FEDERAL COURT OF AUSTRALIA

Brake v Townsend [2006] FCA 1156

BANKRUPTCY – appeal from orders of Federal Magistrate Coker fixing the remuneration of a trustee – consideration of whether a proper foundation subsisted for the exercise of a power to fix costs – consideration of the source of the power – consideration of the intersection between such a power and s 162 of the Bankruptcy Act 1966 (Cth).

Bankruptcy Act 1966 (Cth)

Bankruptcy (Estate Charges) Act 1997

House v The King (1936) 55 CLR 499 - cited

Duncan v McVeigh & Anor FMCA 759 - cited

Bellin v Pattison (Trustee) [1999] FCA 51 - cited

Mayne v Jaques (1959 – 1960) 101 CLR 169

Re Wong ex parte Wong v Donnelly (1995) 63 FCR 426

PAUL NEWTON BRAKE v JULIE-ANN TOWNSEND

QUD121 OF 2005

GREENWOOD J

29 AUGUST 2006

BRISBANE

THE COURT ORDERS THAT:

1. The appellant trustee of the estate of Ms Julie‑Ann Townsend is entitled to be paid costs, charges and expenses of the administration of the bankruptcy including the remuneration of the trustee on the following basis:

(a) for the period 20 June 2003 to 5 November 2004, an amount of $40,110.23 less the amount received in the sum of $15,000.00 plus applicable GST; and

(b) for the period from 5 November 2004 to the date of this order, remuneration of the trustee as determined by operation of s 162 of the Bankruptcy Act 1966 (Cth) and Bankruptcy Regulations; and

(c) costs, charges and expenses incurred on an indemnity basis.

2. The respondent shall pay to the appellant the sum of $25,110.23 plus applicable GST within 45 days of the date of this order.

3. The respondent shall pay the appellant the amount of the remuneration determined in accordance with order 1(b) of these orders within 45 days of delivery by the appellant to the respondent of an itemised Bill of Costs or, alternatively, within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations.

4. The respondent shall pay the appellant the amount of the costs, charges and expenses referred to in order 1(c) of these orders within 45 days of delivery of an itemised Bill of Costs or alternatively within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations.

5. The appellant shall be entitled to 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 as determined in accordance with these orders.

6. The respondent shall pay the appellant’s costs of the hearing in the Federal Magistrates Court limited to those costs of and incidental to the relief sought by the respondent pursuant to s 153A of the Act and the following orders sought by paragraphs 1 and 2 of the respondent’s application dated 16 February 2004 and filed on 24 February 2004, namely: ‘(1) that the bankruptcy of the applicant be annulled on the grounds that the applicant has paid every creditor in full including trustee’s fees; and (2) a declaration that the trustee has deliberately contributed to the excessive charges imposed on the bankrupt by over administering a very simple estate’.

7. The respondent shall pay the appellant’s costs of the appeal.

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

REASONS FOR JUDGMENT

1                     This is an appeal which by the very nature of the subject matter of the controversy gives rise to difficult matters for each of the parties upon resolution. The appellant is the trustee of the estate of the respondent in bankruptcy and contends that Federal Magistrate Coker made findings unsupported by the evidence that; actions taken by the trustee in the course of the administration of the estate were ‘unprofessional’; costs, charges, expenses and remuneration incurred in the administration of the estate were ‘extremely excessive’; and the refusal of the trustee to be satisfied of the matters contemplated by s 153A of the Bankruptcy Act 1966 (Cth) (‘the Act’) until complaints made by the respondent concerning the trustee’s conduct of the administration were resolved, amounted to ‘extreme and inappropriate bullying’.

2                     The appellant further contends that Federal Magistrate Coker, by fixing the costs, charges, expenses and remuneration of the trustee at $15,000.00 (subject to adjustment for prior payments) for the period from 20 June 2003 (the date of the making of the sequestration order) to 10 February 2004 (the date when his Honour found that the administration ought to have been brought to an end), erred,because his Honour had no power to make such an order, or, if such a power subsists, the exercise of the power miscarried having regard to those factors that influenced the exercise of the discretion .

3                     Accordingly, the appellant seeks to set aside the order fixing the costs, charges, expenses and remuneration of the trustee at $15,000.00 and the order that there be no costs of the proceedings in the Federal Magistrates Court and, in their place, seeks orders that:

(a) the appellant is entitled to costs, charges, expenses and remuneration for the period 20 June 2003 to 5 November 2004 at $40,109.43 (less $15,000.00 received) and for the period 5 November 2004 to date, remuneration determined in accordance with s 162 of the Act and the recovery of costs, charges and expenses incurred by the trustee on an indemnity basis; and

(b) the costs of the appeal.

4                     The respondent confronts the consequences that flow from the making of a sequestration order and the administration of her estate for the purposes of the Act and contends that at all relevant times she was solvent; the sequestration order ought not to have been made; and many steps were taken by the trustee that were costly, unnecessary and had the effect of diluting the residual value of the estate for the beneficiary after the discharge of the debts due to creditors and payment of properly incurred costs, charges and expenses of the administration and the remuneration of the trustee.

5                     Further, the respondent contends that costs (both remuneration and expenses) incurred by the trustee in responding to complaints made by the respondent concerning the conduct of the administration, ought not, in the circumstances, be paid by the estate and the insistence by the appellant of resolving a challenge to the conduct of the trustee, within the administration, rather than effecting an annulment of the sequestration order and then responding to a subsequent challenge (possibly pursuant to s 179 of the Act) by seeking security for costs, made the administration, unnecessarily expensive.

6                     In the context of the issues raised on the appeal, the respondent contends that the above considerations provide a basis for the findings of Federal Magistrate Coker and result in the exercise of a discretion, conferred by s 30 of the Act, to fix the costs, charges, expenses and remuneration of the trustee on a basis thought appropriate. Consistent with the familiar passage in House v The King (1936) 55 CLR 499 (and particularly the passage at p 505 of the judgment of their Honours Dixon, Evatt and McTiernan JJ), the exercise of the discretion ought not to be disturbed. The respondent in oral submissions also relied upon s 179 of the Act as the source of the power to fix the amount of the costs (expenses and remuneration) at $15,000.00. The appellant contends that s 179 was not relied upon by the respondent in the proceedings before Federal Magistrate Coker; was raised for the first time in oral submissions in the hearing of the appeal; and the respondent ought not to be allowed to now rely upon s 179 as that section contemplates a particular process which is inconsistent with the conduct of the respondent’s application and had the respondent relied upon s 179, the appellant would have conducted its response to the application differently. Supplementary written submissions have been directed to the question of s 179.

7                     In resolving these competing contentions it has been necessary to closely examine considerable material concerning the precise chronology of events inherent in the administration and the various propositions put to the trustee and the trustee’s response. In dealing with the questions raised on the appeal, it is not the role of the appellate court to resolve contested questions of fact. However, in determining whether the exercise of a power or discretion (if conferred) miscarried, it is necessary to look at the evidence before Federal Magistrate Coker and consider the material in the context of the matters that influenced his Honour to exercise the power in a particular way or to reach particular conclusions.

The application for leave to amend the notice of appeal

8                     The appellant seeks leave to amend the notice of appeal and relies upon two affidavits of James Nicholas Conomos filed 23 November 2005 and 29 November 2005 respectively which exhibit an amended notice of appeal and a further amended notice of appeal. Although Mr Laurie, counsel for the respondent, objects to the lateness of the amendments, Mr Laurie concedes that the respondent has suffered no prejudice by reason of the late notice of the proposed changes. The proposed changes to the amended notice of appeal are not significant. Accordingly, leave is given to amend the notice of appeal in terms of the document described as Exhibit ‘JNC1’ to the affidavit of James Nicholas Conomos filed on 29 November 2005.

Background to the respondent’s application before Federal Magistrate Coker

9                     On 20 June 2003, the Registrar of the Federal Magistrates Court made an order for the sequestration of the estate of Ms Townsend. The application was made by Ms Townsend’s former partner as a result of an unpaid costs order made against Ms Townsend in family law proceedings. It seems the solicitors for Ms Townsend’s former partner were instructed to take all necessary steps to recover the amount of the assessed costs. The affidavit evidence suggests that Ms Townsend’s former partner did not anticipate that such action would result in a sequestration order. Nevertheless, the amount of the costs remained unpaid after service of the certificate, service of a bankruptcy notice and service of an application for a sequestration order. The costs remained unpaid at the date of the hearing of the application. At the hearing, Ms Townsend contended that she was solvent as the value of her assets exceeded the amount due and payable to her creditors (including the amount of the costs order).

10                  It is not clear whether any undertaking to discharge the debts within a particular period, or, by recourse to support from a third party, supported by an affidavit to that effect, was offered as an element of a request for an adjournment of the hearing of the application. In any event, the Registrar was satisfied that there was a proper basis for making a sequestration order presumably on the ground that the material in support of the application and the history of a failure to pay or compromise the unpaid costs claim established that Ms Townsend could not pay her debts as and when they fell due for payment notwithstanding the contended surplus of assets over liabilities.

