Case: Bellin v Pattison (Trustee) [1999] FCA 51
Outcome: cited
His Honour concluded that the matters set out in the final five paragraphs of the letter of 10 February 2004 (as set out at [41]) represented an attempt to force any consideration of Ms Townsend's application to the court to be brought to an end and represented the expression of extreme and inappropriate bullying. Those conclusions cannot stand in the face of the evidence for a number of reasons. First, Ms Townsend had indicated that her disposition was not to press complaints so as to facilitate the resolution of the administration and accordingly the formulation of the costs at 10 February 2004 by the trustee of an additional $2,300.00 recognised that no costs would be incurred in the administration in connection with any matters of complaint. Had those monies been paid, a s 153A certificate would have duly issued effecting an annulment. Secondly, although the response of the trustee to the allegations of complaint might be regarded as robust, the trustee was nevertheless entitled to respond to complaints which he perceived to be misconceived and unmeritorious either because the assessment by the bankrupt of the reasonableness of proposed fees was not founded upon any proper basis or because allegations of abuses were not, in the trustee's view, correct (see Bellin v Pattison (Trustee) [1999] FCA 51 at [18] to [22]). 91 A bankrupt concerned about the conduct of a trustee might invoke an inquiry into the conduct of the trustee pursuant to s 179 and seek to bring the scope of the trustee's conduct within the supervision of the court. In undertaking such an inquiry, the court might form a view that particular conduct involved a breach of duty and make an order that the trustee be removed from office or make an order disentitling the trustee to an indemnity out of the estate assets in respect of any costs, charges and expenses incurred in breach of duty or an order disentitling the trustee to particular remuneration. 92 The proceedings before Federal Magistrate Coker sought an annulment of the bankruptcy on the ground that all debts of the bankrupt had been paid and that s 153A of the Act conferred a power upon the court to annul the bankruptcy. Secondly, the respondent contended that because the sequestration order ought not to have been made, the bankruptcy ought to be annulled. No challenge was made to the conduct of the trustee in reliance upon a power in the court to 'inquire into the conduct of the trustee' for the purposes of s 179 of the Act. I accept the submission of the appellant that the relief sought and the foundation for the relief was directed to annulment of the bankruptcy arising out of the contended discharge of all debts of the bankrupt and a contention that the sequestration order ought not to have been made. The application did not proceed nor was it conducted on the footing that the court was conducting an inquiry into the conduct of the trustee. The first aspect of the application involved an order by his Honour that the costs (both expenses and remuneration) of the trustee be taxed to determine the body of fair and reasonable costs in the expectation that a resolution of that matter would, in all probability, result in a position where a certificate might issue thus annulling the bankruptcy by operation of s 153A of the Act. Within the forum of the taxation of the costs, the conduct of the trustee both in terms of the steps taken by him and his staff and the charges allocated for those steps was to be the subject of examination. The proceeding before the court was not, however, an inquiry for the purposes of s 179 of the Act and it is not now appropriate to determine the questions on appeal on the footing of s 179. 93 A third reason why the conclusions reached by his Honour concerning the position adopted by the trustee in relation to existing and future complaints by Ms Townsend cannot stand is that the trustee put the proposition that Ms Townsend might consider withdrawing threats of action or complaint expressly on the basis that if they were to be pursued, the trustee might either apply to the court for a release or, alternatively, apply to the court for directions as to how the allegations might be dealt with. In addition, the trustee recommended that if Ms Townsend thought the suggestion of the trustee that a private prosecution might not be pursued was, in the circumstances, an 'improper suggestion', Ms Townsend may choose to seek legal advice specifically on that matter. The assessment of the costs incurred by the trustee reveal that in the period from 20 June 2003 to 5 November 2004 the costs of dealing with complaints lodged by Ms Townsend with bankruptcy regulators amounted to $523.42 subject to the addition of GST and an 8% realisation charge. 94 His Honour relied upon s 153B in making an order annulling the bankruptcy and setting aside the sequestration order based upon a finding that Ms Townsend was at the date of the sequestration order solvent and at all material times remained solvent. Section 154(1)(a) provides that all acts done by the trustee or any person acting under the authority of the trustee before the annulment, are taken to have been validly made or done (subject to considerations of breach of duty) and s 154(1)(b) provides that the trustee may 'apply the property of the former bankrupt still vested in the trustee in payment of the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee'. His Honour made a further order fixing the remuneration of the trustee and concluded that the court certainly had power to 'fix a sum in relation to the costs in respect of the administration of the estate' [8] although the source of that power was not identified. Whatever the source of the power may be, the foundation for the exercise of the power was that the trustee ought to have concluded the administration on or about 10 February 2004 and that having regard to that circumstance, the costs ought to have been $15,000.00. 