Bird v The Commonwealth of Australia

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: Schedule of Costs Type of work Solicitor Time spent (units) Hourly Rate (GST Exclusive) Amount charged (GST Exclusive) Costs of compliance (work required in any event) Anthony Hillary (Partner) 174 294.50 5,133.00 Genevieve Spencer (Solicitor) 94 129.50 1,217.30 Amanda Smith (Solicitor) 56 142.45 797.72 Total 324 7,148.02 Costs of compliance (work not required under amended schedule) Anthony Hillary (Partner) 81 294.50 2,385.45 Genevieve Spencer (Solicitor) 205 100.00 - 129.50 2,268.30 Amanda Smith (Solicitor) 75 142.45 1,016.58 Hannah Cohley (Solicitor) 30 129.50 468.00 James Bruun (Senior Associate) 27 259.50 700.65 Total 388 6,838.98 Costs of bringing application Anthony Hillary (Partner) 176 294.50 5,183.20 Genevieve Spencer (Solicitor) 59 100.00 - 129.50 758.15 Amanda Smith (Solicitor) 15 142.45 213.67 Hannah Cohley (Solicitor) 1 129.50 12.95 Graham Dart (Barrister) 105 340.00 3,570.00 Total 356 9,737.97 TOTAL 1,068 23,724.97