Federal Circuit and Family Court of Australia
(DIVISION 2)

Clark and Aravanis in their capacity as joint and several trustees of the property of Kimber v Owners Corporation SP48216 (No 2) [2021] FedCFamC2G 62 
File number(s):	SYG 723 of 2021	
		
Judgment of:	JUDGE DRIVER	
		
Date of judgment:	7 September 2021	
		
Catchwords:	BANKRUPTCY – Application for orders to facilitate the sale of real property to complete the administration of the bankrupt estate – separate question concerning the bankrupt’s interest in the property – dispute between the trustees and the major creditor concerning a proof of debt and claimed priority legal costs.	
		
Legislation:	Bankruptcy Act 1966 (Cth) ss 19, 27, 30, 34, 82, 109, 100, 115, 134, 153A
Evidence Act 1995 (Cth) s 136
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 131, 174
Federal Circuit Court of Australia Act 1999 (Cth)
Insolvency Law Reform Act 2016 (Cth)
Judiciary Act 1903 (Cth) s 79  
Legal Profession Uniform Application Act 2014 (NSW)
Strata Schemes Management Act 2015 (NSW) s 84
Bankruptcy Regulations 2021 (Cth)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) 
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) 
Federal Court Rules 2011 (Cth),
Insolvency Practice Rules (Bankruptcy) 2016 (Cth)
Insolvency Practice Schedule (Bankruptcy) ss 90-15, 90-20
Legal Profession Uniform Law 2014 (NSW)	
		
Cases cited:	Clark and Aravanis in their capacity as joint and several trustees of the property of Kimber v Owners Corporation SP48216 [2021] FedCFamC2G 32    
Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52	
		
Division:	Division 2 General Federal Law	
		
Number of paragraphs:	36	
		
Date of hearing:	7 September 2021 	
		
Place:	Sydney	
		
Counsel for the Applicant:	Mr J T Johnson	
		
Solicitor for the Applicant:	Daniela Fazio Lawyers Pty Ltd	
		
Solicitor for the First Respondent:	Mr D Radman of Grace Lawyers	
		
	Second Respondent in Person	

ORDERS
	SYG 723 of 2021	

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
 	
BETWEEN:	ALEXANDER DAVID CLARK AND ANDREW ARAVANIS IN THEIR CAPACITY AS JOINT AND SEVERAL TRUSTEES OF THE PROPERTY OF JANELLE MARY KIMBER
Applicant
	
AND:	OWNERS CORPORATION SP48216
First Respondent

JANELLE MARY KIMBER
Second Respondent

order made by:	JUDGE DRIVER	
DATE OF ORDER:	7 SEPTEMBER 2021	

INTERLOCUTORY ORDERS:

