Re Currabubula Holdings; ex parte Lord [2004] NSWSC 255

Reported Decision : 48 ACSR 734 (2004) 22 ACLC 858

New South Wales Supreme Court

CITATION : Re Currabubula Holdings; ex parte Lord [2004] NSWSC 255 HEARING DATE(S) : 22 March 2004 JUDGMENT DATE : 1 April 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Direction that liquidator would be justified in admitting administrator's proof of debt for fees

CATCHWORDS : CORPORATIONS - voluntary administration - costs of administrator - whether costs may be fixed by Court under s 449E after administration ends - whether a direction to the liquidator with respect to the administrator's fees and expenses is appropriate under s 479(3) - priority of administrator's fees and expenses under s 556 LEGISLATION CITED : Corporations Act 2001 (Cth), ss 449E, 479(3), 556 CASES CITED : Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674 John Frederick Lord (A) Commonwealth Bank of Australia (R1) Currabubula Holdings Pty Ltd (in liq) (R2) PARTIES : Anthony Michael Paola (R3) Lynette Denise Paola (R4) Franxton Pty Ltd (R5) Brian Raymond Silvia (R6) FILE NUMBER(S) : SC 5722/01 COUNSEL : P Kemp (Sol) (A) K E South (R1) SOLICITORS : Peter Kemp Solicitor (A) Mallesons Stephen Jaques (R1)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

