EXPLANATORY STATEMENT
BANKRUPTCY ACT 1966
BANKRUPTCY RULES (AMENDMENT)
1987 NO 223
The purpose of the amendment to sub-rule 162(2) and Schedule 3 of the Bankruptcy Rules is to implement a recommendation by the Federal Costs Advisory Committee that the scale of solicitors’ costs in bankruptcy jurisdiction be increased by 2.6 per centum.
The Federal Costs Advisory Committee was established to advise the Attorney-General on variations in the quantum of costs for solicitors (including expenses and fees for witnesses) under the Bankruptcy Rules.
Under its terms of reference the Committee is required to have regard to:
(i) reasonable expenses incurred by solicitors in the conduct of their practices and the need for them to recover in full increases in these expenses;
(ii) the need for solicitors’ costs to be consistent with a reasonable return on capital and to provide appropriate recognition of professional skills;
(iii) government policy in relation to prices and incomes and in particular to paragraph 28 of the National Economic Summit Conference communique; and
(iv) any other relevant factors.
The Committee considered a number of submissions, both written and oral, when formulating its recommendation for an increase in the scale of solicitors’ costs under the Bankruptcy Rules. The appropriate increase was calculated by reference to movements in three broad areas of: salaries and wages, other overheads, and partners’ salaries and profit share and by consolidating the percentage movements in each component. For the purpose of calculating the increase in salaries, wages, partner’s salaries and profit share the Committee used movements in the Award Rates of Pay Index. Movements in the Consumer Price Index were used to calculate the increases in other overheads. The result is a 2.6% increase in relation to solicitors’ gross costs.
September 1987
Overview
The Bankruptcy Rules (Amendment) 1987 No 223 amends the Bankruptcy Act 1966 by adjusting the scale of solicitors’ costs within bankruptcy jurisdiction. Enacted in September 1987, this amendment responds to a recommendation by the Federal Costs Advisory Committee aimed at ensuring that the costs borne by solicitors are in line with inflation and other economic factors. The amendment increases the scale of solicitors' costs by 2.6 per centum, reflecting changes in salaries, wages, and other overheads, as well as partners' salaries and profit share. This adjustment was calculated by the Committee with consideration of the Award Rates of Pay Index and the Consumer Price Index, thus maintaining the viability and fairness of the legal costs structure within the bankruptcy system. The policy objective is to ensure that solicitors can recover their expenses and receive a reasonable return on their services, in alignment with broader economic policies.
Scope and Application
The Bankruptcy Rules (Amendment) 1987 No 223 amends the Bankruptcy Act 1966 by adjusting the scale of solicitors’ costs in bankruptcy jurisdiction by 2.6 per centum, in line with a recommendation by the Federal Costs Advisory Committee. This adjustment is aimed at ensuring that solicitors are able to cover their reasonable expenses, including an appropriate return on capital and recognition of professional skills, while taking into account broader government policy on prices and incomes. The amendment applies to solicitors who are involved in bankruptcy proceedings in Australia, and the increase is calculated based on movements in the Award Rates of Pay Index for salaries and partners' salaries and profit share, as well as the Consumer Price Index for other overheads. The increase is implemented through a modification to sub-rule 162(2) and Schedule 3 of the Bankruptcy Rules, and the amendment extends its effect to all bankruptcy cases where solicitors’ fees are claimed under the Bankruptcy Act. There are no exclusions or exemptions specified in the text, meaning the amendment applies broadly across the Commonwealth of Australia to all relevant cases and practitioners.
Key Provisions
The primary operative sections of the Bankruptcy Rules (Amendment) 1987 No 223 are sub-rule 162(2) and Schedule 3, which pertain to the adjustment of the scale for solicitors’ costs in bankruptcy matters. Sub-rule 162(2) details the method and basis for calculating the costs, while Schedule 3 provides the specific figures and percentages that apply to these costs. The amendment mandates an increase in the scale of solicitors' costs by 2.6 percent, as recommended by the Federal Costs Advisory Committee.
The obligations imposed by this amendment require solicitors involved in bankruptcy cases to adjust their fee structures in accordance with the new scale. This involves updating their billing practices to reflect the increased costs, ensuring that clients are invoiced appropriately. Additionally, the amendment places a responsibility on the Federal Costs Advisory Committee to continually monitor and review the costs associated with solicitors' work in bankruptcy cases, ensuring that the scale remains reflective of actual expenses and market conditions.
The amendment also outlines the consequences of non-compliance with the new cost scales. While specific offences and penalties are not detailed within the Explanatory Statement, breaches of the updated cost structures could potentially lead to legal challenges from clients regarding overbilling or from regulatory bodies regarding non-compliance with mandated fee scales. Although the maximum penalties are not specified, such breaches could result in financial penalties or the requirement to refund overcharged amounts to clients. Furthermore, persistent non-compliance could lead to disciplinary action against the solicitors involved, including potential suspension or revocation of their practising certificates.