1.	The Application in a Case filed on 3 September 2021 is dismissed, with no order as to costs. 
2.	The subpoenas issued to Alex Clark, Steven Travis and Pascall Fox on 27 August 2021 are set aside. 
FOR THE PURPOSES OF ORDER 3 MADE ON 18 MAY 2021, THE COURT DECLARES THAT: 
1.	The answer to the first separate question in 2(a) of the application filed on 28 April 2021 is “yes”. 
2.	In relation to paragraph 2(b), the Court declares that pursuant to s 116(2)(g) of the Bankruptcy Act 1966 (Cth) the second respondent enjoys a 25 per cent interest in the net proceeds following the sale of the subject property referred to in Order 3. 
THE COURT ORDERS THAT: 
3.	The second respondent and any other occupier(s) vacate the premises known as Unit 110, 450 Pacific Highway Lane Cove in the State of New South Wales, being the whole of the land contained in Certificate of Title Folio Identifier 110/SP 48216 (“the Property”) and remove from the Property all vehicles, rubbish and chattels which have not vested in the applicants (“the Personal Property”) within 21 days after service of this Order. 
4.	In the event that Order 3 is not complied with: - 
(a)	leave be granted to the applicants to issue a Writ of Possession forthwith; and 
(b)	the applicants be directed, authorised and permitted to remove and dispose of the personal property on the Property as they see fit after 21 days have passed after service of this order. 
5.	The second respondent deliver up to the applicants, within 21 days of the date of this order the keys and security codes (if any) for the Property to the applicants at Aravanis Insolvency, Level 13, 1 Oxford Street, Darlinghurst in the State of New South Wales. 
6.	The net proceeds of sale of the property be paid in the following order: 
(a)	any amount required to be paid to satisfy any secured entitlement of the National Australia Bank Limited, registered dealing number Al339602 secured against the Property; 
(b)	the commission and other expenses of any real estate agent employed by the applicants in respect of the sale; 
(c)	the legal fees and disbursements of transferring the property to the purchaser (ie the conveyancing fees); 
(d)	any taxes including but not limited to Capital Gains Tax, Land Tax and Goods and Services Tax (GST) deemed payable by the Chief Commissioner of Taxation; 
(e)	any costs of insurance and other reasonable expenses incurred for protection and maintenance of the property by the applicants; 
(f)	cost of any valuation report(s) obtained by the applicants for the property; 
(g)	cost of attending to remove and dispose any personal property on the Property (if applicable); 
(h)	adjustment of council rates, water rates and amounts of any unpaid contributions in respect of the property payable to the administrative or capital works fund of the first respondent on and from 23 August 2019 up to and including the date of settlement of the Property, and interest thereon as contemplated by paragraph 3(a) to (c) of the Terms of Settlement between the applicants and the first respondent dated 25 August 2021; 
(i)	any payment ordered by the Court to be made to the second respondent pursuant to s 116(2)(g) of the Bankruptcy Act 1966 (Cth); 
(j)	any realisation charge; 
(k)	the priority costs of the first respondent; 
(m)	the remuneration, costs and expenses of the applicants with respect to these proceedings and the sale of the property and the administration of the second respondent's bankrupt estate. 
7.	Pursuant to s 74MA of the Real Property Act 1900 (NSW) the second respondent shall withdraw the Caveat with dealing number AP660240 registered over the Property within 7 days of the date of these orders. 
8.	If the second respondent fails to withdraw the Caveat with dealing number AP660240 by the specified date, then pursuant to rule 25.10 of the Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021, the Registrar or a Deputy Registrar of the Federal Circuit and Family Court of Australia is hereby authorised to sign a form of withdrawal of caveat numbered AP660240 and provide that signed form of withdrawal to the applicants in registrable form. 
9.	Pursuant to s 74O of the Real Property Act 1900 (NSW), the second respondent, by herself, her servants or agents, be restrained from lodging, or causing to be lodged, any further Caveat or other dealing on the title of the Property. 
10.	Service of any order(s) upon the second respondent in these proceedings be effected on the second respondent by placing same in a sealed envelope addressed to her and placing in the letterbox of the Property. 
11.	The costs of this application be paid from the second respondent’s share of the net proceeds of sale (if any). Or, in the alternative, an order that the applicants’ costs and expenses of this application and the costs and expenses of attending to remove and dispose any personal property on the Property be paid as a cost and expense of the bankrupt estate and paid in priority pursuant to s 109(1) of the Bankruptcy Act 1966 (Cth). 
12.	Orders 3-11 are stayed until 31 January 2022. 
13.	Pursuant to s. 90-15 of the Insolvency Practice Schedule (Bankruptcy) order that the applicants would in the circumstances of the administration and the present proceeding be justified in entering into the Agreement evidenced by the Terms of Settlement signed on their behalf and dated 25 August 2021. 
14.	Short minutes of such further or other orders relating to the carrying into effect of the Agreement including directions as considered necessary to Registrar Segal in connection with the finalisation of the Taxation of the bill of costs submitted by the first respondent in Proceeding No: SYG 2766/2018 are to be submitted to chambers within 14 days. 

