The Trustee's Remuneration and Expenses
67 A trustee has a right under the general law for reasonable reimbursement of costs and expenses and reasonable remuneration arising from his role as a trustee (see Wilson v Official Trustee in Bankruptcy [2000] FCA 1251 and Adsett v Berlouis (1992) 37 FCR 201 at 210). Under the general law, a trustee would also have a right to a lien over the trust assets to secure the payment of remuneration reasonably incurred in their preservation and realisation. Those taking the benefit of the administration of trust assets should not escape bearing the burden of the proper cost of the administration (see Shirlaw v Taylor (1991) 31 FCR 222 at 230).
68 Such a general equitable right of a trustee is not excluded by any provision of the Bankruptcy Act. Indeed, the principle underlying the general right is recognised by s 109(1)(a) of the Bankruptcy Act, which gives priority to the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee.
69 In principle, therefore, the Trustee has a general equitable right to be paid, out of the proceeds of the realisation of the Exempt Assets, reasonable remuneration and reimbursement of costs and expenses incurred in connection with that realisation. Further, as a matter of principle, the creditors of the estate of the Deceased should not be disadvantaged by having the costs and remuneration of the Trustee's dealings with the Exempt Assets paid out of the divisible property.
70 Mrs Young contends that it is necessary for the Court to consider the Trustee's conduct and, in the light of that conduct, to make findings as to whether the amounts claimed as expenses were properly incurred and whether to exercise the equitable jurisdiction to grant remuneration to the Trustee. Mrs Young contends that the following factors militate against the exercise of the Court's discretion to grant equitable relief to the Trustee in the form of remuneration:
the delay in bringing the Trustee's Application;
the fact that the Trustee did not pay to Mrs Young the balance of the proceeds of the MLC Policy, notwithstanding that he was advised to do so by his lawyer on 7 December 2006;
the fact that, as at 10 October 2007, the Trustee had retained substantial sums representing the proceeds of realisation of the Exempt Assets;
the fact that the Trustee sought, improperly, to leverage Mrs Young's approval to his claimed remuneration of $16,000 and legal costs of $3,903;
the fact that the legal costs were in fact $1,903 rather than $3,903;
the fact that those legal costs were not payable out of the Exempt Assets;
the failure of the Trustee to pay the undisputed amount into Court;
the fact that, without any order of the Court, the Trustee improperly used Exempt Assets to pay at least $30,964 to his solicitor for legal costs in relation to the Trustee's Application;
the fact that the total of amounts shown in the Trustee's timesheets for work allegedly carried out in respect of the non-divisible assets for the period 1 September 2006 to 30 April 2007 was only $3,567;
the fact that the Trustee's remuneration for the period 6 October 2006 to 30 September 2007, calculated in accordance with regulation 8.08, would be $1,969;
the fact that the Trustee commenced unnecessary and elaborate proceedings in which he claimed to have earned remuneration from 1 September 2009 to 15 December 2009 of $31,836;
the fact that in the proceeding before the primary judge, the Trustee conceded that there could not be a claim for remuneration for the period 1 May 2007 to 31 August 2009, yet now claims remuneration for that period;
the fact that the Trustee has been paid $4,000 in respect of his claim for payment of $16,000 for remuneration; and
the fact that, generally, a trustee is not entitled to remuneration and that the equitable jurisdiction to allow remuneration is exercised sparingly and in exceptional cases only.