11                  Federal Magistrate Coker concluded in his reasons published on 19 May 2005 in support of an order made by the court on 22 April 2005 annulling the bankruptcy of Ms Townsend that for the purposes of s 153B of the Act, the sequestration order ought not to have been made. That finding is not challenged by the appellant.

12                  The respondent says that on the material available to the trustee in the face of the sequestration order, it must have been apparent that Ms Townsend was, in fact, solvent; the order was made in the context of a relationship dispute; the amount of the unpaid costs order was approximately $6,000.00; and the administration of the estate was very likely to be uncomplicated and capable of resolution in a speedy way not attended by the incurring of significant costs, charges and expenses or significance remuneration on the part of the trustee.

13                  The appellant says that all steps taken by him were reasonable and necessary either in the discharge of statutory responsibilities or as a function of the prudential administration of the estate.

14                  On 25 June 2003, the trustee wrote to Ms Townsend and set out a number of important matters. They included:

(a)                a statement of the purpose of the bankruptcy;

(b)               a statement of the obligation upon Ms Townsend to make out and file a Statement of Affairs (setting out full details of assets and liabilities) within 14 days of 20 June 2003, in the office of the Official Receiver and provide a copy of that document to the trustee. A Statement of Affairs form was enclosed. The letter advised Ms Townsend that she could either provide the original to the trustee for lodging with the Official Receiver or she could complete and file the original document with the Official Receiver and provide the trustee with a copy and a letter from the Official Receiver confirming the date of filing the original document;

(c)                the obligation to deliver books and records (including taxation returns, cheque butts etc) for the previous two years relating to Ms Townsend’s financial affairs to the trustee;

(d)               the requirement to advise the trustee of material changes to the Statement of Affairs, changes in the address of the bankrupt, the provision of information as required to the trustee, the disclosure of property details and other matters.

15                  The letter enclosed, apart from the Statement of Affairs form, a document entitled ‘Written Information or Explanation Required’, copies of ss 115 to 122 of the Bankruptcy Act and provisions from the Bankruptcy Act dealing with items of public examination, co‑operation and disclosure.

16                  On 14 July 2003, Ms Townsend wrote to the trustee explaining the circumstances that led to the costs order and the financial difficulties confronting Ms Townsend by reason of the costs order. In the letter of 14 July 2003, Ms Townsend said this:

‘My financial circumstances have not improved although I do have considerable equity in my family home and a block of land. This equity is well in excess of what is owed to my creditors. However, I do not want my family home sold unnecessarily because it will cause undue stress to both my daughter and myself. My block of land is attached to the same mortgage.

In order that I may have the bankruptcy annulled in accordance with section 153A of the Bankruptcy Act 1966 a third party has offered to pay the creditors and your costs. I undertake that this matter may be resolved, within 30 days, without the need for further expense being incurred on your part. In accordance my obligations under the Bankruptcy Act I will provide you with a list of creditors with respect of debts that have been provided.’

Ms Townsend then said this:

‘Take notice that any action taken by you to enforce the terms of the Bankruptcy Act before the expiration of that 30 days would cause me and my daughter unnecessary harm and on the basis of my undertaking that the matter may be resolved I require that you undertake that yourself and the employees or agents of ACP Insolvency will not take any further action that would result in further or unnecessary cost to me until I have had that reasonable opportunity unless you show cause why your intervention would not be both unnecessary and vexatious.

In order to expedite the resolution of this matter I require, as soon as practicable, a particularised account of your costs to date for my consideration as well as details of the Applicant’s taxed costs the subject of the Bankruptcy Notice.’

17                  On 20 August 2003, the trustee sent Ms Townsend by email a draft Schedule of Remuneration and Expenses and said: ‘It is subject to revision, may not include all costs to date, and does not provide for future costs, nor 8% ITSA fee charged on all receipts. GST is to be added’. ITSA is an acronym for Insolvency and Trustee Service Australia.

18                  On 25 September 2003, the trustee wrote to Ms Townsend in these terms:

‘I understand you complain that you have on numerous occasions asked that I give permission for you to arrange for your creditors to be paid directly to reduce costs and the 8% ITSA realisation charge, I have failed to give such permission, and it is because of such failure that you are now chasing up such a letter.

I deny this. You do not need my permission to arrange for your creditors to be paid directly. I have never said anything to the contrary – see, for instance, my letter to you of 2 September 2003. Your “divisible assets”, however, are vested in me and you have no ability to sell or charge such assets to pay your creditors.

I further understand you consider that the additional costs incurred by these telephone calls and letters should not be charged to the bankruptcy, and therefore not required to be paid. The work properly carried out or yet to be carried out by me in this administration will be charged to the administration. This includes your telephone call to this office earlier today, our subsequent telephone call and this reply.

Could you please provide (a) written evidence that all creditors set out in my letter of 22 September 2003 have been paid (and provide a receipt from each creditor – or preferably an express notice of withdrawal of their proof of debt – that I can independently confirm with the relevant creditor), or (b) advise that you dispute the creditor’s claim. In which case I will consider what amount is properly due to such creditor.’

19                  In a period from 25 June 2003 to December 2003 a number of exchanges occurred between Ms Townsend and the trustee that are particularly contentious. Ms Townsend swore an affidavit on 16 February 2004 in which she says this:

·                she met with Mr Carey of the trustee’s office on 25 June 2003;

·                     she told Mr Carey she wished to cooperate in the interest of expediency;

·                she gave Mr Carey ‘all information regarding my estate’;

·                     she met with Mr Carey for 148 minutes but Mr Carey ‘took none of the documents I was prepared to give him’;

·                she told Mr Carey that she wished to annul the bankruptcy;

·                     she understood Mr Carey would cause a caveat to be lodged concerning a property at Hoffschidldt Drive rather than effect a transfer of title to the trustee;

·                     she agreed with Mr Carey that the trustee would not take any action for two weeks;

·                     she and Mr Carey agreed that Ms Townsend would pay her four creditors directly and she would only pay those creditors that lodged a proof of debt in the bankruptcy; and

·                     she understood that nothing would be done to liquidate the residence at Hoffschidldt Drive or vacant land owned by Ms Townsend at Hattonvale in Queensland.

20                  Ms Townsend in her affidavit refers to the letter of 14 July 2003 and a request for a statement of the trustee’s costs to that date. She says:

·                     on 15 July 2003 the trustee effected a transfer of title of the properties to him despite an agreement to the contrary;

·                     on 20 August 2003 Ms Townsend received an informal Bill of Costs (interim) subject to GST;

·                     the interim bill reflects ‘charges being made against my estate for such complex documents as a ‘Strategic Plan’ followed by a ‘Review of Action Plan’;

·                     a ‘very simple four creditor estate [is] being given the enormous over administration of a corporate disaster’;

·                     by 27 November 2003 Ms Townsend had paid all creditors including the trustee’s costs but was unable to secure certification from the trustee to that effect so as to secure an annulment of the bankruptcy by operation of s 153A of the Act;

·                     on 15 December 2003 the trustee advised her that the administration was not complete and a further report would issue in two months time.

21                  It is clear that Ms Townsend had a certain perception of what the trustee should do and not do in the administration of the estate and a perception of the amount of the costs, charges, expenses and remuneration that ought to be incurred. In response to Ms Townsend’s contentions, the trustee filed an affidavit in which specific allegations are contested and the foundation for Ms Townsend’s perceptions are contradicted.

22                  The trustee in his affidavit says:

·                     at the date of receipt of the letter of 14 July 2003, the bankrupt had not completed a Statement of Affairs as required by the Act.

·                     the Statement of Affairs was lodged on 15 July 2003 and failed to disclose a creditor, namely, Ms Townsend’s former solicitors;

·                     the trustee did not agree to simply lodge a caveat against dealing in the two properties rather than transfer the land to the trustee as the trustee had an obligation to preserve those assets to, potentially, pay creditors;

·                     the Bill of Costs of 20 August 2003 was plainly a draft and Ms Townsend was told the draft bill did not include any estimate for future costs, GST or a fee payable to ITSA of 8% of all receipts;

·                     the preparation of a Strategic Plan for an administration is a document required or recommended to be prepared in the Personal Insolvency National Standards document issued by ITSA and the Insolvency Practitioners’ Association of Australia. The plan is not a complex document and in the administration of Ms Townsend’s estate, preparation of the document involved 10 minutes of work on 26 June 2003 including the signing of a letter to the bankrupt’s bank;

·                     the estate is not ‘a very simple administration’ nor has the estate been ‘over administered’;

·                     a report was made to creditors dated 12 December 2003 which contained a brief explanation of work done up to 11 December 2003;

·                     the bankrupt although unhappy about costs was advised of a right to have the costs taxed or assessed;

·                     although Ms Townsend contended she had the ability to pay her creditors, she had a number of creditors and one of them had obtained a sequestration order leading the trustee to believe Ms Townsend may not have had the ability to pay her creditors as and when they fell due and the bankrupt proposed to call in aid sources other than her divisible assets for the payment those debts;

·                     notwithstanding a fax from the trustee to the bank to place a freeze upon credit funds in the account of the bankrupt, Ms Townsend withdrew the bulk of the credit funds in that account and failed to forward those funds to the trustee.

