Mutton (liquidator) v De Matteis, in the matter of De Matteis Pty Ltd

BACKGROUND 3 This proceeding has a somewhat lengthy background. While not all of the background matters to the proceeding are directly relevant to the issues that now fall for determination, it is nevertheless useful to summarise some key aspects in order to give context to the present application. 4 On 7 October 2022, Car Stackers filed a creditor's petition by which it applied for a sequestration order against the estate of Mr De Matteis. The petition stated that Mr De Matteis owed Car Stackers the amount of $36,351.72, being a judgment debt of $41,351.72 referred to in a bankruptcy notice served on Mr De Matteis on 9 June 2022, less payment of $5,000 made by Mr De Matteis towards that debt on 31 August 2022. The petition stated that Mr De Matteis had committed an act of bankruptcy by failing to comply with the bankruptcy notice on or before 30 June 2022, or to satisfy the Court that he had a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment was obtained (see s 40(1)(g) of the Bankruptcy Act). 5 The debt to which the bankruptcy notice related arose from a default judgment of the Magistrates' Court of Victoria dated 29 April 2022 in proceedings brought by Car Stackers against Mr De Matteis to enforce a personal guarantee contained in a 'Deed of Agreement & Guarantee' dated 12 December 2021 entered into between Car Stackers, LEDM and Mr De Matteis (the Deed). LEDM is a construction company of which Mr De Matteis was the sole director and shareholder. Car Stackers had been contracted by LEDM to supply and install a parking system in an apartment development project. As at the date on which the Deed was entered into, an outstanding balance of $47,200 remained owing by LEDM under its contract with Car Stackers. Under the Deed, LEDM agreed to pay an initial instalment of $8,200, and the balance of $39,000 by the earlier of the date on which a certificate of occupancy was issued for the building and 31 January 2022. Car Stackers agreed to carry out certain additional works on the condition that LEDM paid the outstanding moneys and that Mr De Matteis provided a guarantee and indemnity as set out in the Deed. 6 On 21 February 2022, LEDM was placed into voluntary liquidation and Mr Mutton was appointed as liquidator. Following several letters of demand, Car Stackers filed a complaint against Mr De Matteis in the Magistrates' Court of Victoria by which it sought to recover the amount of the second instalment plus interest pursuant to the guarantee. Mr De Matteis did not file a notice of defence, and Car Stackers sought and obtained default judgment for an amount of $39,000 plus costs fixed at $1796.10 and interest of $555.62. This comprised the debt of $41,351.72 that was the subject of the bankruptcy notice. 7 Mr De Matteis initially opposed the creditor's petition on the grounds that he (or LEDM) had a claim for liquidated damages against Car Stackers in respect of alleged delay costs which offset the amount claimed in the bankruptcy notice, and that the bankruptcy notice was an "abuse of process" in that he had been "forced to sign" the Deed "under corporate coercion" in order to ensure completion of the project to enable the release of funds from financiers. Each of those grounds of opposition was contested by Car Stackers. 8 On 23 January 2023, A.S. James Pty Ltd filed a notice of appearance as a supporting creditor in respect of a claimed debt of $14,890.17. 9 The petition was heard before Registrar Curnow on 23 February 2023. Mr De Matteis appeared unrepresented and opposed the making of a sequestration order. Nevertheless, in the course of his oral submissions, Mr De Matteis did not dispute the claimed debt but said that he had been "trying to come to an arrangement" or a "resolution" and "to organise payment plans", and that he did not have any option other than to sign the Deed in order to complete the project. At the conclusion of the hearing, the Registrar ordered that the estate of Mr De Matteis be sequestrated and that Car Stackers' costs be paid from the bankrupt estate. The Registrar noted that the date of commission of the act of bankruptcy was 30 June 2022, and that a consent to act as trustee signed by Stephen John Michell had been filed under s 156A of the Bankruptcy Act. 10 On 16 March 2023, Mr De Matteis filed an interim application for review of the Registrar's decision, in which he sought the following orders: 1. The Orders made by Registrar Curnow on 23 February 2023 in VID582/2022 be set aside. 2. The Creditor's Petition filed 7 October 2022 in VID582/2022 be dismissed. 3. No order as to costs. 11 The application was accompanied by an affidavit of Mr De Matteis sworn on 16 March 2023, which summarised Mr De Matteis' assets, liabilities, income and debts, and stated his belief that he was solvent. 12 Mr Mutton filed an appearance as a supporting creditor on 6 April 2023. In his affidavit affirmed on 1 May 2023, Mr Mutton deposed that he was a creditor of Mr De Matteis' bankrupt estate in the amount of at least $851,736.31, including a debt of $31,791.47 owed by Mr De Matteis to LEDM and a claim against Mr De Matteis of at least $819,944.84 for failing to prevent LEDM from insolvent trading contrary to s 588G of the Corporations Act 2001 (Cth). Mr Mutton also drew attention to claimed differences in Mr De Matteis' statements as to his income, expenses, assets and liabilities between his affidavit sworn on 16 March 2023 and an earlier statutory declaration submitted to Mr Mutton on 6 December 2022. Mr De Matteis filed an affidavit sworn on 19 May 2023 in which he provided his response to these claimed differences. 13 On 18 May 2023 and 25 June 2023 respectively, a settlement was reached in relation to the debts owed by Mr De Matteis to A.S. James Pty Ltd and Car Stackers. A.S. James Pty Ltd was removed as a party to the proceeding by consent order made by Murphy J on 9 June 2023. In respect of the debt owed to Car Stackers, Mr De Matteis deposed in his affidavit sworn on 28 June 2022 that another company, JAW Piling Pty Ltd, paid Car Stackers "the sum of $36,351.72 in full satisfaction of the judgment debt subject of this proceeding". In this affidavit, Mr De Matteis also addressed his current employment and future earnings, his current debts, and his position in relation to the claims made by Mr Mutton. Mr De Matteis stated that, at the time of his affidavit, "the debts owing to creditors who were demanding payment have been satisfied" and all of his other "undisputed" debts were under payment arrangements with the relevant creditors. Accordingly, in written submissions dated 28 June 2023, Mr De Matteis submitted that there was sufficient proof to demonstrate that he could repay his debts when required, and that he was "sufficiently solvent", such that the Court ought to exercise its discretion to refuse the application for the sequestration order. 