FEDERAL COURT OF AUSTRALIA
Scott (Trustee), in the matter of Price (Bankrupt) [2011] FCA 1478
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IN THE FEDERAL COURT OF AUSTRALIA |
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IN THE MATTER OF THE BANKRUPT ESTATE OF RODNEY FRANCIS PRICE
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ALAN GEOFFREY SCOTT IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF RODNEY FRANCIS PRICE Applicant |
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. The trustee in bankruptcy pay Mr Brandon Price’s costs incurred in bringing the interlocutory application to set aside the summons fixed in the sum of $7,790.
2. Mr Brandon Price’s costs of complying with the summons be paid out of the estate of Mr Rodney Francis Price and be fixed at $12,557.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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IN THE FEDERAL COURT OF AUSTRALIA |
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SOUTH AUSTRALIA DISTRICT REGISTRY |
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GENERAL DIVISION |
SAD 176 of 2011 |
IN THE MATTER OF THE BANKRUPT ESTATE OF RODNEY FRANCIS PRICE
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ALAN GEOFFREY SCOTT IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF RODNEY FRANCIS PRICE Applicant |
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JUDGE: |
LANDER J |
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DATE: |
21 DECEMBER 2011 |
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PLACE: |
ADELAIDE |
REASONS FOR JUDGMENT
1 On 16 July 2009 the applicant, who is a Chartered Accountant, was appointed as the trustee of the bankrupt estate of Mr Rodney Price (the bankrupt) upon the presentation of a debtor’s petition to the Official Receiver in accordance with s 55 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). The applicant has deposed that since his appointment he has conducted extensive investigations into the affairs of the bankrupt.
2 The bankrupt filed his Statement of Affairs in Australia on 16 July 2009, the date when his estate was sequestrated.
3 Apparently the bankrupt was a high profile businessman who operated predominantly in Australia, but resided in the United Kingdom (UK) during the period 1993 to 1998, after which he moved to Monaco. Subsequently he returned to the UK before returning to Australia in 2008.
4 On 27 July 2009 a bankruptcy order was also made against the bankrupt in the High Court of Justice in Bankruptcy in London on the petition of Network Rail Infrastructure Limited. The bankrupt was automatically discharged from that bankruptcy on 27 July 2010.
5 Mr Brandon Price (Mr Price) is a son of the bankrupt and a director and shareholder of a number of associated entities of the bankrupt. He acquired shareholdings in those entities two days prior to the date the bankrupt became a bankrupt.
6 Mr Crase is a Principal of the accounting firm Crase Robinson, which has its principal place of business in Adelaide. Between 1987 and 2009 he was the business and accounting adviser of the bankrupt, and the bankrupt’s family and entities with which the bankrupt was associated. He was also a close personal friend of the bankrupt.
7 Mr Mulvihill is a friend and business associate of the bankrupt, and a former Secretary of Four Arrows Pty Ltd (FAPL), which was established in 1998 as a holding vehicle for the Australian rural business interests of the bankrupt’s family. Mr Mulvihill is also a former Secretary of 24 of 30 entities controlled by FAPL, and a former Secretary of seven further corporate entities of which the bankrupt was associated.
8 On 25 July 2011 the applicant applied for the issue of summonses to examine the bankrupt, Mr Price, Mr Crase, and Mr Mulvihill, all of whom the applicant claimed had been associated with the examinable affairs of the bankrupt. The application was supported by an affidavit which remains sealed, but which identifies the purpose of the examinations. The examinees are persons, it is said, who are capable of giving information about the bankrupt or the bankrupt’s examinable affairs, or are persons who have taken part and been concerned with the examinable affairs of the bankrupt.
9 The application and the affidavit were accompanied by draft summonses for examination in the form provided for in r 6.09 of the Federal Court (Bankruptcy) Rules 2005. All summonses were returnable on 13 September 2011, although at different times.
10 The summons which had been directed to Mr Price was served on 4 September 2011 and required Mr Price to bring with him the books, papers and documents specified in the schedule attached to the summons.
