De Lage Landen Pty Limited v Chaikh (No 2)
[2022] FedCFamC2G 881
Federal Circuit and Family Court of Australia
(DIVISION 2)
De Lage Landen Pty Limited v Chaikh (No 2) [2022] FedCFamC2G 881
File number(s): SYG 889 of 2021 Judgment of: JUDGE GIVEN Date of judgment: 11 October 2022 Catchwords: BANKRUPTCY – Interim Trustee seeking remuneration and third party disbursement expenses to be paid from the Bankrupt Estate Legislation: Bankruptcy Act 1966 (Cth) ss 30, 50, 109 Cases cited: Axess Debt Management Pty Ltd v Haykal, in the matter of Haykal (No 2) [2017] FCA 1186
De Lage Landen Pty Ltd v Chaikh [2022] FedCFamC2G 181
Penning, Re; Ex parte State Bank of South Australia (1989) 89 ALR 417
Victorian Securities Corporation Limited v Gadallah [2010] FMCA 113
Division: Division 2 General Federal Law Number of paragraphs: 27 Date of hearing: 11 October 2022 Place: Sydney Solicitor for the Applicant Creditor: Mr C Hadley of Holman Webb Lawyers The Respondent Debtor: In person ORDERS
SYG 889 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: DE LAGE LANDEN PTY LIMITED (ACN 101 692 040)
Applicant Creditor
AND: MAHMOUD CHAIKH
Respondent Debtor
order made by:
JUDGE GIVEN
DATE OF ORDER:
11 October 2022
THE COURT ORDERS THAT:
1.Pursuant to s 30(1) of the Bankruptcy Act 1966 (Cth) (Act), the following costs incurred by Mr Andrew John Scott (Interim Trustee) be paid from the Bankrupt Estate of Mahmoud Chaikh:
(a)remuneration for the period 9 March 2022 to 12 May 2022 fixed in the sum of $7,278.15 (inclusive of GST); and
(b)third-party disbursement expenses for the period 9 March 2022 to 12 May 2022, fixed in the sum of $12,835.33 (inclusive of GST).
2.The costs referred to in order 1 above, which are proper costs of the Bankruptcy of the Respondent, are to be paid to the Interim Trustee in the same priority conferred by ss 109(1)(a) or 109(1)(b) of the Act.
3.The Interim Trustee’s costs and disbursements of and incidental to the Application in a Proceeding filed on 18 August 2022 are proper costs of the bankruptcy of the respondent.
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).
EX TEMPORE REASONS FOR JUDGMENT
(revised from transcript)JUDGE GIVEN:
I have before me an application in a proceeding which was filed on 18 August 2022 for the Interim Trustee (application), who was appointed on 9 March 2022 by me in the course of hearing an urgent interlocutory matter (see De Lage Landen Pty Ltd v Chaikh [2022] FedCFamC2G 181). By the application, the Interim Trustee seeks various costs be paid from the bankrupt estate of Mr Chaikh, namely for remuneration for the period between his appointment as Interim Trustee and the date of the sequestration order fixed in the sum of $7,278.15 and the third party disbursements in the sum of $12,835.33 for the same period.
In support of the application, an Affidavit of Mr Andrew John Scott made on 18 August 2022 (Scott Affidavit) was read.
Background
The background to this matter is taken from the applicant’s submissions dated 8 September 2022 and the Scott Affidavit, but is not in dispute.
On 7 March 2022, pursuant to s 50 of the Bankruptcy Act 1966 (Cth) (Act), an urgent application was made in these proceedings seeking the appointment of the Interim Trustee to take control of the property of the respondent until the making of a sequestration order or otherwise the disposition of the Creditor’s Petition (initial application).
On 9 March 2022 at the conclusion of the initial application I made orders including, inter alia:
3. Pursuant to section 50 of the Bankruptcy Act 1966 (Cth) (Act), Andrew John Scott of PriceWaterhouse Coopers be appointed as Trustee take control of all property (as defined in s 5 of Act) of the respondent debtor Mahmoud Chaikh, until the making of a sequestration order under s 43 of the Act or otherwise the disposition of the applicant’s creditor petition filed on 20 May 2021.
4. Without limitation of order 3 above, the respondent debtor, Mahmoud Chaikh, is restrained from dealing with, or disposing of, the property situated at 21 Trevanna Street, Busby, NSW 2168 being the land described in certificate of Title Folio Identifier 815/223956.
As at the date of the above orders, the respondent was the co-owner of real property located in Busby, New South Wales (property).
A contract for the sale of the property had been entered into which prompted the initial application. Immediately following his appointment, the Interim Trustee undertook work to preserve the property (including by engaging solicitors to lodge a caveat over the property and liaising with the conveyancer retained by the co-owner and the respondent).
The full steps taken by the Interim Trustee were set out in paragraphs [13] and [14] of the Scott Affidavit. The Interim Trustee says that the steps undertaken by him were necessary and resulted in the property being sold in an orderly way with the bankrupt’s share of the property preserved for creditors of the bankrupt estate.
The settlement of the property’s sale of the property was completed on 31 March 2022 and the sum of $312,504.57 (being the net proceeds of sale after payment of the mortgage and fees and council rates) was paid into the Trust Account of the solicitors acting for the Interim Trustee, with the consent of the joint proprietor Ms Barea Kreidie.
On 13 May 2022, a sequestration order was made against the respondent which included the appointment of the Interim Trustee as the Trustee in bankruptcy (Trustee).
Following that appointment the sale proceeds were disbursed by agreement between the Trustee and the co-owner.
