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 1st 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:
- 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.