Dare v Doolan

Case [2003] FCA 1451

FEDERAL COURT OF AUSTRALIA

Dare v Doolan [2003] FCA 1451

BANKRUPTCY - statutory scheme relating to the quantum of a trustee’s remuneration - power of the creditors to fix the trustee’s remuneration

Bankruptcy Act 1966 (Cth)

Jefferson v Official Trustee in Bankruptcy (2000) 175 ALR 671 (Discussed)
Pattison v Bellin (2000) 103 FCR 590 (Discussed)

TRACEY JOY DARE (AS TRUSTEE IN BANKRUPTCY OF WILLIAM EDWARD DOOLAN v WILLIAM EDWARD DOOLAN)
Q7004 of 2003

WILLIAM EDWARD DOOLAN v TRACEY JOY DARE
Q7005 of 2003

KIEFEL J
BRISBANE
11 DECEMBER 2003


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

Q7004 OF 2003

BETWEEN:

TRACEY JOY DARE (AS TRUSTEE IN BANKRUPTCY OF WILLIAM EDWARD DOOLAN)
APPLICANT

AND:

WILLIAM EDWARD DOOLAN
RESPONDENT

JUDGE:

KIEFEL J

DATE:

11 DECEMBER 2003

PLACE:

BRISBANE

AND:

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

Q7005 OF 2003

BETWEEN:

WILLIAM EDWARD DOOLAN
APPLICANT

AND:

TRACEY JOY DARE
RESPONDENT

JUDGE:

KIEFEL J

DATE:

11 DECEMBER 2003

PLACE:

BRISBANE

REASONS FOR JUDGMENT

  1. The applications before me raise questions about the statutory scheme relating to the quantum of a trustee’s remuneration and the power of creditors to fix that remuneration.

  2. Mr Doolan’s estate was sequestrated on 2 June 1999 and Ms Dare was appointed as trustee of the estate.  The relationship between the parties during the administration of the estate has not been cordial at all times.  It is not necessary for present purposes to detail the complaints raised by Mr Doolan.

  3. At the first meeting of creditors, held on 11 October 1999, a representative of the trustee presided.  There was no discussion about the trustee’s proposals with respect to remuneration.  Prior to a meeting of creditors held on 5 August 2002 the trustee gave notice to creditors of her intention to have creditors fix her remuneration for the period 2 June 1999 to 28 June 2002.  The amount said to be involved was $71,301.10.  A further sum of $40,000.00 was sought to be fixed with respect to future remuneration.  These amounts were calculated according to the trustee’s firm’s usual rates of hourly charges and not according to the rates set by the regulations under the Bankruptcy Act 1966 (Cth). The regulations provide for a rate which is 85 per cent of the hourly rates published by the Insolvency Practitioners Association of Australia (‘IPAA’).

  4. At the meeting of 5 August 2002 a resolution was passed fixing the trustee’s remuneration in the sums sought.  It was passed on the vote of one creditor.  Mr Doolan disputed that creditors’ entitlement to vote and the trustee has not sought to rely upon the resolutions.  On 21 August 2002 Mr Doolan requested taxation of the trustee’s remuneration and the matter was referred to ITSA for taxation.  On 21 November 2002 he withdrew that request.  Subsequent to his request and on about 6 September 2002 the trustee forwarded a revised claim for remuneration, calculated at IPAA rates although not at 85 per cent of them.

  5. On 8 January 2003 Mr Doolan’s solicitors gave notice…

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Dare v Doolan [2003] FCA 1451
Case
[2003] FCA 1451
Decision Date

CaseChat Overview and Summary

In the matter of Dare v Doolan, the dispute involved the determination of the remuneration of a trustee in a bankruptcy case. The case was heard in the Federal Court of Australia, where the primary judge, Gilmour J, delivered the judgment. The central legal issue in this case was whether creditors had the authority to consider and make decisions about the basis of remuneration proposed by a trustee, particularly in light of certain statutory provisions and past judicial interpretations. Specifically, the case examined the extent of creditors' involvement in determining a trustee’s remuneration under the Bankruptcy Act 1966 (Cth), particularly in relation to sections 64U and 162.