11 The schedule required Mr Price to bring with him:
All documents in your possession, custody or control (whether in writing or in electronic form, whether a visual image such as a map, graph, drawing or picture, a film, microfilm, disk, tape or other medium from which writing, visual images or sounds can be reproduced), insofar as they relate to the examinable affairs of RODNEY FRANCIS PRICE (Bankrupt), relating to any and all of your dealings with the Bankrupt, or the interests or assets of the Bankrupt, including (without limitation) …
12 The schedule then identified a series of documents relating to the transfer of property by the bankrupt and all documents relating to 16 separate trusts; documents relating to all entities established in the British Virgin Islands, Ireland and the Isle of Man; documents recording or evidencing any communications with the bankrupt and any persons associated with the bankrupt whether in Australia or overseas, including a number of persons who were identified; personal and business diaries for the years 2004 to 2010 insofar as they related to dealings with the bankrupt and 39 separate entities; documents recording or evidencing all building projects in Australia and overseas that the bankrupt or the entities to which I have referred were involved in; documents recording or evidencing finance provided to FA Finance Pty Ltd and FAPL, and its associated entities, which included the 35 entities to which I have referred; and documents recording or evidencing the sale of the bankrupt’s former residence in 2009.
13 On 13 September 2011 Mr Price’s examination and the return of the summons were adjourned to 28 September 2011.
14 In the meantime, on 8 September 2011 Mr Hillary of Lawson Smith Lawyers was instructed to act on behalf of Mr Price. Mr Price resides in New South Wales and Mr Hillary met with him in New South Wales on 21 September 2011 to take instructions in relation to the summons. Mr Hillary was told that there was a significant volume of documents relating to companies within the FAPL group that were in the possession of Crase Robinson.
15 On 26 September 2011 Mr Hillary contacted Ms Robinson of Crase Robinson who told him that several hundred boxes of documents existed in relation to the affairs of the various companies within the FAPL group. On the same day Mr Hillary attempted to contact Ms Caird of Minter Ellison Lawyers, the applicant’s solicitor with the day-to-day conduct of the matter, but she was unavailable.
16 On 27 September 2011 Mr Hillary wrote to Ms Caird in the following terms:
I refer to our various telephone conversations of this morning with respect to my letter to you of 26 September 2011.
I refer, in particular to paragraphs 3.7 – 3.9 therein and acknowledge that paragraph references contained in these paragraphs relate to the Summons issued against Mr John Crase, not Brandon Price.
I otherwise confirm that paragraph 2, 3, and 4 of the Summons issued against Mr Price are not confined by any relevant period of time.
I further note, paragraph 2 in requiring provision of “all documents relating to each of the … trusts [named thereunder]” is oppressive so far as it is not limited to any period of time and requires production of documents relating to a significant number of companies, if not all of the companies named in paragraph 5 therein.
Accordingly, our objection remains, and the number of documents that may fall within such order, may well be similar to the amount described in paragraph 3.10 of my abovementioned letter.
I confirm that you are amenable to taking instructions in respect to the potential narrowing of the current Summons.
I confirm that we have instructed Mr Graham Dart of counsel. Mr Dart is currently overseas but he is due to return on Thursday, 29 September 2011.
I would hope that a conference could be convene[d] for the purposes of narrowing, by consent, the terms of the order either late next week or early next week after.
I confirm that, in the circumstances, you do not require, at this stage, any Notice of Motion and/or Supporting Affidavit to be filed in respect of the hearing in this matter tomorrow seeking the setting aside of the Summons or an extension of time.
I will otherwise take instructions on your correspondence in relation to the “conflict issue”.
17 Mr Hillary had two conversations with Ms Caird on 27 September 2011 in relation to whether a formal application needed to be made. On 28 September 2011 Minter Ellison wrote to Lawson Smith in the following terms:
We refer to the writer’s telephone discussions with Mr Hillary on 27 September 2011 and to your letter dated 27 September 2011.