23                  The trustee contended that the reason why Ms Townsend did not receive any certificate for the purposes of s 153A upon or immediately after receipt of Ms Townsend’s letter of 27 November 2003 was that the trustee was not satisfied that Ms Townsend had paid all her debts, including the costs of the administration as required by the Act. Ms Townsend was advised of the trustee’s lack of satisfaction on that matter by letter dated 28 November 2003. Moreover, the trustee was required to provide a report to creditors which occurred on 12 December 2003. That report contained details of work undertaken in the administration and a corresponding Bill of Costs to the date of the report. The bankrupt or any creditor had the right to, within 28 days of receiving the report, request that the bill be referred to taxation. Accordingly, the administration could not be finalised until at least after the time period for requiring taxation had expired.

24                  The trustee deposed to the remuneration arrangements in this way at paragraphs 19 and 20 of the trustee’s affidavit sworn 29 March 2004:

’19. I say I originally sought and obtained approval from creditors for my remuneration to be on a time-cost basis at certain specified rates up to a maximum of $6,600 (including GST). Subsequently, after writing to creditors and providing them with an update of the administration, their approval was given for an increase to a maximum remuneration of $8,800 (including GST) at those specified charge out rates.

20. Following my obtaining appropriate approval on 12 December 2003, I drew $8,099.10 of the $8,800 maximum potential remuneration at specified charge out rates, and provided creditors and the bankrupt applicant with the material about my remuneration up to 11 December 2003 as required by s 162(6A) of the Act and Reg 8.12 of the Regulations. … A copy of my letter dated 15 December 2003 to the bankrupt enclosing such report (Report to Creditors) is annexed. Since providing this information, no one (including the bankrupt) has required that my remuneration of $8,099.10 that was drawn be taxed as permitted by Reg 8.09.’

25                  As to costs, expenses and remuneration from 11 December 2003, the trustee said this at paragraph 21 of the affidavit:

’21. Further work has been carried out, a substantial part of which has arisen from having to deal with complaints of the bankrupt applicant made either to me or made by the bankrupt applicant to the Bankruptcy Regulation section of ITSA. Certain steps need to be taken to finalise the administration, for instance revesting title in the real estate transmitted to me back into the name of the bankrupt, preparing a final account of receipts and payments, and several other tasks. Accordingly, I propose to recover any further lawful remuneration in excess of the amount already drawn down and any unpaid expenses either from further payments made by or on behalf of the bankrupt, or, if need be, from the sale of the bankrupt’s divisible assets. Again, details of the additional remuneration will be provided to the creditors and the bankrupt, and creditors and the bankrupt will have the right to require taxation of such additional remuneration.’

26                  At 29 March 2004, three payments had been made in the administration. The first was an amount of $8,099.10 paid on 12 December 2003 in respect of the trustee’s remuneration. The second was a payment of $800.00 made on 29 January 2004 in respect of a mandatory charge payable to the Commonwealth Government under the Bankruptcy (Estate Charges) Act 1997 (Cth) and the third payment of $764.42 was made on 27 March 2004 in respect of rates levied by the Gold Coast City Council concerning the property at 56 Hoffschidldt Drive, Currumbin Waters. At 29 March 2004, $336.48 was held in the administration bank account.

27                  In general terms, the trustee denied the allegation that the administration had been conducted contrary to the interests of the applicant or in a malicious way and asserted that the work undertaken in the administration was consistent with the proper administration of the estate and responsibilities required under the Act. In further general terms, Mr Carey filed an affidavit which contested a number of the matters Ms Townsend asserted. Mr Carey says that Ms Townsend did not produce any documents to him whatsoever nor tender any documents to him at the meeting on 25 June 2003. Mr Carey says he did not refuse to accept any documents. Mr Carey says that the bankrupt was in a distressed state and a considerable amount of time was spent explaining the bankruptcy process. Mr Carey says Ms Townsend agreed to complete the Statement of Affairs and return it promptly. As to the properties, Mr Carey says no action was to be taken to sell the properties in the immediate future and that this would allow Ms Townsend time to complete the Statement of Affairs and return it to the trustee.

28                  These matters are mentioned in some detail because they illustrate the divergence of approach between the trustee and the bankrupt. Ms Townsend was agitating for very little to be done and purporting to direct the trustee not to do things against the background of allegations that taking steps would be both unnecessary and vexatious. On the other hand, the trustee says he identified a statement of the necessary steps taken in the administration, submitted that description to the creditors for approval and contends that the steps taken by him represent the orthodox and proper administration of the estate.

29                  On 7 November 2003, Ms Townsend wrote to the trustee and raised a number of complaints including these matters:

·                     in order for the trustee to perform his functions under the Act, it was only necessary for the trustee to notify creditors of the bankrupt of the administration and determine whether the estate included property that could be realised to pay a dividend to creditors;

·                     the delays in dealing with proofs of debt on the part of the trustee had caused a third party, Ms Helen Thompson, to withdraw a proposal to provide funds to pay creditors;

·                     Ms Townsend attempted to begin making payments to creditors and contacted St George Bank to arrange payments from her Visa account and personal loan accounts and was advised that she would require written authorisation from the trustee. Ms Townsend complains about the trustee’s conduct in dealing with that matter;

·                     Ms Townsend complains about what she describes as unauthorised meetings and phone calls by the trustee, unnecessary correspondence, excessive costs in obtaining information, unnecessary facsimiles sent by the trustee, unnecessary conversations by Mr Carey with particular creditors (PCCR, St George Bank and other entities) and other unnecessary communications;

·                     Mr Carey held unauthorised meetings and telephone conversations with Mr Halpin, Ms Davis and Ms Thompson on 30 June 2003, 21 July 2003 and 18 August 2003; and

·                     excessive costs were incurred in conducting telephone discussions with PCCR and others.

30                  In light of all of these complaints, Ms Townsend offered to pay on 7 November 2003, $4,500.00 as full and final payment of the trustee’s administrative costs.

31                  It is plain that at this time Ms Townsend was asserting her view of the limited nature of the steps that she thought were ‘reasonable’ and her view as to whether particular conversations, steps, correspondence and other communications ought to have been undertaken by the trustee and his staff.

32                  Ms Townsend concluded her letter of 7 November 2003 with these observations:

‘If you elect to reject my offer I require that you provide valid reasons as to why you consistently failed or refused to exercise your power and perform your functions as a Commonwealth Officer to administer my affairs in a manner affording unnecessary expense as well as in a commercially sound way.

If you attempt to enforce payment in excess of the amount offered without providing those valid reasons as well as providing a valid explanation as to why particular statements were made in your letter dated 22 October 2003 or to do any other thing, either by act or by omission, that may affect me in an adverse way financially, without cause, I shall commence private criminal proceedings under section 13 of the Crimes Act 1914 (Cth) with respect to offences under Chapter 7 of the Criminal Code Act 1995 (Cth) in the Magistrates Court at Townsville pursuant to s 68(2) of the Judiciary Act 1903 (Cth).

I warn you that giving false and misleading information is a serious offence.’

33                  On 25 November 2003, the trustee wrote to Ms Townsend in respect of the costs question (which was subsequently the subject matter of Mr Brake’s affidavit). The trustee said this:

‘I am not in a position to provide a written fixed price invoice for final payment of the costs of the bankruptcy administration. The administration is ongoing and further costs continue to be incurred. I understand you have not paid the claim of Redpath as set out in his proof of debt and unless he withdraws his proof of debt, I am required to adjudicate on his claim.

I refer to the draft outline of costs set out in my letter to you earlier today.

That, together with GST and the 8% ITSA fee, amounts to approximately $8,200.00. The actual costs incurred to date may be somewhat more or somewhat less than that outlined, and further work needs to be carried out. To obtain an annulment of the bankruptcy, I suggest you pay $10,000.00 to me. I presently consider that this is likely to cover the costs of the bankruptcy, but please note that this is just my current opinion not a statement of fact. If and when I am satisfied that all your debts (as defined in section 153A of the Bankruptcy Act) have been paid, your bankruptcy will be annulled. … The suggestion that the amount paid be $10,000.00 at the present time is on the basis that, amongst other matters, all creditors who have lodged proofs of debt have been paid and they withdraw their claims. To date, no creditor who has lodged a proof of debt has contacted me to withdraw their claim, so I will have to contact them. I will also have to go back to creditors to seek further fee approval as the current limit has been exceeded.’

