Kordatos v SWEENEY
[2003] FMCA 461
•15 October 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| KORDATOS v SWEENEY | [2003] FMCA 461 |
| Bankruptcy – Application to seek taxation of Trustees Remuneration – Application out of time – quantum of remuneration set by creditors when accepting composition – no objections at time by Bankrupt – Application to extend time discretionary – Application dismissed s.33(1) s.162(1); s.162(4); s.178 of Bankruptcy Act 1966 Re: Bellin: Pattison v Bellin (2000) FCA 1167 |
| Applicant: | STEVE KORDATOS |
| Respondent: | PAUL SWEENEY |
| File No: | BZ 3 of 2002 |
| Delivered on: | 15 October 2003 |
| Delivered at: | Brisbane |
| Hearing date: | 21 May 2002 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Solicitors for the Applicant: | In Person |
| Solicitors for the Respondent: | Mr G. Rodgers, Freehills Solicitors |
ORDERS
That the Application be dismissed.
That the RESPONDENT and ITSA be given 14 days in which to make any submission as to the quantum and basis of costs. The Applicant shall have 14 days thereafter to respond.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ3 of 2003
| STEVE KORDATOS |
Applicant
And
| PAUL SWEENEY |
Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant Steve Kordatos has made application filed 4 January 2002 under s.178 of the Bankruptcy Act (Cth) (“the Act”) for review of what he has described as:
“the decision of the Trustee who refuses to provide me with Bills in a taxable form for the $80,000 he received from my estate”.
The Respondent Trustee is Paul Sweeney.
The Applicant, who was self represented, also says that s.33 may be relevant. It certainly is. It is necessary for the Applicant to seek an extension of time under s.33, to permit him to make application to a Taxing Officer (Registrar) for taxation of the Respondent’s remuneration as Trustee of his Estate.
At the hearing on 21 May 2002, the Applicant relied on his two Affidavits filed 4 January 2002 and 15 May 2002. The Respondent relied upon his Affidavit filed 22 February 2002. Neither party was required for cross-examination. In addition, I was provided by ITSA with 2 folders of documents produced as a result of a subpoena issued by the Applicant to the Regional Director of ITSA, Mr Arthur Carrick.
I have read and considered all this material. I regret the delay in delivering my Reasons in this matter.
History
The history of the matter, post sequestration on 15 July 1996, is well known to the parties and the chronology of events does not appear to be in dispute. It is fair to observe that a high level of conflict and acrimony exists between the Applicant and the Respondent. What follows is a summary of events relevant to the determination of the matter before me.
The Trustee became Trustee of the Estate of the Applicant upon sequestration. The Bankruptcy was annulled by a resolution of creditors under s.74 of the Act on 11 October 1999, and the Trustee acted as Trustee of the composition that came into effect upon the said resolution.
As a result of the sequestration, the Trustee took steps to protect the interest of creditors in a property owned jointly by the Applicant and his partner Mary Cole at 26 Halamah Street, Chapel Hill. It appears that the Applicant did not provide his Statement of Affairs in a timely manner which delayed the investigation of the matters by the Trustee for the benefit of the creditors. These investigations carried out during 1997 and 1998 included a complaint by the Applicant against his former Solicitor, Gray.
Clearly and not surprisingly, the Applicant and his partner desired to protect their interest in the Chapel Hill property and on 5 August 1999. The Trustee provided a comparative table of scenarios dealing with the result to the creditors if a cooperative sale (at various sale prices) of the property occurred when compared to a s.73 proposal. Importantly, in my view, the table disclosed estimated costs of the Trustee to 31 July 1999 of $39,288 and an estimate of future costs. A meeting on
7 August 1999 took place between the parties and the Applicant indicated an intention to seek to borrow funds from Westpac Bank with a view to making an offer to creditors. On this basis the Trustee agreed to the adjournment of an application pending before a Court, for the appointment of a Trustee under the Property Law Act (Qld) for a sale of the property.
I also note that one of the Secured Creditors revealed in the comparative table was the Applicant’s former Solicitor Gray (who had registered a mortgage over the property) claiming $15,000.
On 30 September 1999 the Trustee gave notice to creditors providing:
(a)proposal by the Applicant under s.73, dated 20 September 1999;
(b)his report on the proposal;
(c)a comparison between a sale of the property and the proposal;
(d)guide to rates of charge recommended by Insolvency Practitioners Association of Australia (“IPAA”).
On 11 October 1999, the meeting of creditors resolved to accept the proposal. The minutes reveal, in respect of Trustees Remuneration, as follows:
“(a) Creditors noted that the accepted proposal approved the trustees remuneration on an hourly basis at the rates recommended by the IPPA, from time to time, as a guide to hourly rates. However creditors were of the opinion that the trustee should be paid that approved remuneration in the same proportion as the ordinary unsecured creditors.
The Trustee ordered that he was prepared to accept such a limitation on his remuneration.”
On a show of hands this proposal for remuneration was carried.