14 Mr De Matteis' affidavit of 28 June 2023 also addressed the subject of "trustee's remuneration". By email dated 1 March 2023, Mr De Matteis' solicitor had put the Trustee on notice that an application for review of the sequestration order was being made. At that time, however, the Official Receiver was acting as trustee of Mr De Matteis' bankrupt estate due to a failure to file the consent to act as trustee. After the Trustee was appointed, Mr De Matteis' solicitor wrote to his firm on 16 March 2023 and put the Trustee on notice of the application for review of the sequestration order. A copy of the application and supporting affidavit were emailed to the Trustee on the following day. Subsequent correspondence was exchanged between Mr De Matteis' solicitor and the Trustee in which the former sought and obtained details of the current remuneration and disbursements incurred by the Trustee to 30 May 2023 (being remuneration of $19,274.30 and disbursements of $19.90 both exclusive of GST). 15 On 30 June 2023, Murphy J made consent orders substituting Mr Mutton as the applicant creditor in place of Car Stackers and ordered that Car Stackers' costs in the proceeding as a petitioning creditor be fixed in the sum of $20,000 and stayed until 15 October 2023. Although it was not expressly stated in the consent orders, it is clear that Mr De Matteis was to be liable for payment of Car Stackers' costs, and this is consistent with Mr De Matteis' evidence in his affidavit of 13 October 2023 that he has a current debt of $20,000 owing to Car Stackers for its costs in this proceeding, in respect of which he is paying $5,000 per month. The consent orders also fixed a timetable for the filing of evidence and submissions. 16 Following several adjournments at the request of the parties, the matter was ultimately listed for hearing on 8 November 2023. 17 Several weeks prior to the hearing, the parties reached an agreement to resolve the proceeding and ultimately provided to the Court a minute of proposed consent orders to dismiss the proceeding arising from the creditor's petition and to set aside the sequestration order. The Trustee did not consent to the proposed orders and advised that he intended to raise matters concerning the payment of his remuneration, costs and expenses of administering Mr De Matteis' bankrupt estate. In such circumstances, the matter remained listed for hearing.

THE PARTIES' POSITIONS 18 Mr De Matteis and the Trustee both filed written submissions and affidavit evidence in support of their positions. 19 In support of the proposed consent orders to dismiss the petition and set aside the sequestration order, Mr De Matteis submitted that there was no longer any debt being relied on in the petition and that the requirements under s 52 of the Bankruptcy Act had therefore not been met. 20 In relation to the Trustee's remuneration, Mr De Matteis submitted that he should not be burdened with the costs and expenses of the bankruptcy let alone the remuneration of the Trustee, lest this diminish the necessary protection of the de novo hearing, referring to Robson v Body Corporate for Sanderling at Kings Beach CTS 2942 (2021) 286 FCR 494 at [26] (Allsop CJ). Mr De Matteis noted that the Trustee had been put on notice of the application for review of the sequestration order and was required to act with caution when incurring expenses in the administration of the bankrupt estate. It was submitted that there was a serious question as to whether the remuneration claimed by the Trustee was "proportional and carried out in good faith", having regard to the fact that the Trustee claimed to have incurred almost 80% of the estimated remuneration that was anticipated for completion of the administration of the estate. Mr De Matteis submitted that, save for the statutory obligation of providing a report to creditors within 3 months of the date of the bankruptcy, the Trustee had taken it upon himself to continue exercising his duties without any caution, and that he was or ought to have been aware that he might not be in a position to recover his remuneration in full. 21 The Trustee sought an order for the payment (by Mr De Matteis) of his incurred reasonable remuneration in the amount of $33,565 plus GST and disbursements of $7,600 plus GST. The Trustee did not formally oppose an order setting aside the sequestration order, provided that this was made conditional on the payment by Mr De Matteis of the Trustee's reasonable remuneration and disbursements. 22 The Trustee accepted that it was "uncontentious" that the parties sought consent orders dismissing the proceeding with no order as to costs on the basis that the debts the subject of the creditor's petition were no longer owing or have otherwise been met. Nevertheless, the Trustee submitted that the Court was "required, on a de novo review, to determine whether or not on the state of the evidence a sequestration order ought to be made, having regard to other persons who might have a proper interest in the consequences of a rehearing", including the Trustee and other creditors. The Trustee raised the question of whether Mr De Matteis was personally solvent and able to pay debts owed to other creditors. Further, the Trustee submitted that Mr De Matteis had failed to provide any satisfactory proposal to the Trustee for payment of his reasonable remuneration and disbursements necessarily incurred in the administration of the bankrupt estate. In relation to his position that any order to set aside the sequestration order should be made conditional on the payment of the Trustee's remuneration, costs and expenses, the Trustee submitted that: ...an order for remuneration which is not contingent on the setting aside of the Sequestration Order leaves the Trustee exposed to incurring further legal costs in the pursuit of enforcing the remuneration order, utilizes further Court time unnecessarily and is also undesirable in view of the Respondent's financial position. 23 Affidavits were filed on behalf of the Trustee which set out the progress of the administration and provided details of the remuneration, costs and expenses claimed by the Trustee, including correspondence between the Trustee and Mr De Matteis in relation to payment of his claimed remuneration and disbursements. Among other things, the affidavits referred to the Trustee's report to creditors dated 27 April 2023, together with an initial remuneration notice and remuneration request approval report, in which the Trustee had sought approval of his remuneration to date and estimated remuneration until the finalisation of the administration of the bankrupt's estate. As at the date of that report, Mr De Matteis had not filed a statement of affairs as required by s 54 of the Bankruptcy Act. The creditors by resolution approved remuneration in the amount of $31,911.50 plus disbursements of $3,000. 