Ide v Ide

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5106/01 - MERVYN JOHN IDE (SNR) v MERVYN JOHN IDE (JNR)

1 HIS HONOUR: This is an application brought by the plaintiff's notice of motion dated 15 June 2004 seeking that the receivers in this matter file and serve a detailed claim for remuneration from the date of appointment up to and including the finalisation of the receivership and final distribution. 2 The basal facts are undisputed. The parties to these proceedings, father and son, were partners in a grazing operation, carried on at Ulong near Coffs Harbour in New South Wales. On 9 November 2001 I ordered that the partnership business be dissolved as at 21 May 2001 and that Mr Neil Geoffrey Singleton be appointed receiver and manager of the partnership business. On 9 July 2002 Justice Barrett ordered that Mr John David Leigh be appointed joint receiver on the partnership business. 3 On 6 April 2004 Mr Leigh swore an affidavit verifying accounts on the receivership of the partnership business containing a statement of receipts and disbursements on behalf of the partnership. There is some dispute as between the plaintiff and the receivers as to aspects of the receivers' accounts and costs. 4 The plaintiff is now a person under the care and control of the Protective Commissioner. 5 On 18 February 2002, Mr Leigh, one of the receivers' staff, some drovers and Karen Fallon called at the property for the purpose of removing the remaining cattle. Karen Fallon was the daughter of the plaintiff and held his power of attorney of the plaintiff; she was also the defendant's sister. An argument ensued between Ms Fallon and the defendant. The defendant's version of the event was that he accidentally fired his rifle in his sister's vicinity and, by ricochet she was hit by the bullet and subsequently died. The defendant gave his address as Grafton gaol when he swore his affidavit. 6 Police investigations followed during which the receivers assisted and spent some time towards providing interviews, giving statements and seeing the matter through to trial. Annexed to the affidavit of Mr Leigh sworn 8 October 2003 is a statement of particulars outlining the time spent on attending to matters relating to the additional costs incurred as a result of assisting investigations. The total value of this time is calculated to be $20,457.50. The total value of remuneration sought by the receivers amounts to $40,612.00 plus $4061.20 in GST. 7 Other concerns the plaintiff has with the receivers' accounts include the whereabouts of a truck and tractor said to belong to the partnership. Both assets appear on the partnership tax return for the 1999/2000 financial year. The depreciated value of the truck was then $23,049.00, subject to a liability of $6,267.83 to North State Finance. The depreciated value of the tractor was then $71,778.00, again, subject to a liability of $9,009.45 to North State Finance. The receivers say that they are unable to locate these assets and the plaintiff submits that they should not be paid until full disclosures are made as to the whereabouts of these assets or their status with North State Finance. The plaintiff further submits that he does not want the receivers running around looking for assets, but wants the receivers to disclose what has happened to the partnership assets. 8 There was mention in the evidence of the proceeds of sale of a Nissan Patrol, registration WMS 604. However the plaintiff supports the receivers' position and relies on the receivers' evidence so I needn't deal with that in any detail. 9 There is an outstanding creditor in the Commonwealth Bank. The plaintiff seeks an order that the bank debt be paid forthwith. The plaintiff opposes the discharge of the receivers until accounts are brought and the position regarding the partnership assets is clarified and the Commonwealth Bank loan repaid. 10 On 15 August 2002 a notice of motion was filed seeking approval of remuneration for the period 30 September 2001 to 15 July 2002 and on 4 October 2002 a Deputy Registrar approved that application. 11 On 20 October 2003 the receivers filed a further motion seeking orders in relation to discharge and distribution of funds. Justice Gzell on 22 March 2004 made orders providing for a regime for discharge and on 2 July 2004 the receivers' accounts were filed. 12 On 15 June 2004, the plaintiff filed a notice of motion seeking an order that the receivers file their detailed claim for remuneration. 13 That matter came before me on 15 July 2004 with Mr M Boulton appearing for the plaintiff and Mr S Golledge for the receivers. There was no appearance by the defendant, Mr Mervyn John Ide Jnr. 14 Mr Boulton put that the court needed to determine the issue between the parties as to whether the receivers were entitled to charge the partnership with the $20,457.20 allegedly being additional costs incurred as a result of assisting the police with their investigations into Karen Fallon's death. 15 Mr Boulton said that his client feared that, unless there was a direction by the judge as to this matter, the receivers' application for remuneration would 'slip through' the system and his client would be paying for extraneous work like he said happened in 2002. 16 Mr Golledge argued that the whole matter was premature as the receivers had not filed any fresh application for remuneration. He further put that to make any order would offend against the rule that accounts are taken once and for all by the accepted procedure. 17 I reserved my decision. 18 There are two issues to be considered in this matter:

