AFG Insurances Ltd [2002] NSWSC 845

New South Wales Supreme Court

CITATION : AFG Insurances Ltd [2002] NSWSC 845 CURRENT JURISDICTION: Equity Division Corporations List FILE NUMBER(S) : SC 4559/02 HEARING DATE(S) : 11/09/02 JUDGMENT DATE : 11 September 2002

PARTIES : AFG Insurances Limited (Administrators Appointed) - First Plaintiff Keiran Hutchison and John Raymond Gibbons - Second Plaintiffs JUDGMENT OF : Barrett J

COUNSEL : Mr B A J Coles QC/Mr D R Pritchard - Plaintiffs SOLICITORS : Henry Davis York - Plaintiffs CATCHWORDS : CORPORATIONS - voluntary administration - remuneration of administrators where convening period for second meeting of creditors substantially extended - appropriate that committee of creditors fix remuneration LEGISLATION CITED : Corporations Act 2001 (Cth) CASES CITED : Re Ansett Australia Ltd and Mentha (2002) 40 ACSR 409 DECISION : See paragraph 6

- 2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

WEDNESDAY 11 SEPTEMBER 2002

4559/02 - AFG INSURANCES LIMITED

JUDGMENT

1 The administrators of AFG Insurances Limited seek an order under s.447A of the Corporations Act 2001 (Cth) with respect to their remuneration. 2 Orders were recently made extending the convening period for the second meeting of creditors called for by Pt. 5.3A so that commencement of the meeting may now be delayed by a substantial period. The meeting might not be held until early February 2003. In those circumstances, the occasion for the administrators' remuneration to be set in the way contemplated by s.449E(1)(a) (that is, by resolution of creditors passed at the second meeting) will be substantially delayed by comparison with what would be the normal course of events. 3 The administrators therefore seek to invoke the jurisdiction of the court to fix their remuneration but, apprehending that the power of the court under s.449E(1)(b) (that is, the power exercisable "if no remuneration is so fixed", which refers back to fixing by resolution of creditors at the second meeting) might only arise if the second meeting of creditors has occurred without having made a determination, they apply for what is effectively an order varying s.449E to allow remuneration to be fixed by a resolution of a committee of creditors passed in a certain way, such a committee having been appointed at the first meeting of creditors. 4 It is not appropriate that the administrators should have to wait for a long time – perhaps as long as five months - to know the position in relation to their remuneration. I consider it a necessary by-product of the orders extending the convening period that some other suitable regime should be put in place for the determination of the remuneration. The regime suggested works by reference to a decision of the committee of creditors. The membership of the committee is set out in Mr Gibbons' affidavit of 9 September 2002, being representatives of Westpac Banking Corporation, ACE-INA Services UK, North Atlantic Insurance Company Limited, Equitas Limited and Markel International. This committee should, on the face of things, be well equipped to have proper regard to the interests of the general body of creditors. 5 A process whereby the committee of creditors will fix remuneration is sufficiently analogous with the process envisaged by s.449E(1)(a) that the court should sanction it in the particular circumstances of this case. I note that, in Re Ansett Australia Ltd and Mentha (2002) 40 ACSR 409, a somewhat similar approach was approved by the Federal Court in another case of significant extension of the convening period for the second meeting. 6 I make the following order: Pursuant to section 447A of the Act that Part 5.3A of the Act is to operate in relation to the first plaintiff as if section 449E(1)(a) also provided that the second plaintiffs are entitled to such remuneration as is fixed by a resolution of the first plaintiff's committee of creditors passed after the members of that committee had received no less than seven days prior written notice of the amount of remuneration claimed, together with details of the manner in which the amount claimed is comprised and calculated. **********