Andrew Weatherley.
The following tale of trustees seeking an uplift after racking up costs selling a rundown property reminds iNO of Paul Keating’s infamous utterance about never nursing a loser because they’ll just die in your arms.
Similarly, don’t expend time and money dressing up a dump when there’s limited equity and secured and other creditors also entitled to a drink.
In Thorn as trustee in Bankruptcy for the Bankrupt Estate of Philip Cinzio v Mielnikowski [2024] QSC 249 judge Rebecca Treston KC refused to grant two practitioners a generous uplift in their fees sought for work performed as “statutory trustees”.
The pair – Matthew Flowers and Andrew Weatherley of WCT Advisory – were appointed Statutory Trustees in November 2023 to conduct a sale of a residential property at Logan in Queensland that formed part of a bankrupt estate administered by PKF partner Simon Thorn.
The property has been sold but Flowers and Weatherley had to negotiate challenges of a kind with which anyone working in the personal insolvency sector would be familiar, not least the reality that evicting the bankrupt’s ex-wife and daughter would’ve rendered them homeless.
Flowers and Weatherley granted multiple extensions to the deadline to vacate, which allowed the occupants to arrange alternative accommodation, but as the judge found, much of the work they argued justified an uplift in their fees from $15,000 to $45,000 wasn’t reasonable or proportionate.
Both the bankrupt’s ex-wife and Thorn opposed the application for an uplift, though Thorn suggested only that the statutory trustees’ fees be capped at $37,500.
But in unpacking the uplift application her honour found much to be dissatisfied about.
There was the fact that they obtained two valuations from professional valuers when the judge felt that one from a competent real estate agent would have sufficed.
She also suggested that Flowers and Weatherly should have been more mindful of the impact their expenditures and work would have on the pool of available equity, which they knew from the outset was more of a puddle.
“The Statutory Trustees should have appreciated early that they were appointed for a small value property, which likely had a low level of net equity,” she said.
“They ought to have been alert to exercise prudence in incurring professional costs and outlays given that the indemnity against trust assets is not available where the liability is unreasonable or unnecessary and therefore not properly incurred.”
The legal fees the pair generated also attracted robust comment.
“The legal fees alone are very significant in the context of such a small value pool, but when added to those fees are the Statutory Trustees’ own fees related to the legal advice, I am unable to conclude, on the evidence offered, that that component of those fees over and above that which would be “standard” are reasonable and proper,” she said.
And not to be left out was the ubiquitous gremlin of double handling, which apparently intruded in the dealings between the statutory trustees, their lawyers, the property manager engaged to prepare if for sale and the ex-wife and co-owner.
” …. there seems to have been significant double handling between the property agent (Moresol), the Statutory Trustees and the Statutory Trustees’ solicitors revealed by the time sheets and the summary of costs,” the judge said.
In summing up the judge found that some uplift for the additional work required in the face of the ex-wife’s obstructionism was warranted and ordered another $10,000 be added to the original $15,000.
The Trustee in bankruptcy clearly forgot that any remuneration as trustees for sale was regulated by the Court appointing them and not in their administration in bankruptcy. Too often one sees extraordinary remuneration claims and related legal fees being incurred in a relatively straight forward conduct of sale by statutory trustees for sale appointed under the property law legislation in states and territories with little or no regard to the true functions being undertaken.