FEDERAL COURT OF AUSTRALIA

Maxwell-Smith v Donnelly [2012] FCAFC 82

THE COURT ORDERS THAT:

1.    The appeal be dismissed

2.    The notice of motion filed by the appellant on 2 May 2012 be dismissed.

3.    The first respondent’s costs in the administration, under the Bankruptcy Act 1966 (Cth), of the estates of the appellants include the costs, charges, expenses and remuneration of and incidental to the appeal and notice of motion filed 2 May 2012.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

THE COURT:

1    The appellants have appealed against three sets of orders made by Nicholas J on 14 May 2010, 25 March 2011 and 31 October 2011. His Honour gave detailed, clear reasons for judgment for the making of each of those sets of orders in which the background facts are fully stated. This appeal is the most recent in what his Honour described in his judgment as “a torrent of litigation” in which the appellants have involved their former trustee in bankruptcy with respect to the realisation of so much of the assets of the bankrupt estate as are necessary to pay the trustee’s costs and expenses for which he has rights under s 154 of the Bankruptcy Act 1966 (Cth).

2    There are four grounds of appeal. The first asserts that his Honour erred in conducting a review of a taxation of the trustee’s costs and expenses for the period between 16 September 2003 and 21 May 2008. In the course of arriving at the first set of orders on 14 May 2010, his Honour concluded that certain items that had been taxed by the Registrar ought not to have been allowed for reasons that he gave. He remitted the taxation of those costs to the Registrar. The Registrar’s report of 5 November 2010 concluded that the remuneration costs and expenses of the trustee’s administration of the former bankrupts’ estates of the appellants for the period, the nearly five year period, was $273,717.41.

3    As his Honour noted, and it has not been disputed in the course of argument, the parties were given the opportunity to raise any issue they had with the Registrar’s report of 5 November 2011 and neither the trustee, nor the appellants, raised any such issue. It was open to the appellants to challenge not only the quantum of the amounts found to be due to the trustee, as assessed by the Registrar, but also whether any of the remuneration, costs or expenses were necessarily incurred. No such challenge was made. It is unsurprising, therefore, that his Honour, on 25 March 2011, made a declaration giving effect to the Registrar’s conclusion of the amount due to the trustee on the taxation.

4    His Honour made consequential orders that the appellant gave vacant possession of a property in Tura Beach to the trustee and in his subsequent judgment and orders of 31 October 2011, his Honour ordered a Writ of Possession to issue in respect of that property not before 28 days thereafter. Subsequently, a Writ of Possession has issued.

5    In the course of dealing with an outstanding question as to whether a further inquiry should be ordered under s 179(1) of the Act with respect to the possibility of misconduct by the trustee in procuring registration in his name of the appellants’ interest in a property at Jindabyne that is co-owned with two of Mrs Maxwell-Smith’s sons, his Honour heard evidence and made a number of findings of fact that resulted in his conclusion that no such inquiry should be ordered. His Honour recorded in his reasons that he had read a considerable amount of material on which the appellants placed reliance for the purposes of obtaining such an inquiry, including parts of a number of affidavits, statements and other documents that had been filed throughout the course of the proceedings.

6    The second ground of appeal alleged that his Honour had disregarded the content of the appellants’ evidence that had been filed in 2009 that had allegedly exposed misconduct or unprofessional conduct by the trustee in supporting his claim for costs in relation to the Jindabyne property, including effecting insurance and associated work. The third ground of appeal is related to that insofar as his Honour decided to dismiss the claim that an inquiry should be ordered under s 179(1).

7    His Honour carefully reviewed the facts on which the appellants relied. He had the benefit of seeing and hearing evidence from both Mrs Maxwell-Smith and the trustee. His Honour accepted the trustee’s evidence so far as challenges were made to it in the appellants’ evidence and submissions.

8    Although Mrs Maxwell-Smith clearly feels aggrieved that his Honour accepted the evidence of the trustee, she has not been able to demonstrate that his Honour made any error in doing so. His Honour’s reasons were comprehensive, clear and detailed. He heard Mrs Maxwell-Smith cross-examine the trustee and was able to form an assessment of whose evidence he was prepared to accept. No error in his Honour’s reasoning or the route by which he arrived at his findings on the acceptance and rejection of evidence has been established.

9    The fourth ground of appeal alleged that the trustee and the petitioning creditor had colluded with one another to increase unreasonably the costs of the burden on the bankrupt estates. That ground and the areas of dispute that the appellants wished to raise about it have been traversed in other judgments over some time. The particular incidents or basis on which the collusion said to found the ground was not articulated with any clarity by Mrs Maxwell-Smith and it has not been demonstrated.

10    Mrs Maxwell-Smith seeks to have the Court stay the order for possession and the consequential auction of the Tura Beach property that we have been told is to take place on 19 May, 2012. The only basis upon which the Court could grant such a stay would be if it were persuaded that some error had been made by his Honour in coming to the conclusion that the appellants had had ample opportunity to enter into arrangements with the trustee aimed at facilitating either the mortgage or sale of the Tura Beach property, but nothing had eventuated. That is, again, the position today.

11    Although Mrs Maxwell-Smith asserted that she was ready and willing to obtain a reverse mortgage and to obtain finance if she could be given another six months, the simple fact of the matter is that at no point has she ever produced evidence that she had obtained actual finance to pay such security as is necessary in order to meet, first, the costs of the trustee that have already been assessed to May 2008 and, secondly, the costs incurred in the subsequent four years of what, as his Honour said correctly, was “her torrent of subsequent litigation”. No basis has been established for the Court to exercise any power or discretion to grant a stay of the Writ of Possession, which has already been executed in any event, or of the exercise by the trustee of his right to realise his security over the Tura Beach property.

12    It follows that the appeal must be dismissed. The notice of motion that sought the stay of the Writ of Possession and consequential relief filed by the appellants on 2 May 2012 must also be dismissed. There should also be a declaration that the first respondent’s costs in the administration under the Act of the estates of the appellants include the costs, charges, expenses and remuneration of and incidental to the appeal and notice of motion.

Associate:

Dated:    31 May 2012