34                  On 25 November 2003, the trustee wrote a further letter to Ms Townsend advising that he did not consider that it would serve any useful purpose to respond to the various allegations made by her although if Ms Townsend wished him to do so, he would respond. As to the offer of $4,500.00, the trustee rejected the offer and said that a cheque sent to him for that amount would be returned to the drawer of the cheque.

35                  On 25 November 2003, Ms Townsend wrote to the trustee providing confirmation of payment from third party sources of four creditors, namely, Laidley Shire Council, St George Bank, Lehns Solicitors and ‘PCCR’. A further amount was to be paid to PCCR upon a certain event happening. As to the $4,500.00, Ms Townsend told the trustee he should retain that amount as part payment of the $10,000.00 previously requested although Ms Townsend put the matter on the basis of the ‘amount that I have agreed to pay to annul the bankruptcy and allow me to pursue creditors outside the bankruptcy’. The balance of $5,500.00 was to be paid within a short period of 25 November 2003.

36                  On 27 November 2003, Ms Townsend wrote to the trustee advising of certain further arrangements to complete the payment to creditors of amounts due to them. The letter confirmed a funds transfer to PCCR Lawyers of $3,000.00, a payment to Mr Redpath of $451.45 and a payment to the trustee of $5,500.00. Ms Townsend sought confirmation from the trustee that the proof of payment from the particular creditors now supplied was sufficient in respect of those creditors who had lodged proofs of debt. Ms Townsend raised again the possibility of an annulment.

37                  On 28 November 2003, the trustee responded and acknowledged the receipt of $5,500.00 which aggregated with the earlier payment represented $10,000.00 ‘received on the terms set out in my letter of 25 November 2003’. The trustee advised that he had not yet received a withdrawal of a proof of debt from PCCR or Mr Redpath but that would no doubt follow shortly. As to the annulment, the trustee said:

‘Your bankruptcy will be annulled if and when the conditions set out in section 153A of the Bankruptcy Act are satisfied. Assuming that all proofs of debt have been withdrawn (or rejected by me on the basis that the relevant claim has been paid), and no further proofs are received, the only outstanding issue I currently foresee will be assuring that the costs, charges and expenses of the administration, including my remuneration and expenses, are ascertained and paid in full.

I will provide creditors and you with the information required regarding my remuneration and the receipts and payments in the administration. If any creditor or you require taxation, given that only $10,000.00 is held, it is likely the annulment will not take place until taxation is completed.’

The trustee also said this:

‘Furthermore I note that you have made various allegations against me, including threatening to launch a private prosecution. I consider your allegations unfounded. If I am to carry out work or incur expenses in responding to such allegations, then some or all of the costs involved may be properly chargeable to your estate, and therefore I will need to be paid prior to any annulment occurring. I currently intend to provide you with a release whereby you release me from such allegations (this release will not seek to limit your right to require taxation – that is a separate issue). If you choose not to sign the release, then I will either (a) seek a ruling from the court, or (b) obtain specific insurance to protect me against any future claim you may make against me, or (c) wait seven years until the limitation period for bringing an action against me expires, or the proceedings you bring are finalised. I consider the proper costs of resolving the allegations you made will (subject to any ruling that a court may make) be charged to your estate in bankruptcy. If you do not wish to consider signing a release, please advise me promptly as there is no point in me preparing a release for your consideration if you are not prepared to consider it in any event.

As to the resolution of the financial affairs, the trustee said this:

‘I refer to your request that I do not discuss the state of your affairs with any of your creditors. I bear in mind your request, but will carry out my obligations and exercise my discretions as I am required to do under the Bankruptcy Act.

The Bankruptcy Act requires trustees to automatically provide certain details of receipts and payments (including remuneration). The proper costs incurred by trustees in providing the details as required by the Bankruptcy Act is a cost of the administration, and would be paid out of the estate assets. If you want further details not normally required, I am happy to consider providing them but you would have to pay the costs of preparing such additional details not required by law.

As I have already advised, the Bankruptcy Act provides that subject to certain conditions, you have the ability to require taxation. This in turn would involve additional potential benefits and risks, and I suggest that you seek legal advice in that regard.’

38                  On 8 December 2003, Ms Townsend wrote an extensive letter to Mr Robert Tom the Director of Bankruptcy Regulation at ITSA. In that letter, Ms Townsend expressed serious concerns about the manner in which the trustee had conducted the administration of her bankrupt estate and, in particular, complained as to the unnecessary and excessive costs, the general conduct of the administration and the proposition that the trustee had placed conditions upon any release of Ms Townsend from bankruptcy outside those conditions contemplated by the Act. Ms Townsend further contended that the trustee had conducted the administration in a way that was deceptive and misleading and proceeded to set out the history of events in part recorded in these reasons. The detail of the letter deals with the specific conduct of the administration and the notion that correspondence, communications and particular steps were taken which were unnecessary. Ms Townsend said that she maintained that the account ‘… should not be more than $3,000.00 in total and that Paul Brake abused his statutory powers and failed in his statutory duty of trust’. Ms Townsend set out her view that s 19 of the Act only required the trustee to notify the bankrupt creditors of the bankruptcy and determine the extent of the estate that might be realised to pay a dividend to creditors. Ms Townsend contended that she could see no basis upon which an amount of $10,000.00 could properly have been incurred in the administration of the estate.

39                  On 15 December 2003, the trustee, as deposed in his affidavit, wrote to Ms Townsend and enclosed a copy of his report to creditors dated 12 December 2003.

40                  On 14 January 2004, Ms Townsend sent an email to Mr Barrett at ITSA in these terms:

‘I hereby revoke my verbal consent previously given, allowing ITSA to forward copies of my letter of complaint and various written correspondence to Mr Brake giving him the opportunity to respond to my complaints. The reason for this is that according to you, Greg, there is nothing ITSA can do to stop Mr Brake from charging my estate for his time required to respond to my complaints. I would like you to proceed with any investigations that will not involve Mr Brake’s time. The part of the inquiry involving Mr Brake’s time to respond should proceed only after my bankruptcy is annulled. In the past Mr Brake has always charged my estate to speak with ITSA regarding complaints I have made. I will contact you upon the annulment of the bankruptcy. I would like to formally request that you provide me with a copy of the letter and all documents that have been sent to Mr Brake.

Further, please take notice, in regards the taxing of the bill, I wish to have the bill taxed however will advise you at a later date when I would like you to proceed with the taxing. I am currently awaiting an itemised bill from Mr Brake. To date he has only provided me with a draft bill.’

41                  On 10 February 2004, the trustee wrote an important letter to Ms Townsend in these terms:

‘I am satisfied that any creditors who have lodged proofs of debt have been paid, and where appropriate I have given notice of rejection of the claim (in one case the period to appeal from my rejection has not expired, but clearly I do not anticipate any appeal).

I consider that your bankruptcy will be annulled under section 153A of the Bankruptcy Act as soon as my remuneration and expenses have been paid. I note my remuneration up to 12 December 2003 has been advised to you and creditors, no request for taxation has been received, and I am proceeding on the basis that the issue of what is my remuneration up to 12 December 2003 is now finalised.

My remuneration for work carried out from 13 December 2003 to the present time is approximately $1,300.00 (plus GST) – according to my time – costing records. [While I appreciate limited work to progress the file was carried out post 12 December 2003, work (which entailed costs) was carried out to begin to respond to your letter of complaint to ITSA dated 8 December 2003. Such costs ceased to be incurred after being advised that, to avoid further costs, you did not wish me to respond further]. In addition there is approximately $580.00 (plus GST) for expenses, a total of say $2,200.00 (including the 8% ITSA charge and GST) – subject to correction of errors and omissions. I hold $1,100.90 at the present time (being the $10,000.00 received, less remuneration of $8,099.10 and less the 8% ITSA realisation fee of $800.00).

Unavoidable costs to complete the administration would include seeking approval for further remuneration, writing a final report to creditors, and re‑transmitting the two properties back to you.

Provided I am satisfied that any rates that accrued during the bankruptcy in relation to either property have had been paid, if I did not have to consider the issues set out in the next paragraph, I consider that upon receipt of the further $2,300.00 (including GST, the government charges on re‑transmitting the land and 8% ITSA charge) I could draw down all or the major part of the costs to complete, prepare and lodge any land transfer forms, and issue an annulment certificate under section 153A of the Bankruptcy Act. I emphasise that this ‘guestimate’ of costs to complete is on the basis that the finalisation proceeds smoothly, and is in any event only my ‘guestimate’ at the present time.

…

Details of my expenses and post 12 December 2003 remuneration would be notified to you and creditors. If you (or a creditor) consider that such costs are excessive that can be taxed if required. Once the costs are determined (one way or another), if there was a surplus, the excess would be refunded to you. If there was a shortfall, then the shortfall would be recoverable from you (notwithstanding any annulment that may have occurred in the meantime).

