FEDERAL CIRCUIT COURT OF AUSTRALIA
AXESS DEBT MANAGEMENT PTY LTD v NOTTAS (No.2)	[2015] FCCA 406	

Catchwords: 
BANKRUPTCY – Costs – costs sought in bankruptcy proceedings – costs of petitioning creditor were petition dismissed by consent – costs and disbursements of Trustee appointed pursuant to section 50 of the Bankruptcy Act.	

Legislation:
Bankruptcy Act 1966 (Cth), s.50
Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.13.01(2) & (3)
Federal Court Rules 2011 (Cth), Part 40	

Axess Debt Management Pty Ltd v Nottas [2014] FCCA 2746
Re: Penning; ex parte State Bank of SA (1989) 23 FCR 588
Victorian Securities Corp Ltd v Gadallah [2010] FMCA 113
Wenkart v Pantzer [2013] FCAFC 81	

Applicant:	Axess Debt Management Pty Ltd	

Respondent:	Harris Nottas	

File Number:	ADG 336 of 2014	

Judgment of:	Judge Simpson	

Hearing date:	23 February 2015	

Date of Last Submission:	23 February 2015	

Delivered at:	Adelaide	

Delivered on:	26 February 2015	

REPRESENTATION
Solicitors for the Applicant:	Mr S Sankey of Wallmans Lawyers	

The Respondent:	No appearance	

Solicitors for the Trustee:	Mr Gretsas of Gretsas & Associates	

ORDERS
(1)	The Applicant have its costs of and incidental to the whole of the proceeding, including all interlocutory steps to be agreed or taxed.
(2)	The fees and disbursements of Colin Louise Ambrose pursuant to s.50 of the Bankruptcy Act 1966 (Cth) (the Trustee) including his legal fees in his capacity as controlling trustee pursuant to s.50 of the Bankruptcy Act be fixed in the sum of $36,032.49 inclusive of GST as at 23 February 2015.
(3)	The Trustee is forthwith authorised and directed to withdraw the controlling trustee’s fees and disbursements from the bank account containing the net proceeds of sale of the property of Harris Nottas in the name of “Colin Louis Ambrose ATF Harris Nottas” contained in bank account number 12021424 with the Commonwealth Bank of Australia and to pay the trustee’s fees and disbursements to himself in satisfaction of his aforesaid fees and disbursements.
(4)	The Trustee is forthwith authorised and directed to transfer the balance of the proceeds in the Bank of Queensland account to the s.50 Control account held by the Trustee.
(5)	The property at 24 Nepean Highway Seaford Victoria comprised in Certificate of Title Volume 11157 Folio 742 be charged with the payment of the taxed fees of the Applicant and the Trustee’s fixed fees and disbursements.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT Adelaide	
ADG 336 of 2014
Axess Debt Management Pty Ltd	
Applicant

