I am not prepared to make the substantive order in this application, it is not relevant for the court to further consider the other order sought in relation to discovery.
It follows for the reasons given that the application filed 23 October 2006 should be dismissed.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 8 February 2007