(a) Whether the court is justified in bypassing the usual procedure for taking accounts;

(b) Assuming that the answer to (a) is "Yes", whether the receivers are entitled to charge the partnership with the costs associated with assisting the police with their enquiries over the death of Ms Fallon. I will deal with each of these issues in turn. 19 (a) It is certainly the case that there is high authority for the proposition that the court does not get involved with little bits of accounts: see Adams v Bank of New South Wales [1984] 1 NSWLR 285, 296. Unless the whole of the accounts are agreed except for one item in dispute, the court should not grant any declaration as to disputes within the accounts as the declaration may be otiose. 20 As to this, Mr Boulton submits that where the parties have very little money and there is a small partnership dispute which is likely to finalise the partners' problems the court in this 21st century ought to be more flexible. 21 Mr Boulton points out that the court, as the last 20 years have progressed, has placed more and more significance on the basic principle enshrined in s 63 of the Supreme Court Act that it should act so that disputes are solved cheaply, quickly and efficiently.

22 The standard procedure for taking accounts in relation to partnership suits in which there is some dispute is set out at [14,007] of volume 2 of Ritchie's Supreme Court Procedure NSW. That procedure involves a number of steps including the filing of a notice of motion, the filing of accounts by the receiver, vouching of those accounts before the Chief Clerk, cross examination of the receiver on his accounts before a Master, the filing of surcharges and/or falsifications, and then the trial and final determination of the issues arising on the surcharges and falsifications. This seven stage process carries with it considerable cost to the parties and significant time delay, at times taking years to come to fruition. 23 A surcharge to accounts is an allegation that the accounting party has omitted something for which credit ought to be given. A falsification is an allegation that an entry in the accounts is in respect of money not paid or improperly paid: see Pit v Colmondeley (1754) 2 Ves Sen 565, 566; 28 ER 360. 24 In determining whether the court is justified in bypassing the usual procedure for taking accounts it is incumbent on a judge to consider, on the one hand, the benefits of and the reasons behind implementing the standard procedure and, on the other hand, the benefits associated with taking a more holistic approach by making a determination in a less formal way in accordance with s 63 of the Supreme Court Act 1970. 25 Where there are many issues arising on accounts, the time honoured practice on taking accounts has much to commend it as it focuses on the whole issue as well as identifying all the sub-disputes which will need to be determined in order to decide the main issue. It also prescribes the onus of proof, the onus with surcharges being on the surcharging party and the onus with falsifications being on the accounting party. The present case involves a falsification, so that the onus would be on the receiver. 26 The importance of adhering to this process is realised in cases dealing with substantial assets and those ranging from the middle to the higher end of the financial scale. However, in cases where the gross assets of the receivership are minimal and the parties are not wealthy and indeed in cases such as the present, any benefit obtained by adhering to the standard procedure is outweighed by the significant costs and time involved. 27 In Marra Developments Ltd v B W Rofe P/L [1977] 2 NSWLR 616 at 626, Hutley JA rightly said that granting declarations in proceedings where there should be one trial on the accounts offends against s 63 because it encourages multiplicity of proceedings as against one trial of all issues. 28 However, in this 21st century, the court is more ready to take a practical approach. It is true that hearing applications for declaration may in the long run be more costly and a more convoluted procedure than taking of accounts. On the other hand, the practice of taking accounts was worked out in the 18th century and whilst excellent for complicated matters, can be slow and costly in relatively simple matters. This is demonstrated by the relatively few accounts matters that pass through all stages in the Master's Office and the large number of accounts that are referred out to private accountants. 29 It should also be observed that under the English practice, receivers' accounts are now dealt with far more informally with the parties having to make specific objections to the accounts and only the subject of the objections being considered. If there are no objections, the accounts pass automatically; see Kerr on Receivers 17th ed (Sweet & Maxwell, London 1989) pp 339 et seq. 30 A court must also, however, remember that its power to grant declaratory relief should only be exercised in circumstances where the declaration sought will have practical utility and should not be used to determine matters which may well be otiose. 31 Although I may be accused of proceeding contrary to the Court of Appeal's decisions that I have cited, it seems to me that in the current climate, a judge must evaluate each of the above competing factors when reaching a decision as to whether to examine and grant declaratory relief in a case where the likelihood is that the decision will end the controversy between the parties even though there is no guarantee of this. 32 In the present case, it is true that there are a couple of other disputes between the parties as I have outlined above. However, the present question as to whether receivers may charge a partnership for the time spent assisting police with their enquiries over an incident that occurred whilst carrying out their duties as receivers is a discrete one. It will not go away no matter what the accounts may otherwise show. Furthermore, it is of some general public interest. 