Note: The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

EX TEMPORE REASONS FOR JUDGMENT
(Revised from transcript)
JUDGE DRIVER:
1	I have before me an application filed on 28 April 2021 which relevantly seeks the intervention of the Court in relation to a difficult issue of insolvency practice and the assessment of costs.  The application relevantly sought under s 90-15 of the Insolvency Practice Schedule (Bankruptcy) (Insolvency Practice Schedule) that the Court give directions to the applicant trustees and/or a declaration as between the applicant trustees and the first respondent, being the Owners Corporation responsible for debts relevant to the bankruptcy, as to:
(a)	the claim made by the Owners Corporation, if any, that is:
(i)	a debt arising after the date of bankruptcy;
(ii)	a debt provable in bankruptcy, or
(iii)	in respect of the order for costs made at the time of dismissal of the creditors petition, namely order 2 of orders made 23 August 2019 in proceedings SYG 2766 of 2018 after the date of bankruptcy;
(b)	whether, absent taxation in terms of Part 40 of the Federal Court Rules 2011 (Cth), applying in relation to a taxation of costs in the Federal Circuit Court of Australia, those costs have any priority afforded by s 109(1)(a) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), and
(c)	whether, in the circumstances, the existing order for costs dated 23 August 2019 is an order for costs provable in the bankruptcy, having regard to the decision of Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52;
(d)	the application further seeks the Court to determine whether, in the circumstances of the existing order for costs dated 23 August 2019, an order for costs is recoverable as against the second respondent, Ms Kimber, outside of the bankruptcy being administered by the applicant trustees;
(e)	whether, in the circumstances, absent agreement or taxation, the Owners Corporation is entitled to recover any moneys the subject of the order for costs dated 23 August 2019 as against the trustees, under s 84 of the Strata Schemes Management Act 2015 (NSW), as an ordinary unsecured creditor in the bankruptcy of Ms Kimber, and
(f)	the amount for which the Owners Corporation is entitled to prove under s 109 of the Bankruptcy Act as a creditor with priority or without priority in the administration of Ms Kimber’s estate.
2	Other issues arose in the proceedings which I have already dealt with.  The matter came before me on 18 May 2021 and, relevantly, I ordered the parties to conciliation.  That has occurred and the trustees and the Owners Corporation have reached agreement reflected in terms of settlement.  I am invited to endorse those terms of settlement by order.  The difficulty is that the settlement is not acceptable to Ms Kimber, who is dissatisfied with her degree of involvement in the conciliation process and, more generally, the whole issue of costs incurred leading to her bankruptcy.  In that regard, it is pertinent to note that Ms Kimber herself in her closing submissions today stated that the issue of the recovery costs of collecting strata fees had become part of her life.  
3	In relation to the proposed settlement, I agree with and adopt the submissions of the trustees filed on 31 August 2021.  
4	As noted above, on 18 May 2021 the Court made orders consequential to the determination of a separate question as follows:
7.	The balance of the proceedings be referred for conciliation before a Registrar of the Court under rule 10.05 of the Federal Circuit Court Rules 2001 (Cth).
5	The conciliation was conducted before Registrar Morgan in which the trustees and representatives of the Owners Corporation and Ms Kimber participated. The matter did not resolve on that day and it now appears that there was some concern on the part of Ms Kimber as to her ability to actively participate.
6	During a period in which the conciliation was adjourned there was agreement between the Owners Corporation and the trustees in relation to the resolution of the matters that had been referred to conciliation which primarily involved the proof of debt lodged by the Owners Corporation in the administration.
7	I received a copy of the Terms of Settlement.
8	Application is made by the trustees under s 30 of the Bankruptcy Act and s 90-15 of the Insolvency Practice Schedule.  The application is made on an oral basis.
9	The orders sought by the trustees in relation to the settlement agreement are:
1.	Pursuant to s. 90-15 of the Insolvency Practice Schedule (Bankruptcy) order that the Applicant would in the circumstances of the administration and the present proceeding be justified in entering into the Agreement evidenced by the document signed on their behalf and dated 25 August 2021.
2.	Such further or other orders relating to the carrying into effect of the Agreement including directions as considered necessary to Registrar Segal in connection with the finalisation of the Taxation of the bill of costs submitted by the First Respondent in Proceeding No: SYG 2766/2018.
10	In respect of the application I accept that each of:
(a)	the trustees in their capacity as trustees of the regulated debtor’s estate of Ms Kimber;
(b)	the Owners Corporation as a creditor; and
(c)	Ms Kimber as the regulated debtor,
are persons with a financial interest in the administration, able to bring the proceeding under s 90-15.
11	The provisions of s 90-15, when read in the context of the matters described in s 90-15(3) and (4) are broader in terms than those which were previously existing under s 134(4) of the Bankruptcy Act.
12	It was also appropriate that Ms Kimber be given an opportunity of being heard, on notice, of the present application particularly having regard to her concerns associated with her participation in the conciliation process.  For that purpose I proceeded on the basis that Ms Kimber relied upon all of the material that she has filed.
13	The following materials were relied upon by the trustees in relation to this issue:
(a)	affidavit of Alexander David Clark affirmed 14 April 2021 together with the exhibits referred to (Clark Affidavit 1);
(b)	affidavit of Alexander David Clark affirmed 30 August 2021 (Clark Affidavit 2);
