Pascoe v Liprini
[2013] FCCA 1958
•26 November 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PASCOE v LIPRINI & ANOR | [2013] FCCA 1958 |
| Catchwords: BANKRUPTCY – Trustees – Trustee’s costs and charges – where creditors decline to approve costs rendered on a particular basis – whether Trustee is entitled to request taxation on that basis or must fall back on default option contained in Regulations at time of his appointment. |
| Legislation: Bankruptcy Act 1966, ss.162(1), 162(4) Federal Circuit Court (Bankruptcy) Rules 2006 |
| Dare (as trustee in bankruptcy of Doolan) v Doolan [2003] FCA 1451 Patterson (as trustee of the bankrupt estate of Bellin) v Bellin [2000] FCA 1167 Jefferson v Official Trustee in Bankruptcy [2000] FCA 990 Brake v Townsend [2006] FCA 1156 Re Walker and Anor (as liqs of One.Tel Ltd) (in liq) [2005] 221 ALR 320 McDonald v Sanders [2008] FMCA 1341 |
| Applicant: | SCOTT DARREN PASCOE |
| First Respondent: | KEVIN LIPRINI |
| Second Respondent: | ALLAN STEPHEN LIPRINI |
| File Number: | SYG 66 of 2010 |
| Judgment of: | Judge Raphael |
| Hearing date: | 18 November 2013 |
| Date of Last Submission: | 18 November 2013 |
| Delivered at: | Sydney |
| Delivered on: | 26 November 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr B Skinner |
| Solicitors for the Applicant: | Sally Nash & Co |
| Counsel for the Respondent: | Mr P M Barham |
| Solicitors for the Respondent: | Collas Moro Ross |
ORDERS
Application dismissed.
Applicant to pay the Respondent’s costs to be taxed if not agreed pursuant to the Federal Circuit Court (Bankruptcy) Rules 2006.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 66 of 2010
| SCOTT DARREN PASCOE |
Applicant
And
| KEVIN LIPRINI |
First Respondent
| ALLAN STEPHEN LIPRINI |
Second Respondent
REASONS FOR JUDGMENT
Scott Darren Pascoe is the former trustee of the bankrupt estate of Allan Stephen Liprini. He seeks an order from the court relating to his fees for work undertaken whilst he was trustee and before his removal. The form of orders sought by Mr Pascoe are found in the interim application filed on 9 September 2013:
“2.The remuneration, charges and expenses of the administration of Scott Darren Pascoe, the former Trustee of the property of Allan Stephen Liprini, a bankrupt, be taxed by a Registrar of the Court in accordance with Part 8 Division 4 of the Bankruptcy Regulations, with a view to determining the remuneration, costs and expenses of Scott Darren Pascoe pursuant to s30 of the Bankruptcy Act 1966 (Cth) for the period of 16 January 2012 to 30 November 2012 together with is remuneration, costs and expenses of this Application at the rates and amounts set out in his remuneration report dated 10 December 2012.
3.Alternatively, pursuant to Rule 18.01 of the Federal Circuit Court Rules 2001 (Cth) and s30 of the Bankruptcy Act, the remuneration, costs, charges and expenses of Scott Darren Pascoe, the former Trustee of the property of Allan Stephen Liprini, a bankrupt, be referred to a Registrar of the Court for investigation, report and recommendation, having regard to the terms of Regulation 8.09 of the Bankruptcy Regulations, with a view to the Court fixing the remuneration of Scott Darren Pascoe pursuant to s30 of the Bankruptcy Act 1966 (Cth) for the period of 16 January 2012 to 30 November 2012 together with his remuneration, costs and expenses of this Application at the rates and amounts set out in his remuneration report dated 10 December 2012.”
In the application a further order [4] was sought which was not argued and orders for costs were also sought.
During the time that Mr Pascoe was trustee of the bankrupt estate he submitted three accounts to the creditors for approval. The accounts were based upon the trustee’s stated hourly rate. After his removal as trustee Mr Pascoe submitted a final bill for approval pursuant to s.162(1) of the Bankruptcy Act 1966 (Cth)[1]:
“162Trustee's remuneration-general
(1) Subject to section 161B, the remuneration of the trustee of the estate of a bankrupt may be fixed, from time to time, by resolution of the creditors or, if the creditors so resolve, by the committee of inspection.”
[1] “Act”
This account did not receive the approval of the creditors which brought into operation s.162(4). The relevant wording of s.162(4) was the wording that applied on 3 September 2010 when Mr Pascoe was appointed. At that time the wording of s.162(4) was:
“162(4)Where the remuneration of the Trustee is not fixed by the creditors or the Committee of Inspection, the Trustee is to be remunerated as prescribed by the Regulations.”
At that time the relevant Regulation was Reg.8.08 which provided:
“For the purposes of sub-s.162(4) of the Act, the remuneration of a trustee is to be:
(a) In accordance with the scale of charges that is:
(i) set out in the IPAA Guide to Hourly Rates published by the Insolvency Practitioners Association of Australia;
(ii) Applicable to the work to be remunerated; and
(b) At the level of 85% of those charges.”
