Ashwood v Ashwood (No 2)
[2025] FedCFamC2G 1366
•22 August 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Ashwood v Ashwood (No 2) [2025] FedCFamC2G 1366
File number(s): SYG 924 of 2023 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 22 August 2025 Catchwords: BANKRUPTCY – where a sequestration order made by a Registrar was set aside by consent on the debtor’s paying money to the creditors – whether trustee in bankruptcy is entitled to remuneration and reimbursement for work done and expenses incurred from the making of the sequestration order to the date on which the sequestration order was set aside – trustee is entitled to remuneration and reimbursement of expenses – whether the trustee is entitled to the amounts he claims for remuneration and reimbursement – determination made allowing part of the amount the trustee claims – debtor ordered to pay amount determined. Legislation: Bankruptcy Act 1966 (Cth) ss 60(2),(3), ss 60-5, 60-10, 60-11, 90-15(3)(f) of Sch 2
Federal Circuit and Family Court of Australia Act 2021 (Cth), s 256
Federal Circuit Court of Australia Act 1999 (Cth) (repealed), s 104(3)
Cases cited: Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338
Robson as former trustee of the estate of Samsakopoulos v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143
Division: General Number of paragraphs: 22 Date of hearing: 6 August 2024 Place: Sydney Solicitor for the Applicants: Ms N Mostajabi of Woods & Day Solicitors, by telephone Counsel for the Respondent: Mr V Gray, by telephone Solicitor for the Respondent: Somerset Ryckmans Counsel for the Trustee: Ms V Plain, by telephone ORDERS
SYG 924 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: TERENCE JOHN ASHWOOD
First Applicant
LESLEY MAY ASHWOOD
Second Applicant
AND: SHERIDYN ASHWOOD
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
22 AUGUST 2025
THE COURT ORDERS THAT:
1.The respondent pay the remuneration and expenses of the respondent’s former trustee in bankruptcy, Mr Stephen John Michell, set in the amount of $15,281.89.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
The former trustee in bankruptcy (Trustee) of the estate of Ms Sheridyn Ashwood (Debtor) applies for an order that he be paid an amount the Trustee claims reflects the reasonable remuneration he earned, and the expenses he reasonably incurred, while acting as the trustee of the Debtor’s estate.
BACKGROUND
On 21 December 2023 a Registrar of this Court made a sequestration order against the estate of the Debtor on the petition of Mr and Ms Ashwood (Creditors), and the Trustee was appointed the Debtor’s trustee in bankruptcy.
On 31 January 2024 the Debtor applied for a review of the Registrar’s orders. On 5 February 2024 I made an order staying all proceedings under the sequestration order, and suspended the operation of s 60(2) and s 60(3) of the Bankruptcy Act 1966 (Cth) to the extent necessary to permit the Debtor to pursue and maintain proceedings she had commenced in the Supreme Court of New South Wales. I also made an order that the Debtor’s application for review be set down for hearing on 29 February 2024.
On 29 February 2024, when the application for review was listed for hearing, counsel for the Debtor and the Creditors informed me the parties agreed to the sequestration order being set aside conditionally on the Debtor making a payment to the Creditors before 17 April 2024. I made an order standing over the application for review and the creditors’ petition to 9.30 am on 17 April 2024.
On 1 March 2024 the Trustee sent an email to the solicitors for the Debtor and the Creditors attaching an invoice claiming a total of $10,691.70 for the remuneration and expenses the Trustee earned and incurred as trustee of the Debtor’s estate from 21 December 2023 to 28 February 2024. In his email the Trustee stated that he was raising with the parties the question of his remuneration and expenses to seek agreement before the hearing on 17 April 2024, noting that, if agreement could not be reached on his remuneration before the hearing, it will be necessary for him to engage legal representation. Neither the Debtor’s nor the Creditors’ solicitors responded to the Trustee’s email.
