In the matter of Johanna Johnson Pty Ltd [2016] NSWSC 1943

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Johanna Johnson Pty Ltd [2016] NSWSC 1943 Hearing dates: 15 November 2016 Decision date: 15 November 2016 Jurisdiction: Equity - Corporations List Before: Black J Decision: Order that the former administrator of the company be entitled to receive remuneration in the amount of $42,970 exclusive of GST. Catchwords: CORPORATIONS – Receivers, controllers and managers – Remuneration and expenses – whether meeting of creditors or the Court can determine former administrator's remuneration after the end of the administration pursuant to Corporations Act 2001 (Cth) s 449E – whether and to whom notice of the former administrator's application should be given. Legislation Cited: - Corporations Act 2001 (Cth), ss 447A, 449E, 479(3) Cases Cited: - Re CMC Cairns Pty Ltd (in liq) [2011] QSC 240 - Re Currabubula Holdings Pty Ltd (in liq); ex parte Lord [2004] NSWSC 255; (2004) 48 ACSR 734 - Re El Zorro Transport Pty Ltd [2014] NSWSC 135; (2014) 287 FLR 245 Category: Procedural and other rulings Parties: Alana Rose Teasel (Plaintiff) Johanna Johnson Pty Ltd (administrator appointed) (Defendant) Representation: Counsel: M Rosenblatt (Solicitor – Defendant/Applicant)

Solicitors: Somerset Ryckmans (Defendant/Applicant) File Number(s): 2016/57147

Judgment – ex tempore 1. By Interlocutory Process filed on 15 November 2016, Mr Adam Shepard, in his capacity as former administrator of Johanna Johnson Pty Ltd (Administrator Appointed) ("Company") applies, on several alternative bases, for an order to give effect to his remuneration for work done as administrator of the Company for the short period, 13 April 2016 to 26 April 2016, for which he was appointed as administrator before a liquidator was appointed to the Company. 2. The factual background to the application is straightforward, although the question of the jurisdiction which the Court exercises in making a relevant order is a little more complex. Mr Shepard's application is supported by his affidavit dated 3 November 2016, where he notes that he was appointed as voluntary administrator of the Company on 13 April 2016, and ceased to be the administrator on 27 April 2016, when orders made by Brereton J took effect, and the Company was wound up and Mr Cook was appointed as its liquidator. 3. Mr Shepard's evidence is that, on 9 September 2016, the liquidator convened a meeting of creditors in order to consider, inter alia, the liquidator's request for creditor approval of the liquidator's remuneration. That meeting also considered Mr Shepard's request for remuneration for the period in which he had been administrator. That meeting appears to have been attended by several creditors, largely by proxy, and passed a resolution, unanimously on the voices, that Mr Shepard's remuneration from 13 April 2016 to 26 April 2016 be approved on a time basis in accordance with rates of charge issued by his firm attached to his remuneration report in an amount of $42,970 excluding GST. Creditors were informed that Mr Shepard was seeking regulatory guidance in relation to his fees and expected that he would be required to approach the Court for approval, and it was noted that he would not seek to have the creditors bear the costs of such an application. 4. The complexity in this application arises not from its factual basis, since in the ordinary course one would expect that the Court would approve an amount of remuneration that had already been approved by creditors, who would generally be the best judge of their own interests, on a basis consistent with the former administrator's rates of charge at the point of his appointment. The question is, however, the basis on which that could occur. I have had the benefit of written submissions from Mr Rosenblatt, who appears for the former administrator in that regard. Mr Rosenblatt has taken me to the decision of Brereton J in Re El Zorro Transport Pty Ltd [2014] NSWSC 135; (2014) 287 FLR 245 and to several other decisions to which his Honour referred in that case. 5. In Re Currabubula Holdings Pty Ltd (in liq); ex parte Lord [2004] NSWSC 255; (2004) 48 ACSR 734 at [6], Austin J contemplated that a former administrator of a company could apply to the Court for approval of his remuneration, under s 449E(1)(b) with the Corporations Act (as that section stood prior to 2007 amendments), after an administration had come to an end. However, his Honour ultimately did not order remuneration under s 449E of the Corporations Act but instead dealt with the question under s 479(3) of the Corporations Act where the administrator in that case had subsequently become the liquidator of the company. That is not the case here, where Mr Shepard has, of course, been displaced by the appointment of Mr Cook as liquidator. 6. In Re CMC Cairns Pty Ltd (in liq) [2011] QSC 240, which is again not precisely on point, Atkinson J dealt with a situation where creditors had approved further remuneration of administrators, between a second meeting of creditors and a point at which the company went into liquidation, but had done so at an annual general meeting of the company. Her Honour observed that that approval was given at the point the company was already in liquidation, and was not strictly a resolution of the creditors of the company under administration, and was therefore not effective under s 449E(1)(b) of the Corporations Act to be sufficient authority for the applicants to be paid their fees. Her Honour there proceeded on the basis that, notwithstanding that s 449E(1)(b) of the Corporations Act did not apply, an order could be made under s 447A of the Corporations Act to support the payment of the relevant remuneration. 7. In Re El Zorro Transport Pty Ltd above, Brereton J took a somewhat different view, expressing the view that s 449E(1)(b) should not be construed as limited to a resolution of the company's creditors while a company is a company under administration, and would extend to a resolution of the company's creditors even after the company had gone into liquidation. On that view then, in the present circumstances, the resolution of creditors passed at the meeting of the Company's creditors on 9 September 2016 provides sufficient authority for the payment of Mr Shepard's remuneration. It seems to me that there is substantial force in his Honour's view. First, it is consistent with the language of the section. Second, it permits remuneration to be paid to the person who was the administrator of a company under administration, where that remuneration is approved by resolution of the company's creditors in circumstances that such approval would often have to be determined at a point that the company is no longer under administration. As a matter of policy, there also seems no reason to read down that section, to insert a requirement which is not expressly found in it, that the resolution be passed while the company remains under administration. On that basis, I would be inclined to take the same view as Brereton J has taken. 8. Having said that, it seems to me that the matter is not beyond doubt. I also take the view, which Brereton J took in Re El Zorro Transport Pty Ltd that, whatever the scope of s 449E(1)(b) of the Act in the relevant circumstances, s 449E(1)(c) would enable the Court to fix the administrator's remuneration in the absence of a relevant resolution, whether before or after the administration has come to an end. 9. In these circumstances, whatever the complexity of the analysis, the outcome is clear enough. I would prefer the view, consistent with that expressed by Brereton J, that the remuneration of Mr Shepard is here determined under s 449E(1)(b) of the Corporations Act by resolution of the Company's creditors. If the relevant remuneration were approved under s 449E(1)(b) of the Corporations Act, there would strictly be no need for a further order of the Court. 10. If I were incorrect in that view, and there is no such effective resolution of the creditors, because the resolution was passed after the administration had ceased, then I would myself determine Mr Shepard's remuneration, to give effect to the decision of creditors, in the amount determined by creditors by that decision. Mr Rosenblatt also points out, and I accept, that the Court could properly review the remuneration determined by creditors under s 449E(2) of the Act and confirm that remuneration, in order to avoid any doubt as to the effect of that resolution. Whether the remuneration was determined under s 449E(1)(b), by resolution of creditors, or under s 449E(1)(c) by a decision of the Court, or by a review by the Court under s 449E(2), the outcome would be the same. I also agree with the view expressed by Brereton J in Re El Zorro Transport Pty Ltd that it is not necessary to rely on s 447A of the Corporations Act in that respect.