Maxwell-Smith v Donnelly

[2005] FCA 332

FEDERAL COURT OF AUSTRALIA

Maxwell-Smith v Donnelly [2005] FCA 332

BANKRUPTCY – Application by former bankrupts for an inquiry into the conduct of their trustee in bankruptcy – Sequestration order annulled but continuing liability of former bankrupts for costs of administration – Reasonableness of certain actions taken by trustee – Application refused.

Bankruptcy Act 1966 (Cth) ss 154(1)(b), 179(1)

EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH v MAX CHRISTOPHER DONNELLY
NSD 1672 of 2004

WILCOX J
21 MARCH 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1672 of 2004

BETWEEN:	EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH APPLICANTS
AND:	MAX CHRISTOPHER DONNELLY RESPONDENT
JUDGE:	WILCOX J
DATE OF ORDER:	21 MARCH 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The application be dismissed.

2.The costs of the application be trustee’s costs in the administration of the former bankrupts’ estates.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1672 of 2004

BETWEEN:	EUGENE MAXWELL-SMITH AND INGE MAXWELL-SMITH APPLICANTS
AND:	MAX CHRISTOPHER DONNELLY RESPONDENT

JUDGE:	WILCOX J
DATE:	21 MARCH 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

WILCOX J:

1. This is an application by two former bankrupts, Eugene Maxwell-Smith and Inge Maxwell-Smith.  The respondent to the application is Max Christopher Donnelly, who was the trustee of their estates.  Mr Donnelly was appointed by a sequestration order made by a Registrar of the Court on 15 September 2003. 

2. On 2 July 2004, Moore J made an order annulling each of the bankruptcies.  His Honour held the sequestration orders should not have been made because there was a denial of procedural fairness.  It appears there was a misunderstanding about the hearing of the matter.  Moore J held that the bankrupts had not received due notice of the hearing.  I need not go into detail about the relevant circumstances.  His Honour's order stands, with the result that the bankruptcies terminated on the date of the order.

3. However, termination of the bankruptcies does not affect the former bankrupts’ liability to pay the costs, charges and expenses of the administration of the bankruptcies, including the remuneration and expenses of the trustee, provided they were properly incurred: see s 154(1)(b) of the Bankruptcy Act 1966 (Cth) (‘the Act’). The trustee has prepared accounts setting out the amount claimed by him for remuneration and expenses, including amounts paid or payable by way of legal costs. The total account exceeds $92,000. This sum is greater than the claim made by the petitioning creditor, who is apparently the only creditor of the former bankrupts. The sum is a large one, having regard to the fact that the bankruptcies subsisted for a period of only 10 months. However, it is probably correct, as stated by Mr B. Skinner, counsel for the trustee, that this was an unusually difficult administration. There appears to have been an absence of good communication between the bankrupts and the trustee.

4. The filed application does not…