On 15 April 2024 the Trustee sent another email to the solicitors for the Debtor and the Creditors attaching an invoice claiming $11,556.90 for the remuneration the Trustee earned and incurred from 8 January 2024 to 31 March 2024. The Trustee noted that he expected to incur a further $517.36 plus GST if the sequestration order were to be set aside on 17 April 2024.
When the matter came before me on 17 April 2024, counsel for the Debtor and Creditors informed me that the payment on which the setting aside of the sequestration order was conditional had been made, and counsel handed up draft consent orders which included an order that the sequestration order be set aside. The Trustee, however, by his counsel, indicated that the Trustee would consent to setting aside the sequestration order provided I made an order that the Trustee’s remuneration and expenses be paid. Discussion ensued about a number of matters.
Counsel for the Trustee said that, although it was not impossible that the Creditors could be ordered to pay the Trustee’s remuneration and expenses, counsel considered that, given there is no finding that the Debtor did not commit an act of bankruptcy, the Debtor is the person to whom the Trustee would be looking to pay his remuneration and reimburse his expenses. Counsel for the Debtor, on the other hand, said it was unclear on what basis the Trustee claimed remuneration, noting that he had been provided with an affidavit from the Trustee only the previous evening. Counsel for the Debtor, however, said that he considered it to be unlikely that the Creditors could be liable to pay any remuneration or expenses to which the Trustee may be entitled. Counsel for the Debtor further said that he could see no basis on which the Debtor, if she were ordered to pay the Trustee’s remuneration and expenses, could claim contribution from the Creditors.
Having heard and considered the submissions of counsel, I made the following orders:
1. Subject to order 2:
a) Order 2 of the orders made by Registrar Morgan on 21 December 2023 (the sequestration order) is set aside.
b) The creditor’s petition be dismissed.
c) No order as to costs (with the intent that each party is to bear their own costs) in respect of the application for review.
2. Order 1 is made on the condition that there is reserved for determination by Judge Manousaridis or another Judge of the Court, the question whether the Trustee is entitled to remuneration and costs, and if so, the amount of remuneration and costs.
THE TRUSTEE’S CLAIM FOR REMUNERATION
The Trustee relies on three affidavits. The first is an affidavit made by Mr Warren Brian White on 5 August 2024, in which he refers to two affidavits he made, one on 27 May 2024, and the other on 16 April 2024. Mr White is a principal of the firm of which the Trustee is also a principal. The more significant of the three affidavits is the affidavit Mr White made on 5 August 2024.
In that affidavit Mr White annexes what he describes as a draft invoice covering the period from 21 December 2023 to 31 July 2024. The invoice annexes a table (Remuneration Table) which describes the work that was performed for each of the dates listed in the first column of the table, the class of work that was performed (these being “Admin”, “Assets”, “Creditors”, and “Invest”), the person who performed the work, the time over which the work was performed, and the amount charged for the work that was performed. The sum of the value of each item of work is $19,023.40 (inclusive of GST), which reflects an average hourly rate of $576.47 (exclusive of GST). The Trustee claims an additional $3,300 remuneration for work up to and including 6 August 2024 for briefing counsel, preparing an affidavit, and attending the hearing of the application for an order for remuneration.
The draft invoice also lists disbursements. These are counsel’s fees ($9,900 plus GST), fees for the lodgement and withdrawal of a caveat ($1,034.72 plus GST), and search fees ($264.41 plus GST).
PARTIES’ SUBMISSIONS
In his counsel’s written submissions, the Trustee submits the Court has power to order the payment of the Trustee’s remuneration and expenses under s 90-15(3)(f) of the Insolvency Practice Schedule (Bankruptcy) (IPS); that the orders I made on 5 February 2024 did not relieve the Trustee from performing his duties; and the remuneration the Trustee seeks is reasonable, having been necessarily incurred by the Trustee in the administration of the Debtor’s bankrupt estate, and calculated according to acceptable hourly rates for remuneration in the insolvency industry.