71 In her notice of contention, Mrs Young asserted that the primary judge erred in a number of findings made in the course of her Honour's reasons for the orders of 8 November 2011. The errors asserted in the notice of contention are as follows:
finding that a cause of the delay in the proper administration of the estate of the Deceased was uncertainty as to the ability of Mrs Young to give a good discharge to the Trustee;
finding that the evidence of Hall Chadwick writing off the fees of the Trustee in relation to the estate of the Deceased was limited to the evidence of Mr Mark Findlay;
finding that the evidence in relation to the writing off of the fees of the Trustee was not sufficient to warrant an enquiry;
failing to take into consideration the Trustee's conduct towards the beneficiaries under the will of the Deceased when determining whether an enquiry under s 179 should be ordered;
not finding that the Trustee had an obligation to pay the proceeds of the realisation of the Exempt Assets into the Supreme Court of New South Wales and not finding that the Trustee's failure to do so constituted misconduct;
finding that the Trustee acted reasonably in applying to the Federal Court for a determination as to the nature of the Exempt Assets and that the Trustee acted reasonably in applying to the Federal Court for a determination as to his costs, expenses and remuneration in relation to the Exempt Assets;
finding that the Trustee, in all the circumstances, had any entitlement to costs, expenses and remuneration in relation to the Exempt Assets beyond the day when the Exempt Assets were realised by the Trustee; and
finding that it was not appropriate, in all the circumstances, to determine the Trustee's costs, expenses and remuneration in relation to the realisation of the Exempt Assets.
72 Mrs Young asserts that, if the Trustee's remuneration for the work carried out for the period from 6 October 2006 to 10 October 2007 were to be calculated in accordance with reg 8.08, the amount of the remuneration would be $3,810.77. However, Mrs Young says, the claim for that period included work that was not related to the Exempt Assets. She says that, if the Trustee's remuneration were to be calculated in accordance with reg 8.08, for the work allegedly carried out from 6 October 2006 to 10 October 2007 in relation to the Exempt Assets, the amount of remuneration would be $1,969.11. Mrs Young says that the Trustee should not have required her to pay to him any more than that amount when he wrote on 10 October 2007. She says that the fact that an excessive claim was made is a relevant consideration in deciding whether to exercise the Court's equitable jurisdiction to allow remuneration to the Trustee.
73 In relation to the work carried out from July 2009, Mrs Young contends that the Trustee must establish that the making of the Trustee's Application, and its prosecution, were necessary, in circumstances where the appropriate result could have been, and should have been, achieved by a much simpler and less expensive procedure. Mrs Young contends that, since the Trustee held the Exempt Assets as a trustee, he had an obligation to distribute the proceeds to the persons entitled to them. If he had any doubt about who was entitled, he could have, and should have, obtained advice from the Supreme Court of New South Wales under s 63 of the Trustee Act 1925 (NSW). If he was unable to reach agreement with Mrs Young as to his fees and legal costs, he should have retained that amount and paid the balance into the Supreme Court pursuant to s 95 of the Trustee Act, or into the Federal Court pursuant to a direction sought under s 134 of the Bankruptcy Act.
74 Mrs Young says that there was no need for the Trustee to involve himself in any work in relation to any of the Exempt Assets, other than making such an application to the Supreme Court or the Federal Court to pay the money into Court. She asserts that, during the hearing before the primary judge, the Trustee conceded that he should have remitted the funds to the Supreme Court, that there was inordinate delay by him and that he should simply have retained the sum of $19,903, and paid the rest to Mrs Young. She says that, if the Trustee had simply retained the sum of $19,903 and paid the balance to Mrs Young or alternatively into Court, no further work would have been necessary, unless there had been a challenge to his retention of the sum of $19,903.
75 Mrs Young contends that the Court should have particular regard to the Trustee's conduct from the time of his appointment on 6 October 2006 until the end of the hearing before the primary judge of the interim application. She places considerable emphasis on the letter of 10 October 2007, in which the Trustee claimed to be entitled to deduct legal fees of $3,903. The legal fees were apparently charged to the Trustee by Parry Carroll for advice as to whether the proceeds of the MLC Policy were divisible amongst the creditors of the Deceased. That is to say, the Trustee sought legal advice as to whether he could pay the proceeds of the MLC Policy to the creditors. Mrs Young says that, in those circumstances, those legal fees were not payable from the non-divisible property. In any event, she says, the fees were actually only $1,903.
76 In her written submissions to the primary judge of 7 December 2010, Mrs Young asserted that the Trustee was continuing to hold the Exempt Assets "to leverage [her] approval of his claimed remuneration". She asserted that, rather than paying the proceeds of the realisation of the Exempt Assets to her, or into Court, and having his remuneration claim determined by the Court, so as to bring his involvement to an end, the Trustee maintained his control over the Exempt Assets. The proceeds of the realisation of the Exempt Assets were only paid by the Trustee to Mrs Young following an order of the Court made on 14 December 2011 by another judge of the Court.
