Chep Australia Ltd v Russo (No 3)
[2023] FedCFamC2G 1197
•15 December 2023
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
Russo v CHEP Australia Ltd [2022] FCA 949
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 Respondent’s obligations) and orders 9-11 (as to the costs of the second review), the Applicant pay the remuneration, costs and expenses of the Trustee for necessary work properly performed in administering the estate of the Respondent pursuant to the orders made by a Registrar of this Court on 26 May 2021 which orders ceased to have effect on 2 November 2023.
4.The Applicant pay the remuneration, costs and expenses of the Trustee for necessary work properly performed in giving effect to the vesting of the property in the Respondent.
5.The Respondent pay the remuneration, costs and expenses of the Trustee for necessary work properly performed in administering the estate of the Respondent pursuant to the orders made by a Registrar of the Court on 26 May 2021 which orders ceased to have effect on 2 November 2021 in so far as those costs are in relation to the Respondent’s non-compliance with his obligations to produce a statement of affairs in accordance with the provisions of the Bankruptcy Act 1966 (Cth).
6.For the purposes of orders 3 and 4, on or before 2 February 2024 the Trustee and the Applicant confer and file any agreed proposed minute of orders fixing a lump sum in relation to the Trustee’s remuneration, costs and expenses for necessary work properly performed in administering the estate of the Respondent and in giving effect to the vesting of the property in the Respondent.
7.For the purposes of Order 5, on or before 2 February 2024 the Trustee and the Respondent confer and file any agreed proposed minute of orders fixing a lump sum in relation to the Trustee’s remuneration, costs and expenses for necessary work properly performed in administering the estate of the Respondent in so far those costs are in relation to the Respondent’s non-compliance with his obligations to produce a statement of affairs in accordance with the provisions of the Bankruptcy Act 1966 (Cth).
8.In the absence of any agreement as to the matters set out in Orders 6 and 7:
(a)on or before 16 February 2024, the Trustee file and serve an affidavit and submissions as to matters which have not been agreed;
(b)on or before 1 March 2024, the Applicant and/or the Respondent file and serve any affidavit in response as to any matters which have not been agreed;
(c)in the absence of agreement having been reached on or before 15 March 2024, the Court determine an appropriate lump sum to be fixed for the Trustee’s necessary and proper remuneration, costs and expenses; and
(d)the Court may determine an appropriate lump sum in such manner as it thinks fit, including, if thought appropriate, on the papers.
Costs of the second review
9.The Applicant pay the Trustee’s costs of the proceeding of the second review in this court to be assessed in a lump sum.
10.On or before 2 February 2024 the Applicant and the Trustee confer and file any agreed proposed minute of orders fixing a lump sum in relation to the Trustee’s costs of the second review.
11.In the absence of any agreement:
(a)on or before 16 February 2024, the Trustee file and serve an affidavit constituting a Costs Summary in accordance with paragraphs 4.10 to 4.12 of the Federal Court of Australia’s Costs Practice Note (GPN COSTS);
(b)on or before 1 March 2024, the Applicant file and serve any Costs Response in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note;
(c)in the absence of any agreement having been reached on or before 15 March 2024, the matter of an appropriate lump sum for the Trustee’s costs be referred to a Registrar for determination;
(d)the Registrar may determine an appropriate lump sum in such manner as they think fit, including, if thought appropriate, on the papers.
12.Order 4 of the orders of Ryan JR made on 6 May 2021 that the Applicant creditor’s costs fixed in the sum of $9,181.35 be paid from the estate of the Respondent debtor in accordance with the Act be set aside.
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
JUDGE CHAMPION
SUMMARY
On 2 November 2023 I published reasons and made orders (among others) that the creditor’s petition be dismissed and the sequestration order made on 6 May 2021 be set aside in CHEP Australia Ltd vRusso (No. 2) [2023] FedCFamC2G 978. These reasons might usefully be read together with CHEP v Russo (No. 2).
I reserved consequential issues including as to the Trustee’s remuneration, costs and expenses incurred in the administration of Mr Russo’s estate since her appointment on 6 May 2021 up until the setting aside of the sequestration order on 2 November 2023. I also reserved issues as to the costs of the proceeding: CHEP v Russo (No. 2), [116].
It is appropriate to deal separately with (first) the Trustee’s remuneration, costs and expenses incurred in the administration of Mr Russo’s estate and (second) with the costs of the second review.
As to these consequential issues, the issues are complicated by a long procedural history as follows.
