Quinlivan v Prentice
[2005] FMCA 1996
•20 June 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| QUINLIVAN v PRENTICE & ANOR | [2005] FMCA 1996 |
| BANKRUPTCY – Costs of bankruptcy proceedings as costs of the administration of the bankrupt estate. |
Bankruptcy Act 1966 (Cth), s.139W
Quinlivan v Prentice & Anor [2004] FMCA 1
| Applicant: | ANTHONY PHILIP QUINLIVAN |
| First Respondent: | MAXWELL WILLIAM PRENTICE |
| Second Respondent: | COMMISSIONER OF TAXATION |
| File No: | SYG1753 of 2003 |
| Delivered on: | 20 June 2005 |
| Delivered at: | Sydney |
| Hearing dates: | 20 June 2005 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr M F Holmes, QC |
| Solicitors for the Applicant: | Horton Rhodes |
| Counsel for the Respondent: | Mr D Pritchard |
| Solicitors for the Respondent: | Henry Davis York |
ORDERS
There is to be no order as to costs.
Order 4 made on 17 February 2004 is discharged.
The Court declares that the trustee was and is entitled to be indemnified out of the estate in respect of legal costs and expenses incurred in these proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1753 of 2003
| ANTHONY PHILIP QUINLIVAN |
Applicant
And
| MAXWELL WILLIAM PRENTICE |
First Respondent
COMMISSIONER OF TAXATION
Second Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me a motion filed on 21 September 2004 by Anthony Philip Quinlivan arising out of my judgment in the substantive proceedings between Mr Quinlivan and his trustees in bankruptcy.
My principal judgment, Quinlivan v Prentice & Anor [2004] FMCA 1, contained four orders. The first required the trustees to complete any outstanding compulsory income contribution assessments required pursuant to s.139W of the Bankruptcy Act 1966 (Cth). The second required the trustees at the end of the income assessment period to pay any surplus income contributions to the Commissioner of Taxation on account of taxation liabilities incurred by Mr Quinlivan since the commencement of the bankruptcy. Order three reserved costs and order four was as follows:
Pending further order of the Court as to costs, the trustee may retain sufficient funds in the estate to meet his costs incurred in these proceedings as expenses incurred in the course of the administration of the estate.
I will deal with the last matter first. It is an issue of concern to Mr Quinlivan that in fact the trustees have not retained any money in the estate in respect of potential costs, that the money in the estate has been disbursed either as part of the costs of the administration of the estate or to the Commissioner of Taxation following the completion of the compulsory income assessment process required by order 1 and order 2. That course of action involved some risk on the part of the trustees inasmuch as initial costs remained outstanding until today. However, I did not intend by order 4 to require the trustees to retain funds in the estate and I did intend that order 4 would be discharged once the issue of costs had been resolved.
Mr Quinlivan's motion sought various declarations which, as I indicated to the parties many months ago, I regarded as an attempt partly to re-litigate issues that had already been resolved in my principal judgment, and partly to deal with Mr Quinlivan's dissatisfaction with the compulsory income assessment made by the trustees in pursuance of order 1. In relation to the former, having given judgment in the principal matter, I regard the Court as being functus officio in respect of the issues dealt with in the judgment. In relation to the latter, as I indicated to the parties at earlier stages of the proceedings, Mr Quinlivan had an alternative and preferable administrative review course available to him in order to seek review of the compulsory income assessment made. He told me from the bar table this afternoon that he had in fact pursued that course but without a successful outcome.
I regard the only outstanding issue before me today as the issue of costs of the proceedings. That was the issue that I reserved in order 3 on
17 February 2004. Mr Quinlivan's motion seeks an order for costs on an indemnity basis. He took the opportunity to make oral submissions this afternoon in which he sought to identify, if not malfeasance, at least ignorance and incompetence on the part of his trustee in bankruptcy in the administration of his affairs.
The trustee relies upon written submissions filed in court by leave this afternoon, his response filed on 24 December 2004 and affidavits in support by Jason Lloyd Porter made on 17 December 2004, Maxwell William Prentice made on the same date, and Mark Julian Robinson made on the same date. Mr Pritchard tendered this afternoon exhibit JLP1 to the affidavit of Jason Lloyd Porter. That material adds to the view that I had already formed in my earlier judgment that, while the trustee was mistaken in treating surplus contributions made by Mr Quinlivan to him as voluntary income contributions that could be retained for the benefit of creditors generally, he did not engage in any improper conduct and nor was his conduct manifestly incompetent or negligent.
Mr Quinlivan submits that he was forced to bring proceedings to the court in order to achieve the result he sought, which was the payment of excess contributions to the Commissioner of Taxation in respect of income tax liabilities incurred after the commencement of the bankruptcy. Mr Quinlivan had sought the payment of approximately $82,000 to the Commissioner of Taxation in respect of post-bankruptcy tax liabilities. The orders ultimately made by me, while they facilitated such a payment, did not require a payment in any particular amount. The orders required the completion of the compulsory income assessment process. As matters have turned out, that process resulted in an increase in the compulsory income assessment liability beyond that which the parties probably anticipated when I gave judgment on 14 February 2004. That course, however, was open on the orders that I made. I regard the result in the context of costs of the proceedings as a neutral one.
Mr Quinlivan had sought the clarification of the status of his excess income contributions with a view to facilitating the discharge of his post-bankruptcy tax liabilities. He achieved some success but did not obtain the relief that was specifically sought by him. The trustee, while initially seeking to treat the excess contributions as voluntary contributions for the benefit of creditors generally, ultimately sought the court's directions as to what to do with the money. He received those directions.
I formed the preliminary view at the end of the principal proceedings that the likely costs outcome would be that no costs order should be made. However, I reserved the issue of costs in order for parties to make submissions on the matter. Having heard those submissions I am not persuaded that I should alter the initial view that I took. The outcome of the proceedings was a neutral one and there should be no order as to costs. I will so order.
The action taken by the trustee in relation to the income contributions, including his participation in these proceedings, was a proper and necessary part of the administration of the bankrupt estate. I will, in addition to ordering that there be no order as to costs, discharge order 4 made by me on 17 February 2004 and in lieu thereof declare that the trustee was and is entitled to be indemnified out of the estate in respect of legal costs and expenses incurred in these proceedings.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 5 July 2007
0