77 The obligations of the Trustee under the Bankruptcy Act extended only to the property of the Deceased that was divisible amongst his creditors. The non-divisible property of the Deceased did not come under the control of the Trustee, but should have been under the control of an executor or administrator, which would have been the case had a grant of probate or letters of administration been made. Since no grant had been made, the Trustee, in effect, undertook obligations that may have resided in the NSW Trustee. In those circumstances, the principles of the general law applied to his dealing with the Exempt Assets.
78 To the extent that the actions of the Trustee conferred a benefit on the beneficiaries of the Exempt Assets, he would, under the general law, be entitled to reimbursement of reasonable costs and expenses in doing so. In so far as some benefit was conferred on the beneficiaries, he may also be entitled to some reasonable remuneration for the work done by him in the care, preservation and realisation of the Exempt Assets and in the distribution of the proceeds of that realisation. Further, to the extent that the Trustee can demonstrate that work was done and costs were incurred in that regard, he may be entitled to a lien on the proceeds of that realisation for any expenses reasonably incurred and reasonable remuneration for the work done.
79 The Trustee also performed work and incurred expenses in relation to the property of the Chris Macryannis Family Trust. That was work that should have been undertaken by the legal personal representatives of the Deceased, had there been any. It is by no means clear when and how that work would have been performed if the Trustee had not undertaken it. To the extent that the beneficiaries of the Chris Macryannis Family Trust have derived a benefit from the work performed by and the expenses incurred by the Trustee, he would have the same rights in relation to that property.
80 It is clear from the Report that, by 15 June 2007, all of the Exempt Assets had been realised and the proceeds were held in an account in the name of the Trustee in the trust account of Hall Chadwick. The terms of the letter of 10 October 2007 make it clear that no further work was necessary after that time in relation to the care, preservation or realisation of the Exempt Assets, including the BWA Account. Accordingly, the Full Court indicated, in the course of the hearing of the appeal, that it was satisfied that no further work or expense was required in relation to the care, preservation or realisation of the Exempt Assets after 10 October 2007.
81 The Trustee is entitled to reimbursement of reasonable expenses reasonably incurred in the realisation of the Exempt Assets and is entitled to reasonable remuneration for the work done in connection with that realisation. The Bankruptcy Act would provide guidance as to the manner of determination of the remuneration that would be payable, or the reasonable costs and expenses that would be reimbursable, out of the proceeds of the realisation of the Exempt Assets. In relation to remuneration, the rates of remuneration contemplated under the Bankruptcy Act and the Regulations would be appropriate.
82 The further question is what, if any, further work was required in order to determine who was entitled to the proceeds of the realisation of the Exempt Assets. In the course of the hearing of the appeal, it became apparent that the submissions prepared on behalf of the parties did not adequately address the extent to which the remuneration and expenses and costs claimed by the Trustee could fairly be said to be related to the distribution of the Exempt Assets, as distinct from the care, preservation and realisation of the Exempt Assets. The Trustee was therefore directed to file further submissions setting out in detail, with appropriate references to the relevant parts of the appeal book, the basis upon which he contends that he is entitled to remuneration and indemnification in respect of work done and expenses incurred that are referrable to the distribution of the Exempt Assets.
83 The Court subsequently received further submissions from the Trustee and Mrs Young, as well as submissions in reply from the Trustee and submissions by way of rejoinder from Mrs Young. The further written submissions go well beyond what was contemplated by the direction. The direction was limited to work done and expenses incurred that are referrable to the distribution of the Exempt Assets. The only question was whether any further work was needed in order to determine to whom the proceeds of the realisation of the Exempt Assets should be distributed. The further submissions, however, deal in considerable detail with the work allegedly performed by the Trustee in identifying, receiving, maintaining and administering the Exempt Assets. The parties indicated that they were content for the Court to decide the appeal without any further oral submissions.
