Yeo & Rambaldi v Francis (No 2)

[2020] FCCA 3646

FEDERAL CIRCUIT COURT OF AUSTRALIA

Yeo & Rambaldi v Francis (No 2) [2020] FCCA 3646

File number(s):	MLG 492 of 2018
Judgment of:	JUDGE MCNAB
Date of judgment:	6 August 2020
Catchwords:	BANKRUPTCY – orders made reflecting agreement for disputed amounts owing to creditors arising from costs orders be paid into court fund and be dealt with outside of the administration of bankruptcy – amendment of bankruptcy matter possible by reason of the agreement and subsequent orders.
Number of paragraphs:	14
Date of last submission/s:	6 August 2020
Date of hearing:	6 August 2020
Place:	Melbourne
Counsel for the Applicant:	Mr P Fary
Solicitor for the Applicant:	Gadens Lawyers
The Respondent:	Appearing in Person

ORDERS

MLG 492 of 2018

BETWEEN:

ANDREW REGINALD YEO & GESS MICHAEL RAMBALDI (IN THEIR CAPACITY AS JOINT & SEVERAL TRUSTEES OF THE BANKRUPT ESTATE OF LOUISE ELLEN FRANCIS)

Applicant

AND:

ELLEN LOUISE FRANCIS

Respondent

ORDER MADE BY:	JUDGE MCNAB
DATE OF ORDER:	6 AUGUST 2020

THE COURT ORDERS THAT:

1.All extant applications be dismissed.

REASONS FOR JUDGMENT
(Delivered Ex Tempore – Revised from Transcript)

Judge McNab:

1. These reasons set out the background to short reasons that were given on 6 August 2020.

2. On 29 July 2020, Orders were made by consent in the following terms:

   OTHER MATTERS:

   1.Eggleston Mitchell Lawyers Pty Ltd (now k/as R Mitchell Lawyer Pty Ltd) (Creditor) has sought to prove in the bankrupt estate of the Bankrupt for the following amounts:

Date	Details of Untaxed Costs orders	GST	Amount (incl GST)
14/5/12	Federal Court Proceeding VID 1182 of 2011	$22,935.27
26/9/12	High Court of Australia M49 of 2012	$475.91	$14,359.53
11/7/13	Federal Court of Australia VID 5 of 2013	$6,137.82	$67,516.05
7/3/2014	Federal Court of Australia VID 695 of 2013	$3,7804.74	$41,643.13

(Relevant Cost Orders)

2.The Trustees have determined that the Order made on 11 July 2013, would be provable in the bankruptcy and that the other orders are not.

3.A taxation of the costs order made on 11 July 2013 is likely to delay the annulment of the bankruptcy of the Bankrupt.

4.The Trustees, the Bankrupt and the Creditor have agreed as follows:

(a) The Trustees shall make an allowance to the Bankrupt of $146,453.98 (Allowance) pursuant to s 134(ma) of the Bankruptcy Act 1966 (Cth) and pay those moneys at the Bankrupt’s direction into the Federal Court Litigants' Fund Account (Fund);

(b) Upon payment of the Allowance into the Fund, the Creditor has agreed to withdraw its proof of debt in the bankruptcy of the Bankrupt (expressly without waiving its rights in respect of each of the Relevant Costs Orders being satisfied from the Account in accordance with these Orders);

(c) The purpose of (a) to (b) above is:

(i) to enable the Trustees to give a certificate pursuant to s 153A of the Bankruptcy Act 1966 (Cth); and

(ii) to provide a fund from which the Creditor's claim in respect of each of the Relevant Costs Orders will be satisfied.

THE COURT ORDERS BY CONSENT THAT:

1.The Trustees (at the direction of the Bankrupt) pay the sum of $146,453.98 (Relevant Moneys) into the Federal Court of Australia Litigants' Fund Account in an interest bearing account (Account) for the purpose of payment of the Relevant Costs Orders.

2.The Relevant Moneys be held in the Account pending either:

(a) written agreement between the Bankrupt and the Creditor; or

(b) certificate of taxation/court order.

3. Upon either of the matters occurring in Order 2(a) or 2(b) above, the Relevant Moneys shall be applied from the Account held by the Fund in satisfaction of the agreed or taxed costs (including any further costs orders) of the Creditor with any balance to be remitted to the Bankrupt.