Having now obtained our clients instructions we confirm our client’s position as follows:
Our client in no way sanctions your client’s failure to comply with the summons and he does not accept that the summons is oppressive or ought to be narrowed.
The Courts [sic] order of 13 September 2011 required compliance by today. Your letter suggests that no steps have been taken to extract and produce the documents.
Compliance with the Courts [sic] order is not a matter for negotiation and it is too late for your client to now resist production in the terms of the summons having failed to file the necessary application before now.
18 On 28 September 2011 Mr Hillary replied to this letter by email:
I confirm that no Notice of Motion or affidavit in respect of the Summons was put on the file in circumstances were [sic] you said that it was unnecessary and that the matters which were being raised were capable of resolution by agreement and that the summons in respect of Mr Price would be capable of being stood over today to facilitate discussions. This position was accepted, by me, in good faith.
The contents of the attached is completely contrary to this position.
You have provided no reason why you consider that the scope of the orders are acceptable in light of our submissions, particularly in respect of the incredibly broad nature of order 2.
19 On 4 October 2011 Mr Price filed an interlocutory application seeking the following orders:
1. That the Summons requiring Brandon Price to be examined pursuant to the provisions of the Bankruptcy Act be discharged as oppressive and/or an abuse of process.
2. That in the alternative the schedule attached to the said Summons be struck out as oppressive and/or an abuse of process.
3. That in the further alternative that Brandon price have an extension of time to comply with the Summons.
4. For the costs of this application.
5. Such further or other order as this Honourable Court sees fit.
20 On 7 October 2011 Mr Hillary wrote again to Ms Caird relating to the width of the summons:
Our client’s preferred position is simply to come to a sensible accommodation about what documents are really sought. The documents sought in the schedule in paragraphs 2, 3 and 4 are very wide ranging and unlimited by date. We have ascertained that there are several hundred archive boxes of documents that potentially fall within the listing of the documents sought. It will take sometime to check the documents. It is clearly onerous to put an obligation on a third party to check and search such a large number of documents to see whether they relate to the examinable affairs of the bankrupt.
We ask, once again, that your client indicate to us, particularly in relation to the trusts, the specific nature and type of documents that he seeks and the period for which your client seeks those documents. It is clear enough that all of the trust documents cannot relate to the examinable affairs of the bankrupt. That simply reinforces the point that the breadth of the documents sought is oppressive.
If we can agree the exact type of documents sought and the period for which they are sought, we can then attend, in an orderly way, to producing the documents to the Court to assist the Trustee in his investigations.
We ask that you give urgent consideration to reaching an accommodation of the type suggested in this letter. If this can be achieved it will not be necessary to press our client’s application.
21 On the same day Lawson Smith received approximately 300 archive boxes of documents. Those documents were inspected to establish whether they fell within the documents described in the schedule to the summons issued on 25 July 2011.
22 On 10 October 2011 Ms Caird wrote to Mr Hillary and said in the concluding part of her letter:
We do not accept the assertion that the scope of production is too wide. If your client asserts otherwise please provide details as to the extent of the documentation that your client has in relation to the bankrupt’s overseas interests which you claim would be too onerous for him to produce.
You assert that you have ascertained that there are “some hundreds of archive boxes of documents that potentially fall within the listing of the documents sought” although you have not provided us with any detail in this regard and the evidence in your affidavit is inadequate.
Your foreshadowed application for costs is opposed.
In our view the Court has no power to make an order for costs of an examination before a Registrar under Section 81 of the Bankruptcy Act 1966 in a case where terms as to costs have not been imposed by the Registrar on the application of the summons. See Kusmenko Re Golovachenko v Official Receiver (1976) 14 ALR 673.
We confirm we have provided your client with a cheque for $600 for conduct money pursuant to Rule 6.15 of the Federal Court (Bankruptcy) Rules 2005.
Please let us know as a matter of urgency whether you intend to press your application tomorrow and whether you intend to make an application for costs as foreshadowed.
