Brake v Townsend

Case [2006] FCA 1156

FEDERAL COURT OF AUSTRALIA

Brake v Townsend [2006] FCA 1156

BANKRUPTCY – appeal from orders of Federal Magistrate Coker fixing the remuneration of a trustee – consideration of whether a proper foundation subsisted for the exercise of a power to fix costs – consideration of the source of the power – consideration of the intersection between such a power and s 162 of the Bankruptcy Act 1966 (Cth).

Bankruptcy Act 1966 (Cth)
Bankruptcy (Estate Charges) Act 1997

House v The King (1936) 55 CLR 499 - cited
Duncan v McVeigh & Anor FMCA 759 - cited
Bellin v Pattison (Trustee) [1999] FCA 51 - cited
Mayne v Jaques (1959 – 1960) 101 CLR 169
Re Wong ex parte Wong v Donnelly (1995) 63 FCR 426

PAUL NEWTON BRAKE v JULIE-ANN TOWNSEND

QUD121 OF 2005

GREENWOOD J
29 AUGUST 2006
BRISBANE


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QUD121 OF 2005

BETWEEN:

PAUL NEWTON BRAKE
APPELLANT

AND:

JULIE-ANN TOWNSEND
RESPONDENT

JUDGE:

GREENWOOD J

DATE OF ORDER:

29 AUGUST 2006

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.The appellant trustee of the estate of Ms Julie‑Ann Townsend is entitled to be paid costs, charges and expenses of the administration of the bankruptcy including the remuneration of the trustee on the following basis:

(a)for the period 20 June 2003 to 5 November 2004, an amount of $40,110.23 less the amount received in the sum of $15,000.00 plus applicable GST; and

(b)for the period from 5 November 2004 to the date of this order, remuneration of the trustee as determined by operation of s 162 of the Bankruptcy Act 1966 (Cth) and Bankruptcy Regulations; and

(c)costs, charges and expenses incurred on an indemnity basis.

2.The respondent shall pay to the appellant the sum of $25,110.23 plus applicable GST within 45 days of the date of this order.

3.The respondent shall pay the appellant the amount of the remuneration determined in accordance with order 1(b) of these orders within 45 days of delivery by the appellant to the respondent of an itemised Bill of Costs or, alternatively, within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations. 

4.The respondent shall pay the appellant the amount of the costs, charges and expenses referred to in order 1(c) of these orders within 45 days of delivery of an itemised Bill of Costs or alternatively within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations. 

5.The appellant shall be entitled to apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy including the remuneration and expenses of the trustee as determined in accordance with these orders. 

6.The…

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Brake v Townsend [2006] FCA 1156
Case
[2006] FCA 1156
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CaseChat Overview and Summary

In Brake v Townsend, the respondent, Julie-Ann Townsend, sought the annulment of a sequestration order made by the Federal Magistrates Court. The application was contested by the appellant, the trustee of Townsend's estate. The central legal issue before the court was whether the sequestration order should have been annulled, considering the circumstances and the subsequent conduct of the trustee. The court needed to determine if the trustee acted unprofessionally by failing to finalize the administration of the estate by a certain date, and whether the costs incurred were reasonable.

The court reviewed the evidence and found that while Townsend believed the costs were excessive, the trustee was entitled to assess the costs and charges necessary for the administration of the estate. The trustee had made a reasonable estimate of the costs, charges, and expenses required to complete the administration. The court concluded that the trustee was not obligated to accept Townsend's assessment of the costs and was entitled to seek further funds if necessary. The independent taxation of the Bill of Costs also supported the trustee's claim for costs.

The court ordered that the trustee of Townsend's estate is entitled to costs, charges, and expenses of administration, including remuneration, on the basis outlined in the decision. Townsend was directed to pay the trustee a specified amount within a certain timeframe, along with any additional remuneration and costs as determined. Furthermore, Townsend was ordered to cover the trustee's costs of the hearing and appeal. This decision underscores the trustee's right to manage the estate according to the statutory provisions and to seek reasonable compensation for their services.

Orders

Orders of the court

1. The appellant trustee of the estate of Ms Julie‑Ann Townsend is entitled to be paid costs, charges and expenses of the administration of the bankruptcy including the remuneration of the trustee on the following basis:

(a) for the period 20 June 2003 to 5 November 2004, an amount of $40,110.23 less the amount received in the sum of $15,000.00 plus applicable GST; and

(b) for the period from 5 November 2004 to the date of this order, remuneration of the trustee as determined by operation of s 162 of the Bankruptcy Act 1966 (Cth) and Bankruptcy Regulations; and

(c) costs, charges and expenses incurred on an indemnity basis.

2. The respondent shall pay to the appellant the sum of $25,110.23 plus applicable GST within 45 days of the date of this order.

3. The respondent shall pay the appellant the amount of the remuneration determined in accordance with order 1(b) of these orders within 45 days of delivery by the appellant to the respondent of an itemised Bill of Costs or, alternatively, within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations.

4. The respondent shall pay the appellant the amount of the costs, charges and expenses referred to in order 1(c) of these orders within 45 days of delivery of an itemised Bill of Costs or alternatively within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations.

5. The appellant shall be entitled to apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy including the remuneration and expenses of the trustee as determined in accordance with these orders.

6. The respondent shall pay the appellant’s costs of the hearing in the Federal Magistrates Court limited to those costs of and incidental to the relief sought by the respondent pursuant to s 153A of the Act and the following orders sought by paragraphs 1 and 2 of the respondent’s application dated 16 February 2004 and filed on 24 February 2004, namely: ‘(1) that the bankruptcy of the applicant be annulled on the grounds that the applicant has paid every creditor in full including trustee’s fees; and (2) a declaration that the trustee has deliberately contributed to the excessive charges imposed on the bankrupt by over administering a very simple estate’.