Mr Pascoe argues that notwithstanding this regulatory regime he is entitled to ask the court to make orders which would allow the taxation of the trustee’s costs on the scale previously approved by the creditors rather than on the scale indicated in the Regulations. He notes that on 1 December 2010 amendments to the Act and Regulations came into effect which removed the default procedure contained in Regulation 8.08 as it applied to this estate. He notes that in the Explanatory Memorandum to the Bankruptcy Legislation Amendment Bill 2010 at paragraph 32 it was stated:
“Item 12 will repeal subsection 162(4) which currently provides an entitlement for a Trustee to be remunerated as prescribed by the Regulations where the remuneration has not been fixed by creditors of the Committee of Inspection. Regulation 8.08 provides for a default remuneration scale based on the IPAA Guide to hourly rates published by the Insolvency Practitioners Association of Australia. The IPAA last issued that guide on 18 June 1999 and does not intend to revise or reissue it. The use of a default scale has been judicially criticised on the basis that it undermines the effective price competition.”
The IPAA scale was abolished in 2001. Mr Pascoe argues that the rates there contained are severely out of date but he puts that only as a submission and no evidence has been called to indicate that remuneration paid at 85% of the rate would not indemnify the trustee for the work done on behalf of the estate. In Dare (as trustee in bankruptcy of Doolan) v Doolan [2003] FCA 1451[2] Kiefel J considered the statutory scheme as it then stood. Her Honour noted at [17] that s.162 in its then form referred only to remuneration being fixed by creditors or by regulation and then stated:
“[18]It is of some importance that the new statutory regime provides for the automatic application of the rates of remuneration prescribed by regulation where creditors have not fixed remuneration and, it would follow, where it is not intended to seek such a resolution.”
[2] “Dare”
In that case the bankrupt sought to have some input into the basis for remuneration but her Honour noted at [22]:
“[22]There is nothing in the statutory provisions which would entitle a creditor to deny or contest a trustee’s decision to claim remuneration under s 62(4).”
The applicant says at [11] of his submissions:
“[11]In lieu of the use of the defunct Scale, the applicant seeks an order of the kind made by Justice Moore in Maxwell-Smith & Maxwell-Smith v S & E Hall Pty Ltd. On 8 June 2007 Justice Moore made the following order:-
1.The costs, charges and expenses of the administration of the former bankrupt estate of Eugene and Inge Maxwell-Smith, including the remuneration and expenses of the Trustee, be taxed by a Registrar of the Court in accordance with Part 8 Division 4 of the Bankruptcy Regulations.”
He continues at [12]:
“[12]The underlying reason for the order made by Justice Moore was that the former bankrupt refused to seek a taxation of the former trustee’s costs. The approach and order of Moore J in the Maxwell-Smith matter was later reviewed by Nicholas J. in Maxwell-Smith v Donnelly (No 2) [2011] FCA 259; Maxwell-Smith v Donnelly [2010] FCA 474. His Honour approved of the order and the power of the Court to make it. The decision of Mr Driver FM in McDonald v Sanders [2007] FMCA 649 was drawn to the attention of Justice Moore.”
But in Nicholas J’s decision in the 2010 case his Honour noted at
[21– 23]:
“[21] It is necessary to say something more about the order made by Moore J pursuant to which the taxation took place. The order required that the trustee’s costs be taxed “in accordance with Part 8 Division 4 of the Bankruptcy Regulations.”
[22]The remuneration of a trustee may be fixed by a resolution of creditors or, if the creditors so resolve, by the committee of inspection: s 162(1) of the Act. Where it is not so fixed, the trustee is to be remunerated as prescribed by the regulations: s 164(2) of the Act. The Bankruptcy Regulations 1996 (Cth) (Regulations) provide that the remuneration of the trustee is to be fixed by reference to a formula based upon the IPAA Guide to Hourly Rates published by the Insolvency Practitioners Association of Australia applicable to the work to be remunerated: reg. 8.08.
[23]The Regulations also provide a mechanism by which the bankrupt or a creditor dissatisfied with the amount claimed by the trustee by way of remuneration may have the claim taxed: reg. 8.09. In addition, s 167(1) of the Act provides that a trustee of a bankrupt’s estate may (on his or her own initiative or at the request of the bankrupt or a creditor) require a bill of costs for services provided by a person in relation to the administration of an estate to be taxed by a taxing officer.”
It seems to me that the most relevant part of that decision for the purposes of this case is his Honour’s indication that taxation was something that could be required by the bankrupt or a creditor rather than the trustee. My reading of these paragraphs is that the regulation applied where the creditors were not prepared to allow remuneration at a rate proposed by the trustee. The taxation option was available where the creditors were prepared to allow the rate but did not agree with the total amount charged. 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] 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.”
The trustee argued in the instant case that the situation had become unworkable and therefore I should make the orders for taxation as requested based upon the rates that had previously been approved. But interestingly in McDonald v Sanders [2008] FMCA 1341 Driver FM was asked to consider a report from the Registrar after taxation of the trustee’s account in which report it was noted that:
“The rate to be allowed is 85% of the amounts published in the IPAA guide.”
At [5] Driver FM accepted the recommendations in the report.
I cannot accept the trustee’s submission that the process has broken down. In my opinion the trustee is bound by the regulations that existed at the time he undertook the work and they provide for a default position where, as here, the creditors are not prepared to accept the trustee’s proposed charges. The fact that the IPAA, for reasons of its own, decided not to publish updated scales, may have disadvantaged its members including the trustee but this is a matter between the members and those deputed to make policy within the organisation. It does not constitute the breakdown of the type considered by Driver FM. I do not believe that in the instant case it lies within the power of the court under s.30 to make the orders requested by the applicant when there is a clear basis for the calculation of his charges. In those circumstances the application must be dismissed and the applicant must pay the costs of the respondents to be taxed if not agreed pursuant to the Federal Circuit Court (Bankruptcy) Rules 2006.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Associate:
Date: 26 November 2013
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