24 Mr Mutton sought to be excused from appearing at the hearing on 8 November 2023 on the basis that his position was reflected in the proposed consent orders (dismissing the petition and setting aside the sequestration order). Mr Mutton adopted no position in respect of the Trustee's remuneration, costs and expenses, noting that neither Mr De Matteis nor the Trustee was submitting that he should be responsible for the payment of such amounts. After it became apparent during the hearing that the issues concerning the Trustee's remuneration, costs and expenses might affect Mr Mutton, in that both Mr De Matteis and the Trustee had raised the possibility that Mr Mutton could be ordered to pay some proportion of those amounts, I made orders allowing Mr Mutton to file written submissions and affidavit evidence on those issues after having been provided with a copy of the transcript of the hearing, and to indicate whether he wished to have an opportunity to make oral submissions. 25 In written submissions filed on 27 November 2023, Mr Mutton submitted that he should not be responsible for any of the Trustee's remuneration, costs or expenses. Mr Mutton submitted that if anyone were to be held responsible for those costs it should be Mr De Matteis. While acknowledging that ordinarily a respondent debtor should not be ordered to pay the costs and expenses of the bankruptcy or the remuneration of the trustee (Robson at [25]-[26] per Allsop CJ), Mr Mutton submitted that this was not an ordinary case in that the Court was not being asked to correct any error arising from the original creditor's petition or from Mr Mutton's subsequent involvement as the substituted petitioning creditor. Rather, Mr Mutton contended that his agreement to the dismissal of the petition was in response to new evidence that was filed by Mr De Matteis on 13 October 2023, several weeks prior to the final hearing and 6 months after Mr Mutton had filed his affidavit material in the proceeding (referred to in paragraph 12 above). 26 In support of these submissions, Mr Mutton filed an affidavit affirmed on 27 November 2023. In this affidavit, Mr Mutton deposed that, following his appointment as liquidator of LEDM, he had identified the claims referred to in paragraph 12 above. Mr Mutton further deposed that on or around 6 December 2022 he reached an agreement with Mr De Matteis pursuant to which he had agreed to forego pursuit of these claims on behalf of LEDM in return for a payment of $8,000, in circumstances where Mr Mutton had formed the view that it was not commercial for him to enforce the claims against Mr De Matteis who had declared a net negative asset position. When Mr De Matteis did not make payment in accordance with the agreement, and after the sequestration order was made on 23 February 2023, Mr Mutton lodged a proof of debt with the Trustee and filed a notice of appearance in these proceedings as a supporting creditor in respect of the claims. 27 Although the parties were continuing to engage in settlement discussions, Mr De Matteis' affidavit of 28 June 2023 asserted that the alleged insolvent trading claim was "capable of being defended", and that he also had a set-off claim against LEDM in respect of unpaid superannuation and other debts amounting to approximately $40,000. At that time, as Mr Mutton did not believe that Mr De Matteis' purported defence to the claims had any proper basis, he agreed (with the consent of Mr De Matteis) to be substituted as petitioning creditor. 28 On 11 September 2023, Mr Mutton filed an affidavit affirmed on that date in which he disputed Mr De Matteis' set-off claims and maintained the director's loan and insolvent trading claims against Mr De Matteis in respect of which he was seeking to prove in the bankruptcy. In an affidavit sworn on 13 October 2023 and filed on the same date, Mr De Matteis responded to Mr Mutton's affidavit of 11 September 2023, including to address in detail the claim that LEDM had traded while insolvent. 29 Returning to Mr Mutton's affidavit of 27 November 2023, Mr Mutton explains that, in light of Mr De Matteis' affidavit of 13 October 2023, he "conceded the defences were at least arguable" and "made the decision that it was appropriate at that point in time to withdraw as the Petitioning Creditor in this proceeding". Accordingly, Mr Mutton offered to discontinue the creditor's petition with no order as to costs "on a purely commercial basis, in good faith and in an effort to finalise the matter". 30 Mr Mutton deposes in his 27 November 2023 affidavit that he would not have sought to be substituted as the petitioning creditor if Mr De Matteis had adduced the evidence in his 13 October affidavit at an earlier point in time and that, as a consequence, the Trustee would not have incurred additional fees or expenses beyond that date. Mr Mutton states that he has a duty as a liquidator to the creditors of LEDM to realise the assets of the company, including any claims against directors, and that his actions in this proceeding have been motivated by that duty. Further, Mr Mutton notes that he is not funded by creditors for his legal fees or for his work in progress stemming from this litigation. 31 In such circumstances, and in the light of the procedural history recounted above, Mr Mutton submits that it would be unduly harsh for him to be ordered to pay any of the Trustee's remuneration, costs or expenses. Accordingly, Mr Mutton seeks orders that Mr De Matteis be held responsible for the Trustee's fees and, further, pay his costs of "being brought back into this proceeding after having already reached a settlement agreement with [Mr De Matteis] on 18 October 2023". 32 On 4 December 2023, Mr De Matteis filed written submissions in reply. Mr De Matteis submits that he has at all times maintained that he was solvent and that this was a sufficient reason to dismiss the petition, and that he acted properly and responded to the material filed by Mr Mutton in a timely manner. Mr De Matteis submits that Mr Mutton, who is a professional accountant with expertise in the area of insolvency, ought to have been aware when he was substituted as petitioning creditor of the risk that he may be wholly or partly liable for the Trustee's remuneration if he were unable to maintain his claim. Further, having regard to s 51 of the Bankruptcy Act, there were no grounds on which Mr De Matteis should be ordered to pay any of Mr Mutton's costs of the proceeding (at least after the date on which the settlement was reached between the parties). 33 No party sought to make further oral submissions to the Court.

CONSIDERATION 34 The issues for determination are: (a) firstly, what orders should be made to determine the creditor's petition, and in particular should a consequential order be made setting aside the sequestration order made by the Registrar; (b) secondly, should consequential orders be made for the payment of the Trustee's remuneration, costs and expenses and, if so, who should be responsible for those amounts and how should they be fixed.