7. The respondent shall pay the appellant’s costs of the appeal.

Background

Background to the litigation

The appellant seeks leave to amend the notice of appeal and relies upon two affidavits of James Nicholas Conomos filed 23 November 2005 and 29 November 2005 respectively which exhibit an amended notice of appeal and a further amended notice of appeal. Although Mr Laurie, counsel for the respondent, objects to the lateness of the amendments, Mr Laurie concedes that the respondent has suffered no prejudice by reason of the late notice of the proposed changes. The proposed changes to the amended notice of appeal are not significant. Accordingly, leave is given to amend the notice of appeal in terms of the document described as Exhibit ‘JNC1’ to the affidavit of James Nicholas Conomos filed on 29 November 2005. Background to the respondent’s application before Federal Magistrate Coker On 20 June 2003, the Registrar of the Federal Magistrates Court made an order for the sequestration of the estate of Ms Townsend. The application was made by Ms Townsend’s former partner as a result of an unpaid costs order made against Ms Townsend in family law proceedings. It seems the solicitors for Ms Townsend’s former partner were instructed to take all necessary steps to recover the amount of the assessed costs. The affidavit evidence suggests that Ms Townsend’s former partner did not anticipate that such action would result in a sequestration order. Nevertheless, the amount of the costs remained unpaid after service of the certificate, service of a bankruptcy notice and service of an application for a sequestration order. The costs remained unpaid at the date of the hearing of the application. At the hearing, Ms Townsend contended that she was solvent as the value of her assets exceeded the amount due and payable to her creditors (including the amount of the costs order). It is not clear whether any undertaking to discharge the debts within a particular period, or, by recourse to support from a third party, supported by an affidavit to that effect, was offered as an element of a request for an adjournment of the hearing of the application. In any event, the Registrar was satisfied that there was a proper basis for making a sequestration order presumably on the ground that the material in support of the application and the history of a failure to pay or compromise the unpaid costs claim established that Ms Townsend could not pay her debts as and when they fell due for payment notwithstanding the contended surplus of assets over liabilities. Federal Magistrate Coker concluded in his reasons published on 19 May 2005 in support of an order made by the court on 22 April 2005 annulling the bankruptcy of Ms Townsend that for the purposes of s 153B of the Act, the sequestration order ought not to have been made. That finding is not challenged by the appellant. The respondent says that on the material available to the trustee in the face of the sequestration order, it must have been apparent that Ms Townsend was, in fact, solvent; the order was made in the context of a relationship dispute; the amount of the unpaid costs order was approximately $6,000.00; and the administration of the estate was very likely to be uncomplicated and capable of resolution in a speedy way not attended by the incurring of significant costs, charges and expenses or significance remuneration on the part of the trustee.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GREENWOOD J
Two further things emerged throughout 2004. First, the trustee indicated he would respond to ITSA and Ms Townsend concerning complaints made and threats to commence various actions (petitions, legal actions, investigations etc) against him and those steps would be treated by the trustee as actions taken in the administration of the estate and, in consequence, a charge upon the estate. Secondly, the cost of responding to the proceedings commenced by Ms Townsend would also represent a charge upon the estate. Accordingly, the costs, charges and expenses of the administration and the remuneration of the trustee in conducting the administration, expanded significantly. The judgments of Federal Magistrate Coker Plainly enough, Ms Townsend had a perception that the costs should be much lower and had agitated that complaint in various quarters. Ms Townsend had offered the trustee an amount of $4,500.00 at an earlier time against the background of her assessment that the costs ought to be $3,000.00. The trustee had rejected Ms Townsend’s assessment of those matters. On 8 December 2003, Ms Townsend continued to assert to ITSA that the costs should only be $3,000.00. Ms Townsend’s view that the costs were excessive continued to be held and was, no doubt, the reason for contesting the request for the further funds by electing to file the court application on 24 February 2004. However, it is not open on the evidence to conclude, as his Honour did, that the administration of the estate ought to have been finalised by the trustee on or about 10 February 2004 and the failure to do so represented unprofessional conduct. The trustee identified the value of the costs, charges and expenses and remuneration required to bring the estate to a conclusion but Ms Townsend was of the view, no doubt in her own mind a reasonably held view, that the request for further funds was unreasonable. The trustee could have simply abandoned any claim for further monies and assumed an obligation to complete the administration and accept as consideration for the administration of the estate, the amount of $10,000.00 previously paid to the trustee in the context of the earlier letters. However, the trustee could not be directed to adopt that position and was entitled to properly identify the field of costs, charges, expenses and remuneration, make an informed assessment of the costs and require payment of the costs (see s 162 of the Act and Division 4 of the Bankruptcy Regulations; Mayne v Jaques (1959 – 1960) 101 CLR 169; Re Wong ex parte Wong v Donnelly (1995) 63 FCR 426). The only basis upon which the trustee could have brought the administration to completion on or about 10 February 2004 was by accepting Ms Townsend’s contention that no further fees ought to be paid. His Honour’s conclusions on these matters are unsupported by the evidence. The independent taxation of the Bill of Costs demonstrates that across the period of the bill an amount of only $218.57 was taxed off the amount of the bill as delivered by the trustee, namely, $40,328.90.

Ratio Decidendi

Legal Principle Established

Established by: GREENWOOD J

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