Relief sought
The Court’s power to make the orders sought arises from ss 50(1)(b) or 30(1) of the Act. Section 50(1)(b) of the Act is as follows:
Taking control of debtor's property before sequestration
(1) At any time after a bankruptcy notice is issued, or a creditor's petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:
…
(b) make any other orders in relation to the property.
Section 30(1) of the Act is as follows:
(1) The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
Authorities in support of the relief sought
In Penning, Re; Ex parte State Bank of South Australia (1989) 89 ALR 417, Doussa J said at 24 [425]:
Furthermore, as a necessary incident of the exercise of the jurisdiction under s50, which existed between the presentation of the creditor’s petition and its dismissal, after the dismissal the Court can give all necessary directions as to the distribution of property of the debtors in the control of the person who had been appointed under s 50, and can settle the proper remuneration of that person for work done prior to the dismissal of the creditor’s position.
In Victorian Securities Corporation Limited v Gadallah [2010] FMCA 113, Smith FM said at [18] and [19]:
Rather, in my opinion, Mr Pascoe’s costs are appropriately addressed by the court pursuant to its powers in s 50, whether expressly through s 50(1)(b) which gives it a power to “make any other orders in relation to the property” of the debtor, or by implication of the role of a trustee appointed under s 50 as an officer of the court performing a function analogous to a court-appointed receiver. In this respect, I note the opinion of Von Doussa J in (supra) at 597…”
I propose, therefore, to give directions which would make Mr Pascoe’s remuneration, costs and expenses recoverable from Mr Gadallah’s bankrupt estate, giving them the priority conferred by s 109(1)(b) of the Bankruptcy Act. That provision gives second priority to the remuneration and costs of a controlling trustee arising prior to the making of a personal insolvency agreement, and I consider that Mr Pascoe should be regarded as having performed an analogous role by reason of my s 50 order.
In Axess Debt Management Pty Ltd v Haykal, in the matter of Haykal (No 2) [2017] FCA 1186 (Axess), White J said at [15] and [18]:
On its face s 50(1) authorises the making of orders only before the debtor becomes bankrupt. That time has expired in this case because the sequestration orders were made on 27 June 2017. However, I do not regard s 50(1) as stating exhaustively the Court’s powers with respect to a trustee appointed under s 50. It is more natural to understand it as limiting the time in which the appointment of a controlling trustee and orders for the protection and prevention of property may be made. Section 50 is silent on a number of matters concerning the regulation of a controlling trustee’s conduct and the remuneration of such trustees. It is reasonable to infer that the Parliament must have intended the Court to have power with respect to matters of that kind and regarded such powers to be necessarily incidental to the exercise of the power vested in the Court by s 50(1).
The Court’s power presently may also be found in s 30(1) of the Act which authorises the Court, amongst other things, to “make such orders … as the Court considers necessary for the purposes of carrying out or giving effect to this Act” in, relevantly, any case of bankruptcy. In addition, s 23 of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) confers power on the Court, in relation to all matters in which it has jurisdiction, to make orders of such kinds as the Court consider appropriate.
In Axess, White J fixed the remuneration of the Interim Trustee ordering that it be paid from the bankrupt estate, in priority.
On 15 September 2022 a Registrar made orders referring the present application to me for hearing. It was initially listed before me on 29 September 2022. In advance of that hearing, Affidavit material was filed by the solicitor for the Interim Trustee annexing correspondence between himself and Mr Chaikh, which left open the inference that Mr Chaikh wished to be heard on the application but would require an interpreter in the Arabic language in order to participate. Accordingly, on 29 September 2022 I adjourned the application and made orders relating service of documents on Mr Chaikh which included notifying him that an Arabic interpreter would be available.
Mr Chaikh has attended before me today and has been assisted throughout the hearing by an interpreter in the Arabic language.
After identifying the relevant documents before me on the Court file, I adjourned briefly so that each of the Interim Trustee’s two written submissions could be interpreted to Mr Chaikh.
Upon resuming the hearing, and having heard from the solicitor for the Interim Trustee, I gave Mr Chaikh an opportunity to address the Court in relation to the application.
Mr Chaikh was keen to point out that he had not voluntarily entered into his bankruptcy, and that he had not asked anyone to supervise his finances or take over his affairs. He sought to explain the reasons why he had been trying to sell the property, and also detailed some of the attempts on his part to reach an agreement with the solicitors for the Interim Trustee, so as to prevent a sequestration order being made.
Mr Chaikh also wanted to know about his work rights, which I indicated to him was a matter that he needed to discuss with the Trustee. Otherwise Mr Chaikh did not address the subject matter of the orders which are sought by the application in a proceeding.
Having regard to the evidence in this matter and the relevant authorities, I am of the view that it is both available to me, and appropriate, to make the orders sought.
Mr Chaikh was made bankrupt by an order of the Court on 13 May 2022. The costs which are sought by the application in a proceeding do not involve any costs or remuneration which were incurred after the making of the sequestration order on 13 May 2022. Having regard to the evidence which is set out in the Scott Affidavit, I am satisfied that the costs have been reasonably incurred.
I am satisfied that the amounts are reasonable. I am also satisfied that the Interim Trustee’s costs which are sought by the application in a proceeding are proper costs of the bankruptcy of the respondent.
I am further satisfied that orders should be made which entitle the Interim Trustee to be paid those amounts in the same priority which is conferred by s 109(1)(a) or (b) of the Act. I will so order. I will also make an order that the Interim Trustee have his costs of the application.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Given. Associate:
Dated: 24 October 2022
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