One significant potential additional cost is the potential cost of responding to the various complaints and allegations that you have made or may make in the future in respect to my work. I note if all you wish to do is require my remuneration or costs to be taxed, then so be it (subject to you complying with any time limits or making a successful application to extend any time limit). I can finalise the file without making any further provision for the potential costs of taxation (given that, in the event that the bill is reduced by less than 15%, you will have to pay both the taxing fee and my costs of the taxation).

If, however, you have already referred (or in the future refer) your complaints to the Federal Police, or have already commenced a private prosecution against me (or in the future commence such a private prosecution), or make a complaint in some way other than by requiring taxation then it is difficult to provide a good estimate to you of the costs to finalise the administration.

I note that any potential investigation or private prosecution may not be finalised for several years and the costs of responding to that may be thousands of dollars. I consider it appropriate that our respective rights and obligations be finalised on a timely basis.

I can apply to the court for a release and/or seek directions as to how your allegations should be dealt with. The costs of making such an application may be considerable. I again invite you to consider withdrawing your threat to take any action against me in respect to the work carried out to date, other than requiring costs to be taxed (if you so make available a requirement for taxation). If we are to proceed on this basis, a release would need to be prepared and signed. Previously you’ve alleged that it was somehow improper to invite you not to undertake not to bring a private prosecution, etc. Frankly, I cannot see it is improper, but you may wish to seek legal advice on this matter.

If however, you do not wish to sign a release, I propose to make an application to the court.

Please let me know how you wish to proceed.’

42                  In response to that letter, Ms Townsend filed on 24 February 2004 an application in the court dated 16 February 2004 which sought relief in these terms:

‘1. That the bankruptcy of the Applicant be annulled on the grounds that the Applicant has paid every creditor in full including trustees’ fees;

2. A declaration that the trustee has deliberately contributed to the excessive charges imposed on the bankrupt by over‑administering a very simple estate.

3. That the trustee is liable in damages for preventing my dealing with my property during the peak of a real estate boom, prevented me renting it, selling it and charging fees that were excessive in the circumstances.’

Ms Townsend also sought orders in these terms:

‘1. Restriction of additional charges being made by the trustee, which the Applicant believes on reasonable grounds are malicious or vindictive.

2. Directions of the court on how to prevent excessive trustee charges for a bankrupt estate that has been finalised directly by the bankrupt.

3. That the dealing with the lands of the Applicant by the trustee be stayed pending decision on the annulment of the bankruptcy of the Applicant.’

43                  That application was amended on 8 October 2004 so as to reflect an application for ‘the annulment of the bankruptcy pursuant to sections 153A and 153B of the Bankruptcy Act 1966 (as amended)’. Ms Townsend brought on an interlocutory application for summary judgment. The principal application ultimately came before Federal Magistrate Coker on 5 November 2004. His Honour made orders that the trustee’s costs from the date of the sequestration order to 5 November 2004 be taxed; that the costs of both parties be reserved and that the application be adjourned until 15 February 2005.

44                  Prior to the hearing of the application on 5 November 2004, further exchanges took place between the trustee and Ms Townsend. On 6 June 2004, the trustee wrote to Ms Townsend in these terms:

‘I refer to your request that I provide an updated figure for estimated outstanding costs and costs to complete.

The costs of my remuneration rose dramatically upon your launching your application for annulment, and increased substantially again since you chose to bring an application for summary judgment.

According to my time costing records, and rounding off figures to the nearest dollar, the outstanding remuneration up to yesterday is $9,721.00 with $3,252.00 of expenses (the principal item of expenses being barrister’s fees). GST of $1,282.00 needs to be added, bringing the total to $14,255.00. When the 8% ITSA realisation charge is added, the total estimated amount is $15,395.00.

…

Unavoidable costs to complete the administration would include documenting the dismissal or withdrawing of your court proceedings, seeking and obtaining fee approval with a final report to creditors, and re‑transmitting the two properties back to you. Provided I am satisfied that any rates that accrued during the bankruptcy in relation to either property had been paid, if I did not have to consider the issues set out in the next paragraph I consider that upon receipt of a further $16,500.00 (including GST and the 8% ITSA charge) I could issue an annulment certificate under section 153A of the Bankruptcy Act.

Details of my expenses and post 12 December 2003 remuneration would be notified to you and creditors.’

45                  The letter then went on to deal again with the question of the costs that might be incurred in dealing with the various complaints either made or to be made by Ms Townsend to the Federal Police or to regulatory bodies.

46                  On 15 June 2004, Ms Townsend wrote to the trustee in these terms:

‘I acknowledge receipt of your letter dated 6 June 2004.

I am writing to advise that I intend to pay your account fees on or about 1 July 2004 sufficient to annul the bankruptcy.

I require you to provide a fully itemised, formal, final account for all work completed by you or your employees or agents in association with my bankruptcy since your appointment as trustee of my estate on or about 20 June 2003 and including all necessary work yet to be done to annul the bankruptcy. I require final, formal account within seven days.

Please allow for all possible work to be completed to ensure that all your costs will be covered. Should there be a surplus paid, this will be refunded to me upon annulment.

…

Take notice, there are no creditors who require notification regarding your expenses or final reports associated with my bankruptcy. Should you intend to provide this information to any person, business or company other than myself, please provide me with a certified copy of the Authority you are relying on that allows “creditors who have been paid 100% of their debt to continue to be regarded as creditors” in this, or any bankruptcy. Further I require evidence that you are entitled to seek fee approval from anyone other than a current, valid creditor.

…

I am making an application to the court for an Extension of Time to submit my Amended Application. The reason for this is so you are not required to commence work on a Response prior to me being able to finalise your account. Provided I am able to pay your account in full and you annul the bankruptcy, I intend to withdraw my court proceedings. However, as I am unable to make such payment prior to 1^st July 2004, I ask that you will consent to an application for an extension of time to submit my Amended Application to the Federal Magistrates Court due to be filed on 17 June for a further 28 days. Should an unforeseen problem arise in regards payment of your account or you do not annul the bankruptcy, the application for annulment will continue.’

47                  On 23 June 2004, the trustee wrote to Ms Townsend and enclosed a draft account of ‘certain of my remuneration and expenses’. The trustee said the draft account ‘is subject to revision, GST has yet to be added, the rates for the work carried out need to be approved, etc. However it should be sufficient to indicate the broad basis of how the level of charges set out in my letter of 6 June 2004 is estimated by me’. As to the estimate of 6 June 2004, the trustee said this:

‘The estimated costs set out in my letter of 6 June 2004 will have, naturally, increased slightly by the work carried out in responding to your further queries. I have raised on several occasions (see, for instance, my letter of 9 February 2004) the difficulty in dealing with determining a level of costs, given your expressed intentions to (in various circumstances) lodge petitions in Parliament, launch a private prosecution against me, etc. Please respond to this issue.

If a satisfactory response to the issue of what appears to be a reasonable[y] foreseeable application by you to lodge a petition in Parliament, launch a private prosecution against me etc is received, I consider paying $17,000.00 will provide a reasonable assurance that such sum would be sufficient to cover the remaining costs of the bankruptcy. However, I cannot give a guarantee in that regard, as my rights and obligations are set out in the Bankruptcy Act and applicable case law, etc.’

48                  In relation to the question of whether a final report to creditors was necessary, the trustee said the position was not immediately obvious but having regard to s 162 of the Act and particular authorities, the trustee observed:

‘I propose to write to creditors seeking further fee approval up to a further $11,000.00 plus GST (in addition to the remuneration already approved, ie. a total maximum of $19,000.00 plus GST) or such higher amount as may be agreed between you and I. I do not consider that such maximum level of $19,000.00 plus GST will be required, but it seems that such a resolution may avoid yet further costly correspondence with creditors if there are some problems in the future. Creditors and you of course can apply to have any remuneration taxed, provided time limits are complied with or an extension of time is granted.’

49                  On 5 July 2004, the trustee met with Ms Townsend and on 19 July 2004 the trustee wrote to Ms Townsend setting out a basis for future resolution of the bankruptcy. The elements of that proposal were these:

1. Ms Townsend would cause $23,000.00 to be paid to the trustee.

2. Upon receipt of those funds, the trustee would formulate a claim for remuneration from 12 December 2003 until the date of receipt of the additional monies.

3. Ms Townsend would not make any further complaints to ITSA, lodge petitions in Parliament, launch private prosecutions or institute court proceedings in respect of the conduct of the trustee or his staff from the date of commencement of the bankruptcy. The expression of any dissatisfaction on the part of the bankrupt would be taken up in the forum of a taxation of costs (if a taxation was required).

4. Upon being provided with details of the claim for remuneration for the period from 12 December 2003 to the date of receipt of the additional funds, Ms Townsend might seek to require a taxation of the claim for remuneration (if made within time) or seek a taxation of remuneration already paid to the trustee from 20 June 2003 to 11 December 2003.