23 On 11 October 2011 the interlocutory application came on for hearing. At that hearing I made orders by consent in the following terms:
1. The summons handed to me today directed to Brandon Price be substituted for the summons issued on 25 July 2011.
2. Service of the substituted summons be deemed to have been effected today.
3. The return of the summons issued to Brandon Price on 25 July 2011 be vacated.
4. The return of the substituted summons referred to in paragraph 1 be on 25 October 2011 at 9.00am before the Registrar.
5. The costs of the interlocutory application issued on 4 October 2011 and the costs of compliance with the summons be reserved, and in both cases be heard on 28 October 2011 at 9.00am.
24 Paragraph 5 of those orders was made in response to an application by Mr Dart, counsel for Mr Price, seeking an order that the applicant pay his client’s costs of the interlocutory application, and costs pursuant to s 81(14) of the Bankruptcy Act.
25 The substituted summons which was ordered to be issued and deemed to be served on 11 October 2011 reflected the parties’ agreement as to the appropriate terms of the summons.
26 Because one of the counsel was unavailable on 28 October 2011, the application for costs was heard on 4 November 2011.
27 In the meantime, on 3 November 2011, Mr Hillary swore a further affidavit in which he set out the costs incurred by Mr Price in relation to the bringing of the application, and the costs of compliance with the summons including the costs of compliance with the summons which was substituted. The schedule is in the following form:
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Schedule of Costs | ||||
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Type of work |
Solicitor |
Time spent (units) |
Hourly Rate (GST Exclusive) |
Amount charged (GST Exclusive) |
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Costs of compliance (work required in any event) | ||||
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Anthony Hillary (Partner) Genevieve Spencer (Solicitor) Amanda Smith (Solicitor) |
174 94 56 |
294.50 129.50 142.45 |
5,133.00 1,217.30 797.72 | |
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Total |
324 |
7,148.02 | ||
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Costs of compliance (work not required under amended schedule) | ||||
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Anthony Hillary (Partner) Genevieve Spencer (Solicitor) Amanda Smith (Solicitor) Hannah Cohley (Solicitor) James Bruun (Senior Associate) |
81 205 75 30 27 |
294.50 100.00 – 129.50 142.45 129.50 259.50 |
2,385.45 2,268.30 1,016.58 468.00 700.65 | |
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Total |
388 |
6,838.98 | ||
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Costs of bringing application | ||||
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Anthony Hillary (Partner) Genevieve Spencer (Solicitor) Amanda Smith (Solicitor) Hannah Cohley (Solicitor) Graham Dart (Barrister) |
176 59 15 1 105 |
294.50 100.00 – 129.50 142.45 129.50 340.00 |
5,183.20 758.15 213.67 12.95 3,570.00 | |
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Total |
356 |
9,737.97 | ||
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TOTAL |
1,068 |
23,724.97 | ||
28 In due course Mr Hillary deposed in a further affidavit as to the particular work which was done and by whom and when in relation to the three heads of costs which he had identified in his previous affidavit.
29 On 4 November 2011 I ordered the applicant to pay Mr Price’s costs relating to the interlocutory application issued on 4 October 2011 because the applicant’s intransigence and refusal to consider the reasonable requests of Mr Price to restrict the terms of the summons required him to bring the application. The applicant agreed to limit the terms of the summons, which I think on any understanding were too wide, only after the application was brought and at the hearing.
30 As I have set out above at [27], Mr Price’s costs for bringing the application have been quantified in the sum of $9,737.97.
31 Rule 40.02 of the Federal Court Rules 2011 authorises a party who is entitled to costs to apply to the Court for an order that the costs be awarded in a lump sum instead of taxed costs. The rule does not give any guidance for the application of the rule. However the Court should not be slow in the appropriate case to assess a party’s entitlement to costs in a lump sum. A party who is obliged to tax its costs is put to cost, expense and delay. It is therefore appropriate for the Court to exercise the power, when it can, to obviate that cost, expense and delay.
