The trustee's costs and expenses
3 For the reasons stated in my earlier judgment, I made an order remitting the proceeding to the Registrar to allow her to review the bills of costs the subject of the taxation and prepare a short report indicating what further amounts should be disallowed in accordance with my reasons. The Registrar's report is dated 5 November 2010. In it the Registrar revises the total for all bills that were the subject of the previously issued certificates of taxation down from $392,482.72 to $273,717.41.
4 The parties were given the opportunity to raise any issue they had with the Registrar's report. Neither the trustee nor Mrs Maxwell-Smith raised any such issue.
5 Now that the Registrar's report is at hand and the trustee's appeal has been determined, it is necessary for me to make the appropriate orders. In my earlier judgment I said (at [99]) that it was my intention to make an order for the payment of the trustee's entitlement after it was finally ascertained. I also said:
And unless there is some co-operation between the trustee and Mr and Mrs Maxwell-Smith which renders it unnecessary for me to do so, it is also my intention to make an order for possession of the Tura Beach property so that it may be sold by Mr Donnelly, thereby allowing him to be paid what he is owed from the proceeds of the sale.
6 The title to the Tura Beach property is registered in the name of the trustee though it is still occupied by Mrs Maxwell-Smith. The relief now sought by the trustee is as follows:
A judgment in favour of the trustee in the sum of $273,717.41 against Mr & Mrs Maxwell-Smith.
An order that Mr and Mrs Maxwell-Smith give vacant possession of the property known as 8B Surf Circle, Tura Beach, New South Wales to the trustee within 42 days.
Leave to issue a writ for possession in the event that Mr and Mrs Maxwell-Smith fail to give such possession.
A direction that a Registrar of the Court tax any further costs, charges and expenses of the applicant trustee including his legal expenses of the notices of motion filed 5 May 2009 (which was amended and filed 16 October 2009) and 20 August 2010 (together, the Notices of Motion) in accordance with Part 8, Division 4 of the Bankruptcy Regulations.
7 Counsel for the trustee argued that there should be a judgment in the amount of $273,717.41 in the trustee's favour against Mr and Mrs Maxwell-Smith. He said that this was the result provided for by the rules in accordance with which the taxation occurred. While counsel did not refer me to any specific rules, I understood him to be referring to O 62 of the Federal Court Rules and, in particular, O 62, r 45(3) which provides:
If, after 14 days from the date of service of the certificate of taxation, the costs remain unpaid then the Registrar shall, at the request of the party in whose favour the costs are awarded draw up sign and seal an order in favour of that party for the sum shown in the certificate of taxation and enter the same.
8 The first difficulty with the trustee's argument is that the taxation that occurred did not occur in accordance with O 62. The taxation went beyond a taxation of "costs" and extended to the trustee's remuneration and expenses for work undertaken by him in connection with the trustee's administration of the former bankrupt estates. Nor was the taxation one that occurred under Pt 8, Div 4 of the Bankruptcy Regulations 1966 (Cth) (Bankruptcy Regulations). The reason for that is that the Registrar who conducted the taxation in the present case was not appointed by the Inspector General of Bankruptcy. As I previously explained, the taxation occurred pursuant to an order authorised by s 30(1) and (2) of the Act: see paras [21]-[32] of my previous reasons. In substance, the order made by Moore J provided that the trustee's costs, charges and expenses of the administration of the estates, including the remuneration and expenses of the trustee, would be taxed by a registrar of the Court as if it were a taxation in accordance with Pt 8, Div 4 of the Bankruptcy Regulations. That is precisely what occurred.
9 The second difficulty with the trustee's argument is that it would, if accepted, have the result that Mr and Mrs Maxwell-Smith would be personally liable for the trustee's remuneration, costs and expenses incurred by him in the course of the administration of the bankrupt estates. Yet as counsel for the trustee has emphasised, his client's entitlement to be paid his reasonable costs, expenses and remuneration arises out of his right to be indemnified out of the trust assets. That entitlement has been confirmed by orders made from time to time, including, for example, the order made by Allsop J which provided that "the costs, remuneration and expenses of the respondent trustee … as taxed … form part of the respondent trustee's costs, charges and expenses of the administration …". That order, and others like it made in favour of the trustee, is not one that renders Mr and Mrs Maxwell-Smith personally liable.