4.  The Application in a Case filed 8 July 2020 be dismissed.

1. The Respondent was made bankrupt by orders of the Court made on 25 July 2011.  During the course of the bankruptcy there has been numerous applications made in order to deal with property which is the subject of the bankruptcy.

2. The Respondent wanted the bankruptcy to be annulled but had issues with the fees and costs incurred by the trustee in the course of administering her estate. Those issues are the subject of an inquiry by the Inspector-General in Bankruptcy. The remaining outstanding issues involved costs claimed by Eggleston Mitchell Lawyers, a creditor in whose favour costs orders were made in four proceedings.  Those costs orders are set out in paragraph 1 of the recitals under the heading “Other Matters” in the orders above.

3. The trustees determined the cost order made on 11 July 2013 in the sum of $67,516.05 and GST of $6137.82 is provable in the bankruptcy, subject to those costs being taxed, but the balance was not.

4. As is set out in the recitals, the taxation of the cost order made on 11 July 2013 was likely to delay the annulment of bankruptcy.  The orders provide for the claimed value of the value of the costs orders to be placed in a Court’s Litigant Fund, and for those funds be held there pending written agreement between the bankrupt and the creditors or the provision of a certificate of taxation or Court order.

5. The terms of these orders were discussed over two days on 28 July 2020 and 29 July 2020.  Initially the creditors and the trustees proposed that the funds be placed into the Marshalls Dent Wilmoth Lawyers trust account, to be held on trust for the benefit of Eggleston Mitchell Lawyers, Wilmoth Field Warne Lawyers and the Respondent.  That was opposed by the Respondent and the Court Litigant Fund was agreed to be the receiver of the funds.

6. Ms Francis agreed to these orders during the course of the hearing on 28 July 2020. The discussion between the Court and the Respondent in relation to those orders was as follows:

   HIS HONOUR: Now, before you get instructions [Mr Fary], Ms Francis – if – would you agree to a proposal along those lines?

   MS FRANCIS: Absolutely, because – yes – as long as it’s – I’m worried they’re not going to produce any information on the orders at all, seems to be the inference I’m getting. You know, like they’re just - - -

   HIS HONOUR: Yes, let’s not worry about that.

   MS FRANCIS: Yes. I’m very happy with that, with what you’re saying, your Honour.

   HIS HONOUR: All I’m worried about is orders being made by this court which means that I don’t’ have to keep coming back to court - - -

   MS FRANCIS: You don’t have to be involved any more.

   HIS HONOUR: - - - and you’re not spending $10,000 every time it comes on to court.

   MS FRANCIS: Yes, so you’re saying it goes into the court rather than - - -

   HIS HONOUR: Yes. It goes into a fund maintained by the court, whether it’s - - -

   MS FRANCIS: That’s exactly what I want. Yes.

   HIS HONOUR: Whether it’s the - - -

   MS FRANCIS: And then you have to either get it taxed, or have an agreement to get it out. It undermines my position if it goes to them. So that would be great.

   HIS HONOUR: Okay. All right. Loud and clear. I just want you to tell me loud and clear that you would agree to orders that the trustees pay the sum of 146 - - -

   MS FRANCIS: So, it’s the whole lot.

   HIS HONOUR: Yes, the whole lot, the entire amount, into a trust – a court fund – and that those moneys be held on trust pending agreement between the parties or further order of the court.

   MS FRANCIS: All right. Well, yes – it’s so peculiar because the littlest case seems to have the hugest bill and the other ones seem little. So, I guess I will just – yes. Agree to that.

   HIS HONOUR: Ms Francis, I just want to hear you say that you will agree to that proposal.

   MS FRANCIS: Yes, I agree. I agree to that, your Honour.

   HIS HONOUR: Yes. Good, okay. Thank you.

   (Transcript, 28 July 2020, page 24, line 20 – page 25, line 22)

7. On 28 July 2020 the matter was stood down on number of occasions for Ms Francis to discuss the terms of the orders with Mr Fary, Counsel for the trustees. The matter was stood down at 3:20pm so that Mr Fary could seek instructions from the trustees. The matter was mentioned again at 3:50pm and the following discussion took place between the Court and the parties:

   HIS HONOUR: Thank you. Now, how did it go, Mr Fary?