A Registrar made a sequestration order on 6 May 2021. As a result, on that date, Ms Alice Ruhe, a registered trustee, was appointed to administer Mr Russo’s estate. The first review of the debtor, Mr Russo, of the Registrar’s decision in this Court was unsuccessful on 10 September 2021 in CHEP Australia Ltd v Russo [2021] FedCFamC2G27. On 17 August 2022 Mr Russo’s appeal to the Federal Court was successful: Russo v CHEP Australia Ltd [2022] FCA 949. Following the success of the appeal, McElwaine J remitted the debtor’s review application to this court and the matter was allocated to me. On 30 August 2022 McElwaine J reserved the costs of the appeal. Before me, on 2 November 2023, on the second review, Mr Russo succeeded in having the creditor’s petition dismissed and the sequestration order set aside.
Issues arising
The consequential issues which now arise for determination are as follows:
(1)Should the Trustee be entitled to an order for her remuneration, expenses and costs in relation to her administration of the estate from 6 May 2021 (the date of her appointment) until 2 November 2023 (the date the sequestration order was set aside)? How should the remuneration, expenses and costs be calculated?
(2)If so, which party should pay the Trustee’s remuneration, expenses and costs of administering the estate? Should the remuneration, costs and expenses in administering the estate be allocated in proportions or in some other way as between CHEP and Mr Russo? If so, in what proportions or in what way?
(3)Should the Court make an order in favour of Mr Russo as to his costs?
(4)Can (or should) this Court make an order for costs in the Federal Court or the costs of the first review?
Submissions received
Pursuant to orders I made on 2 November 2023, each of the Trustee, CHEP and Mr Russo filed submissions. Further, Ms Ruhe (Trustee) made an affidavit on 9 November 2023. Mr Russo made an affidavit on 16 November 2023 in support of his submissions. I treat each affidavit as read. I also treat the annexures (A–F) to Mr Russo’s affidavit made on 16 November 2023 as tendered in this proceeding.
I indicated in my reasons in CHEP v Russo (No. 2) at [117] that I would convene a further oral hearing if any party requested it. As no party sought an oral hearing, I propose to decide these consequential issues on the papers.
The Court’s power
The Court’s power under s. 256(2) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act) in reviewing a power exercised by a delegate (such as a Registrar) is to “make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised”. I have a “broad power to ensure a just outcome having regard to the determination made on review”: Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 (2021) 286 FCR 494; [2021] FCAFC 143, [239]. I have power to make orders relating to “the remuneration, costs and expenses of the trustee, orders validating for future purposes actions of the trustee undertaken pursuant to the sequestration order and orders to effect the re-vesting of property in the debtor”: Robson, [255]. No party contended that I did not have the power to make orders of this kind.
Synopsis
In Robson at [236], Colvin J held: “in most cases … justice is achieved by requiring the party who has maintained the position that is ultimately shown to be unjustified to bear the burden of orders made to restore the position retrospectively”. This case is within the broad scope of “most cases”.
As a result, CHEP, as the party which has maintained the position ultimately shown to be unjustified, must bear the substantive burden of orders made to restore the position retrospectively which means paying the Trustee’s necessary and proper remuneration, costs and expenses of administering the estate whilst the sequestration order was in place.
There is one qualification to the general proposition that CHEP must bear the substantive burden of the orders I will make. Insofar as Mr Russo “alone” caused extra expense because he defaulted in complying with his obligations to produce a statement of affairs as required by the Bankruptcy Act 1966 (Cth) he ought to pay the Trustee’s necessary and proper remuneration, costs and expenses occasioned by his default. I have dealt separately with Mr Russo’s purported disclaimer of his interest in his late mother’s estate below.
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).
Ms Ruhe anticipated her further remuneration would approximate $2,000 (exclusive of GST) as to matters consequential on the setting aside of the sequestration order: Ms Ruhe, Affidavit, [4].
The majority (but not all) of the Trustee’s legal costs, approximately $33,000, were in the proceedings across each of its stages before the Judge in this court on the first review, before the Federal Court and before me on the second review: Ms Ruhe, Affidavit, [13](d). The additional legal costs of approximately $10,000 were in connection with Mr Russo’s purported disclaimer of his interest in the deceased estate of his mother, the late Ms Caterina Russo: Ms Ruhe, Affidavit, 14(c).