The Debtor, on the other hand, submits as follows:
(a)Absent an annulment of the Debtor’s bankruptcy, the Court has no power to deal with the Trustee’s application for remuneration.
(b)The Trustee had notice of the orders I made on 5 February 2025 staying all proceedings under the sequestration order.
(c)The Trustee’s entitlement to remuneration is entirely governed by Div 60 of the IPS, and, at most, the Trustee is entitled to be paid no more than the maximum default amount pursuant to s 60-5(2) of the IPS. That is so because the Trustee’s remuneration was not determined by any resolution of creditors (pursuant to s 60-10), or by the Inspector General (pursuant to s 60-11).
(d)In any event, the Trustee has not demonstrated that the work for which he seeks remuneration was necessary work properly performed in relation to the Debtor’s estate.
(e)To the extent the Trustee has demonstrated he is entitled to remuneration, he can only recover such remuneration out of the assets of the Debtor’s estate.
PRINCIPLES
The source of the power to set the remuneration and reimbursement of expenses of the Trustee lies in the provision pursuant to which I made the order setting aside the sequestration order, namely, s 256(2) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act). In Robson v Body Corporate for Sanderling at Kings Beach CTS 2942, the Full Federal Court held that the equivalent provision of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act) (s 104(3)) conferred on this Court, when setting aside a sequestration order made by a Registrar, a broad power to ensure a just outcome. Thus Colvin J (with whose reasons Allsop CJ, Markovic J and Derrington J agreed) said:[1]
Therefore, in the particular case where the order made by the registrar is a sequestration order and the order on review is a dismissal of the creditor’s petition, the Court is not confined to making the dismissal order. It can make such consequential orders as it thinks fit in relation to the matter of which it is seized at the time of the review. By providing that the Court may make orders as it thinks fit, s 104(3) confers a broad power to ensure a just outcome having regard to the determination made on the review.
[1] [2021] FCAFC 143, at [239].
The Full Federal Court held that the power conferred by s 104(3) of the FCC Act (and now s 256(2) of the FCFC Act) extends to making orders for the payment of the trustee’s remuneration and expenses. Allsop CJ said “there is ample content to s 104(3) of the FCCA Act . . .to make all appropriate orders to deal with the remuneration, costs and expenses of the trustee”;[2] and Colvin J said that the power conferred by s 104(3) of the FCC Act “include orders as to the remuneration, costs and expenses of the trustee”.[3] Allsop CJ also identified some of the matters that may be relevant to the exercise of the power to make orders for the remuneration, costs, and expenses of a trustee. His Honour said that the burden of paying the trustee’s remuneration, costs, and expenses:[4]
should not fall to be shared by the debtor merely because the sequestration order has been set aside. There may in any given case be circumstances that make it just for the debtor to pay some money for what, or in respect of what, has occurred. Such an order would need to be conformable with the Constitutional imperative. The debtor may have contributed to the making of the first sequestration order by his or her conduct, such as by failing, after being told clearly of the necessity, to bring forward evidence of solvency; the debtor may have asked the trustee to take steps that the trustee was not obliged to take and which have benefitted the debtor. There may be other circumstances. Thus, the circumstances surrounding the making of the order by the registrar may be relevant to consider in the making of the consequential orders…
[2] [2021] FCAFC 143, at [30].
[3] [2021] FCAFC 143, at [255].
[4] [2021] FCAFC 143, at [30].
I therefore do not accept the Debtor’s submission that, absent annulment, the Court does not have power to order the payment of an amount to remunerate work a trustee in bankruptcy performed in relation to the administration of a bankrupt estate, or to order the reimbursement of amounts a trustee in bankruptcy has spent in relation to his or her administration of a bankrupt estate.