Determination of the creditor's petition 35 An application under s 35A(5) and (6) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) for review of a sequestration order made by a registrar proceeds as a hearing de novo of the creditor's petition on the evidence then available: Bechara v Bates (2021) 286 FCR 166 at [17], [27] (Allsop CJ, Markovic and Colvin JJ); Totev v Sfar (2008) 167 FCR 193 at [13]-[15] (Emmett J). The application for review is a demand that the claim by the petitioning creditor for relief be heard afresh by a judge. A sequestration order made by a registrar is inherently subject to the prospect of such a review on an application being made by the debtor: Bechara at [3], [6], [66]; Robson at [62] (Colvin J). The hearing on the review is prosecuted by the creditor, who bears the onus to prosecute its petition. The Court must be satisfied of the matters on which proof is required by s 52(1), and must exercise for itself the discretions under ss 52(1) and (2) of the Bankruptcy Act. In particular, there must be affidavit evidence to establish that the relevant debt on which the creditor relies is still owing at the time of the hearing: Totev at [15]; Bechara at [34], [62]. 36 In the present case, it was common ground among the parties and the Trustee that an order should be made to dismiss the petition. The original petitioning creditor, Car Stackers, has been removed as a party and the substituted petitioning creditor, Mr Mutton, has settled with Mr De Matteis and no longer presses for any relief on the petition. No current affidavits have been filed by Mr Mutton in accordance with r 4.06 of the Federal Court (Bankruptcy) Rules 2016 (Cth) to show that the debts on which he relies are still owing. The Court cannot be satisfied that the matters referred to in s 52(1) of the Bankruptcy Act have been proved, irrespective of any question of whether Mr De Matteis was or is solvent. Accordingly, the petition must be dismissed. 37 Section 35A(6) of the FCA Act confers on the Court a broad power to make consequential orders dealing with the rights of the parties in the event that a petition is dismissed on review by the Court. It was accepted by a majority of the Court in Robson that this power extends to an order setting aside a sequestration order made by a registrar - that is, "as a necessary consequential order to perfect the overtaking or superseding of the registrar's order by the order made on review by the judge as the Court", so as to ensure "the debtor is taken not to have, or henceforth ever to have had, the status of a bankrupt": Robson at [29] (Allsop CJ). Indeed, Allsop CJ (with whom Markovic and Derrington JJ agreed) considered that setting aside the sequestration order was "the appropriate consequential order", on the basis that the existence on the record of the sequestration order would be "fundamentally inconsistent" with the single exercise of judicial power by the Court in respect of the creditor's petition: Robson at [3]-[4]. As Allsop CJ stated in Robson (at [24]): The proper analysis of the superseding or overtaking of the registrar's order by the order of the judge cannot simply mark the end of the existence of a temporary bankruptcy in which the debtor was, for a limited time, a bankrupt. The creditor's petition on which the registrar acted has been dismissed. There can be but one outcome of the one overall exercise of judicial power by the Court. If the Constitutional imperative of a rehearing by a judge of the creditor's petition is to have meaning, the consequence of the dismissal of the petition must include the eradication of the status of the debtor as a bankrupt. For any other position to obtain would permit the delegated exercise of power to have not only temporary, but lasting, if limited, effect notwithstanding that the same power has now been exercised in a contrary way. The order would remain on the Court record, potentially causing confusion. The procedure is sui generis; it is framed and given content by the Constitutional imperative. The appropriate way to vindicate the protection of the debtor is to set aside the sequestration order as a consequential order to ensure that the Court record has one result of the exercise of judicial power in respect of the one petition, not two diametrically opposed orders of the Court potentially affecting the status of the debtor. This ensures the elimination of the status, and the record of the status, of the debtor as a bankrupt. 38 Even Colvin J (with whom Anastassiou J agreed), in adopting the minority view that there was no statutory authority to make a consequential order to set aside an order of the registrar that was validly and regularly made (see Robson at [248]-[253]), nevertheless did not contemplate the continuation of the bankruptcy or the ongoing effectiveness of the sequestration order made by the registrar following the dismissal of the creditor's petition. Rather, it was accepted that the Court's order to dismiss the petition overtakes or supersedes the sequestration order and deprives it of any effect. Thus, Colvin J accepted (at [254]) that the Court has power "to make orders that reverse the effect of the sequestration order and thereby give effect to the decision on review that the creditor's petition is dismissed (with the consequence that there is no longer a sequestration order)" (emphasis added). Further, Colvin J made it clear (at [263]-[264]) that, notwithstanding his view that there was no power to set aside the sequestration order, "the bankruptcy itself is brought to an end by the dismissal of the creditor's petition on review" and "it is a bankruptcy that must cease to be administered". Accordingly, Colvin and Anastassiou JJ differed from the majority's view only as to "the historical fact of the registrar's order (and its past legal effect as a valid exercise of judicial power up until the order on review)", and accepted that the sequestration order made by the registrar had been overtaken and that "going forward there [was] no longer any legal foundation for [the debtor] being considered to have the status of a former bankrupt": Robson at [290], see also at [257], [261]. 39 In the present case, Mr Mutton and Mr De Matteis have proposed consent orders under which the petition is dismissed, and the sequestration order is set aside. The Trustee does not oppose the making of an order to set aside the sequestration order, but only if such an order is made conditional on the payment by Mr De Matteis of the Trustee's remuneration and disbursements. The Trustee submits that there is a serious concern that, in the light of the financial standing and apparent liabilities of Mr De Matteis, the Trustee would not recover payment of his remuneration and disbursements unless this were made a condition of the setting aside of the sequestration order. 