The Trustee submitted (Trustee’s Submissions, [22]) that in two respects the Trustee’s remuneration and expenses were increased by Mr Russo’s conduct “alone” as to:
(a)Mr Russo’s belated compliance with his obligation to produce a statement of affairs as required by the Act “which necessitated additional investigations by the Trustee in order to report to creditors;” and
(b)as to Mr Russo’s purported disclaimer of his interest in the deceased estate of the late Ms Caterina Russo.
As to (a) above, the Trustee did not separately itemise any remuneration referable to Mr Russo’s belated compliance with his obligation to produce a statement of affairs.
As to (b) above, the Trustee deposed that Mr Russo’s only asset which vested in her as Trustee was Mr Russo’s interest in his mother’s deceased estate, the major asset of which was a property in Merrylands, New South Wales. She noted that Mr Russo had purported to disclaim this interest and she was obliged to take steps to preserve that interest in the interests of Mr Russo’s creditors. The Trustee separately identified remuneration of $4,172 and legal costs of $9,787 as to Mr Russo’s purported disclaimer of an interest in his mother’s deceased estate.
The evidence of the circumstances of the purported disclaimer before me is scant. I do not know and express no opinion as to whether the purported disclaimer was legally effective or whether (as the Trustee appears to depose) Mr Russo’s interest in the Merrylands property vested in her. Although arguably Mr Russo’s purported disclaimer of this interest in his mother’s estate may have been for an improper purpose to put an asset otherwise available to his creditors beyond reach, the Trustee has not developed or made good any submission to that effect. Further, no submission has been put, or made good, that Mr Russo was in breach of any obligation as a person whose estate had been sequestrated as to his purported disclaimer of an interest in his mother’s estate.
CHEP’s position
CHEP submitted at [24]:
The Applicant [that is,CHEP] does not dispute the validity of the actions and works undertaken by the Trustee in her appointed role, her entitlement to participate in these proceedings (to the degree necessary, and with caution as to expense) or her ability to seek orders relating to her remuneration and expenses including legal costs.
CHEP submitted that it was concerned about the quantum of legal costs claimed “given the Trustee’s appropriately circumspect involvement”: CHEP’s submissions, [32].
CHEP submitted that it ought not to bear any portion of the Trustee’s costs other than any legal costs which it may be ordered to pay in the proceeding: CHEP’s submissions, [28]. CHEP submitted legal costs ought to be apportioned between CHEP and Mr Russo in equal shares, such costs to be taxed in default of agreement: CHEP’s submissions, [33].
CHEP submitted that while the sequestration order has now been set aside “that does not mitigate or absolve [Mr Russo’s] obligations under the Act for the duration of his bankruptcy, given there was no stay sought or obtained”: CHEP’s submissions, [31].
Mr Russo’s position
Mr Russo’s position is that as the successful party he should not be responsible for any part of the Trustee’s remuneration and expenses: Mr Russo’s submissions, [1].
Mr Russo referred to the nine “matters of general approach” in Porter at [48] (above). He submitted that the Trustee has no “entitlement” to costs but the costs discretion ought to be exercised in accordance with the matters of general approach identified in Porter at [48]: Mr Russo’s submissions, [5].
He disputes that the Trustee has exercised “caution” (see: Flint, [58]) in the administration to date and, as an example, points to the fact that the Trustee caused solicitors to appear at multiple listings of the proceedings including for the whole of each of the three substantive hearing days on the first review and the second review in this court and in the Federal Court: Mr Russo’s submissions, [5]. He submitted that other options were open to the Trustee which would have limited costs. Those options included the Trustee requesting that no order affecting her rights be made without notice or, that given the challenge to the sequestration order, the Trustee had the option to apply to the Court for relief from any statutory obligations: see, i.e., Porter, [48(5)].
Mr Russo does not expressly submit that the Court ought not, in its discretion, make an order for some of the Trustee’s remuneration, costs and expenses. He submits that if any order is made requiring the payment of some, or all, of the Trustee’s remuneration, costs and expenses then that obligation should fall entirely on CHEP because CHEP has been the unsuccessful party in the litigation.
Mr Russo says that although sometimes the debtor’s non-appearance before the Registrar will be a relevant matter in the court’s cost discretion, in this case, Mr Russo has explained his absence before the Registrar by reference to his admission into Westmead Hospital on 3 May 2021 in connection with a neurological illness: see Russo v. CHEP (No. 2), [13].
Further, he contends that CHEP has been on notice from early 2020 — before the commencement of proceedings in the bankruptcy jurisdiction — of the grounds on which Mr Russo disputed its claim and he has been vindicated by the judgment of 2 November 2023.