5. The trustee observed that ‘if any bill is being taxed, you may object to any item in the bill, and for that purpose make such comments or criticisms about my conduct at that time to the taxing officer as you think fit’.

6. …

7. The Trustee observed: ‘After the remuneration for the period from 12 December 2003 until the receipt date (or, if applicable, from inception until the receipt date) is determined and paid, a certificate of annulment can, if appropriate, be issued at that time (ie. in advance of all costs being exhaustively determined and paid) – assuming I am satisfied that the remaining funds in hand are sufficient to cover the costs to complete’.

8. Assuming the work to finalise the administration can be completed, the existing court proceedings would then be dismissed by consent.

9. The cost of work undertaken by the trustee after receipt of the further funds would be agreed between the trustee and Ms Townsend and paid promptly.

10. The trustee observed: ‘I will issue a Section 153A Certificate annulling the bankruptcy when I am satisfied that the funds held are sufficient to cover all your “debts” as defined in Section 153A(1). In that regard, I note that where a certificate of annulment is issued, Section 154(1)(b) provides that a trustee may apply the property of a former bankrupt still vested in him in payment of the costs, charges and expenses of the administration. Thus it is likely that I can issue you with an annullment certificate even if not all costs are exhaustively determined and paid for, and the two properties not transferred back to you at that stage’.

11. The bankrupt would submit transfer papers to the trustee to facilitate both properties being transmitted to Ms Townsend without further work on the part of the trustee.

50                  On 22 July 2004, the trustee wrote to Ms Townsend in relation to obligations on the part of Ms Townsend to provide the trustee with a statement of income derived by her during the ‘contribution assessment period’ (20 June 2003 to 19 June 2004) and books evidencing the derivation of income during that period.

51                  On 16 August 2004, the trustee issued a further report to creditors in which he identified a claim for remuneration for the period 12 December 2003 to 15 January 2004 of $637.12 plus GST and a claim for remuneration for the period 15 January 2004 to 2 August 2004 of $10,934.63 plus GST constituting a total amount of $12,028.09. During August and October further exchanges took place between the trustee and the bankrupt concerning notices from the Gold Coast City Council and the Laidley Shire Council. On 7 October 2004 the trustee provided Ms Townsend with a statement of income during the contribution assessment period. During October further exchanges took place between the trustee and the bankrupt. Ms Townsend made a request of ITSA for the removal of the trustee. ITSA advised that an application would be necessary under s 179 of the Act in the event that the trustee was removed, the Official Trustee could, in particular circumstances, assume the role of trustee of the estate.

52                  During October Ms Townsend had further correspondence with ITSA concerning the claim for remuneration by the trustee. On 5 November 2004, Ms Townsend’s application pursuant to ss 153A and 153B of the Act was heard by Federal Magistrate Coker.

53                  These exchanges demonstrate essentially three phases in the dealings between the trustee and the bankrupt. At first, Ms Townsend was entirely convinced that a trustee administering her estate was required to take very limited steps and that many of the telephone calls taken and received, meetings held, correspondence and facsimiles sent and received were thought to be unnecessary. This view of the requirements or duties cast on the trustee gave rise to Ms Townsend’s view that the costs, charges, expenses and remuneration for work undertaken in the administration of the estate must necessarily be limited and could not be more than $3,000.00. Thus, an offer of $4,500.00 was made on 7 November 2003.

54                  In the second phase, Ms Townsend accepted that $10,000.00 would be paid to the trustee. The respondent thought by 25 November 2003 that this amount would be sufficient to secure an annulment of the bankruptcy although the appellant on 28 November 2003 re‑asserted the qualification upon the ‘estimate’. On 8 December 2003, the respondent re‑asserted to ITSA her complaints and her view that the fees ought to be only $3,000.00.

55                  The third phase represented the period from 10 February 2004 through to the hearing of the application pursuant to s 153A and s 153B. The letter of the trustee of 10 February 2004 acknowledged the payment of $10,000.00. An amount of $8,899.10 had been drawn down with creditor approval (including an $800.00 ITSA fee) leaving $1,100.90. A further $2,300.00 (including GST, an ITSA charge of 8% and retransmission of title fees) would be required to complete the administration and secure the issue of the certificate pursuant to s 153A.

56                  On 24 February 2004, Ms Townsend issued proceedings.

57                  Two further things emerged throughout 2004. First, the trustee indicated he would respond to ITSA and Ms Townsend concerning complaints made and threats to commence various actions (petitions, legal actions, investigations etc) against him and those steps would be treated by the trustee as actions taken in the administration of the estate and, in consequence, a charge upon the estate. Secondly, the cost of responding to the proceedings commenced by Ms Townsend would also represent a charge upon the estate. Accordingly, the costs, charges and expenses of the administration and the remuneration of the trustee in conducting the administration, expanded significantly.

The judgments of Federal Magistrate Coker

58                  On 24 December 2004, Federal Magistrate Coker published his reasons in relation to orders made on 5 November 2004. The respondent’s application in the Federal Magistrates Court relied upon s 153A and s 153B. The contention of the applicant was that by 27 November 2003, the debts of the bankrupt had been paid in full. However, the debts of the bankrupt included the ‘costs, charges and expenses of the administration of the bankruptcy including the remuneration of the trustee’ (s 153A(6)). Since the controversy, at its centre, involved the question of the content of the steps taken by the trustee and the reasonableness of those steps and the corresponding charges, his Honour directed that the trustee’s costs (expenses and remuneration) from the date of the sequestration order on 20 June 2003 to 5 November 2004 be taxed. His Honour accepted that the applicant had expressed an ongoing requirement for taxation of the costs (including the remuneration of the trustee). His Honour made these observations:

‘[11] I have made a passing comment in relation to the costs and the increasing significance of those costs. This is particularly the case when one considers that the liabilities that were needed to be met in relation to the matter are, in fact, less than the costs that have now been charged. It would be inappropriate, however, for me to make any comment in relation to whether those costs are, or are not, proper, particularly when there is to be a taxation in relation to same and I would specifically decline to make any comment in relation to those costs.

[12] It would seem that if the issue of costs is able to be resolved, no matter what the outcome, then it is clear that, pursuant to section 153A, the applicant would be entitled to annulment of the bankruptcy. The trustee acknowledged during the course of the hearing that the debts other than the issue of costs had been clearly resolved as between the parties and it would seem that resolution of that particular aspect of the matter in relation to costs should then bring the matter to an end.’

As to the treatment of the collateral proceedings, his Honour said this:

‘[13] The trustee raises a concern in respect of the possibility of the some other proceedings, be it a personal prosecution, referral to Parliament or whatever, and obviously the applicant cannot be told what she can or cannot do other than to say that I would think that there would be significant further expense incurred by her in relation to proceedings and one would have to be giving serious consideration to the wise action in relation to the matter being simply to bring proceedings to an end’.

59                  His Honour considered aspects of the application made pursuant to s 153B of the Act but took the view that the proper course was to order taxation of the costs on the footing that a resolution of the reasonableness of the costs would facilitate an annulment of the bankruptcy pursuant to s 153A of the Act. His Honour made this observation:

‘[17] I am satisfied that the proper course to follow in relation to this matter is taxation and a resolution pursuant to the provisions of s 153A. I do not, for a moment, find that the trustee has acted in any way that might be suggested to be malicious or vexatious but that he has acted in a proper manner in relation to the matter. What I would also say, however, is that I gave the distinct impression, particularly in material read and more particularly perhaps from seeing both the applicant and the trustee, that there is a degree of distrust or lack of confidence that each might have in the other in relation to services provided by the trustee, and the actions that might or might not be contemplated by the applicant, such that they are unable to fully resolve what should happen in relation to this proceeding.’

60                  His Honour further observes:

‘However if that [resolution of the costs and the issue of an annulment certificate] is not agreed, for one reason or the other, then it would seem to me appropriate that the court should determine the application by the applicant. It may be that the sequestration order has already been annulled as a result of the taxation and resolution. If not, I will give consideration to whether it is appropriate for any direction to be given pursuant to section 153A or whether the application should be dismissed.’

61                  On 10 December 2004, the trustee submitted a Bill of Costs to the ITSA taxing officer for assessment. Mr Laurie, counsel acting for Ms Townsend, on 11 January 2005, made written submissions to ITSA in relation to the Bill of Costs which addressed six categories of costs within the bill. On 28 January 2005, the taxing officer issued a provisional assessment and on 4 February 2005 a final assessment was issued to the parties. A detailed Bill of Costs was submitted for work carried out between 20 June 2003 and 5 November 2004 totalling $40,328.80 subject to the addition of GST. The taxing officer considered the extensive objections made by Mr Laurie and set out an assessment having regard to the six categories of challenge.