(c)	affidavit of Ms Kimber sworn 17 May 2021 as to assertions made by her but not as to the truth of their contents; and
(d)	submissions filed by Ms Kimber as to assertions made by her but not as to the truth of their contents.
14	The Owners Corporation has not filed any evidence nor filed any Notice of Grounds of Opposition or affidavit in support of those grounds.
15	In relation to the claims made by the Owners Corporation being a creditor in the estate of the regulated debtor, being Ms Kimber: 
(a)	it has, as a creditor, lodged a Proof of Debt ;
(b)	it claims to be a creditor with priority as a consequence of orders made by Judge Cameron in a creditors petition previously presented by the Owners Corporation against Ms Kimber in proceeding SYG 2766 of 2018; and
(c)	it claims to be a creditor in respect of various orders for costs made in its favour both at first instance and on appeal. Some of those costs orders have been the subject of a lump sum costs order and some remain unassessed either in accordance with the Legal Profession Uniform Law 2014 (NSW) as applicable of New South Wales under the Legal Profession Uniform Application Act 2014 (NSW) or to the extent that orders were made in either the Federal Circuit Court of Australia or the Federal Court of Australia, under Part 40 of the Federal Court Rules 2011 (Cth) (Federal Court Rules). 
16	The trustees assert that Ms Kimber, in her Statement of Affairs dated 21 August 2019, filed in conjunction with the Debtors Petition lodged by her, disclosed the Owners Corporation as a creditor in the amount of $140,000 but which was disputed.  Under the settlement agreement the amount which the Owners Corporation will receive will be less than that which was the disputed admitted indebtedness in the statement of affairs. 
17	As between the trustees and the Owners Corporation, for practical purposes, issue was joined prior to the commencement of the proceedings in connection with issues associated with the proof of debt.
Advice given to trustees
18	I am told that, for the purpose of considering matters at the conciliation, oral advice was given by counsel for the trustees consistent with the matters set out below as to the appropriateness of compromising the various claims made in connection with the entitlement of the Owners Corporation to participate as an ordinary unsecured creditor with or without priority, and the quantum of any such entitlement. The following paragraphs set out the apparent nature of that advice and the recommendation that was given.
19	The trustees in the performance of their duties have an obligation to realise available property for the benefit of the estate, as efficiently as possible avoiding unnecessary expense, in exercising powers in performing functions in a commercially sound way, in accordance with the duties imposed under Schedule 2, namely the Insolvency Practice Schedule and the Insolvency Practice Rules (Bankruptcy) 2016 (Cth) (Insolvency Practice Rules).
20	The trustees also have duties in connection with the “overarching purpose” set out in the Federal Circuit Court of Australia Act 1999 (Cth), now within the FCFC Act.
21	Issues have been raised by Ms Kimber with a view to going behind the various judgments relied upon by the Owners Corporation. The trustees submitted that in the circumstances of the way those judgments were obtained there is no proper basis, subject to quantification of amounts where costs have not been the subject of assessment or taxation, to go behind the judgment as to liability for the debt.
22	In circumstances where a relevant Court or Tribunal has quantified the amount of costs as a “lump-sum” amount, it was submitted that also it is not appropriate for the trustees to seek to go behind that judgment in quantification.
23	The trustees consider that the judgment of the High Court of Australia in Foots v Southern Cross Mine Management Pty Ltd has application to the making of costs orders imposing a liability in the estate of the regulated debtor.  At the present time the order of Judge Cameron has not been set aside, although it has been indicated that such an application could be made by the trustees if necessary under the “slip rule” such that upon a proper taxation expressed in terms of the order of Judge Cameron there would be a priority afforded under s 109(1)(a) of the Bankruptcy Act.
24	I do not see such a process as necessary or desirable.  In a commercial sense in dealing with the operation and effect of the order of Judge Cameron:
(a)	any application to Judge Cameron to set aside or vary the order made by him founded upon Foots v Southern Cross Mine Management Pty Ltd would involve costs and expense and further litigation;
(b)	it would result in any liability that might arise as a consequence of the re-exercise of discretion by Judge Cameron imposing a liability on Ms Kimber in favour of the Owners Corporation, which would be to her substantial disadvantage having regard to the matters the subject of the separate question dealing with non-divisible property which could in the ordinary course be attached; and
(c)	an estimate having been issued by Registrar Segal in relation to the taxation of the orders made by Judge Cameron is at the “estimate stage” in terms of Part 40 of the Federal Court Rules, with a Notice of Objection having been filed. I accept that a full taxation of the quite substantial bill of costs would take after any relevant conciliation provided for in Part 40 of the Federal Court Rules two days and the costs associated with that would be quite disproportionate on both sides with the eventual outcome.
25	An additional factor which needed to be considered was the claims by the Owners Corporation as an ordinary unsecured creditor, which made it by a substantial margin the largest creditor.
26	In circumstances where a priority was preserved in favour of the Owners Corporation it would be afforded a priority ahead of the trustees in relation to their remuneration.
27	It is unlikely on the information presently available that there would be any prospective surplus, other than perhaps that related to non-divisible property the subject of the separate question, available for distribution after satisfaction of the bankrupt’s debts.