95 No such foundation existed and the exercise of the power therefore failed. 96 As to the source of the power, it cannot be found in s 153B or any provision of Division 5 of Part VII of the Act. Division 4 of Part VIII of the Act addresses the topic of 'Control over trustees'. Section 178 of the Act within Division 4 contains the heading ' Appeal to court against trustee's decision ' and is in these terms: ' 178(1) [Right of appeal] If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the court, and the court may make such order in the manner as it thinks just and equitable. 178(2) [Time limit] The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision.' 97 Plainly enough, the application to the court made by Ms Townsend on 24 February 2004 did not expressly raise the notion of an appeal from a decision of the trustee. Ms Townsend's application was signed on 16 February 2004 and filed on 24 February 2004 within 14 days of the letter from the trustee dated 10 February 2004 seeking a further sum of $2,300.00 in order to bring the administration of the estate to a conclusion and facilitate the issue of a certificate and, in consequence, an annulment of the bankruptcy. Although the precise character of an 'act, omission or decision of the trustee' is not clear, s 178(1) may well be sufficiently broad in its formulation to confer power upon the court to make such order as the court thinks just and equitable in relation to the request by the trustee for the provision of further monies in respect of costs (both expenses and remuneration) incurred from 13 December 2003 to 10 February 2004 and in respect of those costs to be incurred in undertaking steps necessary to complete the administration. 98 Because his Honour failed to have regard to the evidence, no proper foundation subsisted for the exercise of a power to fix costs. The discretion has miscarried but to the extent that the source of the power might need to be identified, it seems to me that s 178(1) may well confer a power to determine or fix the quantum of the costs (both expenses and remuneration) in respect of an administration. In addition, s 30(1)(b) of the Act confers a power upon the court to make such orders as the court considers 'necessary for the purposes of carrying out or giving effect to the Act in any case or matter'. The intersection, however, between the exercise of such powers directed to the subject matter of the trustee's remuneration and the proper application of s 162 of the Act which specifically addresses the mechanisms by which the trustee's remuneration is to be determined, must be carefully considered in any particular case. The trustee's remuneration might be determined by resolution of the creditors or, by a committee of inspection. Where the remuneration of the trustee is not so determined, the trustee is to be remunerated as prescribed by the regulations (s 162(4)). The making of an order to fix or otherwise determine the remuneration of the trustee in the exercise of a power which properly comprehends such subject matter, notwithstanding the preparation of an itemised Bill of Costs and the taxation of those costs, could only arise out of an exposed process of reasoning identifying a proper basis for recourse to such power. There is no such process of exposed reasoning identified. 99 Accordingly, the orders made by Federal Magistrate Coker on 22 April 2005 that 'the costs of the administration of the estate of the applicant including the transfer back to the applicant of any real property, be fixed in the sum of $15,000.00' and that 'there be no order as to costs in relation to the proceedings before this Court' must be set aside. Because the request of the trustee on 10 February 2004 for a further amount of $2,300.00 in order to complete the administration was fair and reasonable having regard to all the evidence with the result that the trustee was entitled to form the view that the debts of the bankrupt had not been fully paid by reason of the controversy concerning the costs, charges, expenses and remuneration of the administration, it necessarily follows that the rejection of that request and the election to commence proceedings is the true source of the additional costs. 100 Before setting out the proposed orders, it should be noted that the matters before Federal Magistrate Coker on 5 November 2004 and subsequently on 15 February 2005 involved a challenge to the refusal of the trustee to issue a certificate for the purposes of s 153A, an examination of the requests by the trustee for the provision of funds in connection with the administration of the estate and a consideration of whether the bankruptcy ought to be annulled pursuant to s 153B. Although Federal Magistrate Coker determined that the bankruptcy ought to be annulled on the ground of the solvency of the applicant, a substantial part of the proceeding involved a consideration of evidence going to the first limb of the application as to whether a certificate ought to have issued on the part of the trustee and whether the court had power to direct an annulment in circumstances where a factual contention that all debts of the bankrupt including the costs (both expenses and remuneration) had been paid by a certain date, was resolved in favour of the applicant. The applicant was successful on the second limb of the application. Accordingly, any costs arising out of or in connection with the hearing which now might be the subject of an order, ought to be limited to those matters arising out of or in connection with the first limb of the application.