In the matter of Lowery Classic Homes Pty Ltd (in liq) [2013] NSWSC 719

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Lowery Classic Homes Pty Ltd (in liq) [2013] NSWSC 719 Hearing dates: 20 May 2013 Decision date: 04 June 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Referred to Corporations Registrar to determine the question of the proper remuneration of the liquidator. Catchwords: CORPORATIONS - winding up - liquidators - application for the determination of liquidator remuneration where meeting of creditors lacked a quorum and no likelihood of quorum in future. Legislation Cited: Corporations Act 2001 (Cth) ss 499, 499(3), 499(6)-(7), 511, 511(1)(a), 549(3) Corporations Amendment (Insolvency) Act 2007 (Cth) Cases Cited: - Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 - Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822 - Palmer Re Harrison [2010] NSWSC 1400 - Re One.Tel Ltd (in liq) (Unreported, Supreme Court of New South Wales, 14 March 2011, Ward J) - Walker & Anor (as liquidators of One.Tel Ltd) [2005] NSWSC 557 Category: Interlocutory applications Parties: Bruce Gleeson (Plaintiff) Lowery Classic Homes Pty Limited (Defendant) Representation: Counsel: S. Calabretta (sol) (Plaintiff) Solicitors: ERA Legal (Plaintiff) File Number(s): 2013/136362

Judgment 1By Originating Process filed on 2 May 2013, the Plaintiff, Mr Bruce Gleeson in his capacity as liquidator of Lowery Classic Homes Pty Limited (in liq) ("Company") seeks an order for the determination of his remuneration by the Court under s 511 of the Corporations Act 2001 (Cth). In particular, he claims an order that in addition to any remuneration that has already been approved, his further remuneration for the period 9 September 2011 to 6 February 2013 be fixed in the amount of $40,997.50, exclusive of GST, or alternatively referred to a Registrar for review. The application is supported by an affidavit of Mr David Shannon dated 29 April 2013. Mr Shannon has had day-to-day carriage of the winding up of the Company, subject to Mr Gleeson's supervision. Factual background 2Mr Gleeson was appointed as liquidator on 9 September 2011 by a special resolution of the Company's sole director and shareholder. His appointment was confirmed at a meeting of the Company's creditors on 22 September 2011, and a committee of inspection with six members was appointed. At that meeting, creditors also approved his remuneration for the period from 9 September 2011 in the amount of $30,000 plus GST. 3Mr Shannon's evidence is that the liquidator then carried out investigations into the Company's affairs, identifying recovery actions in relation to debtors, insolvent trading claims and an unfair preference claim. 4By circular to the creditors' committee dated 23 February 2012, Mr Gleeson sought additional remuneration for the period 9 September 2011 to 20 February 2012 in an amount of $36,839.50 exclusive of GST (having previously drawn down the amount of $30,000 plus GST that previously been approved) and also sought approval for additional remuneration from 21 February 2012 for an amount of $30,000 plus GST. The members of the committee of inspection approved his additional remuneration for the period to 20 February 2012 in the amount sought, but did not pass a resolution approving his additional remuneration from 21 February 2012 onwards. The minutes of that meeting record that, following discussion with the committee of inspection, Mr Gleeson agreed to defer seeking approval of his future remuneration until a later meeting. 5By a report to the committee of inspection dated 7 February 2013, Mr Gleeson sought approval for additional remuneration for the period 9 September 2011 to 6 February 2013 in the amount of $40,997.50 and in the further amount of $5,000 for the period from 7 February 2013 until the conclusion of the liquidation. The amount of remuneration for which approval was sought, referable to the period from 9 September 2011 to 6 February 2013, was in addition to the amount of remuneration of $36,839.50 exclusive of GST which had already been approved for the period 9 September 2011 to 20 February 2012, and the amount of additional remuneration claimed had increased from $30,000 (for which approval had been sought at the meeting on 5 March 2012 and deferred) to nearly $46,000, although that comparison is not entirely straightforward because of the differing periods for which approval was sought. No member of the committee for inspection moved a motion for approval of Mr Gleeson's additional remuneration at the meeting of the committee of inspection on 25 February 2013. Mr Gleeson also advised the committee that it could not in any event pass that motion at that meeting since a majority of the members of the committee of inspection were not present at that meeting and a quorum was not established under s 549(3) of the Corporations Act. 6Mr Shannon's affidavit exhibits a copy of a remuneration report for the period 9 September 2011 to 6 February 2013 in the form attached to the liquidator's report to the committee of inspection dated 7 February 2013, and also exhibits a detailed description of the work performed, and his affidavit summarises the nature of that work. Mr Shannon also exhibits copies of employee timesheets and narrations recording the work undertaken over that period, extracted from a computer software program maintained by his firm. 7Mr Shannon's evidence is that, since the liquidator's appointment, a full dividend has been paid to the Company's former employees and no dividend has been paid to ordinary unsecured creditors; and it is unlikely that any dividend will be paid based on asset realisations to date and the Liquidator's outstanding remuneration and disbursements. 8Mr Shannon's evidence is that he and Mr Gleeson have formed the view that the mechanism for fixing of the liquidator's remuneration in the voluntary winding up under s 499 of the Corporations Act will not be capable of determining that remuneration, given the absence of a quorum at the last creditor's meeting and that the committee members present did not put a resolution for approval of the liquidator's further remuneration at that meeting. 9The Originating Process and Mr Shannon's supporting affidavit and exhibit has been served on those creditors whose representatives were appointed to the committee of inspection. Mr Calabretta, a solicitor employed by the firm of solicitors representing the liquidator, gives evidence of a telephone conversation with a representative of one of those creditors concerning those documents, in which Mr Calabretta made clear that the creditor had the ability to appear today in order to take objection to the liquidator's claim for remuneration. No creditors appeared to oppose that claim. Applicable principles 10Section 449 of the Corporations Act relevantly provides that the remuneration to be paid to the liquidator may be fixed, if there is a committee of inspection, by that committee or by resolution of the creditors. That section was amended by the Corporations Amendment (Insolvency) Act 2007 (Cth) to permit a meeting of creditors to fix a liquidator's remuneration in a creditors' voluntary winding up, even if there was a committee of inspection, and to introduce the requirements for information to be provided to the committee of inspection or creditors in s 499(6)-(7). 11Section 511(1)(a) of the Corporations Act in turn provides that the liquidator, or any contributory or creditor, may apply to the Court to determine any question arising in the winding up of a company. The Court may determine a liquidator's remuneration under that section where the process for approval of that remuneration under s 499 of the Corporations Act has failed or become unworkable or where a committee of inspection has stated that it is unable to approve that remuneration: Re Walker & Anor (as liquidators of One.Tel Ltd) [2005] NSWSC 557; (2005) 54 ACSR 11; Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822; Re One.Tel Ltd (in liq) (Unreported, Supreme Court of New South Wales, 14 March 2011, Ward J). 12In the ordinary course, the Court will not make orders under s 511 merely because a committee of inspection has not approved the liquidator's remuneration at a single meeting, since the process contemplated by s 499 of the Corporations Act contemplates that there will be an opportunity for interaction and debate and that the committee of inspection will be provided further information or explanation if it requests it and given adequate time to consider any explanation provided. However, the problem with the process for fixing the liquidator's remuneration is here more fundamental. 13It is apparent from the evidence that creditors are unlikely to receive a dividend from the liquidation and would be justifiably reluctant to devote time to the affairs of the committee of inspection in those circumstances; on the last occasion, the committee of inspection lacked a quorum and there is no reason to anticipate that that position would change if the liquidator called a further meeting; and it appears that neither of the two members who attended the last meeting was prepared to propose a resolution for the liquidator's remuneration, whether in the amount he sought or in some other amount. It does not seem likely that the liquidators convening a further meeting of the committee of inspection would change that position. It also does not seem likely that the liquidators convening a meeting of the creditors generally would resolve the difficulty, although s 499 of the Corporations Act now provides a power for him to do so, since there is no reason to think that creditors would devote time to attending such a meeting where there is no likelihood that they will receive a distribution in the winding up. 14In Palmer Re Harrison [2010] NSWSC 1400, Barrett J similarly ordered that the quantification of the remuneration of liquidators be referred to a Registrar, in circumstances that a meeting of creditors was asked to fix the liquidator's remuneration but did not do so, with no creditor moving a motion for a relevant resolution and that question not being put before the meeting for decision. His Honour there noted that s 499(3) provided a specific mechanism for fixing the remuneration of a liquidator in a creditor's voluntary winding but that, if creditors decline to perform the function of fixing the liquidator's remuneration, but did not have the result that the liquidators received no remuneration, but instead that a question had arisen in the winding up as to the proper quantum of their remuneration in the absence of a determination under s 499(3), which the Court could determine on an application made under s 511(1)(a) of the Corporations Act. 15In my view, that process for approval of the liquidator's remuneration has failed in respect of the relevant period. I consider that an order should therefore be made referring the liquidator's application for remuneration to the registrar to deal with the details of assessment and quantification on the basis that he or she will report back to the Court constituted by a judge, who may then make an order under s 511 of the Corporations Act, consistent with the course previously taken in Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 at [80] and in Palmer Re Harrison above. 16I therefore order that there be referred to the Corporations Registrar the question of the proper remuneration of Mr Bruce Gleeson (in his capacity as liquidator of Lowery Classic Homes Pty Limited (in liq)) (in addition to any remuneration that has already been approved by the committee of inspection) for the period 9 September 2011 to 6 February 2013, to determine the question of the quantum thereof and report to a Judge of the Court.