Funds of $80,000 were paid by the Applicant, the sequestration was annulled and the property transferred back to the Applicant. From that point, commencing with a letter from the Applicant dated
11 November 1999, a litany of complaints and letters passed between the parties also involving ITSA. I would describe the Applicant’s letters as bordering on obsessive behaviour.
Importantly by letter dated 17 December 1999 the Trustee gave the Applicant an Account of Receipts and Payments. It reveals:
- Trustees Remuneration of $38,313.12
- Dividend to Creditors $21,040.60
No payment to Gray was made.
Despite numerous queries, no notice requiring taxation of the Trustees remuneration was given by the Applicant until 13 July 2001 – nearly 2 years after the Administration of the composition was completed by the Trustee.
Legislation
Bankruptcy Act
Section 162.(1): Subject to s.161B, the remuneration of the trustee of the estate of a bankrupt may be fixed, from time to time, by resolution of the creditors or, if the creditors so resolve, by the committee of inspection.
(4)Where the remuneration of the trustee is not fixed by the creditors or the committee of inspection, the trustee is to be remunerated as prescribed by the regulations.
178.If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
33.(1)The Court may:
(a)upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;
(b)at any time allow the amendment of any written process, proceeding or notice under this Act; or
(c)extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.
Bankruptcy Regulations
8.08For the purposes of sub-section 162(4) of the Act, the remuneration of a trustee is to be:
(a)in accordance with the scale of charges that is:
(i)set out in the IPPA Guide to Hourly Rates published by the Insolvency Practitioners Association of Australia; and
(ii)applicable to the work to be remunerated; and
(b)at the level of 85 per cent of those charges.
8.09(1) Where the trustee of the estate of a bankrupt claims remuneration under s.162 of the Act, the bankrupt or a creditor who is dissatisfied with the amount of the claim may, by notice in writing lodged within fourteen (14) days of being notified in writing or becoming aware of the amount of the claim, request a taxing officer to tax the claim.
Analysis
The Applicant, in oral submissions, said, in effect:
“I am entitled to know how the $80,000 that I gave to the Respondent was used.”
He specifically complained about the lack of taxation of remuneration and the arrangement reached with the secured creditor Gray.
I make the following findings:
(a)The request for taxation was first made on 13 July 2001;
(b)The Trustees Remuneration was accepted by the creditors at the meeting on 11 October 1999 and:
-had been previously estimated to the Applicant;
-the Applicant had, perhaps, reluctantly, in light of his desire to secure his home and annul his Bankruptcy, accepted that estimate at the time.
(c)The Trustee was not obliged to accept the reduction in remuneration proposed by the creditors from that set out in Regulation 8.08(a). The Trustee has acted commercially (but to his financial detriment) in reducing his fees in order to secure the approval of the s.73 composition. This benefited the creditors.
(d)The Trustee provided the Applicant with appropriate information as to the disbursement of funds received for the composition. No obligation exists in the Act for the rather simple accounting given in this matter to be audited.
The Applicant proposed in paragraph 6.2 of his proposal dated 20 September 1999, that:
“The Trustee is entitled to be paid remuneration calculated on an hourly rate, in respect of the time spent by him and his staff in and about the administration of my bankruptcy estate, the implementation of and the administration of the composition at the rate(s) recommended by the Insolvency Practitioners’ Association of Australia, from time to time, as a guide to hourly rates and the Trustee shall be entitled to draw such remuneration and expenses at his discretion.”
In all respects, I am satisfied that at the time the creditors fixed the remuneration, the Applicant did not raise any objection at all.
Where the level of remuneration is fixed by creditors in this way, the issue of quantum is a matter for the creditors. The reason for this is simple. The quantum of a Trustees remuneration, which has priority, impacts upon the return or dividend to the unsecured creditors (see Re: Bellin: Pattison v Bellin (2000) FCA 1167).
The granting of an extension of time under s.33 is discretionary and in this case is shaped by:
(a)the Applicant knowing all the background facts and eventually formulating the proposal, ultimately accepted by creditors;
(b)lack of evidence to suggest excessive remuneration, and in fact, evidence to the contrary which establishes the Trustee agreed to accept less than the Applicant himself originally proposed;
(c)the Administration of the composition having been completed nearly years before any request for taxation was made;
(d)the delay between July 2001 and the filing by the Applicant of this application in January 2002.
(e)No evidence of any concerns by a creditor.
There are compelling public policy reasons when a Debtor and his creditors reach an agreement by way of composition, why a Court should not unduly interfere in the administration of the estate (see Re: Tyndall (1997) 30 FLR 6. Time limits in Regulations recognise the need for timely determination (Bellin v Pattison (1999) FCA 51).
In this matter I refuse the application to extend time for the giving of a Notice under Regulation 8.09.
The Application will be dismissed. Costs should follow the event. I will give the Respondent and ITSA fourteen (14) days in which to make any submission as to the quantum and basis of costs. The Applicant shall have fourteen (14) days thereafter to respond. It is my intention, after consideration of those submissions, to fix the quantum of costs.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
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