Paciocco v Australia and New Zealand Banking Group Limited

CONSIDERATION 13 Sections 244 and 245 of the Bankruptcy Act allow creditors to apply for an order that the administration of the estate of a deceased debtor occur under Part XI of the Bankruptcy Act. Section 245 is the more specific of these sections. It deals with the position which obtains when a debtor dies after a creditor's petition has been presented, but before a sequestration order has been made or the petition has been dismissed. It provides in so far as is presently relevant: Debtor dying after presentation of creditor's petition (1) Subject to subsection (2), where a person against whom a creditor's petition has been presented under Part IV dies after he or she has been served with the petition but before a sequestration order has been made on the petition or the petition has been dismissed, an order may be made on that petition for the administration of his or her estate under this Part. (2) The matters of which the Court is to require proof before making such an order in a case to which subsection (1) applies are those of which the Court would have required proof before making a sequestration order on the petition if the deceased person had not died. ... 14 Structurally, s 245(1) provides the Court with a discretion to make an order for the administration of a deceased debtor's estate under Part XI of the Bankruptcy Act upon satisfaction of five pre-conditions to the exercise of the discretion. 15 The first pre-condition is that there has been a presentation of a creditor's petition under Part IV of the Bankruptcy Act. That occurred when the creditor's petition was filed on 29 March 2022. 16 The second pre-condition is that the person against whom the creditor's petition has been presented has been served with that petition. I am satisfied that service of the creditor's petition was served on Mr Coshott. This is confirmed by Mr Hall's filing of a Notice of appearance on behalf of Mr Coshott on 9 May 2022. 17 The third pre-condition is that the person against whom the creditor's petition has been presented has died after service of the creditor's petition upon that person. This pre-condition has also been satisfied - the petition was served on Mr Coshott before 9 May 2022, being the date of the filing of the Notice of appearance, and Mr Coshott died on 5 July 2022. 18 The fourth pre-condition is that the person against whom the creditor's petition has been presented has died before a sequestration order has been made on the petition, or the petition has been dismissed. This pre-condition has also been satisfied - Mr Coshott died on 5 July 2022 and no order for sequestration or dismissal has been made. 19 The final pre-condition is proof of those matters of which the Court would have required proof before making a sequestration order on the petition if the person against whom the creditor's petition has been presented had not died. Those matters are contained in Division 2 of Part IV of the Bankruptcy Act. The matters of relevance to the present proceeding are discussed below. 20 Section 43(1) of the Bankruptcy Act provides that the Court may make a sequestration order, on a petition presented by a creditor, where: (1) the debtor has committed an act of bankruptcy. Relevantly, s 40(1)(g) provides that a debtor commits an act of bankruptcy: if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia--within the time fixed for compliance with the notice; or (ii) where the notice was served elsewhere--within the time specified by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained; I am satisfied that Mr Coshott committed an act of bankruptcy. As set out above, Mr Spencer obtained final judgments or orders (in respect of which there is no evidence of a stay); the Bankruptcy Notice was served on Mr Coshott; Mr Coshott failed to comply with the Bankruptcy Notice; and there is no evidence of any claim by Mr Coshott against Mr Spencer in an amount equal to or exceeding the amount claimed in the Bankruptcy Notice; and (2) at the time that the act of bankruptcy was committed, the debtor satisfied one or more specified criteria providing a nexus between the debtor and this country. Those criteria include that the debtor was personally present in Australia, an ordinary resident in Australia, or had a dwelling-house in Australia. For the reasons set out at [9] above, I am satisfied that Mr Coshott satisfied each of these criteria. 21 Section 44(1) of the Bankruptcy Act provides: (1) A creditor's petition shall not be presented against a debtor unless: (a) there is owing by the debtor to the petitioning creditor a debt that amounts to the statutory minimum or 2 or more debts that amount in the aggregate to the statutory minimum, or, where 2 or more creditors join in the petition, there is owing by the debtor to the several petitioning creditors debts that amount in the aggregate to the statutory minimum; (b) that debt, or each of those debts, as the case may be: (i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and (ii) is payable either immediately or at a certain future time; and (c) the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition. 22 This section is satisfied because the debts owing by Mr Coshott to Mr Spencer exceed the statutory minimum of $10,000 (s 5(1) of the Bankruptcy Act; reg 10A of the Bankruptcy Regulations 2021 (Cth)); those debts are each liquidated sums due at law and payable immediately; and the acts of bankruptcy on which the creditor's petition is founded were committed in January 2022, and thus within 6 months of the presentation of the creditor's petition on 29 March 2022. 23 Section 47 of the Bankruptcy Act requires that the creditor's petition be verified by an affidavit of a person who knows the relevant facts; and that the petition be in the form prescribed by the rules of Court. This section is satisfied because the creditor's petition has been verified by an affidavit of Mr Spencer, who it is clear has knowledge of the facts set out in the creditor's petition; and the creditor's petition is in the prescribed form. 24 Section 52 of the Bankruptcy Act requires proof of: (1) the matters stated in the creditor's petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient). I am satisfied that the matters stated in the petition have been proven by Mr Spencer's 24 March 2022 affidavit (see [7] and [23] above); (2) service of the creditor's petition. For the reasons set out at [16] above, I am satisfied that such service occurred; and (3) the fact that the debt or debts on which the petitioning creditor relies is or are still owing. As set out at [11] above, this is the case. 25 I note, for completeness, that the requirements of Part 4 of the Federal Court (Bankruptcy) Rules 2016 to the extent they are applicable have been met in relation to the proof of the above matters. 26 For the reasons set out above, I am satisfied that there is proof of the matters of which the Court would have required proof if Mr Coshott had not died. 27 Thus, all five pre-conditions have been satisfied and the Court's discretion to make an order for the administration of Mr Coshott's estate under Part XI of the Bankruptcy Act has been enlivened. In my view, it is appropriate to make such an order for the following reasons. First, there is proof of the matters of which the Court would have required proof if Mr Coshott had not died. Secondly, this includes proof of the matters in s 52 of the Bankruptcy Act and where this occurs, the Court will generally proceed to make an order for sequestration: see Totev v Sfar [2006] FCA 470; (2006) 230 ALR 236 at 243 [37] per Allsop J (as the Chief Justice then was). Thirdly, whilst the application has been heard without Mr Coshott's estate being represented or heard, I do not consider this to be a reason not to make the order. Section 245 (in contrast to s 244) does not require that notice be given to any legal personal representative of the deceased debtor (or indeed to any person) and contemplates that an order may be made effectively on an ex parte basis. Further, s 252B of the Bankruptcy Act allows an application to be made for an annulment of the order. Finally, there is no apparent reason not to make the order sought. 28 I am satisfied that it is appropriate to make the order sought pursuant to s 245 of the Bankruptcy Act. It is thus unnecessary to consider whether such an order should be made under s 244 of that Act.