Gilmour J addressed the legal issue by examining the statutory framework provided by sections 64U and 162 of the Bankruptcy Act. The judge highlighted that while section 64U provides a procedure for creditors to propose and consider remuneration, it does not explicitly grant creditors the sole authority to determine remuneration. Gilmour J noted that past judicial decisions, such as Pattison v Bellin, suggested that there are no express provisions involving the court in fixing or determining the trustee’s remuneration. However, the judge also pointed out that the absence of such provisions does not necessarily mean that creditors have exclusive authority. Instead, Gilmour J concluded that the statutory scheme allows for the trustee to propose remuneration, with creditors having the opportunity to question and potentially amend the proposal, but without exclusively determining it.

Consequently, the court ruled that while creditors play a role in the remuneration process, they do not have the sole authority to determine it. Gilmour J emphasised that the statutory provisions provide a framework where the trustee proposes remuneration, and creditors can participate in discussions and propose amendments, but the ultimate determination of remuneration is not solely in the hands of creditors. This interpretation aligns with the legislative intent to balance the roles of trustees and creditors in the administration of a bankrupt's estate. The decision clarifies that creditors’ involvement is consultative rather than determinative.

The final orders of the court would reflect the clarification of the roles and responsibilities of creditors and trustees in the remuneration process, ensuring that the statutory framework is adhered to in future proceedings.

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

KIEFEL J

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Ratio Decidendi

Legal Principle Established

Established by: KIEFEL J

Mr Doolan’s argument appears to proceed upon an assumption that creditors are given rights to consider and make decisions upon the course a trustee proposes to take. In that regard much reliance was placed upon s 64U. It is necessary to set it out in full: ‘Remuneration of registered trustee (1)If the meeting is the first meeting of the bankrupt's creditors and the trustee is a registered trustee, the President must then ask the trustee to state the basis on which the trustee wishes to be remunerated. (2)If the trustee states that he or she wishes to be remunerated as prescribed by the regulations, the minutes secretary is to record that statement in the minutes of the meeting. (3)If the trustee states a different basis for the fixing of his or her remuneration, the following provisions of this section have effect. (4)The President must invite the creditors and their representatives to propose a motion that the trustee be remunerated in accordance with the statement and, if no such motion is proposed, the trustee may propose such a motion. (5)A statement to be made by the trustee as mentioned in subsection (3) must: (a)if the trustee proposes to charge on a time-cost basis: (i)if there is only one rate at which the remuneration is to be calculated—state that rate; or (ii)otherwise—state the respective rates at which the remuneration of the trustee and the other persons who will be assisting, or will be likely to assist, the trustee in the performance of his or her duties are to be calculated; or (b)if the trustee proposes to charge on the basis of a commission upon money received by the trustee - state the rate of that commission; and must also state the periods at which the trustee proposes to withdraw funds from the bankrupt's estate in respect of the trustee's remuneration. (5A) The statement under subsection (3) must also include: (a)an estimate of the total amount of the trustee's remuneration; and (b)an explanation of the likely impact of that remuneration on the dividends (if any) to creditors. (6)Any of the creditors and their representatives may ask the trustee questions about the proposed remuneration of the trustee and, if such a question is asked, the trustee must answer it. (7)Any of the creditors and their representatives may move an amendment to a motion proposed in accordance with subsection (4) so as to change in any way the basis on which the trustee is to charge or the periods at which the trustee may withdraw funds in respect of his or her remuneration or to refer the fixing of the trustee's remuneration to a committee of inspection. (8)If the meeting is not the first meeting of the bankrupt's creditors and the trustee is a registered trustee, the President must request the trustee to lay before the meeting a statement of the amount of remuneration drawn by the trustee from the funds of the bankrupt's estate before the meeting was held and the trustee must comply with the request.’ There have been amendments in recent years to s 162 and other provisions concerning the way in which a trustee’s remuneration is to be fixed. Prior to 1996, s 162 provided that where the remuneration of a trustee was not fixed by the creditors or the committee of inspection, the registrar may fix the remuneration. The registrar was given powers, on the application of a creditor or the trustee or of his own motion, to review the amount of the remuneration and to confirm, reduce or increase the remuneration (sub-s (4) and (5)). That power has been removed. Section 162 in its present form refers only to remuneration being fixed by creditors or by regulation. Goldberg J in Pattison v Bellin (2000) 103 FCR 590 observed that there remains no express provisions involving the Court in fixing or determining the trustee’s remuneration. Mr Doolan relies upon the decision as confirming that it is for the creditors alone to consider and determine remuneration. I do not consider the decision goes that far.