40 While there is clear authority that this Court can make consequential orders under s 35A(6) of the FCA Act for the payment of the Trustee's remuneration, costs and expenses, it would be problematic to make such payment a condition of an order setting aside the sequestration order taking effect, or otherwise to defer setting aside the sequestration order until such time as the Trustee's remuneration, costs and expenses have been met. As discussed above, the dismissal of the creditor's petition brings an immediate end to the bankruptcy, and to the status of the former bankrupt. The dismissal of the petition on a de novo hearing reverses or undoes the exercise by the registrar of delegated judicial power. The Trustee nevertheless submitted that an order setting aside the sequestration order conditional upon payment of the Trustee's remuneration is within the Court's discretionary powers to make consequential or ancillary orders that are "just, necessary or convenient", referring to Robson at [33] (Allsop CJ). In that paragraph, Allsop CJ was addressing the powers of the Court under s 28 of the FCA Act on an appeal against the making of a sequestration order, as opposed to a de novo rehearing on review of a sequestration order made by a registrar. While Allsop CJ drew an analogy with the amplitude of the power conferred by s 35A(6) of the FCA Act to make consequential orders about the trustee's position (see at [35]), there was no direct consideration of the question raised in the present case about imposing conditions on a consequential order setting aside a sequestration order. The Trustee was unable to identify any examples of analogous conditional orders having been made in previous cases. 41 Even assuming that the Court has power to subject an order setting aside the sequestration order to a condition requiring the payment of a trustee's remuneration, costs and expenses, I do not consider that it would be appropriate to make such an order in the circumstances of the present case. Any consequential order made in favour of the Trustee for recovery of his remuneration, costs and expenses will give rise to a debt that may be enforced in the usual manner against the party who is liable. As Allsop CJ noted in Robson at [35], the nature of the jurisdiction exercised in the present case is concerned with insolvency and not debt collection. Whatever might be the true financial position of Mr De Matteis, noting that this is not a matter on which the Court has been required to adjudicate, this is not a proper basis on which the sequestration order can be used as security or leverage for the payment of debts owing to the Trustee. In so far as this would implicitly entail ongoing recognition to the effectiveness of the sequestration order or the continuation of the bankruptcy in the event that the condition requiring payment of the Trustee's remuneration were not to be fulfilled, such an outcome would be inconsistent with the principles discussed in Robson as outlined above. 42 For completeness, I note that neither of the parties nor the Trustee sought an order for annulment of the bankruptcy. As the Full Court held in Robson, where a creditor's petition is dismissed on review under s 35A(6), there is no bankruptcy to be annulled: Robson at [21] (Allsop CJ) and [262] (Colvin J). Accordingly, any question regarding the trustee's remuneration, costs and expenses in the administration of the estate of the bankrupt pursuant to the sequestration order made by the registrar is to be addressed in the exercise of the Court's power to make consequential orders, rather than as a statutory consequence of the discharge or annulment of the bankruptcy. 43 Accordingly, it is appropriate to make orders to dismiss the petition and to set aside the sequestration order made by the Registrar on 23 February 2023.

Trustee's remuneration, costs and expenses 44 As discussed above, the Trustee seeks an order for the payment of his remuneration in an amount of $33,565 plus GST and disbursements of $7,600 plus GST. The Trustee submits that these amounts are reasonable, having been necessarily incurred by him in the administration of the bankrupt estate of Mr De Matteis from the date of the sequestration order to the present date. 45 It is clear from Robson that the Court has power under s 35A(6) of the FCA Act to make consequential orders dealing with the remuneration, costs and expenses of the trustee in circumstances where a petition is dismissed and the sequestration order is set aside on review. In this way, the trustee has a proper interest in the consequences of the rehearing: Robson at [23] (Allsop CJ), [143]-[144] (Colvin J). Such consequential orders may proceed on the basis that there was a valid order in place under which the trustee acted: Robson at [24] (Allsop CJ). The applicable principles and relevant considerations were summarised by the Full Court in Porter v Ghasemi (2021) 286 FCR 556 at [48]-[49] (Allsop CJ, Markovic, Derrington, Colvin and Anastassiou JJ): For reasons given in Robson, the Court has a broad power under s 104(3) [of the Federal Circuit Court of Australia Act 1999 (Cth)] to make consequential orders which include allowing a trustee in the position of the Trustee to recover reasonable remuneration (as subsequently approved by the Court) and costs and expenses. The following matters of general approach should be seen as relevant to help guide the determination of the terms of the appropriate order in any particular case: (1) there should be appropriate recognition that the trustee has acted to give effect to the sequestration order, being an order that was not sought by the trustee; (2) there should also be appropriate recognition that the trustee must perform the obligations imposed by the Bankruptcy Act once appointed; (3) in the absence of special considerations pertaining to the conduct of the debtor or the trustee in circumstances where the creditor's petition is dismissed on review, the petitioning creditor, as the unsuccessful moving party should generally be responsible for the remuneration, costs and expenses reasonably incurred by the trustee in the conduct of the administration; (4) when informed of an application for review, the trustee should exercise caution in undertaking further work and incurring costs and expenses where the validity of the sequestration order is in issue, and work undertaken and in the usual case costs and expenses incurred contrary to such caution should be borne by the trustee; (5) the caution to be exercised by the trustee may include seeking an extension of time to comply with statutory obligations such as providing a report to creditors; (6) where the debtor is the party who may be seen to be the party primarily responsible (at least in a practical sense) for the making of the sequestration order before the registrar (such as where the debtor failed to appear before the registrar who made the order despite adequate notice of the hearing or succeeded on review on grounds that had not been advanced before the registrar) it may be that the debtor ought be responsible for the reasonable remuneration, costs and expenses of the trustee; (7) where particular work done by the trustee or the costs and expenses incurred were requested by and were for the benefit of the debtor then the remuneration, costs and expenses for that particular work should be borne by the debtor; (8) general work done and costs or expenses incurred in the administration such as to take possession of property or to collect rents or to assume the conduct of a business are not for the benefit of the debtor in the relevant sense because they are consequences of the sequestration order; and (9) work done and costs or expenses incurred in dealing with the debtor in the course of the administration (including to answer questions raised by the debtor, correspond with the debtor as to the conduct of the administration and to do things at the debtor's request) will generally not have been for the benefit of the debtor because they also are caused by the existence of the sequestration order and, in the absence of unreasonable behaviour by the debtor in dealing with the trustee those costs should not be borne by the debtor. The above list of considerations is not intended to be either rigid or exhaustive or to detract from the broad nature of the power to make consequential orders under s 104(3) as explained in Robson. Rather, it is intended to explain why, in many instances the appropriate consequential order will be to the effect that the creditor is responsible for the reasonable remuneration of the trustee and for the costs and expenses of the administration and that usually there will need to be particular reasons why the debtor as the party who successfully opposes the making of a sequestration order on review should have to bear some or all of the costs of the administration or why some or all of the costs should fall on the trustee. 