Mr Russo’s affidavit
Mr Russo made an affidavit on 16 November 2023. Mr Russo deposed (among other matters) that he did not lodge his statement of affairs after the sequestration order was made because he believed “that if I filed that document, I was admitting the bankruptcy was valid and I was concerned that that would affect my review application”: Mr Russo, Affidavit, [4]. His affidavit is silent as to the purported disclaimer of his interest in his late mother’s estate. He deposed that although the Trustee appeared on the first review, in the Federal Court and on the second review the Trustee on each of the three substantive days of hearing she made no substantive legal submissions: Mr Russo, Affidavit, [6]–[7]. He deposes that he is in straitened financial circumstances: Mr Russo, Affidavit, [10]–[16].
Should an order be made for the Trustee’s remuneration, costs and expenses of administering the estate?
Noting that I have a discretion, it is appropriate that I make an order in favour of the Trustee as to her remuneration, costs and expenses because she acted to give effect to the sequestration order over a period of approximately 2½ years, an order not sought by her. There was no stay. There should be appropriate recognition that she had to perform the obligations imposed by the Act once appointed: Porter [48(1)–(2)]. In my view, the fact that she may have (but did not) apply for relief from her statutory obligations does not disentitle her to remuneration, costs and expenses.
How should the Trustee’s remuneration, costs and expenses of administering the estate by calculated?
The Trustee framed the order she sought in terms of the “fair and reasonable remuneration and costs of the trustee”. There was no submission as to whether the “fair and reasonable costs” were equal to, or less than, the Trustee’s total remuneration, costs and expenses. I note in s. 60-5(1) of the Insolvency Practice Schedule (Bankruptcy) in Schedule 2 to the Act there is an entitlement to remuneration for “necessary work properly performed”. Although I am not exercising any jurisdiction under s. 60-5(1), and I am exercising a discretion under s. 256 of the FCFCOA Act, I propose to use the words drawn from the Insolvency Practice Schedule (Bankruptcy) in Schedule 2 to the Act to make an order for remuneration for necessary work properly performed rather than make an order for costs by reference to what is “fair and reasonable”.
If there is a dispute between the parties as to the quantum of the remuneration, that matter will need to be the subject of an application to this Court pursuant to Division 90 of the Insolvency Practice Schedule (Bankruptcy) in Schedule 2 to the Act. Although it is to be hoped the parties will agree the quantum of the remuneration, I have built a mechanism into the orders intended to enable the resolution of any dispute as to the quantum of the remuneration.
Aside from both CHEP and Mr Russo submitting that the Trustee has not exercised “caution” as to legal costs in the proceeding, neither CHEP or Mr Russo otherwise made submissions that the Trustee’s remuneration, costs and expenses were not for necessary work properly performed by her in relation to the administration.
Issue 2: Which party should pay the Trustee’s remuneration, expenses and costs of administering the estate?
As noted, I propose to deal separately with, first, the remuneration, expenses and costs of administering the estate and, secondly, the costs of the proceeding as Issue 4 below.
As to the first issue of the costs of the remuneration, expenses and costs of administering the estate, I confirm that I propose to make an order that the Applicant pay remuneration for necessary work properly performed by the Trustee in relation to the administration except where the remuneration, costs and expenses were consequent on Mr Russo’s default as to his obligations as to the late filing of a statement of affairs. Mr Russo ought to pay the Trustee’s remuneration for necessary work properly performed by the Trustee in relation to that issue.
It appears to me that the remuneration, costs and expenses referable to that issue ought to be dealt with by a separate order. That approach (rather than apportioning liability in percentage terms) will properly apportion liability as between CHEP and Mr Russo.
I repeat that CHEP ought to pay the remuneration, costs and expenses of the Trustee for necessary work properly performed because of the foundational principle that justice is achieved by requiring the party who has maintained the position that is ultimately shown to be unjustified to bear the burden of orders made to restore the position retrospectively: Robson, [236] Mr Russo should never have been the subject of a sequestration order in the first place: see Kyriackou v Shield Mercantile Pty Ltd. (No. 2) [2004] FCA 1338, [43]. He had in 2020, before the commencement of these proceedings, told CHEP that he was not liable for the debt because Mr Singh was acting outside the scope of his apparent authority and he has been vindicated in that position.
