FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
CHEP Australia Ltd v Russo (No 3) [2023] FedCFamC2G 1197
File number: MLG 425 of 2021 Judgment of: JUDGE CHAMPION Date of judgment: 15 December 2023 Catchwords: BANKRUPTCY– Trustee’s costs, expenses and remuneration of administration of the estate – Costs of the proceeding – Where Registrar made sequestration order and Judge of this Court dismissed first review application – Where Federal Court remitted review for re-hearing following successful appeal – Where on second review the Court set aside Registrar’s sequestration order because underlying debt not owing – Whether order should be made as to Trustee’s remuneration, costs and expenses of administering the estate while the sequestration order was in place – Form of such order – Orders made for the Applicant as the unsuccessful party to bear the substantive burden of orders to restore the position retrospectively – Where special considerations pertaining to the conduct of the debtor applied as to his failure to comply with his obligation to file a statement of affairs so that the debtor ordered to pay costs as to that issue
Cost of the proceeding for the second review – Whether costs should follow the event – Orders made for the Applicant as the unsuccessful party to pay the Trustee’s costs of the proceeding
Legislation: Bankruptcy Act 1966 (Cth)
Federal Circuit and Family Court of Australia Act 2021 (Cth) s. 256
Cases cited: CHEP Australia Ltd v Russo [2021] FedCFamC2G27
CHEP Australia Ltd v Russo (No. 2) [2023] FedCFamC2G 978
Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375
Kyriackou v Shield Mercantile Pty Ltd. (No. 2) [2004] FCA 1338
Porter as former trustee of the Estates of Ghasemi and Kakhsaz v Ghasemi (2021) 286 FCR 556; [2021] FCAFC 144
Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 (2021) 286 FCR 494; [2021] FCAFC 143
Division: Division 2 General Federal Law Number of paragraphs: 61 Date of last submissions: 29 November 2023 Place: Melbourne Counsel for the Applicant: Ms A Carruthers Solicitor for the Applicant: Law Squared Counsel for the Respondent: Mr S Golledge SC Solicitor for the Trustee: Harwood Andrews ORDERS
MLG 425 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHEP AUSTRALIA LTD
Applicant
AND: DOMENICO RUSSO
Respondent
ORDER MADE BY:
JUDGE CHAMPION
DATE OF ORDER:
15 DECEMBER 2023
THE COURT ORDERS THAT:
1.All acts done prior to 2 November 2023 by the Trustee when acting as Trustee pursuant to the sequestration order made on 6 May 2021 or any person acting under the authority of the Trustee when acting pursuant to that order are taken to have been validly done.
2.All property that vested in the Trustee when acting as Trustee pursuant to the sequestration order made on 6 May 2021 shall vest immediately in the Respondent.
Remuneration, costs and expenses of administering the estate
3.Subject to order 5 (as to the…
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- Case
- [2023] FedCFamC2G 1197
- Decision Date
CaseChat Overview and Summary
The legal issues the court needed to address included whether the court had the authority to make consequential orders for the trustee's remuneration, expenses, and costs, and if so, the extent of such orders. The court also had to consider the principle that the unsuccessful party in a petition for review should generally bear the costs and expenses incurred by the trustee. Furthermore, the court had to decide whether the costs of the proceeding should follow the event and who should bear the burden of those costs. These issues were considered in light of the conduct of the debtor and the trustee, as well as the principles established in relevant case law.
The court, in reaching its decision, referred to the case of Porter as former trustee of the Estates of Ghasemi and Kakhsaz v Ghasemi (2021) 286 FCR 556; [2021] FCAFC 144, where the court held that it had a broad power to make consequential orders, including allowing the trustee to recover reasonable remuneration, costs, and expenses. The court also noted the need for the trustee to exercise caution when undertaking further work and incurring costs where the validity of the sequestration order was in issue. The court determined that the trustee was entitled to remuneration, costs, and expenses for the period of valid appointment, subject to any special considerations. It further held that the unsuccessful party should bear the burden of the orders to restore the position retrospectively, and that the costs of the proceeding should follow the event, meaning the unsuccessful party would be responsible for the costs.
In conclusion, the court made orders that the trustee was entitled to remuneration, costs, and expenses incurred during the period of valid appointment. It also ordered that the unsuccessful party, Mr Russo, should bear the substantive burden of the orders to restore the position retrospectively and pay the trustee's costs of the proceeding for the second review. The court set aside an earlier order that required Mr Russo to pay the trustee's costs fixed in the sum of $9,181.35 from his estate.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
My reasons as to each of the four issues I have identified above follow.Issue 1: Should the Court make an order for the Trustee’s remuneration, expenses and costs?Legal authority In Porter as former trustee of the Estates of Ghasemi and Kakhsaz v Ghasemi (2021) 286 FCR 556; [2021] FCAFC 144, as in Robson, a Registrar had made a sequestration order and, later, a Judge dismissed the petition and set aside the sequestration order. An issue was the power of the Court to make consequential orders as to the remuneration, costs and expenses of the Trustee in the intervening period. The same issue arises in this case. In Porter, the Court held it had a broad power to make consequential orders including allowing the Trustee to recover reasonable remuneration, costs and expenses. Whether to make such an order is a matter of discretion. In Porter, the Court set out nine matters of “general approach” at [48]. The first five of those matters are as follows:(1)there should be appropriate recognition that the trustee has acted to give effect to the sequestration order, being an order that was not sought by the trustee;(2)there should also be appropriate recognition that the trustee must perform the obligations imposed by the Bankruptcy Act once appointed;(3)in the absence of special considerations pertaining to the conduct of the debtor or the trustee in circumstances where the creditor's petition is dismissed on review, the petitioning creditor, as the unsuccessful moving party should generally be responsible for the remuneration, costs and expenses reasonably incurred by the trustee in the conduct of the administration;(4)when informed of an application for review, the trustee should exercise caution in undertaking further work and incurring costs and expenses where the validity of the sequestration order is in issue, and work undertaken and in the usual case costs and expenses incurred contrary to such caution should be borne by the trustee;(5)the caution to be exercised by the trustee may include seeking an extension of time to comply with statutory obligations such as providing a report to creditors;[…] If a trustee knows that a debtor is challenging a sequestration order, whether on review or appeal, the trustee is required to exercise “caution” as to its remuneration, costs and expenses in the administration: Flint v Richard Busuttil & Company Pty Ltd (2013) 216 FCR 375, [58]. That caution would extend to incurring legal costs in the proceedings where the sequestration order is challenged.The Trustee’s position From 6 May 2021 until 2 November 2023 the Trustee was validly appointed as the trustee of the estate of Mr Russo with the attendant statutory responsibilities of the appointment: Porter [48](1) and (2). No order was made that the Trustee’s appointment be stayed pending the outcome of the bankrupt’s application (Mr Russo’s application) for review of the sequestration order and subsequent appeal. Ms Ruhe, the Trustee, deposed in her affidavit made on 9 November 2023 at [3] that as of 9 November 2023:(a)the Trustee’s outstanding remuneration was $48,006.00 (exclusive of GST);(b)the Trustee’s outstanding disbursements were $273 (exclusive of GST); and (c)the Trustee’s legal costs incurred to date totalled approximately $43,000 (exclusive of GST).