And

Harris Nottas	
Respondent

REASONS FOR JUDGMENT
(As Corrected)
1.	On 21 October 2014, on the application of Axess Debt Management Pty Ltd ACN 061 791 786 (“Axess”) I made an order pursuant to s.50 of the Bankruptcy Act 1966 (Cth), (“the Act”) that Colin Louise Ambrose be appointed Trustee to take control of the property of the respondent debtor, Harris Nottas (“respondent”) and that such control was to continue until the court ordered otherwise.  I also made an order at that time that the Trustee be indemnified as to his reasonable costs and expenses from and against the respondent’s property and/or any proceeds of its sale.  A further order was made that the respondent pay Axess’ costs of and incidental to the application.
2.	On 29 October 2014, I made orders dismissing the respondent’s application to have the orders of 21 October 2014 set aside.  My reasons for making those orders are to be found in Axess Debt Management Pty Ltd v Nottas.
3.	On 2 December 2014, I made an order dismissing the petition for bankruptcy filed by Axess with Mr Nottas as respondent.  I also made orders at that time that the respondent pay Axess’ costs, where reserved, to be agreed or taxed and otherwise as ordered by the Court.  A further order was made that the Trustee appointed under s.50 of the Act to take control of the respondent’s property pursuant to the order made by me on 21 October 2014, be authorised and directed to pay to Axess the sum of $23,621.29 from the funds held in the controlled estate of the respondent.  Further orders were made that the appointment of the Trustee continue until such time as all outstanding issues in relation to costs (of Axess and/or the Trustee) have been dealt with.  
4.	The matter came on again on 8 December 2014.  The respondent attended by telephone.  The telephone reception was very poor with the result that the involvement of Mr Nottas in the hearing was unable to continue.  The matter was therefore adjourned to 23 February 2015 at which time the Court would hear any argument.  As is the usual practice, the Court’s orders of 23 February 2015 were sent to the parties, including the respondent, immediately following the hearing.
5.	On 5 December 2014, I had made an order that the respondent’s attendance by telephone would only be granted if he gave the Court the telephone number of a landline and that he supply that telephone number prior to the hearing.  The respondent did not provide the Court with such a telephone number for the hearing on 23 February 2015.  When the matter was called on the respondent failed to appear.  The hearing continued in his absence.
6.	The applicant and the Trustee now seek the following orders:
	“1.	The Applicant have its costs of and incidental to the whole of the proceeding, including all interlocutory steps to be agreed or taxed.
	2.	The fees and disbursements of Colin Louise Ambrose pursuant to section 50 of the Bankruptcy Act 1966 (the Trustee) including his legal fees in his capacity as controlling trustee pursuant to section 50 of the Bankruptcy Act 1966 be fixed in the sum of $36,032.49 inclusive of GST as at 23 February 2015 (the controlling trustee’s fees and disbursements).
	3.	The Trustee is forthwith authorised and directed to withdraw the controlling trustee’s fees and disbursements from the bank account containing the net proceeds of sale of the property of Harris Nottas in the name of “Colin Louis Ambrose ATF Harris Nottas” contained in bank account number 12021424 with the Commonwealth Bank of Australia and to pay the trustee’s fees and disbursements to himself in satisfaction of his aforesaid fees and disbursements.
	4.	The Trustee is forthwith authorised and directed to transfer the balance of the proceeds in the Bank of Queensland account to the section 50 Control account held by the Trustee.
	5.	The property at 24 Nepean Highway Seaford Victoria comprised in Certificate of Title Volume 11157 Folio 742 be charged with the payment of the taxed fees of the Applicant and the Trustee’s fixed fees and disbursements.
	6.	Any further orders as this Honourable Court deems appropriate.”
7.	The affidavit of Mr Ambrose filed on 1 December 2014 indicates that Mr Ambrose controls the sum of $73,995.75 plus some minor interest that had accrued as at the date of his affidavit.
8.	It is clear from authorities that this Court has power to deal with payment of a controlling trustee’s fees and disbursements.  His Honour Justice Von Doussa had this to say:
	“It follows that action taken by Mr Heywood-Smith to get in the property of the debtors prior to 23 December 1987 was performed pursuant to a valid and subsisting order of the court. Furthermore, as a necessary incident of the exercise of the jurisdiction under s 50, which existed between the presentation of the creditor’s petition and its dismissal, after the dismissal the court can give all necessary directions as to the distribution of property of the debtors in the control of the person who had been appointed under s 50, and can settle the proper remuneration of that person for work done prior to the dismissal of the creditor's petition.”
9.	Rule 13.01(2) and (3) of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) provides that the Court may fix the amount of costs as a result of which it will not be necessary to have them taxed pursuant to Part 40 of the Federal Court Rules 2011 (Cth). 
10.	Paragraph one of the minute of order relates only to the applicant’s costs.  There is no reason why the applicant should not have a costs order in its favor.  In fact it would appear that the parties accept this and that the matter of taxing those costs is already well advanced.  I will however, make an order as requested that the applicant have its costs of and incidental to the whole of the proceeding including all interlocutory steps to be agreed or taxed.  This will include costs to date.
11.	The applicant also seeks an order that:
	“The property at 24 Nepean Highway Seaford Victoria comprised in Certificate of Title Volume 11157 Folio 742 be charged with the payment of the taxed fees of the Applicant and the Trustee’s fixed fees and disbursements.”
12.	It is appropriate that I make the order requested as it will enable the Trustee to take such action as he considers appropriate to ensure that the respondent does not dissipate the proceeds of the sale of the property.
13.	The Trustee seeks certain orders in relation to its fees and disbursements.  There is no doubt that this Court can make appropriate orders for the Trustee’s costs and disbursements (see Re: Penning (supra); Victorian Securities Corp Ltd v Gadallah [2010] FMCA 113 at para 14, 18-19 per Smith FM).  There is also no doubt that the Trustee is entitled to such an order.
14.	The Trustee seeks that the order for its costs and disbursements be on an indemnity basis.  The case of Wenkart v Pantzer [2013] FCAFC 81, a decision of the Full Federal Court, makes it clear that in circumstances such as the present one, the Trustee is entitled to costs on an indemnity basis.  
15.	In Wenkart’s case, Mr Pantzer was a Trustee in Bankruptcy who was involved in extensive litigation with a bankrupt.  At first instance, Flick J ordered that the bankrupt pay his Trustee 90% of his costs as taxed on a party/party basis.  Mr Pantzer appealed from these orders arguing that he was entitled to a full indemnity as a matter of bankruptcy law unless the Court held that he had behaved unreasonably in incurring some or all of those costs.  The Full Court agreed with the submissions and held as follows:
	“We have confirmed Flick J’s finding that the trustee has not behaved unreasonably throughout this saga. For that reason, we see no basis for doing other than allowing the trustee to recover in full measure his costs of the litigation to date. The costs order made by Flick J should be set aside. The correct costs order in the present case as between the trustee and Dr Wenkart is that the trustee’s costs of and incidental to the Appeal and both Cross-Appeals and of the proceedings below be paid by Dr Wenkart on the trustee basis as taxed or agreed. We intend that the taxation of costs on the trustee basis be carried out upon the basis that no costs shall be disallowed, except insofar as those costs, or part thereof, should not, in accordance with the duty of the trustee (or quasi trustee) or personal representative as such, have been incurred or paid. The emphasis is on what is to be excluded rather than on what is to be included.”
16.	In my opinion, the Trustee in this case, Mr Ambrose, has acted reasonably and in accordance with his duty as Trustee and is therefore entitled to his fees and disbursements on an indemnity basis.  Mr Ambrose’s affidavit filed on 1 December 2014 makes it clear the amount of work that was involved and the cost of that work.  This includes the legal services provided by Mr Gretsas.
17.	I fix the Trustee’s costs in the sum of $36,032.49 inclusive of GST as at 23 February 2015.
18.	I make the orders to be found at the beginning of these reasons.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Judge Simpson

Associate:  

Date:  26 February 2015

CORRECTION
1.	Paragraph 5 line 1 – delete “5 February 2014” and replace with “5 December 2014”.