46 Allsop CJ recognised in Robson at [26] that a "a debtor in respect of whom a creditor's petition has been dismissed by a judge on a de novo rehearing should not be burdened in status, nor (unless other considerations as to the conduct of the debtor independently justify it) with financial liability, by the earlier making of the sequestration order." Accordingly, in many cases, it would "substantially diminish the necessary protection of the de novo hearing" if the debtor were to be burdened with a share of the costs and expenses of the bankruptcy, including the remuneration of the trustee: Robson at [26] (Allsop CJ). Nevertheless, while the burden should not fall on the debtor merely because the sequestration order has been set aside, Allsop CJ accepted that "[t]here may in any given case be circumstances that make it just for the debtor to pay some money for what, or in respect of what, has occurred": Robson at [30]. For example, the debtor may have contributed to the making of the sequestration order by failing to deny the act of bankruptcy or to bring forward evidence of solvency. 47 The circumstances surrounding the making of the sequestration order, including what happened at the hearing before the registrar, may therefore be relevant to the consequential orders that should be made following the dismissal of the petition on review: Robson at [30] (Allsop CJ). In addressing submissions as to the basis on which the debtor should be made liable for some of the costs of the trustee, Colvin J also noted in Robson that "[u]sually there will need to be some affirmative basis upon which the debtor may be said to have been substantially at fault for the events that have happened before it will be appropriate to make a consequential order that attributed some or all liability for the costs of the administration to the debtor": at [278]. But Colvin J distinguished, for example, a case in which "a solvent debtor did nothing until the review application". 48 It can be accepted that a trustee is required to exercise caution in relation to expenses incurred in the administration of the bankrupt estate while a sequestration order made by a registrar is subject to an application for review by the Court, and the "status of the bankruptcy remains uncertain": Kyriackou v Shield Mercantile Pty Ltd (No.2) [2004] FCA 1338 at [42] (Weinberg J). The trustee might be left with "no obvious and immediate recourse" against either the debtor or the petitioning creditor for his remuneration, costs and expenses, and may be left "out of pocket" if the petition is ultimately dismissed and the sequestration order is set aside. That is one reason why an application for review should be heard and determined promptly in order to minimize any such exposure on the part of the trustee: see Bechara at [89], [176]. I leave to one side whether the trustee might have other remedies under the general law to recover the costs and expenses of the administration of the estate, in the absence of any court order for the payment of the trustee's remuneration, costs and expenses: see, e.g., Kyriackou at [16], [34], [43] (Weinberg J); Robson at [178]-[179] (Colvin J); Flint v Busuttil (2013) 216 FCR 375 at [49] (Allsop CJ, Katzmann and Perry JJ); Boensch v Somerville Legal (2021) 286 FCR 293 at [166] (Katzmann, Markovic and Abraham JJ). 49 Nevertheless, the trustee has statutory obligations to continue with administration under the sequestration order unless and until the petition is dismissed: see, e.g., Robson at [282] (Colvin J). The trustee may be entitled to seek a consequential order for payment of his remuneration, costs and expenses in so far as he has acted reasonably and as required by law. In some cases, it may be appropriate for such costs to be borne by the unsuccessful petitioning creditor, particularly where the debtor has consistently challenged the validity of the bankruptcy notice or otherwise denied that the debt is owing, or has consistently maintained that he or she is able to pay his or her debts as they fall due. In other cases, the conduct of the debtor at the hearing before the registrar and subsequently may have contributed to the making of the sequestration order and its maintenance until the ultimate determination of the application for review, making it just that the debtor should be ordered to pay the trustee's remuneration, costs and expenses to that date. 50 Thus, Weinberg J observed in Kyriakou at [42] that, in a case such as The Austral Brick Company Pty Ltd v Daskalovski [1998] FCA 782, which involved a resolution of a dispute between a debtor and a creditor, "[t]here was something to be said for making the putative bankrupt's estate meet the costs needlessly thrown away [in the administration of the estate], particularly given the fact that there had been a short administration". In contrast, in circumstances where "the putative bankrupt should never have been the subject of a sequestration order in the first place" (particularly where the sequestration order was based on a bankruptcy notice that had always been challenged as invalid), "[t]he argument for fixing the estate with the costs and expenses of the administration" was seen by Weinberg J to be "less cogent". 51 In the present case, the Trustee was appointed on 16 March 2023 pursuant to s 181A of the Bankruptcy Act. From the outset, the Trustee was on notice that Mr De Matteis had applied for review of the sequestration order, and was seeking orders that the petition be dismissed and the sequestration order be set aside. Nevertheless, counsel for Mr De Matteis conceded that the Trustee was required by statute to undertake certain steps in the administration of the bankrupt estate, including preparing and sending a report to creditors. 52 In his report to creditors dated 27 April 2023, the Trustee sought approval for his remuneration and disbursements, comprising an amount of $6,601.50 for the period from 16 March 2023 to 18 April 2023, and estimated future remuneration of $25,310 for the period 19 April 2023 until the finalisation of the bankruptcy, in addition to internal disbursements of $3,000 (all exclusive of GST). These amounts were subsequently approved by the creditors. The Trustee noted that Mr De Matteis had failed to comply with his statutory obligation to lodge a "Bankruptcy Form" with the Official Receiver. One of the matters listed as potentially affecting the future progress and cost of the bankruptcy included the Trustee having to "monitor proceedings initiated by the bankrupt to set aside the Sequestration Order". 53 On 27 July 2023, the Trustee sent a letter to the Court advising that he had currently unpaid remuneration of $22,654.50 and disbursements of $493.71 (each exclusive of GST). The letter stated that the Trustee's administration costs had been impacted by: 1. The bankrupt's failure to file a Bankruptcy Form with the Official Receiver; 2. Not being provided with affidavits or orders as they are filed; 3. Completing a Report to Creditors in the absence of the Bankruptcy Form; and 4. Dealing with secured and unsecured creditors of the bankrupt estate. 