THURSDAY 1 APRIL 2004

5722/01 RE CURRABUBULA HOLDINGS PTY LTD (IN LIQ); EX PARTE LORD JUDGMENT 1 HIS HONOUR: The applicant, Mr Lord, was appointed administrator of Currabubula Holdings Pty Ltd ("the Company") by resolution of the directors of the company on 22 March 2002. On 25 March 2002 the Court made orders terminating the administration of the company, and ordering that the company be wound up and that Mr Lord be appointed liquidator. 2 In the three days in which he occupied the office of administrator, Mr Lord did a certain amount of work, including preparation of a circular to creditors enclosing notice of the first meeting of creditors, together with forms of proof of debt and appointment of proxy. He spent five hours on the administration and his staff spent various amounts of time on it. Charged at hourly rates using the scale of fees last published by the Insolvency Practitioners Association of Australia, the total amount of fees for that work is $2,917.42. He also incurred expenses for legal costs in the sum of $1246.30, giving him a total claim for fees and expenses of $4,163.72. 3 Over $6 million in debts has been admitted in the liquidation of the company. On 29 November 2002 the creditors resolved at a meeting to appoint a committee of inspection of two members, representing over 67% of the total admitted claims. 4 Mr Lord wishes to prove in the liquidation, and be accorded priority for, his fees and expenses as administrator. Section 449E(1) of the Corporations Act states relevantly, that the administrator of a company is entitled to such remuneration as is fixed by resolution of the company's creditors passed at a meeting convened under s 439A, or if no remuneration is so fixed, such remuneration as the Court fixes on the application of the administrator. Here, no meeting of creditors was held because the administration lasted for only three days. Mr Lord has made an application as liquidator, under s 479(3), for directions to the effect that he would be justified in admitting a proof of debt by himself as administrator for the amount of his fees, and justified in paying those fees and his expenses in priority to all other unsecured debts and claims in accordance with s 556(1)(a). 5 The Court's power to give directions to a liquidator, which is analogous to the power to give judicial advice to a trustee, is a very wide one, available according to s 479(3) "in relation to any particular matter arising under the winding up": see McLelland J's discussion of the nature and origins of the power in Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674. There is no obstacle to giving Mr Lord an appropriate direction about his fees as administrator in the present case. The evidence shows that he undertook the works that he has described during the three days in which he occupied the office of administrator. He has obtained the written consent of the two members of the committee of inspection in the liquidation to this application, so far as it relates to the fees. 6 It may be open to Mr Lord to obtain an order of the Court fixing his remuneration under s 449E(1)(b). Under that provision the Court is empowered to fix the remuneration to which the administrator is entitled, "on the application of the administrator". "Administrator" is defined in s 9, relevantly, to mean an administrator of an entity appointed under Part 5.3A. It seems to me at least arguable that a person appointed as administrator has standing to apply to the Court for approval of his or her remuneration under s 449E(1)(b) after the administration has come to an end. It is not easy to see any necessity for construing the section to mean that the administrator's opportunity to have his or her remuneration fixed comes to an end if the administration is terminated and there has been no opportunity to convene a meeting of creditors. I note that for the purposes of some other provisions of the Corporations Act (such as the definition of "deferred expenses" in s 556(2)) a person may be an "administrator" notwithstanding that the administration has come to an end. 7 Since, however, I have not been invited to exercise the discretion to fix remuneration under s 449E(1)(b), and there is no good reason for declining to make a direction about remuneration under s 479(3), I shall proceed under latter provision. I do not regard s 449E as preventing the former administrator of a company that has gone into liquidation from making a claim for fees properly and reasonably incurred during the administration, in circumstances where there has been no opportunity to have the fees fixed by the creditors or the Court under the section. I shall now make a direction that Mr Lord, as liquidator, is justified in admitting a proof of debt by himself as administrator of the company in the amount of $2,917.42. 8 Mr Lord also seeks a direction that he is justified in paying the amount of fees and his expenses incurred while administrator, with the priority afforded by s 556(1)(a). I cannot see any particular problem raising doubts about the application of s 556 in the present circumstances, and therefore there does not seem to me to be any need to make a direction in order to give the liquidator protection in circumstances of doubt. 9 Section 556(1) states that certain debts and claims must be paid in a liquidation in priority to all other unsecured debts and claims. Subparagraph (a) specifies expenses "properly incurred by a relevant authority in preserving, realising or getting in the property of the company, or in carrying on the company's business". It appears on the evidence that the expenses incurred by Mr Lord fall into this category, but it seems to me his own fees as administrator do not. This is because subparagraph (a) excludes "deferred expenses". "Deferred expenses" are defined in s 556(2) to mean (to the extent relevant) expenses properly incurred by a relevant authority insofar as they consist of remuneration or fees for services payable to the relevant authority. "Relevant authority" is defined in the same subsection to include an administrator of the company, even if the administration ended before the winding up began. It seems to me that Mr Lord was a "relevant authority" as administrator during the three days in which he held that office, and therefore that his fees should be treated as deferred expenses. They have the priority afforded by s 556(1)(de). 10 I shall give Mr Lord the opportunity, by lodgement of a written submission, to draw attention to anything I may have overlooked in my observations about s 556, which would engender sufficient doubt to warrant a direction under s 479(3). If no submission is received in my Chambers by 8 April 2004, I shall make an order dismissing this part of the application on 13 April 2004. 11 In his application Mr Lord also seeks a direction that he is justified as liquidator in paying out of the company's property the amount of costs in respect of the application for the winding up order, in the sums of $25,872.69 and $442.75 and any GST payable on those amounts, in priority to all other unsecured debts and claims in accordance with s 556(1)(b). That subparagraph accords priority, in a case where the Court has ordered the winding up, such as the present case, to "the costs in respect of the application for the order (including the applicant's taxed costs payable under s 466)". 12 On 4 April 2002 the Court ordered that the assessed costs of the plaintiff in the proceeding for winding up the company be paid out of the property of the company. On 27 January 2004 a costs assessor issued a certificate that the fair and reasonable amount of costs to be paid to the plaintiff is $25,872.69, and another certificate that the costs of the costs assessor are $442.75. These are the sums in respect of which Mr Lord seeks a direction under s 479(3). On the evidence before me, I see no reason to doubt that the two amounts in question have been properly incurred as costs in respect of the application for the winding up order, and that they fall within the description of "taxed costs incurred by the applicant" for the purposes of s 466(2): see Legal Profession Act 1987 (NSW), Schedule 8, clause 45. On the material before me I cannot determine whether any amount of GST is payable, having regard to the comments on that subject made by the costs assessor in his reasons for determination. 13 Once again, I see no basis for providing the liquidator with a direction under s 479(3) on this matter. The Court's power to give directions is not there to provide a liquidator with comfort before he or she takes any step with legal consequences. In most cases the liquidator should apply the law (taking such advice as he or she may think appropriate) and act accordingly, without application to the Court. Intervention by the Court under s 479(3) is justifiable only to resolve some genuine doubt or in the other circumstances discussed in the GB Nathan case. However, in case I have overlooked some aspects of a matter that would justify making a direction, I shall give the liquidator the opportunity to lodge written submissions to be received in my Chambers by 8 April 2004, in the absence of which I shall also dismiss this part of the application on 13 April 2004. 14 Finally, the application seeks an order that the costs of the application be paid out of the assets of the company. As the bulk of the application relates to a direction concerning the liquidator's fees as administrator, upon which he has been successful in obtaining a direction under s 479(3), I accept that such a costs order is appropriate. The making of the order will be deferred until the balance of the application is dealt with on 13 April 2004.