COSTS 29 Mr Spencer seeks an order that his costs be paid on a lump-sum basis. In support of that application he relies upon an affidavit of his solicitor, Mr Taylor, sworn on 7 November 2022. Mr Taylor was admitted as a solicitor in 1999 and is an accredited specialist in commercial litigation. The essence of Mr Taylor's affidavit evidence is that: (1) Mr Spencer's costs from 17 February 2022 to the date of the hearing on 7 November 2022 (excluding the costs of the hearing and the preparation of Mr Taylor's 7 November 2022 affidavit) are $14,512.83, comprising professional costs of $9,997.17 and disbursements of $4,515.66 (all figures exclusive of GST); and (2) no claim is made for the recovery of GST or for the payment of an additional amount under item 11 of the Scale of Costs in Schedule 3 to the Federal Court Rules 2011. 30 The time records annexed to Mr Taylor's affidavit record that time was spent by: (1) Mr Taylor, mostly at $450 per hour, with five entries at $500 per hour; (2) Ms Ebony El-Hitti, a paralegal, at $200 per hour; (3) another person, "KM", at $200 per hour. From that charge-out rate, I infer that "KM" is also a paralegal; and (4) another person, "KE", at $180 per hour. I also infer that "KE" is a paralegal. 31 The Court's discretion with respect to costs is broad and includes the making of a lump-sum order for costs. Such an order is appropriate in the present case given that: it accords with the Court's preference for lump-sum costs orders (Costs Practice Note at [3.3] and [4.1]; Paciocco v Australia and New Zealand Banking Group Limited (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at 406-407 [16] and [19]); it will save the time and costs of a taxation process; and the costs which have been incurred appear to be proportionate to the complexity of the issues raised in the proceeding (which has been prolonged by reason of Mr Coshott's death). 32 I am satisfied that Mr Taylor's costs are below the maximum hourly rate of $650 per hour provided for in item 1 of the Scale. However, I am not so satisfied with respect to the costs incurred by the two paralegals. As noted above, their charge-out rates are $180 or $200 per hour, whereas the amount allowed by item 1 of the Scale for paralegals is $110 per hour. The application of a rate of $110 per hour rather than $180 or $200 per hour to the time spent by the paralegals produces a total figure for professional costs of $9,282.50. 33 The Court's discretion includes the possible application of a discount to the total costs claimed on a lump-sum basis. In considering the level of discount (if any) to apply, relevant considerations include the risk that the lump-sum awarded will be excessive because of the absence of the close scrutiny of the claims for costs that attend a taxation and the risk that the lump-sum awarded will be inadequate because too great a discount has been applied so as to compensate for the risk of an award of an excessive sum. 34 In the present case, taking these considerations into account, as well as the time records annexed to Mr Taylor's affidavit appearing to show an appropriate division of tasks between Mr Taylor and the paralegals; and that no claim was made for the costs of the hearing or the preparation of Mr Taylor's 7 November 2022 affidavit, I have formed the view that a discount of 15 per cent of the professional costs is appropriate. Such a discount reduces the professional costs from $9,282.50 to $7,890.13. In my view the disbursements, which appear to relate to the prosecution of this proceeding, should be recoverable in full. 35 The addition of $7,890.13 for professional costs to the disbursements of $4,515.66 produces a total of $12,405.79, which I will round down to $12,400.

CONCLUSION 36 For the reasons set out above, I will make an order that Mr Coshott's estate be administered under Part XI of the Bankruptcy Act; and an order that Mr Spencer's costs, in the lump-sum of $12,400 be paid from that estate. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman.