Maxwell-Smith v Donnelly [2007] FCAFC 180 (23 November 2007)

Last Updated: 26 November 2007

FEDERAL COURT OF AUSTRALIA

Maxwell-Smith v Donnelly [2007] FCAFC 180

COSTS – costs of trustee for inquiry into conduct of the trustee under s 129 of the Bankruptcy Act – no error in awarding costs to include remuneration, charges and expenses – additional submissions not considered by primary judge due to filing error – allegation of procedural fairness not established – appeal dismissed


Bankruptcy Act 1966 (Cth) s 179

Maxwell-Smith v Donnelly [2006] FCAFC 150 cited
Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 894 cited
Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 1097 cited
Maxwell-Smith v Max Christopher Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 1005 cited
Pantzer v Wenkart [2006] FCAFC 140; (2006) 153 FCR 466 cited



















INGE MAXWELL-SMITH AND EUGENE MAXWELL-SMITH v MAX CHRISTOPHER DONNELLY

NSD 1180 OF 2007

BENNETT, EDMONDS AND FLICK JJ
23 NOVEMBER 2007
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1180 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	INGE MAXWELL-SMITH First Appellant EUGENE MAXWELL-SMITH Second Appellant
AND:	MAX CHRISTOPHER DONNELLY Respondent

JUDGES:	BENNETT, EDMONDS AND FLICK JJ
DATE OF ORDER:	23 NOVEMBER 2007
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal is dismissed.

2. Leave is given to the parties to file and serve any written submissions on the order for costs of the appeal within seven (7) days.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1180 OF 2007

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	INGE MAXWELL-SMITH First Appellant EUGENE MAXWELL-SMITH Second Appellant
AND:	MAX CHRISTOPHER DONNELLY Respondent

JUDGES:	BENNETT, EDMONDS AND FLICK JJ
DATE:	23 NOVEMBER 2007
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

1 The history of this matter, as relevant to this appeal, may be shortly stated.

2 Proceedings were commenced in 2004 against the respondent (‘the Trustee’), who had been the trustee in relation to the bankruptcy of Mr and Mrs Maxwell-Smith. The bankruptcy had been annulled. Pursuant to a decision of the Full Court (Maxwell-Smith v Donnelly [2006] FCAFC 150), the primary judge conducted an inquiry under s 179 of the Bankruptcy Act 1966 (Cth) into the refusal of the Trustee to give permission to Mrs Maxwell-Smith to travel outside of Australia on or about 20 May 2004 (Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 894). In that inquiry Mr and Mrs Maxwell-Smith were represented by counsel, who appeared pro bono pursuant to a referral by the Full Court under O 80 r 4(1) of the Federal Court Rules.

3 The primary judge delivered reasons for judgment and proposed orders on 8 June 2007. Those proposed orders were:

(1) Having inquired into the conduct of the respondent trustee, Max Christopher Donnelly in relation to the matters in order 3 of the orders of the Full Court of the Federal Court on 27 October 2006 and finding no basis for criticism of the conduct of the said trustee or of his manager, Mrs Angela Margaret Gallucci, the applicants, Mr Eugene and Mrs Inge Maxwell-Smith pay the costs of the respondent, Max Christopher Donnelly, of this inquiry as taxed in accordance with the Bankruptcy Act 1966 (Cth) and that the costs of the respondent trustee of this inquiry before [me] form part of the respondent trustee’s costs and expenses of the administration of the former bankrupt estate of Mr and Mrs Maxwell-Smith;

(2) Time be extended for the filing of any application for leave to appeal from the orders made today to a date 14 days after the date of the signing by [my associate] of the settled reasons for judgment; [and]

(3) Leave be granted to the parties, through counsel only, to file and serve written submissions within seven days as to the form of order pronounced today.

4 Written submissions were filed on behalf of the Trustee. No submissions were filed by counsel for Mr and Mrs Maxwell-Smith. On 6 July 2007, the primary judge replaced order 1 as follows (‘the 6 July order’):

Having inquired into the conduct of the respondent trustee, Max Christopher Donnelly, in relation to the matters in order 3 of the orders of the Full Court of the Federal Court on 27 October 2006 and finding no basis for criticism of the conduct of the said trustee or of his manager, Mrs Angela Margaret Gallucci, the applicants, Mr Eugene and Mrs Inge Maxwell-Smith pay the costs, charges and expenses of the respondent, Max Christopher Donnelly, of this inquiry as taxed in accordance with the Bankruptcy Act 1966 (Cth) and that the costs, remuneration and expenses of the respondent trustee of this inquiry before [me] form part of the respondent trustee’s costs charges and expenses of the administration of the former bankrupt estate of Mr and Mrs Maxwell-Smith.

(amendments emphasised)

5 His Honour gave reasons for that amendment (Maxwell-Smith v Max Christopher Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 1005). He observed that, left to decide the issue free of authority, he would have characterised the Trustee’s position, like any other litigant, as successfully defending himself against allegations in litigation and entitled simply to costs (at [3]). However, his Honour considered himself bound by and applied Pantzer v Wenkart [2006] FCAFC 140; (2006) 153 FCR 466 at [43] and made the 6 July order.

6 In further reasons delivered on 6 August 2007 (Maxwell-Smith v Donnelly (in the matter of Inge and Eugene Maxwell-Smith) [2007] FCA 1097) the primary judge noted that Mrs Maxwell-Smith had been in Court at the time of making the 6 July order and had sought to file submissions on the order made that day and the reasons that accompanied it (at [5]). Accordingly, his Honour stayed the 6 July order to give Mr and Mrs Maxwell-Smith the opportunity to file and serve any further written submissions in relation to the order by 20 July 2007. As set out by the primary judge at [6], no submissions had been received by the Court when the matter was called for hearing at 10 am on 20 July 2007. His Honour stayed the order again to protect the Maxwell-Smiths’ position. His Honour then received a six page document from Mrs Maxwell-Smith. That document was headed "Argument by Inge Maxwell-Smith". It was appropriate and reasonable for his Honour to refer to that document as ‘the submissions of Mrs Maxwell-Smith’. His Honour commented at [8]:

No part of them deals with the question of the variation of order 1 made in the 8 June Orders. All the submissions relate to the substantive issues dealt with in my reasons as delivered on 8 June 2007. There was no leave to file such submissions.

7 His Honour then determined that the 6 July order was entitled to be entered (at [10]).

8 Mr and Mrs Maxwell-Smith filed a notice of appeal and then an amended notice of appeal. The Trustee filed a notice of motion seeking orders that the appeal be dismissed as incompetent and, subsequently, a second notice of motion seeking an order that Mr and Mrs Maxwell-Smith file and serve an amended notice of appeal that complies with O 52 r 13(2) of the Federal Court Rules. Mr and Mrs Maxwell-Smith filed a notice of motion seeking, in substance, a stay of the orders made by the primary judge and pro bono legal assistance.

9 The various notices of motion came before Madgwick J, who granted leave to Mr and Mrs Maxwell-Smith to file a notice of appeal in the form amended and initialled by his Honour. Consequently, the grounds of appeal before this Court are:

1. The primary judge erred in the order for costs. There is no statutory authority to approve the costs of the inquiry as further costs and expenses in the administration of the bankrupt estate, which was annulled on 2 July 2004.

2. The appellants’ submissions and supporting evidence, pursuant to leave granted on 6 July 2007, could not have been and were not considered by the primary judge, because the submissions were mistakenly filed in NSD 1180 of 2007 instead of NSD 1672 of 2004. This must be considered a denial of procedural fairness.

10 It is necessary to make reference to one further document. Mrs Maxwell-Smith, who appears before us in person on behalf of herself and her husband, says that she had sent to the Court an eleven page document that represented the submissions that she had wished to put to the primary judge pursuant to the leave given on 20 July to address the form of orders (‘the additional document’). It is unnecessary to track through the circumstances of the receipt of the additional document, mailed to the Court with an incorrect file number apparently placed by Mrs Maxwell-Smith on an accompanying document. It does not seem to have been before the primary judge. The only reference in the additional document to the order for costs was:

63. The proposition put by Counsel Skinner that all costs of the respondent in his reply to the application for an inquiry into his conduct should be allowed on an indemnity basis is strongly objected to by the applicants.

11 Quite clearly this submission was based on an incorrect understanding of Mrs Maxwell-Smith that the proposed order was to award the Trustee indemnity costs. The remainder of the additional document addressed matters not relevant to the order and beyond the subject matter for which leave to file submissions was given. The submissions could not have affected the order made by the primary judge.

12 In this appeal, Mrs Maxwell-Smith presented detailed written submissions and addressed the Court orally. The submissions dealt almost exclusively with underlying questions in respect of the bankruptcy and allegations with respect to the conduct of the Trustee. They are not relevant to the issues in this appeal.

13 With respect to the 6 July order, Mrs Maxwell-Smith submits that any expenses incurred by the Trustee after the annulment of the bankruptcy on 2 July 2004 are not to be considered as part of the administration of a bankrupt estate and should be claimed and paid in the same manner as in any other Court proceedings. In Pantzer the Full Court at [43]–[44] considered the position of a trustee who was drawn into litigation as an incident of having acted as a trustee charged with the responsibility of administering the bankrupt’s estate. The Full Court held that the remuneration, costs, charges and expenses arising from the litigation were properly incurred for the purpose of administering the estate (at [44]). The primary judge applied Pantzer. He has not been shown to have been in error for doing so.

14 No other error has been shown on the part of the primary judge. The allegation of a denial of procedural fairness has not been established. To the contrary, the primary judge afforded Mr and Mrs Maxwell-Smith every opportunity to present their case, in particular with respect to the 6 July order the subject of this appeal. It is unfortunate that his Honour did not have before him the additional document, the provenance of which is unclear. However, nothing in the additional document could in any way have affected his Honour’s conclusions as to the 6 July order.

15 Counsel for the Trustee, in written submissions, challenged the competency of the appeal. That challenge was not pursued.

16 The appeal must be dismissed.

17 We propose to order the appellants to pay the respondent’s costs but will give the parties the opportunity to make submissions in writing, only as to the order for costs of the appeal, within seven (7) days. If no such submissions are received the order will be as proposed.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Bennett, Edmonds and Flick JJ.

Associate:

Dated: 22 November 2007

The Appellants were self represented.
Counsel for the Respondent:	B J Skinner
Solicitor for the Respondent:	Church & Grace
Date of Hearing:	19 November 2007
Date of Judgment:	23 November 2007