28	In circumstances where some reduction could be negotiated in respect of the “estimate” concerning a priority claim acting in accordance with their duties the trustees received advice that it was reasonable and appropriate for them to agree to the priority afforded in the terms of settlement.
29	In respect of the claimed entitlement in the creditors petition in proceeding SYG 2766 of 2018 the claim was in respect of a final judgment or order in the amount of $9,322.12 as of 28 September 2018. Payments were made thereafter as referred to in the proof of debt leaving a balance in the proof of debt of $6,242.12 .  Prima facie the payments would be void as against the trustees being payments that were made after the date of commencement of bankruptcy of the regulated debtor . In the circumstances of the possible resolution of issues advice was received by the trustees that it would be reasonable to take that amount into account for the purpose of any final figure to be agreed upon.
30	As to the balance of the claims relied upon for the purpose of establishing the claim as a creditor on the part of the Owners Corporation:
(a)	where the costs orders have been fixed, the trustees consider that it is not cost efficient or appropriate to seek to set aside those orders particularly where the determination may have been the subject of an appeal which has been dismissed;
(b)	where the orders for costs have not been assessed, having been made in the Supreme Court of New South Wales, proceeding towards an assessment would be expensive and time-consuming in respect of each costs order, with little eventual benefit for the estate and the creditors, particularly having regard to the substantial position of the Owners Corporation as a creditor entitled in a non-surplus administration;
(c)	where the orders for costs have not been taxed, having been made in the Federal Circuit Court of Australia or the Federal Court of Australia, proceeding towards an assessment would be expensive and time-consuming in respect of each amount of costs sought, with little eventual benefit to the estate or the creditors, particularly having regard to the substantial position of the Owners Corporation as a creditor entitled in a non-surplus administration; and
(d)	in reviewing the quantum and in particular the invoices that were raised by the solicitors for the Owners Corporation, the trustees had difficulty in precisely determining the proper quantum for the amounts because of the manner in which the invoices were received, covering more than one proceeding. The totality, however, of the claims equated to the same total and having been advised of those matters the trustees formed a view that it was appropriate to not require any formal taxation.
31	I am told that the trustees were advised, having regard to their duties both under the Bankruptcy Act and to the Court, as set out above, and the factual matters known to them including the criticisms raised by Ms Kimber, the settlement agreement was appropriate to be entered into in the interests of creditors and the proper administration of the estate. 
32	Because of the apparent ability of Ms Kimber to review any decision of the trustees  it was considered appropriate that she be given an opportunity of being heard on the present application for approval which goes to:
(a)	the question of the appropriate satisfaction of duties on the part of the trustees in the performance of the administration of the regulated debtor’s estate; and
(b)	the timely and commercial resolution of disputes which quite likely could give rise to expensive costs which would absorb the available assets in the estate. 
33	Ms Kimber has been engaged upon a dispute which appears to go back at least as far as 2013 and has involved litigation in this Court and the Federal Court over many years.  It is, perhaps, the most extreme example I have encountered of legal costs growing out of all proportion with the original dispute over unpaid strata levies.  Ms Kimber has pursued what she sees as her right in the successive acts of litigation, but without a positive outcome.  As has been seen in other cases of this nature, the legal costs grew and grew.  Ultimately, Ms Kimber was bankrupted on her own petition which gave rise to part of the problem, which the parties invited the Court to address in relation to the legal costs of the final creditors petition proceedings.  
34	The case is, to my mind, a sorry tale.  The trustees, however, have a job to do and the administration of the estate needs to be brought to a close.  If the outstanding legal costs are not dealt with under a proof of debt in the administration of the bankrupt estate, at least part of them, but nevertheless a significant amount, could be pursued personally against Ms Kimber.  She may be willing to undertake that contest, but the Court must take a broader perspective.  I have listened to her submissions and I have considered the evidence, and it does not deter me from my view that the appropriate course is for the Court to take action now to endorse the agreement between the trustees and the Owners Corporation to enable the bankrupt administration to be completed.  
35	I will order as sought in the trustees’ submissions that, pursuant to s 90-15 of the Insolvency Practice Schedule, the trustees would, in the circumstances of the administration and the present proceedings, be justified in entering into the agreement evidenced by the documents signed on their behalf and dated 25 August 2021.  As noted above, that document is titled Terms of Settlement and was put into evidence as an exhibit, exhibit T1.  
36	The trustees also invite the Court to make such other or further orders relating to the carrying into effect of the agreement, including directions as considered necessary to Registrar Segal in connection with the finalisation of a taxation of a bill of costs submitted by the trustees in proceedings SYG 2766 of 2018.  In that regard, I will invite the solicitors for the trustees to submit to my chambers short minutes of any further orders to give effect to concerns expressed in that subparagraph.
I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Driver.	

Associate:

Dated:	28 September 2021