84 In his further written submissions, the Trustee identified the following types of conduct and tasks as conduct and tasks for which he claims he should be remunerated out of the Exempt Assets:
Identifying, contacting and dealing with the parties holding the Exempt Assets.
Receiving funds from the realisation of the Exempt Assets and banking the funds.
Administering the bank account holding those funds and investing the funds.
Administering Exempt Assets that were non-cash assets, being books and records of the business of the Deceased.
Accounting for any income from these funds and preparing tax returns of that income.
Dealing with Mrs Young and any other party claiming an interest in the Exempt Assets or in respect of the disbursement of any part of the Exempt Assets.
Preparing, making and pursuing the Trustee's Application, to the extent that it related to the investigation and determination of the status of any Exempt Assets, the entitlement to the Exempt Assets, and remuneration of the Trustee.
85 The Trustee claims that, for the period 6 October 2006 to 30 April 2007, the cost of the work involved in the care, preservation and realisation of the Exempt Assets was $6,948 and that the cost of that work from 1 May 2007 to 31 August 2009 was $8,648.25. It is unclear how those amounts are to be reconciled with the claim for $19,903 made in the letter of 10 October 2007. In addition, the Trustee claims that the cost of the work from 6 September 2009 to 9 December 2009 was $31,836. The majority of the time charged for that last period related to the preparation of the Trustee's Application. Thus, the total amount now claimed by the Trustee is $47,432 made up as follows:
6 October 2006 to 30 April 2007 $6,948
1 May 2007 to 31 August 2009 $8,648
1 September 2009 to 9 December 2009 $31,836
Total $47,432
86 The Trustee's timesheets, which recorded all the work allegedly done by him and his staff in relation to the non-divisible assets, amounted to $6,948 for the period 6 October 2006 to 30 April 2007. During the course of oral submissions to the primary judge, counsel for the Trustee said that he made no claim for remuneration for the period 1 May 2007 to 31 August 2009, since no relevant work had been carried out during that period. In circumstances where the Trustee claims the sum of $6,948 for the work involved in the realisation and getting in of the Exempt Assets up to 30 April 2007, it is difficult to see what justification there was for costs totalling $19,903 up to 10 October 2007. While some work may have been done after 30 April 2007 up to 10 October 2007, it is not possible from the material before the Court to conclude that any work was actually attributable to realising the Exempt Assets.
87 In the light of the Trustee's letter of 10 October 2007, it is puzzling why the Trustee thought that further steps needed to be taken in order to determine to whom the proceeds of the realisation of the Exempt Assets should be paid. Certainly, at that stage, no order had been made by the Supreme Court as was subsequently made on 1 November 2010. However, the Trustee, in his letter of 10 October 2007, indicated that he was prepared to pay the proceeds to Mrs Young, subject to deduction of the sum of $19,903 for his costs and remuneration. It is not clear whether, at that stage, the Trustee had seen the Copy Will that was the subject of the orders of the Supreme Court of 1 November 2010.
88 On the other hand, it would have been somewhat foolhardy for the Trustee to part with the proceeds of realisation of the Exempt Assets without some formal determination as to the entitlement of the recipient. There had at that stage been no grant of probate to Mrs Young. She was, at that time, not entitled to receive the proceeds. Indeed, the primary judge found that the Trustee was justified in commencing a proceeding to determine the persons entitled to the proceeds of the realisation of the Exempt Assets. Further, the considerations to which Mrs Young adverts are not such as to deprive the trustee of any right to remuneration or reimbursement of expenses to which he would otherwise be entitled.
89 In the circumstances, the Trustee is entitled to be paid, out of the proceeds of the realisation of the Exempt Assets, his reasonable costs and expenses in relation to the Trustee's Application, in so far as it claimed determination of the question as to the persons entitled to distribution of the proceeds, but not otherwise. He is also entitled to reasonable remuneration for the work done by him in that regard. The rates of remuneration contemplated under the Bankruptcy Act and the Regulations would be appropriate.