Porter v Smedley

In the Federal Circuit Court of Australia, Jason Porter and Paul Weston, as Trustees of the Bankrupt Estate of Graeme Gilbert Smedley, sought costs and expenses incurred in administering the estate of Graeme Gilbert Smedley. A sequestration order had been made against Mr Smedley on 29 November 2013, but this order was later set aside on 17 March 2014, following an application for review filed by Mr Smedley. The underlying creditor's petition remained extant until Mr Smedley paid the debt owed to the petitioning creditor, which he subsequently did.

The legal issues before the court were whether the Trustees were entitled to recover their costs and expenses from Mr Smedley, and whether the court had the power to make such an order, particularly given that the sequestration order was set aside and the bankruptcy was not annulled. Mr Smedley argued that the Trustees should bear their own costs, or even pay his costs, due to their opposition to his application to set aside the sequestration order. The Trustees contended that they had acted appropriately and diligently in administering the estate and that to leave their remuneration unpaid would be a gross injustice, arguing that case law supported their entitlement to costs.

The court reasoned that the Trustees had acted appropriately by intervening in the proceedings to seek orders for their costs and expenses, referencing the Full Federal Court's decision in *McCracken v Phoenix Constructions (Queensland) Pty Ltd*. The court found that while the sequestration order was set aside, the Trustees had incurred reasonable costs and expenses in administering the estate between the date of the sequestration order and the notification of the application for review. The court distinguished the present case from others where costs were not awarded to trustees, noting that the creditor's petition was validly served and that the Trustees had provided evidence of the work undertaken. The court ultimately determined that Mr Smedley should pay the Trustees' reasonable costs and expenses for the period of administration.

Consequently, the court ordered that Graeme Gilbert Smedley pay the Trustees their reasonable costs and expenses incurred in the administration of the estate from 29 November 2013 to 4 February 2014, to be taxed if not agreed. Mr Smedley was also ordered to pay the Trustees' costs as intervener in the application for review and the costs of the costs application. The creditor's petition filed on 9 August 2013 was dismissed, and the Trustees were directed to notify the Official Receiver of these orders.