33 I take on board Mr Golledge's point that there is no current application for remuneration before the court. However, it is almost certain that, in due course such an application will be filed and that the receivers will claim remuneration for this time spent. I note that all parties seem to assume that the receivers will be able to justify the time claimed. The only issue is whether it is billable time. 34 In my view, the scales are tipped in favour of determining the issue. This is a case where the monetary value in dispute is relatively low with the receivers claiming some $20,000. The costs associated with the standard procedure would outweigh the benefit to be gained by any party. 35 Under some modern rules of court, a superior court would not concern itself with a dispute over $20,000. However, some small disputes are merely instances of a wider problem. In the present case, it seems to me that it is in everybody's interest that the question be decided and preferably with as little expenditure of time and cost as possible. 36 (b) A receiver will, unless it is otherwise ordered or unless the receiver consents to act without salary, be allowed a proper salary or have allowances made to him for his care and pains in the execution of his duties. The question here is whether time taken to assist police with their enquiries when an incident occurred in the course of the receivers' agents' duties where one partner fatally shot the other partner's representative is billable as being within the receivers' mandate. 37 I have consulted the standard works on receivers, particularly Kerr on Receivers; Picarda, The Law Relating to Receivers, Managers & Administrators 3rd ed (Butterworths, London, 2000); Lightman & Moss, The Law of Receivers and Administrators of Companies (Sweet & Maxwell, London 2000) and O'Donovan, Company Receivers and Managers (LBC, Sydney, 1981). 38 One can find in those works, broad, general statements about the principles on which a receiver's remuneration is fixed, but little on the specific problem with which I have to deal. It is, however, of some use to set out some of those general statements. 39 First, the court constituted by a judge, never considers a review of quantum, but only matters of principle: Re Catlin (1854) 18 Beav 508; 52 ER 200; Australian Coal and Shale Employees' Federation v Commonwealth (1953) 94 CLR 621. 40 Secondly, as Kerr says at p 233, a receiver is entitled to have his costs, charges and expenses properly incurred in the discharge of his ordinary duties, or in the performance of extraordinary services which have been sanctioned by the court. It is important to note that Kerr at page 235 says that where a receiver has undertaken such extraordinary services without the approbation of the court, allowances for them will not generally be sanctioned: Bristowe v Needham (1847) 2 Ph 190; 41 ER 914; Malcolm v O'Callaghan (1837) 3 My & Cr 52; 40 ER 844 and Viola v Anglo-American Cold Storage Co [1912] 2 Ch 305 at 311. 41 Picarda elaborates at page 482, noting that a receiver who, without applying to the court for directions, performs extraordinary or extra services going beyond what it was his duty as a receiver and manager to perform may be allowed remuneration in addition to his salary or commission if what he has done has benefited the receivership assets. 42 Thirdly, as Lightman & Moss say at 22-029: "The receiver must justify the reasonableness and prudence of the tasks undertaken for which remuneration is sought, in the same way as he must justify the reasonableness and prudence of incurring disbursements for which he seeks allowance and reimbursement." 43 Thus, as with a falsification of accounts, the relevant onus is on the receiver. 44 Fourthly, it must always be remembered that a receiver's remuneration is not in the same category as costs: Mirror Group v Maxwell [2001] BCC 488. The receiver is making application for a fair recompense for what he or she has properly done. The award is in the discretion of the court according to well known guidelines: Lindley on Partnership 18th ed (Sweet & Maxwell, London, 2002) [23-177]. 45 Fifthly, the court's objective is to award a sum or devise a formula which will reasonably compensate the receiver for the time and trouble expended in the execution of his duties and, to some extent, the responsibility he has assumed: Re Alexander McLean (1912) 14 GLR 561, 562. As Dennison J said in that case the vital question is what is the value to the estate of the work done by the receiver. 46 This point was taken up by Ferris J in Mirror Group Newspapers v Maxwell (No 2) [1998] 1 BCLC 638, 652 where His Lordship said that the court's task in assessing a receiver's remuneration is to reward value not indemnify against cost. His Lordship repeated this in Re Independent Insurance Co Ltd (No 2) [2003] 1 BCLC 640. This, of course, does not mean that the receiver is only remunerated if successful in adding value to the assets; see Waldron v MG Securities (Australasia) Ltd [1979] ACLC 40-541. 47 However, the mere fact that the work done is of value to the partnership is not enough if the work done is outside the receiver's remit. Thus in Venetian Nominees Pty Ltd v Conlan (1998) 16 ACLC 1653, a provisional liquidator was not remunerated for preparing statutory returns which were the duty of the directors to prepare. 48 Sixthly, the court will usually work off time sheets created in the receiver's office provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff. As Ferris J said in Mirror Group Newspapers v Maxwell (No 2) [1998] 1 BCLC 638, 648: "They must explain the nature of each main task undertaken, the considerations which led them to embark upon the task, and, if the task proved more difficult or expensive to perform than first expected, to persevere in it … . The amount of detail which needs to be provided will, however, be proportionate to the case."