10 There are circumstances in which a beneficiary may be personally bound to indemnify a trustee for liabilities properly incurred: see Hardoon v Belilios [1901] AC 118 and other authorities referred to in J.D. Heydon, M.J. Leeming, Jacobs Law of Trusts, 7th ed at [2015]. But the trustee has never argued that Mr and Mrs Maxwell-Smith could be made personally liable by reference to the principles discussed in those cases. Indeed, in his submissions to me, counsel for the trustee made it clear that his client wished to do no more than enforce his right to be indemnified out of the trust assets.
11 It is therefore not appropriate to enter judgment against Mr and Mrs Maxwell-Smith. What I propose to do, however, is make a declaration that the sum of the trustee's entitlements to remuneration, costs and expenses of his administration of the former bankrupt estates of Mr and Mrs Maxwell-Smith for the period 16 September 2003 to 21 May 2008 is $273,717.41.
12 There is an additional complication in that the trustee's entitlements are most likely not confined to the sum of $273,717.41 because, since the close of the period to which the certificates of taxation issued by the Registrar relate (ie. 16 September 2003 to 21 May 2008) further costs and expenses have been incurred by the trustee which are covered by the indemnity. Hence, the declaration I propose to make is not intended to impose any limit upon the total amount that might ultimately be payable to the trustee in respect of his remuneration, costs and expenses. What further amount is payable will depend upon the outcome of a further taxation which will occur in accordance with another direction that I propose to make similar to the direction proposed by the trustee.
13 I will also order that Mr and Mrs Maxwell-Smith deliver up possession of the Tura Beach property to the trustee to enable the property to be sold by him. My order will allow them 60 days in which to provide the trustee with vacant possession of the Tura Beach property. I propose to give the trustee liberty to apply for leave to issue a writ of possession should that prove necessary.
14 The trustee, through his counsel, stated that he is willing to co-operate with Mr and Mrs Maxwell-Smith with a view to allowing them, if possible, to obtain finance on the security of the property and thereby avoid the proposed sale. I received into evidence a letter written by the trustee on 4 July 2007. In numbered paragraph 10 of that letter the trustee states:
In regard to the finalisation of my administration, I have sought to reach agreement with you about my entitlements on a number of previous occasions. I have offered to assist by speaking to financiers who you may wish to approach. I have volunteered to participate in orderly arrangements for the transfer of title to your properties in conjunction with payment of my entitlements (for example a transfer to you in conjunction with you granting a mortgage to a mortgagee who advances funds from which my entitlements are paid, which is standard conveyancing practice). This is a matter of record.
The significance of this for present purposes is that counsel for the trustee informed me that the trustee's position remains as stated in that paragraph.
15 I propose to grant Mr and Mrs Maxwell-Smith liberty to apply for the purpose of applying for a stay of the order for possession in the event that they are able to arrange a payment to the trustee in the amount of $273,717.41 together with such other amount as they might reasonably be required to pay on account of the trustee's additional remuneration, costs and expenses which are yet to be taxed. But there are two things I should say to Mr and Mrs Maxwell-Smith about this. First, I would need to be satisfied by evidence that they were willing and able to make such a payment before granting a stay of the order for possession. Secondly, they need to understand that if they want to avail themselves of the opportunity to reach an agreement with the trustee, they will need to move quickly.
16 I think the trustee should provide an estimate of the additional costs and expenses which he has incurred in the period since that covered by the taxation before the Registrar. This would seem to be a necessary step in allowing Mr and Mrs Maxwell-Smith the opportunity to arrange finance to pay out the trustee. Should there be any dispute about the reasonableness of any further amount which the trustee seeks to have set aside out of the proceeds of sale on account of his additional costs and expenses, then it will be open to any party to apply for further orders in relation to that matter. I will allow the trustee 21 days in which to comply with this order.
17 I was informed by counsel for the trustee that the trustee does not have an up-to-date valuation of the Tura Beach property but that he intends to obtain one for the purpose of setting a reserve and selling the property by auction. Counsel for the trustee said that the trustee did not object to filing and serving an affidavit that exhibits the valuation. I think that should be done. I also think the affidavit should outline the steps the trustee proposes to take in terms of advertising and promoting the sale of the property. I will allow the trustee 28 days in which to comply with this order.