54 In an affidavit of Warren White of PCI Partners (the Trustee's firm) sworn 3 November 2023, the contents of which are adopted by the Trustee in an affidavit of the same date, Mr White deposes to a list of tasks that have been attended to by the Trustee or his staff at his direction in the administration of the bankrupt estate of Mr De Matteis. 55 In my view, it is just and appropriate to make an order for the payment to the Trustee of his reasonable remuneration, costs and expenses in the administration of the estate of Mr De Matteis pursuant to the sequestration order made on 23 February 2023. Subject to the determination of the quantum of such remuneration, costs and expenses, it has not been established that the Trustee has acted other than reasonably and as required by law. In the circumstances of the present case, I consider that good cause has been shown for Mr De Matteis, rather than Mr Mutton, to be responsible for the payment of the Trustee's reasonable remuneration, costs and expenses. I have reached this conclusion for the following reasons. 56 The dismissal of the creditor's petition on review is the consequence of Mr De Matteis entering into arrangements with the petitioning creditor and supporting creditors after the making of the sequestration order. Although Mr De Matteis opposed the making of the sequestration order when the matter was before the Registrar, he did not advance any good reason why a sequestration order should not be made. He did not dispute the existence of the debt owing to Car Stackers, nor that he had committed an act of bankruptcy by failing to comply with the bankruptcy notice based on that debt, and he did not provide evidence to satisfy the Registrar that he was solvent or that there was other sufficient cause to dismiss the petition. It was not until 25 June 2023 that the debt to Car Stackers was paid, and the debt to another supporting creditor, A.S. James Pty Ltd, was paid on 24 May 2023. 57 When entering into consent orders for the removal of Car Stackers as a party to the proceeding, Mr De Matteis accepted that Car Stackers should be paid its costs in the amount of $20,000 (which he subsequently agreed to meet in four instalments of $5,000). In the light of those orders, it would be inappropriate for any order to be made requiring Car Stackers to pay any of the Trustee's remuneration, costs and expenses. Rather, at least to the point of the removal of Car Stackers and the substitution of Mr Mutton as the petitioning creditor, responsibility for the payment of the costs of the administration of the bankrupt estate should fall on Mr De Matteis. It may be noted that as at 30 May 2023 (some weeks prior to the consent orders made on 30 June 2023), the Trustee had incurred remuneration of $19,274.30 and disbursements of $19.90 (each exclusive of GST). 58 Mr De Matteis submits that, because Mr Mutton elected to be substituted as the petitioning creditor in order to prosecute the debts allegedly owing by Mr De Matteis to LEDM, Mr Mutton should bear some or all of the liability for the Trustee's costs from that date. Counsel for Mr De Matteis also referred to s 51 of the Bankruptcy Act, which provides that "the prosecution of a creditor's petition to and including the making of a sequestration order on the petition shall be at the expense of the creditor", subject to s 109 which deals with the order of payment of debts from a bankrupt estate. 59 In my view, neither of those matters advanced on behalf of Mr De Matteis warrants making an order that Mr Mutton should pay or contribute to the payment of the Trustee's reasonable remuneration, costs and expenses from 30 June 2023. I accept Mr Mutton's evidence that he was seeking at all times to perform his duties as the liquidator of LEDM and to act in the interests of its creditors. Mr Mutton sought to reach a commercial agreement with Mr De Matteis to settle the claimed liabilities, but lodged a proof of debt in the bankruptcy after Mr De Matteis failed to make payment in accordance with the settlement agreement. Mr De Matteis did not respond in detail to the substance of the claims until he filed his affidavit sworn on 13 October 2023, following which Mr Mutton entered into a settlement with Mr De Matteis to discontinue the proceeding with no order as to costs. In the circumstances, I do not consider that Mr Mutton should be responsible for the conduct of the administration of the bankrupt estate during the period from 30 June 2023 until the hearing of the review application on 8 November 2023. 60 Nor do I consider that the Trustee should be denied any remuneration, costs or expenses after becoming aware that the matter had been resolved between Mr Mutton and Mr De Matteis. The agreement reached between the parties self-evidently did not deal with the position of the Trustee, who maintained his claim for payment of his reasonable remuneration and disbursements. That remained a live issue at the hearing on 8 November 2023. 61 Finally, I note that orders requiring Mr De Matteis to pay the Trustee's reasonable remuneration, costs and expenses are consistent with the position that would arise upon an annulment of the bankruptcy under Division 5 of Part VII of the Bankruptcy Act. Where the bankruptcy of a person is annulled by the Court upon satisfaction that a sequestration order ought not to have been made, the trustee may recover the costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee, from any property of the former bankrupt still vested in the trustee or as a debt due by the former bankrupt to the trustee: ss 154(1)(b), (2) of the Bankruptcy Act. Although there is no power to annul a bankruptcy when a creditor's petition is dismissed on review under s 35A(6) of the FCA Act, and the "necessary protection" of the review extends to the protection of the debtor against the costs and expenses of the bankruptcy (Robson at [26], [35] (Allsop CJ)), the conduct of Mr De Matteis in the present case caused or significantly contributed to both the making of the sequestration order and the subsequent course of the proceedings. While it is now common ground that a sequestration order ought not be made, the bankruptcy might have been avoided or abridged if Mr De Matteis had taken earlier steps to meet or address the debts on which the proceedings were based. 62 There was a live issue between Mr De Matteis and the Trustee as to the quantum of the Trustee's reasonable remuneration, costs and expenses. In broad terms, Mr De Matteis submits that the amounts of remuneration and disbursements claimed by the Trustee are unreasonable. That submissions did not descend to specific particulars, although Mr De Matteis did rely on an affidavit of his solicitor, Rodrigo Mariano Haddad of Marshalls & Dent & Wilmoth Lawyers, sworn on 6 November 2023, which identified "certain questionable time entries" in the Trustee's work in progress report dated 31 October 2023, and asserted that: ...a large part of the remuneration incurred by the Trustee was incurred not acting in the best interests of the creditors and the bankrupt (as it was not incurred in recovering funds for creditors), but rather it was incurred by the Trustee, acting in his own interest, by monitoring the current proceeding and ensuring that it receives the remuneration that he had incurred (and continued to incur) by continuing to monitor the proceeding. 