32 The costs claimed by Mr Price are the actual costs incurred by him in making the application. If the full amount were allowed it would effectively mean that he would have an order for costs on a full indemnity. Mr Dart, counsel for Mr Price, recognised that there would have to be some reduction for that reason, and he suggested a reduction of 20%. He said the reduction should not be greater because the rate charged by Lawson Smith was very modest, and it was unlikely that there would be much by way of solicitor and client costs. I think both points are valid, and I think a reduction of 20% on the amount claimed would do justice between the parties. I therefore fix Mr Price’s costs of the application in the amount of $7,790 (rounded off).
33 The application for the costs of compliance, which was based on s 81(14) of the Bankruptcy Act, was also adjourned to enable further evidence to be adduced by Mr Price’s solicitors as to the particular work done. Mr Price’s solicitor swore an affidavit addressing that issue.
34 On 21 November 2011 the applicant also swore an affidavit in which he said that no proceedings had been issued against Mr Price, and that he did not have any present intention to issue proceedings against Mr Price, or indeed any other person in connection with the bankrupt estate of Mr Rodney Price.
35 Section 81 of the Bankruptcy Act relevantly provides:
(1) Where a person (in this section called the relevant person) becomes a bankrupt, the Court or a Registrar may at any time (whether before or after the end of the bankruptcy), on the application of:
(a) a person (in this section called a creditor) who has or had a debt provable in the bankruptcy;
(b) the trustee of the relevant person’s estate; or
(c) the Official Receiver;
summon the relevant person, or an examinable person in relation to the relevant person, for examination in relation to the bankruptcy.
…
(7) A person summoned to attend before the Court, the Registrar or a magistrate for examination under this section is entitled to be represented, on his or her examination, by counsel or a solicitor, who may re-examine him or her after his or her examination.
…
(14) The Court, the Registrar or the magistrate, as the case may be, may direct that the costs of a person, other than the relevant person, examined under this section shall be paid out of the estate of the relevant person.
…
36 The relevant person is defined in the Act to be the bankrupt. Section 81(14) therefore only applies to an examinee who is not the bankrupt.
37 Mr Price is claiming costs under s 81(14) in respect of costs incurred in complying with the subpoena, and separately costs incurred in complying with the subpoena prior to the amendment to the schedule. In respect of both amounts Mr Price contended that there should be an order that those costs be paid out of the estate of the bankrupt to compensate Mr Price for complying with the subpoena.
38 Section 81 provides an important procedure for a trustee seeking to ascertain relevant information about the examinable affairs of a bankrupt. Trustees ordinarily ought not to be discouraged from obtaining accurate information in relation to the existence and whereabouts of assets and the ascertainment of true liabilities. However, because the power given to the trustee in s 81 is a far-reaching power, its use must be controlled carefully both on an application for a summons, and at the hearing of any examination that follows the issue of the summons: Karounos v Official Trustee (1988) 19 FCR 330; Re Abrahams; Ex parte Thomas (1985) 70 ALR 784 at 790 per Lockhart J.
39 The fact that s 81(7) permits an examinee to be represented on his or her examination by counsel or a solicitor indicates Parliament’s concern that an examinee’s rights should be protected during the examination.
40 Section 81(14) is to be understood in the context of the powers which are given in s 81. Section 81(14) was introduced into the Bankruptcy Act by s 41 of the Bankruptcy Amendment Act 1980 (Cth). In its original form s 81(14) did not include the words “other than the relevant person”, which would have meant that a bankrupt who was examined under s 81 might apply for costs, but those words were added by s 22 of the Bankruptcy Amendment Act 1991 (Cth). The explanatory memorandum does not indicate why s 81(14) was inserted but, for the reasons which follow, in my opinion the subsection was inserted to make it clear that the Court was empowered to make an order that an examinee, other than the bankrupt, have their costs.