This general proposition is qualified by reference to the “special considerations pertaining to the conduct of the debtor”: Porter, [48(3)]. Additional remuneration, costs and expenses have arisen consequent on Mr Russo’s conduct “alone” as to the discrete issue of his non-compliance with his obligations to file a statement of affairs. Mr Russo’s explanation that he did not lodge a statement of affairs because he believed that “if I filed that document, I was admitting the bankruptcy was valid and I was concerned that would affect my review application” was unsatisfactory.
As I have noted, the evidence as to Mr Russo’s purported disclaimer of an interest in his late mother’s estate is scant. The Trustee deposed that additional remuneration and costs arose because of the issue. However, no party has established that Mr Russo engaged in any wrongdoing or breach of legal obligation by the purported disclaimer of the interest in his late mother’s estate. As a result, I will order that CHEP pay the Trustee’s remuneration for necessary work properly performed as to this issue in accordance with the general proposition Colvin J explained in Robson rather than “carving out” that part of the Trustee’s remuneration and costs and making an order that Mr Russo pay that part of the remuneration.
Issue 3: Is Mr Russo entitled to an order for his legal costs of the proceeding?
Costs of the first review and the Federal Court proceeding
On 30 August 2022 McElwaine J reserved the costs of the Federal Court proceeding.
Even though the terms of s. 256 of the FCFCOA Act are broad, I see no basis on which I have the power to make a costs order as to issues which arose in a different court on the Federal Court appeal. If that is wrong and I have the power, in any event, in my view it is inappropriate for me to make an order for costs in the Federal Court appeal and/or as to the costs of the first review.
It may be appropriate, but I do not express an opinion, for the Federal Court to deal with the costs of the first review in respect of which it heard an appeal.
If any party seeks a further order as to costs in the Federal Court, that party will have to make an application in that court. That course will enable the Federal Court to decide what order should be made as to the costs of the first review.
Mr Russo has incurred no costs
As his pro bono counsel acknowledged, despite his success on the second review, there is no basis for Mr Russo to recover his costs, because he has not incurred any.
I record the Court’s gratitude for the assistance rendered by pro bono counsel.
Issue 4: What order ought to be made as to the costs of the proceeding?
As to costs of the second review proceeding before me, CHEP ought to pay its own costs as the unsuccessful party in the proceeding before me. There is no basis to depart from the usual rule that costs follow the event as to CHEP’s costs. No order is necessary.
As to the Trustee’s costs, for the reasons set out above, my order as to the Trustee’s costs of the proceeding is confined to the second review proceeding before me.
The Trustee submits that she has incurred approximately $33,000 costs in connection with these proceedings, but those costs include preparation and for an appearance by a solicitor at hearings on the first review, in the Federal Court and on the second review before me. The Trustee’s costs on the second review are a fraction of that total.
I have already noted that if the Trustee seeks a costs order in her favour as to the Federal Court appeal, or the first review, she will have to make application in the Federal Court.
Costs of the second review
As to the proceeding before me, I accept that it was appropriate for the Trustee to intervene as an interested party pursuant to s. 5-30 of the Insolvency Practice Schedule (Bankruptcy) set out in Schedule 2 to the Act. Although it does not necessarily follow in the exercise of my discretion that the Trustee is entitled to her costs or all of her costs, the Trustee appeared by a solicitor in the substantive hearing before me. It is true that she played no active part. However, neither CHEP nor Mr Russo gave any prior notice that her appearance was unnecessary or ought only to be on the basis that she paid her own costs. I have exercised my discretion to order that the Trustee is entitled to costs (if necessary to be assessed in a lump sum on a party and party basis) of her proper participation in the second review, including her appearance at the substantive hearing on 28 August 2023.
By application of the foundational principle in Robson and the principle that costs follow the event, I will order that CHEP pay the Trustee’s costs incurred on the second review to be taxed by a Registrar in default of agreement.
OTHER ISSUES
The Trustee sought ancillary orders that her acts prior to 2 November 2023 have been validly done, that property vested in the Trustee shall re-vest immediately in the Respondent and that her remuneration and expenses in giving effect to the re-vesting of the property and the Respondent form part of remuneration for necessary work properly performed.
Neither CHEP nor Mr Russo opposed these ancillary orders. They are set out as Orders 1–2 and 4.
As a final consequential matter, I have set aside Order 4 of Ryan JR made on 6 May 2021 that the Applicant’s costs fixed in the sum of $9,181.35 be paid from the estate of Mr Russo.
CONCLUSION
I will make orders accordingly.
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion. Associate:
Dated: 15 December 2023
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