62                  The first category concerned work done in the ordinary course of the administration up to and including 9 January 2004. Mr Laurie contended that by that date all creditors had been paid and the trustee had received $10,000.00 in satisfaction of costs, charges, expenses and remuneration. The bankrupt contended that by that date, an annulment certificate ought to have issued. The taxing officer allowed as a fair and reasonable amount for that period, the sum of $9,491.46 made up of outlays of $766.10 and fees of $8,725.36. GST and the 8% realisation charge were not included in that sum.

63                  The second category identified by Mr Laurie was an assessment of the fair and reasonable costs relating to work carried out up to the date of Ms Townsend’s annulment application to the court dated 16 February 2004 but filed on 24 February 2004. The total amount allowed as fair and reasonable constituted $10,438.20 comprising $770.40 outlays and $9,667.83 as fees subject to the addition of GST and the 8% realisation charge.

64                  The third category of analysis involved the fair and reasonable costs relating to the opposition by the trustee to the annulment application and various attendances at court. The total amount allowed as a fair and reasonable claim constitute $24,844.60 comprising outlays of $4,042.27 and $20,802.37 fees subject to the addition of GST and an 8% realisation charge.

65                  The fourth category involved the fair and reasonable costs of dealing with complaints lodged by Ms Townsend with bankruptcy regulators. The taxing officer allowed an amount of $523.42 subject to the addition of GST and an 8% realisation charge.

66                  The fifth category involved a contention that the balance of costs incurred in the administration of the estate were entirely unnecessary including attending to ordinary matters of the administration because at the time the costs were incurred an annulment ought to have been granted and in addition, concern was expressed about the level of charges and the amount of time spent in the ordinary administration. Ms Townsend relied upon the general discretion of the taxing officer in determining a proper charge for the various matters and requested the taxing officer to identify an amount which related to the ordinary administration of the estate from the date of the order of Federal Magistrate Coker until the date of assessment of the costs. Mr Laurie identified a series of items the subject of specific inquiry. In respect of all of those items but for three (items 308, 440 and 442), the taxing officer considered that the work performed by the trustee involved responding to Ms Townsend’s annulment application and accepted the items in the Bill of Costs as fair and reasonable.

67                  The sixth category involved an assessment of the costs incurred by the trustee in disputing with ITSA the question of whether the request for taxation was a valid request or not. As to that matter, the taxing officer allowed $1,197.12 subject to the addition of GST and an 8% realisation charge.

68                  Accordingly, in respect of the total bill of $40,328.80 plus GST lodged for assessment, the taxing officer disallowed $218.57 having taken account of submissions put to the taxing officer by counsel for the bankrupt.

69                  On 9 February 2005, a Certificate of Taxation issued reflecting the assessment. The taxing officer indicated that the interim costs of taxation for 4 February 2005 amounted to $2,760.00.

70                  On 8 February 2005, the trustee wrote to Ms Townsend in relation to the taxing officer’s assessment of the costs. The trustee said that costs up to 9 January 2004 had been allowed at $9,491.46. The GST component amounted to $949.15 and the ITSA realisation charge constituted $800.00. The total amount to 9 January 2004 therefore represented $11,240.61. In the period 1 July 2003 to December 2003, the trustee had received $10,000.00 and accordingly the trustee contended that total funds received could not have discharged all debts within the meaning of s 153A of the Act. The trustee observed that even if $11,240.61 had been received, further work would be required to issue the certificate, report to creditors and transfer title to the properties to the bankrupt. As to the question of the costs incurred by the trustee in resisting the annulment application, the trustee took the position that it was appropriate to oppose that application because the trustee could not be satisfied that all debts had been paid as contemplated by s 153A. No observation was made in the letter concerning s 153B.

71                  Because the trustee could not be satisfied that all the bankrupt’s debts had been paid in full by reason of outstanding costs, charges and expenses and an outstanding claim for remuneration, Ms Townsend’s application for final relief was determined by Federal Magistrate Coker on 22 April 2005 supported by reasons published on 19 May 2005. The respondent sought an order annulling the bankruptcy on the ground the applicant had paid every creditor in full including the trustee’s fees; a declaration that the trustee deliberately contributed to excessive charges; and an order that the trustee is liable in damages to the respondent. The source of the power relied upon by the respondent was s 153A and s 153B. The appellant contended that he was not satisfied of the relevant matters; the court had no power to dispense with the statutory requirement of satisfaction on the part of the trustee; and no proper basis had been identified for an order pursuant to either s 153A or s 153B.

72                  His Honour reached these conclusions:

(a)                his Honour was not satisfied that a declaration could be made that the trustee had deliberately contributed to the imposition of excessive charges [8];

(b)               his Honour was of the view that ‘there is certainly in my view, power to fix a sum in relation to costs in respect of the administration of the estate’ [8];

(c)                it is not possible to make an order pursuant to s 153A or direct the trustee to issue a certificate [10] – [12];

(d)               had the financial circumstances of the respondent been properly considered at the time of hearing the creditor’s petition, there would have been some consideration given to adjourning the petition [16];

(e)                the contention that the value of Ms Townsend’s assets exceeded her identified liabilities makes it ‘clear that the applicant was in a position of solvency’. His Honour relies upon the decisions of Reithmuller FMin Duncan v McVeigh & Anor FMCA 759 and Spender J in Re McDonald; ex parte The Deputy Commissioner of Taxation (1996) 33 ATR 1. Those decisions, of course, both recognise the importance of an undertaking to pay the costs of the trustee’s administration and the need for the court to be satisfied that by reason of any asset surplus, the bankrupt is able to pay his or her debts [17] – [22];

(f)                 within a short period of time, the debts due to creditors had been paid by the bankrupt and some clarification of the position with regard to securing an annulment was sought [22];

(g)                during the administration, a fundamental breakdown in the relationship between the trustee and Ms Townsend occurred;

(h)                at [23], [24] and [25], his Honour quotes extensive passages from the trustee’s letter dated 10 February 2004 to Ms Townsend and in reliance upon, at least in part, those passages, his Honour concludes that: ‘it is most disturbing that a certificate has not issued pursuant to s 153A notwithstanding that the creditors have been paid [26]; the trustee’s position is that it is impossible to issue a certificate whilst the possibility of a private prosecution or complaint remains outstanding [26]; the actions of the trustee are unprofessional [27]’; and as an apparent explanation of that conclusion, his Honour says the proper course on the part of the trustee ‘would have been to bring the matter to a prompt finalisation’ [27] and that result was not reached because the approaches by the applicant ‘to a serious extent were unable to be dealt with as a result of the trustee’s very determined efforts to ensure that no complaint could be brought in relation to the conduct by him of the administration’ [27];

(i)                  the trustee by reason of the letter of 10 February 2004 ‘quite obviously’ attempted to ‘force any consideration by the applicant of the proceedings now before the court, not to be brought because of the financial influence and effect of those proceedings’ [28].

(j)                 ‘extremely excessive costs have been incurred as a result of the failure to bring this matter to a successful conclusion’ [29]; and

(k)               At [29] and [30], these observations:

‘[29] I am concerned as to further costs being incurred in relation to these proceedings and to what I consider to have been extremely excessive charges incurred, as a result of the failure to bring this matter to a successful conclusion. I am mindful of the terms of the letter of 10 February 2004 and, in particular, the indications as to costs expended and expectations in relation to future to costs. In my view, that was the appropriate time to bring this matter to an end. To suggest that the bankruptcy could never be annulled whilst there was some possibility of a disgruntled client complaining as to the administration of the estate, is bullying in the extreme and is inappropriate.

[30] I intend to fix the trustee’s costs in relation to the administration of the estate at $15,000.00 taking into consideration the amounts already paid and the estimates contained within the correspondence of 10 February 2004.’

73                  His Honour concluded that the respondent was then and at all times solvent and the proper course was to annul the bankruptcy pursuant to s 153B of the Act.

74                  The immediate difficulty with his Honour’s conclusions and findings is that they do not arise out of an exposed analysis of the evidence no doubt because his Honour was seeking to expeditiously dispose of a controversy with a long history.

75                  However, there are two reasons on the evidence why the trustee had refused to reach a state of satisfaction required by s 153A of the Act. The first was that notwithstanding the payment of $10,000.00 by Ms Townsend (or those assisting her) having regard to the letters of 25 November 2003 (see [33], [34] and [35]), 27 November 2003 [36], 28 November 2003 [37] and 10 February 2004 [41], a further amount as at 10 February 2004 of $2,300.00 would be required to meet the cost of work undertaken from 13 December 2003 to that date and the additional tasks necessary to finalise the administration. The second consideration involved the question of whether further costs would be incurred by the trustee in responding to complaints and allegations and a threatened private prosecution or other proceedings.

76                  As to the first reason, the trustee on 10 February 2004 said that remuneration for work done from 13 December 2003 (having regard to the fact that the report to creditors was dated 12 December 2003 and the completion of the earlier billing period was 11 December 2003) was approximately $1,300.00 (plus GST), plus $580.00 for expenses (plus GST); that is, approximately $2,068.00. The trustee suggested a further amount of $2,200.00 would fairly represent the value of that work.