41 The old English legislation did not have an equivalent of s 81(14), and the Courts in England have consistently rejected claims by witnesses at an examination to be paid their legal costs: Ex parte Waddell; In re Lutscher [1877] 6 Ch 328; In re Appleton, French & Scrafton, Ltd [1905] 1 Ch 749. There was one exception identified in Ex parte Waddell, which was acted upon in In re Appleton, French & Scrafton, Ltd, and that was where there was litigation in existence between the witness and the trustee.
42 In Australia in Re Anderson; Ex parte Official Receiver (1937) 10 ABC 284 Paine J said that it was only in exceptional circumstances that an examinee in a s 81 examination should be awarded his or her costs, but recognised that costs could be awarded in the circumstances which existed in In re Appleton, French & Scrafton, Ltd where proceedings were either pending or contemplated against the examinee.
43 In Re Kusmenko; Ex parte Golovachenko v Wilson (1976) 14 ALR 673 this Court found another reason for not awarding examinees their costs. In that case two persons who submitted proofs of debt that were rejected in part applied to the Court for an order reversing the decision of the trustee to reject that part of their proofs of debt. The application was dismissed, but nevertheless the applicants applied for their costs of attending before the Registrar for their examination under s 81 of the Bankruptcy Act.
44 Justice Riley said that their entitlement to costs must be found in s 81(1) or s 32 of the Bankruptcy Act.
45 At the relevant time s 81(1) provided:
The Court or the Registrar may, on the application of the trustee or of a creditor who has proved his debt, and on such terms as to costs as the Court or the Registrar thinks fit to impose, at any time summon …
46 Section 81(4) was in the same terms as s 81(7) presently is.
47 Justice Riley found first that there was no entitlement to costs in s 81(1). He then considered s 32 of the Bankruptcy Act, which provided that:
The Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit.
48 He considered the definition of proceeding in s 5(1) of the Bankruptcy Act and concluded that an examination under s 81 was not a proceeding under the Act. In those circumstances he found the Court lacked jurisdiction to award an examinee their costs.
49 However, in case he was wrong about this conclusion on jurisdiction, Riley J went on to consider when the costs of attending an examination might be ordered out of a bankrupt’s estate. His Honour concluded, following Re Anderson; Ex parte Official Receiver, that an order for costs should only be made if the relationship between the examining party and the examinee had reached a stage where legal proceedings were “either actually in existence or in contemplation, in the sense of being actually determined upon”: at 680. He said that in considering whether a litigious relationship existed between the examining party and the examinee the Court should consider the application for the summons, the affidavit accompanying the application, and the notes of the examination.
50 Thus it was that prior to the introduction of s 81(14) the authorities in Australia stood for two propositions. First, that costs could not be awarded to a person who is examined under s 81 of the Bankruptcy Act because there was no statutory authority in the Bankruptcy Act. Secondly, there were the English decisions which had been adopted by a judge in the Bankruptcy Court in Australia, and confirmed by way of obiter by a judge of this Court, that costs could only be awarded to an examinee if there was litigation either pending or contemplated by the trustee against the examinee.
51 Accordingly, it is not hard to think why s 81(14) was enacted. Section 81(14) does not confine the power to the Court, but extends the power to a Registrar or magistrate. Clearly it was enacted to give the person who conducted the examination the power to award an examinee his or her costs. The purpose of the enactment of s 81(14) was remedial. The section contradicted the law established by the authorities in England and Australia, and should be seen and construed in that light. The subsection should be given a beneficial interpretation: Holmes v Permanent Trustee Co. of New South Wales Ltd (1932) 47 CLR 113 at 119 per Rich J (with whom Evatt and McTiernan JJ agreed); Bird v The Commonwealth of Australia (1988) 165 CLR 1 at 6 per Mason CJ, Brennan and Toohey JJ and at 9 per Deane and Gaudron JJ; Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 at 260-261 per McHugh J (with whom Brennan and Deane JJ agreed).
52 It was contended by the trustee that no order for costs should be made in favour of Mr Price because there were no proceedings in existence, or between the trustee and Mr Price, and no proceedings were contemplated. The trustee relied upon the evidence contained in his affidavit sworn on 21 November 2011.