   MR FARY: Good. We think that the way forward is as follows: the trustee could make an allowance to Ms Francis of the 140,000 or so and at her direction pay that money into court in accordance with a court order. The next step in the process would be the creditor would need to withdraw their proof of debt because in that way the trustee could subsequently certify that they’re satisfied that all debts have been paid. And then the taxation of the costs would occur and the payment out of court would be pursuant to the court order which will embody an agreement between Ms Francis and the creditor as to what’s to be done with the money that’s paid into court.

   Now, while the matter has been stood down, my instructing solicitor has been trying to contact one of the registrars of the court because we were looking for a precedent order for payment into court. We haven’t yet been able to do that. So, I’m reasonably confident it’s possible but I would need to find a precedent order in which it has been made. It’s not like the Supreme Court where there’s – as I said – a dedicated fund. I think when money is paid into a Federal Court it’s essentially pursuant – the entire basis upon which it’s paid is pursuant to the court order itself. So ultimately - - -

   HIS HONOUR: So, the payment out of the court fund is under the – pursuant to court orders rather than as part of the bankruptcy?

   MR FARY: That’s right. So, the orders would say something to the effect of – that Ms Francis pay or – you know, by direction pay – $146,000 into court. That those moneys be held in court pending a taxation or agreement between the parties. And I think there would need to be a further order of your Honour that the money be paid pursuant to the taxation order. In that way, the power and the rights are all self-contained within the orders themselves. But I would need – probably overnight – to find a precedent that I could circulate to give effect to that proposal.

   HIS HONOUR: All right. I can make some enquiries and if I become – my Associate’s looking for one. The Federal Court is looking for one. So, we might – might be able to email it to you.

   MR FARY: Thank you.

   HIS HONOUR: All right. So, that – do you understand what’s being discussed, Ms Francis?

   MS FRANCIS: Yes, I do, your Honour. I was thinking – yes. Yes, I do.

   HIS HONOUR: The moneys be paid into an account – a court account – a trust account – controlled moneys account – controlled by the court. That the creditor would withdraw their proofs of debt in respect of the bankruptcy upon the moneys being paid in and that the – so that would deal with the outstanding creditor, and then the question of the moneys held in the fund could be the subject of either agreement or the subject of taxation within the court system.

   MS FRANCIS: Yes. Some discretion. Yes.

   HIS HONOUR: And then the moneys be paid out on a court order. Or on agreement.

   MS FRANCIS: Yes.

   HIS HONOUR: A consent order would have to be provided to them – if it was an agreement then a consent order would be provided to the court, and the court could make a consent order.

   MS FRANCIS: Okay. That sounds good, yes.

   HIS HONOUR: Now. All right. So, what I will do is I will stand the matter down. The balance of your matters that you’re dealing with in your application, Ms Francis, are dealing with the trustee’s costs. But those matters are all being dealt with by the Inspector-General of bankruptcy.

   MS FRANCIS: Well, I’m not sure, but yes. […]

   (Transcript, 28 July 2020, page 26, line 47 – page 28, line 19)

8. The discussions which took place over parts of the two days between the Court and the parties, including the Respondent, Mr Fary and Mr Anthony Desiderio (who appeared on behalf of the creditors) indicate that Ms Francis understood the orders and agreed to them. Ms Francis also had time to consider the orders and the effect of them.

9. Once the orders were made, the trustee paid the funds into the Court Litigant Fund.

10. On 4 August 2020, the Respondent raised questions regarding the operation of the orders. In correspondence dated 4 August 2020, Ms Francis claimed that the orders had been made under duress. The creditors opposed the matter being reopened and made written submissions by way of correspondence dated 4 August 2020.

11. The matter was listed for a Mention on 6 August 2020. Mr Fary appeared on behalf of the Applicant and the Respondent appeared in person. Mr Desiderio appeared on behalf of the creditors.  

12. On that day, I gave brief reasons that the Orders made on 29 July 2020 properly reflected the agreement reached between the parties. The Orders represent a pragmatic solution to a problem that confronted the parties.  Had the order not been made, the annulment of the bankruptcy would have been delayed until the costs orders had been taxed.  This would not have been in the best interests of Ms Francis. There were good commercial reasons for Ms Francis to agree to the Orders because they resulted in the immediate annulment of the longstanding bankruptcy. Her interests in disputing the quantum and treatment of those costs orders are protected by the terms of those orders.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of Judge McNab.

Associate:

Dated:       23 April 2021