See also Re Solfire Pty Ltd (No 2) [1999] 2 Qd R 182 and Re Medforce Healthcare Services Ltd [2001] 3 NZLR 145. 49 Seventhly, the court is guided by professional scales of charges: Re Queensland Forests Ltd [1966] Qd R 180; Waldron v MG Securities (Australasia) Ltd [1979] ACLC 40-451 and see Picarda p 480. What is important is the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work: Mirror Group Newspapers v Maxwell (No 2) [1998] 1 BCLC 638, 648. 50 There are few examples given in the cases and textbooks as to how taxing officers or the like apply these principles in practice. There are few examples as to what is reasonably included in billable hours and disbursements. 51 One example comes from a taxation of costs case, which, for reasons earlier, might not be the best source of material. In Corwest Management Pty Ltd v Deputy Commissioner of Taxation (WA) (1987) 18 ATR 823 at 826, Onley J in the Western Australian Supreme Court said in a dispute over costs that whilst all expenses reasonably necessary to get a case ready for trial were allowable, a party could not say that he would not have brought a document into the State were it not for the trial and thus should be allowed the stamp duty paid on it. Even though the duty was a necessary expense, it was really part of the payer's ordinary civic responsibilities to pay it. 52 In Mirror Group Newspapers v Maxwell (No 2) [1998] 1 BCLC 638, 659-660, Ferris J considered the situation where the receiver had to spend some hours dealing with the enquiries being made by the Serious Fraud Office into the activities of Mr Maxwell, one of the directors of the relevant company. His Lordship allowed the initial conference with the Serious Fraud Office. However, he said he would not allow the time spent later on if it in any way was attributable to the receivers justifying their own conduct. However, he considered that, apart from this, time spent answering the inquiries of the Serious Fraud Office, though extraordinary, should be allowed. 53 His Lordship put some weight on the point that the inquiries were not initiated by the receivers and arose out of the activities of the companies of which they were presently in control.

54 In the present case, the incident which gave rise to the police involvement occurred in the course of the receivers' agents' duties. However, the incident had nothing to do with the administration by the receivers, it appears to have been a personal matter within the partners' family. 55 Even taking on board the point that the inquiries were initiated by the police and not by the receivers, it is difficult to see how assisting the police with their enquiries into Karen Fallon's death was work which was part of the ordinary or extraordinary duties of the receivers. However, a small part of the time spent might fall within this category. 56 If, for instance, a murder is committed whilst the receiver is making his inspection and the police forbid anyone to leave the site for some hours until interviewed, the time might be billed to the partnership in the same way as if the receiver was snowed in by adverse weather. However, this concept would not justify a charge being made for the whole of the time spent making statements to the police etc. 57 The situation is really little different to the receiver driving to the partnership premises and witnessing a fatal road accident on the way. There is no way that anyone could say that the time spent in giving statements to the police was conduct which assisted the partnership even though the loss to the receiver arose in connection with the receivership. 58 As Ferris J says, one does not indemnify the receiver for loss, one looks to the value of the work to the partnership. In the present case the value of assisting the police with their enquires to the partnership must be close to nil. 59 In passing I think it is important to note that assisting police with any enquiry falls into a greater civic duty that surpasses all professional duties. That the receivers' representative was a witness to the shooting and unfortunate killing of Ms Fallon places on them a civic responsibility to ensure that justice is done by assisting police in any way they can, for the greater benefit of the community. 60 Thus in my view, the great majority of the time spent and ancillary disbursements for what the receivers did in this connection is not chargeable to the partnership. 61 I do not consider that it is necessary to make any order. Not the least reason for this is that a deputy registrar may conclude that, consistent with these reasons, a small part of the time claimed by the receivers should be allowed. However, these reasons make the position clear to the deputy registrar who may consider the receivers' application for remuneration when made in due course. 62 It is only fair and just, however, to say that if the receivers wish to seek leave to appeal from my determination, I will make the appropriate declaration to enable them to do so. 63 In my view there should be no order as to costs of the motion. In one sense the plaintiff has succeeded, but the receivers were technically correct in their submission that the application was premature and contrary to the usual practice of the court. 64 Accordingly, I merely publish these reasons and stand the matter over until Tuesday 14 September 2004 at 9:30 am. If there is no appearance on that occasion, I will not take offence, but merely dismiss the notice of motion of 15 June 2004 with no order as to costs.

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