53 In my opinion, for the reasons given, that contention does not recognise the enactment of s 81(14). If the trustee’s contention were accepted it would mean that s 81(14) has not changed the law at all. Section 81(14) is a remedial provision which is intended to benefit an examinee who incurs costs in being examined or producing documents on the examination.
54 The purpose of an order for costs is to compensate the party who has an entitlement to costs. There is no reason to read down s 81(14) to the extent contended for by the trustee. Where it is appropriate that an examinee be compensated for the costs incurred in attending an examination, or producing documents for an examination, then an order should be made.
55 It would not be in every circumstance that an order for costs should be made in favour of an examinee. Rather, an order will only be made where it was appropriate for the examinee to incur the costs, and it is appropriate to compensate the examinee for those costs.
56 In my opinion there is no warrant for reading s 81(14) as dependent on the proof by the examinee of the existence of a relationship between the examiner and the examinee of the kind referred to by the authorities, including by Riley J in Re Kusmenko. The subsection ought to be construed as conferring an unfettered discretion, and costs should be awarded when it is in the interests of justice to do so.
57 Section 81(14) does not impose any liability upon the trustee in bankruptcy. If it is to be applied it has the effect that the examinee’s costs are paid out of the bankrupt’s estate. Whether the examinee can recover those costs must depend upon the funds available in the bankrupt’s estate.
58 When considering whether an order should be made the Court or a Registrar will have to determine whether in any particular circumstance the interests of justice favour the examinee’s costs being paid by the bankrupt’s creditors or by the examinee. As I have said, that will require the Court or a Registrar to determine whether in the particular case it was appropriate for the examinee to incur legal costs for which the examinee should be compensated.
59 An order under s 81(14) is like any other order for costs. It is designed to compensate the party for the costs to which the party has been put and is not of course designed to punish the party who is obliged to pay the costs. There is no element of punishment at all in s 81(14), because if an order is made in favour of an examinee under s 81(14) the burden falls upon the bankrupt’s creditors, not the trustee.
60 In this case it was appropriate in my opinion for Mr Price to obtain legal assistance so that he could comply with the summons which had been issued. The summons was very wide and required a consideration of hundreds of documents in some 300 separate boxes. An assessment needed to be made whether any of the documents which were sought in the summons were protected by legal professional privilege.
61 Mr Price also claims costs in respect of those costs incurred in complying with the summons before it was amended, as well as the costs incurred in complying with the summons after it was amended. There really can be no doubt that Mr Price ought to be compensated for the costs incurred in complying with the summons before it was amended. Those costs have been thrown away by reason of the amendment to the schedule to the summons. Furthermore, for the reasons already given, Mr Price should be compensated for the costs in complying with the summons after it was amended.
62 That leaves the question of the quantification of those costs.
63 In my opinion it would be appropriate to award Mr Price 100% of the costs which have been thrown away and 80% of the costs of compliance with the summons after the schedule was amended. The order for costs should therefore be in the sum of $6,838.98, together with the further sum of 80% of $7,148.02, which totals $12,557 (rounded off).
64 A trustee who is seeking to have an examinee produce documents for the purpose of that examinee’s examination or some other person’s examination must be careful to ensure that the breadth of the summons is not too wide otherwise the person who is summonsed is more likely to have to seek legal assistance in order to comply with that summons.
65 A trustee in bankruptcy therefore ought to be careful to ensure that the trustee seeks no further documents than are required for the purpose of the examination under s 81. Otherwise, if costs are awarded under s 81(14), the creditors will be disadvantaged by the trustee’s conduct.
66 I make the following orders:
1. The trustee in bankruptcy pay Mr Brandon Price’s costs incurred in bringing the interlocutory application to set aside the summons fixed in the sum of $7,790.
2. Mr Brandon Price’s costs of complying with the summons be paid out of the estate of Mr Rodney Francis Price and be fixed at $12,557.
67 The schedule of costs which was provided did not address the costs of this application, and so I will hear the parties as to the costs of this application.
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I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. |
Associate: