Replacement Trustees and Liquidators: issues regarding familirisation of Estate.

In a recent decision from the Federal Court of Australia, in the matter of Nixon (No 2) [2015], FCA 1047, a major concern has been raised as to whether additional remuneration should be charged by the incoming Trustees and/or Liquidators to familiarise themselves with each administration.

The background of the case was as follows:-

  • When Mr. Brendan Joseph Nixon (“Mr. Nixon”) left his employment at FTI Consulting (previously KordaMentha Qld), he had been appointed to the roles of Trustee and Liquidator of various Estates while serving in that employment. He and the Senior Managing Directors of FTI agreed that he would resign from his appointments as Trustee and Liquidator.
  • The application was made to the Federal Court of Australia to seek orders that Mr. Nixon be removed from his appointments as Trustee and Liquidator (in effect by acceptance of his resignation) and new Trustees and Liquidators replace Mr. Nixon in appointments of his various Estates.
  • The application dealt with 85 different estates. Of these, there were 71 Bankrupt Estates, four Estates where the court had appointed a Liquidator, and 10 Estates where creditors had appointed a Voluntary Liquidator (the CVL Estates).

The concern was raised by the court as to whether the applicants (incoming Trustee and Liquidators) should charge professional fees to familiarise themselves with the prior conduct of the Estates if they replace Mr. Nixon in those appointments. In this regard, the applicants subsequently provided evidence that they would not pass on the following costs to the Estates:-

  • the costs of this application,
  • the costs of new appointees familiarising themselves with the Estates,
  • the costs of obtaining information from Mr. Nixon relevant to the files, or
  • the costs of notifying the bankrupts, directors, and shareholders of the companies of the change in appointees.

The court was the opinion of that the applicants had addressed this concern satisfactorily and made the order on the condition that none of the applicants charge any professional fees to any of Mr. Nixon’s various estates. Subsequently they filed a consent to Act as Trustee with the official receiver in respect of Bankrupt Estate and consents to act as Liquidator with the Court in respect of Creditors’ Voluntary Liquidations.

In light of the above, the Federal Court of Australia delivered a message to Trustees and Liquidators that they should consider the costs that they need to bear for familiarising themselves with the estates they seek to replace.