Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd (No 2)
[2012] VSC 500
•12 October 2012
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
S CI 2011 00647
| BARBO GROUP PTY LTD (trading as Alice Roof Tiles) ACN 005 105 724 | Plaintiff |
| v | |
| INVESTMENT AND CONSTRUCTION ENTERPRISE PTY LTD (ACN 102 333 951) | Defendant |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | Last submissions filed 4 June 2012 | |
DATE OF JUDGMENT: | 12 October 2012 | |
CASE MAY BE CITED AS: | Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 500 | |
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CORPORATIONS – Application for winding up insolvency – Application by liquidators for their remuneration under Section 473(3) of the Corporations Act2001 (Cth) – Consideration of what orders for costs should be made consequent on award of remuneration to liquidators.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Kohn | Leonard Legal |
| For the Defendant | Mr A. Sandbach | Goldsmiths Lawyers |
HIS HONOUR:
On 6 April 2011, the defendant was ordered to be wound up in insolvency. Mr Clyde White and Mr David Charles Quinn were appointed as joint and several liquidators in the winding up.
On 6 May 2011, the winding up orders were set aside and the defendant was ordered to pay the liquidators’ remuneration and costs, which if not agreed were to be fixed by the Court. The Court was required to be involved in the process because no committee of inspection was appointed by the creditors, nor was there any resolution by the creditors approving the remuneration, as contemplated by s 473(3) of the Corporations Act2001 (Cth) (“the Act”). Unlike the situation in most remuneration applications, where the contradictor is a significant creditor or, on occasion, ASIC, the defendant having been ordered to meet such liability as part of the terms on which the winding up was terminated, was the sole contradictor. As such, it became something akin to a party litigant in inter partes litigation.
On 18 October 2011, Messrs White and Quinn made an application for their remuneration by interlocutory process. The defendant opposed the award of remuneration. The liquidators’ application by interlocutory process was heard in February 2012. On 2 March 2012, I made orders pursuant to s 473(3) of the Act that the liquidators’ entitlement to remuneration be fixed at $17,787.52 excluding GST. I published reasons for coming to that determination.[1]
[1]Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd [2012] VSC 71 (“Reasons”).
As my reasons made clear, the application before me was not concerned with the approval or quantification of costs and disbursements, as such matters are not within the Court’s power to determine in an application for liquidators’ remuneration.[2]
[2]Ibid, [8]; Venetian Nominees v Conlan (1998) 16 ACLC 1653.
I made orders awarding the liquidators’ remuneration in respect of two periods. For the period 8 April 2011 to 12 May 2011, when the liquidators were in office and several days afterwards, I awarded the sum of $12,734.27. That figure was arrived at after a reduction of 15% of the “Lodestar”[3] figure of $14,981.50. That reduction was made because I considered that on the evidence before the Court it was a relatively unremarkable liquidation, which did not involve significant commercial risk and responsibility. For the second period, which related to the tasks performed after the winding up order was set aside on 1 December 2011, I reduced the amount claimed by the liquidators for the reasons set out at paragraph 41. The liquidators had claimed a total of $12,990, excluding GST, as their remuneration for that period. However, I reduced the amount claimed to a figure of $5,945, which I adopted as the “Lodestar” figure and again, on an application of the relevant statutory criteria, reduced that amount by 15%. This resulted in an award of remuneration for that period of $5,053.25.
[3]See the decision of Finkelstein J in Re Stockford (2004) 52 ACSR 279, [47] which dealt with an application under the legislative precursor of s 473.
When I delivered my reasons, the parties indicated that they wished to make written submissions on the question of what order for costs should be made. The parties also filed affidavit material, which exhibited without prejudice (save as to costs) correspondence passing between them. The defendant relied on an affidavit of Patrick Dunell sworn 8 May 2012. The liquidators relied on affidavits of Filomena Maffi, sworn 8 May 2012, and of Garry Goldsmith sworn 4 June 2012.
In his affidavit, Mr Dunell, the solicitor for the liquidators, exhibits correspondence relating to certain offers, which were exchanged in an apparent quest to resolve the remuneration application. The exchange of correspondence exhibited by Mr Dunell occurred between May 2011 and August 2011. On 13 May 2011, shortly after the winding up was terminated, Mr Quinn wrote to Mr Goldsmith, the solicitor for the defendant, and noted that the fees, out of pocket expenses and costs of the liquidation totalled $23,731.94. Of that sum, Mr Quinn sought remuneration of $16,479.65. On 20 May 2011, Mr Goldsmith wrote back to Mr Quinn stating that the defendant disputed the reasonableness of Mr Quinn’s charges and made a counteroffer to resolve the matter for $19,000. Mr Goldsmith did not give a break‑down of how that figure was to be appropriated but it was clearly an all‑in offer to resolve the issue of remuneration, disbursements, legal costs and other expenses.