63 Otherwise, Mr De Matteis challenged the quantum of the remuneration claimed by the Trustee on the basis that, as at 24 October 2023, the incurred remuneration and disbursements represented approximately 78% of the estimated remuneration approved by creditors for the completion of the bankruptcy, in circumstances where the Trustee had not administered that proportion of the bankrupt estate. 64 As noted above, the Trustee had incurred remuneration of at least $19,274.30 (exclusive of GST) with minimal disbursements by the time the consent orders were made by the Court on 30 June 2023. There did not appear to be any dispute raised at that time regarding the amount of the Trustee's remuneration, costs or expenses. In the period to 24 October 2023, the Trustee appears to have incurred approximately $5,500 in additional remuneration, along with disbursements of just under $500. Thus, as at 24 October 2023, the Trustee's representatives advised my chambers via email that the Trustee sought to recover his remuneration fixed at $24,839.50 plus GST and disbursements of $493.71 plus GST, noting that the Trustee was intending to raise these matters at the hearing on 8 November 2023. By the time of the hearing, however, the Trustee was seeking to recover remuneration in the amount of $33,565 plus GST and disbursements of $7,600 plus GST. Presumably, the difference in these figures is explained by the Trustee subsequently incurring costs in relation to the hearing on 8 November 2023, although it is unclear why those costs were not anticipated in the email sent to my chambers on 24 October 2023. 65 In the circumstances, I do not consider that it is appropriate for this Court to conduct a detailed review of the Trustee's work in progress in order to rule on the reasonableness of particular items or tasks performed by the Trustee in connection with the administration of the bankrupt estate under the sequestration order. In my view, it is sufficient to make an order that Mr De Matteis should pay the Trustee's reasonable remuneration, costs and expenses, with an avenue for the amount to be independently assessed in the event that agreement cannot be reached between Mr De Matteis and the Trustee. Further, I consider that it is appropriate to make an order that the amount be capped, having regard, among other things, to the estimated remuneration and disbursements that was previously approved by creditors. I note that a similar approach was adopted by this Court in Robson. Accordingly, I will order that Mr De Matteis pay the reasonable remuneration of the Trustee, and the reasonable costs and expenses incurred by the Trustee, in administering the estate of Mr De Matteis pursuant to the orders made by the Registrar on 23 February 2023 until the present date, to be capped at an amount of $35,000 plus GST. 66 During the hearing on 8 November 2023, counsel for Mr De Matteis requested that any order that Mr De Matteis pay the Trustee's remuneration, costs and expenses ought to be stayed for a period of six months or such other period as appropriate. The explanation given for seeking such a stay order was that Mr De Matteis was managing a number of debts and "it would be easier for the respondent to accommodate a payment in such a way". A party seeking a stay is not required to show "special" or "exceptional" circumstances, but rather, must demonstrate that the case is an appropriate one for the exercise of the discretion in their favour: Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694-695; see also Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66. I consider that a stay of six months would be excessive in the present case, but on balance I am prepared to grant a stay of the order for 28 days to enable Mr De Matteis to make appropriate arrangements for payment.

Other issues 67 By his written submissions of 27 November 2023, Mr Mutton seeks that Mr De Matteis be ordered to pay "costs of and incidental to being brought back into this proceeding" on the basis that Mr Mutton already reached a settlement agreement with Mr De Matteis on 18 October 2023. This can be understood to refer to the costs arising from the post-hearing submissions filed by Mr Mutton pursuant to the orders made by the Court on 10 November 2023, by which Mr Mutton was given an opportunity to file written submissions and any affidavit evidence addressing the matters raised at the hearing of 8 November 2023 regarding the Trustee's remuneration, expenses and costs. 68 Mr De Matteis resists any order that he should be liable for Mr Mutton's costs of and incidental to any part of this proceeding. Mr De Matteis refers to s 51 of the Bankruptcy Act and contends that there are no grounds for Mr De Matteis to pay Mr Mutton's costs in circumstances where Mr Mutton is no longer pressing for a sequestration order to be made and the parties had never reached any agreement as to who would be specifically liable for the Trustee's remuneration. 69 I do not consider that it is appropriate to make any order in relation to Mr Mutton's costs. The parties reached a settlement agreement on 18 October 2023, pursuant to which the petition would be dismissed with no order as to costs as between the parties. However, the hearing on 8 November 2023 was necessitated because the Trustee, who was not a party to those orders, had an interest in the determination of the proceeding in so far as he sought a consequential order for payment of his remuneration and disbursements. While Mr Mutton had initially been excused from attendance at the hearing on the basis that his position was reflected in the consent orders and he had no position on whether or not Mr De Matteis should pay the Trustee's remuneration and disbursements, it became clear from the submissions advanced on behalf of Mr De Matteis and the Trustee that the issue of the Trustee's remuneration, costs and expenses could potentially affect the interests of Mr Mutton as the petitioning creditor. Mr Mutton subsequently took up the opportunity to make submissions on that issue. I do not consider that he should recover his additional costs of doing so from either Mr De Matteis or the Trustee.

CONCLUSION 70 For the reasons set out above, the petition should be dismissed and the sequestration order should be set aside. Mr De Matteis should pay the Trustee's reasonable remuneration, costs and expenses, to be capped at an amount of $35,000 plus GST, with that order to be stayed for a period of 28 days. There should otherwise be no order as to the costs of the proceeding. 71 The orders of the Court are as follows: (1) The creditor's petition dated 7 October 2022 be dismissed. (2) The sequestration order dated 23 February 2023 be set aside. (3) The respondent pay the reasonable remuneration, costs and expenses of the former trustee, Mr Stephen Michell, in administering of the estate of the respondent pursuant to the orders made by a Registrar of this Court on 23 February 2023, which orders ceased to have effect on 22 December 2023. (4) The amount of the reasonable remuneration, costs and expenses of Mr Stephen Michell pursuant to Order 3 is to be agreed between the respondent and Mr Michell, or in default of agreement is to be assessed by a Judicial Registrar of this Court, and is to be capped in the amount of $35,000 plus GST. (5) Order 3 be stayed for 28 days from the date of these orders. (6) There otherwise be no order as to costs. I certify that the preceding seventy-one (71) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Horan.