77                  In addition, further identified steps to complete the administration would be necessary (see paragraph 3 of the letter of 10 February 2004 [41]). The trustee said in the letter of 10 February 2004 that he held $1,100.90 (being the $10,000.00 received, less remuneration of $8,099.10 and less the 8% ITSA realisation fee of $800.00) and upon receipt of a further $2,300.00 (including GST, the Government charges on re‑transmitting Ms Townsend’s land and the 8% ITSA charge) the trustee ‘could draw down all or the major part of the cost to complete, prepare or lodge any land transfer forms and issue an annulment certificate under s 153A of the Bankruptcy Act)’. In other words, a total amount of $3,400.90 would complete the administration, satisfy all relevant costs, charges, expenses and remuneration and result in an annulment certificate. Having regard to the $10,000.00 already paid and its application, the additional $2,300.00 would result in an annulment certificate based upon costs, charges, expenses and remuneration (including GST, Government charges and ITSA charges) of $12,300.00, in all.

78                  Ms Townsend refused to pay any further contribution and on 24 February 2004 filed the application the subject of these proceedings.

79                  Had Ms Townsend on or about 10 February 2004 paid a further amount of $2,300.00 to the trustee, consistent with the request made in the letter of 10 February 2004, the inference clearly open on the material is that the administration would have been finalised on the terms of the letter with an annulment certificate issuing pursuant to s 153A of the Act. However, Ms Townsend was plainly of the view that the request for the further monies was both unnecessary and unreasonable and accordingly she sought to test, in effect, the request by placing the matter before the court framed by the orders sought in the application.

80                  As a result of the taxation of the trustee’s Bill of Costs pursuant to the order of Federal Magistrate Coker on 5 November 2004, an objective basis for an assessment of whether the costs, charges, expenses and remuneration of the trustee constituted fair and reasonable fees emerged. The comparative position to 10 February 2004 consistent with the taxation is this:

81                  Accordingly, having regard to the independent assessment of the costs, charges, expenses and remuneration which was undertaken expressly on the basis that all complaints relating to the conduct of the trustee would be put before the taxing officer, the amount payable to 10 February 2004 would have been $12,261.72 as compared with the amount the trustee was seeking to complete the administration of $12,300.00. The trustee’s assessment included an estimate of the costs to undertake the additional steps to complete the administration whereas the assessed fees and outlays represented simply the costs, charges, expenses and remuneration to 10 February 2004.

82                  Two things flow from this evidence.

83                  The first is that his Honour did not have regard to the legitimacy of the expenses incurred by the trustee that the trustee was entitled to recover and accordingly no obligation arose in the trustee to issue a certificate pursuant to s 153A on or about 10 February 2004. Secondly, having regard to the objective assessment of the costs taking into consideration the extensive submissions made by Mr Laurie on behalf of Ms Townsend, a conclusion is not open on the evidence that the costs were ‘extremely excessive’. The costs since 10 February 2004 have, of course, become extensive but those costs flow from an election by Ms Townsend to contest by litigation the legitimacy of the fees sought by the trustee on or about 10 February 2004. The costs estimated by the trustee on 10 February 2004, having regard to the objective evidence of the assessment, reveals that the costs are both the actual costs and those costs considered by an assessor to be fair and reasonable.

84                  Plainly enough, Ms Townsend had a perception that the costs should be much lower and had agitated that complaint in various quarters. Ms Townsend had offered the trustee an amount of $4,500.00 at an earlier time against the background of her assessment that the costs ought to be $3,000.00. The trustee had rejected Ms Townsend’s assessment of those matters. On 8 December 2003, Ms Townsend continued to assert to ITSA that the costs should only be $3,000.00. Ms Townsend’s view that the costs were excessive continued to be held and was, no doubt, the reason for contesting the request for the further funds by electing to file the court application on 24 February 2004.

85                  However, it is not open on the evidence to conclude, as his Honour did, that the administration of the estate ought to have been finalised by the trustee on or about 10 February 2004 and the failure to do so represented unprofessional conduct. The trustee identified the value of the costs, charges and expenses and remuneration required to bring the estate to a conclusion but Ms Townsend was of the view, no doubt in her own mind a reasonably held view, that the request for further funds was unreasonable. The trustee could have simply abandoned any claim for further monies and assumed an obligation to complete the administration and accept as consideration for the administration of the estate, the amount of $10,000.00 previously paid to the trustee in the context of the earlier letters. However, the trustee could not be directed to adopt that position and was entitled to properly identify the field of costs, charges, expenses and remuneration, make an informed assessment of the costs and require payment of the costs (see s 162 of the Act and Division 4 of the Bankruptcy Regulations; Mayne v Jaques (1959 – 1960) 101 CLR 169; Re Wong ex parte Wong v Donnelly (1995) 63 FCR 426). The only basis upon which the trustee could have brought the administration to completion on or about 10 February 2004 was by accepting Ms Townsend’s contention that no further fees ought to be paid. His Honour’s conclusions on these matters are unsupported by the evidence.

86                  The independent taxation of the Bill of Costs demonstrates that across the period of the bill an amount of only $218.57 was taxed off the amount of the bill as delivered by the trustee, namely, $40,328.90.

87                  The exercise of the discretion by his Honour miscarried because his Honour failed to have regard to the burden of the evidence. The findings that his Honour made of unprofessional conduct and the incurring of extremely excessive charges cannot stand in the face of the evidence and the precise chronology of events.

88                  In assessing the material comprised in the Appeal Book, I have considered in real detail the draft bills of account submitted by the trustee and the detail of the Bill of Costs as delivered. His Honour’s reasons do not identify a sequence of charges or item numbers which are said to represent the class or categories of excessive costs or charges. An assessment of the bill does not readily convey an impression that the items are not matters which a trustee would encounter in the course of the administration of an estate. Having said that however, it seems to me that in the absence of disallowance by the taxing officer of a significant number of items on the articulated ground that the particular items were unnecessary and thus the charges excessive, it is not open to conclude that the fees and outlays were extremely excessive.

89                  The second reason upon which the trustee relied in failing to be satisfied that an annulment certificate could issue concerned the potential costs, charges and expenses and remuneration which might be incurred in responding to complaints and allegations made by Ms Townsend in various forums. The trustee’s letter of 10 February 2004 proceeded on the footing that the trustee would not find it necessary to respond to complaints and that such matters would not continue to be agitated at least in the context of a continuing administration. Ms Townsend seems, on the evidence, to have accepted that particular complaints would not be agitated as previously suggested. Ms Townsend did agitate matters further with ITSA and particularly with a view to attempting to secure a replacement of the trustee but those matters were agitated in the context of the continuing costs of the administration particularly having regard to the costs incurred in connection with the application to the court, among other matters.

90                  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.

101               I propose to make the following orders:

1. The trustee of the estate of Ms Julie‑Ann Townsend is entitled to be paid costs, charges of the administration of the bankruptcy including the remuneration and expenses of the trustee on the following basis:

(a) for the period 20 June 2003 to 5 November 2004, an amount of $40,110.23 less the amount received in the sum of $15,000.00 plus applicable GST; and

(b) for the period from 5 November 2004 to the date of this order, remuneration of the trustee as determined by operation of s 162 of the Bankruptcy Act 1966 (Cth) and Bankruptcy Regulations; and

(c) costs, charges and expenses incurred on an indemnity basis.

2. The respondent shall pay to the appellant the sum of $25,110.23 plus applicable GST within 45 days of the date of this order.

3. The respondent shall pay the appellant the amount of the remuneration determined in accordance with order 1(b) of these orders within 45 days of delivery by the appellant to the respondent of an itemised Bill of Costs or, alternatively, within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations.

4. The respondent shall pay the appellant the amount of the costs, charges and expenses referred to in order 1(c) of these orders within 45 days of delivery of an itemised Bill of Costs or alternatively within 14 days of the issuance of a certificate of taxation in the event that the respondent requests such Bill of Costs to be taxed under the provisions of the Act and the Bankruptcy Regulations.

5. The appellant shall be entitled to 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 as determined in accordance with these orders.

6. The respondent shall pay the appellant’s costs of the hearing in the Federal Magistrates Court limited to those costs of and incidental to the relief sought by the respondent pursuant to s 153A of the Act and the following orders sought by paragraphs 1 and 2 of the respondent’s application dated 16 February 2004 and filed on 24 February 2004, namely: ‘(1) that the bankruptcy of the applicant be annulled on the grounds that the applicant has paid every creditor in full including trustee’s fees; and (2) a declaration that the trustee has deliberately contributed to the excessive charges imposed on the bankrupt by over administering a very simple estate’.

7. The respondent shall pay the appellant’s costs of the appeal.

Associate:

Dated: 29 August 2006