On 31 May 2011, Mr Quinn wrote back to Mr Goldsmith, rejecting the offer made by Mr Goldsmith on 20 May 2011. He stated that all of his remuneration and expenses were properly incurred and reasonable. However, Mr Quinn noted that, while he had previously claimed an amount of $23,731.94, this inadvertently failed to include the costs of advertising, which amounted to $368.37. He stated that his total claim, therefore, amounted to $24,100.37. However, he was prepared to accept the original amount claimed of $23,731.94.
By a letter dated 15 April 2011 and obviously from the context written on 15 June 2011, Mr Goldsmith rejected Mr Quinn’s position as set out in Mr Quinn’s letter of 31 May 2011 and re-put the offer made on 20 May 2011, that is, a total of $19,000 all‑in. On 1 July 2011, Mr Goldsmith again wrote to Mr Quinn. It seems that since the last letter of Mr Goldsmith of 15 June 2011, Mr Quinn had in the meantime made an offer of $22,500 directly to the defendant. Mr Goldsmith also rejected that offer and made a counteroffer of $19,500.
On 15 August 2011, Mr Dunell wrote to Mr Goldsmith on behalf of Mr Quinn stating that Mr Quinn would accept $25,000 from the defendant as a full and final payment of remuneration and expenses. Mr Dunell also said that should this offer not be accepted, an application would then be made for the liquidator’s full costs in the sum of $36,100.31. On 19 August 2011, Mr Goldsmith made a final counteroffer of $21,000 all‑in.
All of the letters referred to above are expressed to be without prejudice save as to costs.
I note at this juncture that the parties exchanged offers and counteroffers using the generic word “costs”. However, it seems clear from the context of the correspondence that the offers were intended to include and were directed to resolution of the liquidators’ entitlement to legal costs and disbursements, as well as remuneration. The affidavit of Ms Maffi, which was filed on behalf of the defendants on 8 May 2012, confirmed that this was the basis on which the offers were made. The current application is, of course, only related to remuneration. The series of offers and counteroffers related, it seems, to the period of the liquidation itself and did not include, other than the several days immediately thereafter, the second period for which I have fixed remuneration, that is, from 13 May 2011 to 1 December 2011.
In my earlier reasons, I determined that the amount of remuneration for the first period should be fixed at $12,734.27. Initially, Mr Quinn made a claim for a sum of $16,479.65 as remuneration for that period. The subsequent correspondence, which I have set out above, reveals that Mr Quinn maintained his claim for that sum and indeed by mid‑August 2011 had sought a total of $25,000, coupled with an indication that if this figure was not accepted an application would then be made for the liquidators’ “full costs” in the sum of $36,100.31.
If Mr Quinn had accepted the offer made by Mr Goldsmith in the letter of 19 August 2011 of $21,000 all in, the application for remuneration could have been disposed of much more economically. Acceptance of the $21,000 offer would have enabled payment of the remuneration that I have awarded of $12,734 (i.e. $14,007.40 inclusive of GST). In addition, it most probably would have enabled Mr Quinn’s legal fees, costs and disbursements claimed in his letter of 13 May 2011, totalling $7,522.29, to be paid in full. In this regard I note that, of that sum, the amount claimed for legal costs ($6,036) was subsequently assessed by Grace Cost Consultants on behalf of the liquidators on 20 April 2012 and reduced to $4,672. That assessment is said to relate to the costs for the period from 2 May 2011 when the solicitors commenced acting on behalf of the liquidators, until 21 August 2011, the date of the last settlement offer.
Although in the absence of other contradictors, the defendant became something of a party litigant in the application, in order for the liquidators to be legally awarded their remuneration an application to the Court was still strictly necessary. However, I do not consider that it would have been necessary for the liquidators to have produced evidence of the comprehensive and detailed kind that they have proceeded to produce in support of this application. I would not have required Mr Quinn to descend to anything like the degree of detail that he has in his evidence to justify the claim for remuneration, if I was informed that the matter was the subject of consent orders.
In the circumstances, I consider that Mr Quinn should have accepted the offer made by the defendant prior to the issue of this application and that he should pay the defendants’ costs, including costs reserved on 4 November 2011. His final position, of $25,000, while not very wide of the mark, was found not to be justified. It was coupled with the observation that if it was not accepted, an amount of $36,100 would be sought.
However, despite the exchange of Calderbank letters, I do not consider it is appropriate in the exercise of my discretion to award the defendant its costs on an indemnity basis. The determination of remuneration involves the exercise of a discretion and I consider it is harsh to expect parties, when formulating offers which have costs consequences, to be able to predict with a high degree of accuracy what the Court’s determination will be to the liquidators’ entitlements and if they propound a figure, though not widely at odds with the amount determined by the Court, is higher than the amount ordered, to be ordered to pay the costs on a special basis. As it is, the defendant will have its costs but the circumstances, in my view, do not have features which warrant a solicitor- client order.
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