DETERMINATION
The Debtor’s other submissions appear to be premised on the view that the question of the Trustee’s entitlement to remuneration is to be determined entirely by the provisions contained in Div 60 of the IPS. That premise is incorrect. As I have already noted, the source of the power to order remuneration of a trustee in bankruptcy in relation to a sequestration order that has been set aside pursuant to the exercise of the power conferred by s 256(2) of the FCFC Act is s 256(2) itself. Nevertheless, in most if not in all cases, the exercise of the power is to be informed by at least two considerations. The first is the criterion provided by s 60-5(1) of the IPS, namely, that a trustee “is entitled to receive remuneration for necessary work properly performed by the trustee in relation to the administration of the regulated debtor’s estate, in accordance with the remuneration determinations (if any) for the trustee (see sections 60-10 and 60-11)”. A second consideration is the principle that “a trustee who administers a bankrupt estate, in the knowledge that the bankrupt is challenging the validity of the sequestration order, must exercise caution when incurring expenses whilst the status of the bankruptcy remains uncertain”.[5]
[5] Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338 (Weinberg J).
I am satisfied that the Remuneration Table constitutes sufficient evidence from which to identify the work the Trustee (or his agents) performed in relation to the administration of the Debtor’s estate and for which he seeks remuneration, and from which to assess whether such work was necessary work properly performed in relation to the administration of the Debtor’s estate. On the basis of the Remuneration Table, I am satisfied that the work that was performed up to and including 12 February 2024 was necessary work properly performed in relation to the Debtor’s Estate. The work primarily related to the identification of the assets of the estate and their protection. I am also satisfied the rate is reasonable. I have calculated the amount of the remuneration to be $7,593.5 (exclusive of GST). I am not satisfied, however, that the work performed after 12 February 2024 was necessary work in relation to the administration of the Debtor’s estate. That is particularly the case for work performed after 17 April 2024, when the sequestration order was set aside. Even before 17 April 2024, most of the work appears to relate to the calculation and recovery of the Trustee’s remuneration and expenses. Work that is performed to recover remuneration is not necessary work in relation to the administration of the Debtor’s estate.
As for the claimed expenses, I am satisfied that the fees for the lodgement and withdrawal of caveats, and the search fees, were necessary expenses in relation to the administration of the Debtor’s estate. I am not satisfied, however, that counsel’s fees were a necessary expense. The Trustee briefed counsel for the purpose or applying for an order for remuneration, not for any purpose connected with the administration of the Debtor’s estate. It is the case, however, that the Trustee was put to the expense of engaging counsel because the Trustee’s emails of 1 March and 15 April 2024 went unanswered. In those circumstances, an appropriate way to deal with counsel’s fees is to include a reasonable amount for counsel’s fees as a disbursement. I consider that it is within the broad power conferred by s 256(2) of the FCFC Act to deal with counsel’s fees in this manner. That is, I am satisfied that allowing counsel’s fees incurred in connection with the Trustee seeking to recover his remuneration is an order “in relation to the matter in respect of which” I exercised the power conferred by s 256(2) of the FCFC Court when on 17 April 2024 I set aside the sequestration order. I am not satisfied, however, that $9,900 (excluding GST) is a reasonable amount. I am satisfied that $5,000 (excluding GST) would be a reasonable allowance for counsel’s fees.
The Trustee, therefore should be paid a total of $13,892.63 ,[6] plus GST of $1,389.26,[7] making a total of $15,281.89. The Debtor, rather than the Creditors, should be ordered to pay this amount. There is no finding the Debtor did not commit an act of bankruptcy; and, in any event, by agreement between the Debtor and the Creditors, the setting aside of the sequestration depended on the Debtor paying an amount to the Creditors, which the Debtor apparently did before 17 April 2024 when I set aside the sequestration order.
[6] $7,593.50 + $5,000 + $1,034.72 +$264.41 = $13,892.63.
[7] $13,892.63 x 10% = $1,389.26.
DISPOSITION
I propose to order that the Debtor pay the Trustee’s remuneration set in the amount of $15,281.89.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 22 August 2025
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