Blitz Telecom Operations Pty Ltd (In liquidation)
[2009] VSC 662
•24 June 2009
| IN THE SUPREME COURT OF VICTORIA |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST E
No. 4972 of 2009
IN THE MATTER OF: | |
| BLITZ TELECOM OPERATIONS PTY LTD (IN LIQUIDATION) | |
| AND IN THE APPLICATION OF: | |
| ANTHONY ROBERT CANT and SIMON PATRICK NELSON | Plaintiffs |
| (as Administrators of Blitz Telecom Operations Pty Ltd) (ACN 123 769 880) |
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ASSOCIATE JUSTICE: | Gardiner AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 June 2009 | |
DATE OF JUDGMENT: | 24 June 2009 | |
CASE MAY BE CITED AS: | Blitz Telecom Operations Pty Ltd (In liquidation) | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 662 | |
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CORPORATIONS – External administration – Administrator’s application pursuant to section 449E(1)(c) of the Corporations Act 2001 for determination of remuneration as administrator.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr S. Rubenstein | Aitken Walker & Strachan |
REASONS
The Plaintiffs, Messrs Cant and Nelson, make application by originating process filed 27 February 2009, pursuant to s 449E(1)(c) of the Corporations Act2001 (Cth) (“the Act”) that their remuneration as administrators under part 5.3A of the Act for the period 5 July 2008 to 28 July 2008 be determined in the sum of $48,853 plus GST.
On 16 December 2008, prior to the filing of the originating process, the solicitors for the administrators sent to each of the creditors of the company a formal notice of intention to apply for remuneration together with the principal affidavit in support of the application of Simon Patrick Nelson dated 12 December 2008. The affidavit of Lauren May Nicole Elsegood sworn 23 December 2008 states that such notices were posted on 16 November 2008. I have assumed that it was a typographical error and should be a reference to 16 December 2008.
As a result of the service of such notices, four persons contacted the solicitors for the administrators and were then regarded as objectors to the application. The originating process was first returnable before Efthim AsJ on 20 March 2009. On that occasion Mr George Capozza appeared as an objector and orders were made adjourning the application for the purpose of Mr Capozza filing and serving affidavits in opposition to the application by 15 April 2009. The application was adjourned to 11 May 2009.
On 11 May 2009, the matter again came before Efthim AsJ and Mr Capozza was represented by Counsel. Mr Capozza had not complied with the orders made by Efthim AsJ on 20 March 2009 in respect of the service of further affidavit material. Orders were made giving him further time in that regard and he was ordered to pay the administrators’ costs of the adjournment.
On 11 May 2009, Mr Capozza filed an affidavit sworn by him on 8 May 2009 but did not file any further affidavit material as contemplated by Efthim AsJ’s orders. Mr Capozza’s affidavit of 8 May 2009 complains in general terms about the manner in which the administrators have conducted the administration. I do not consider that the matters raised in the affidavit have any relevance to the application for remuneration.
The administrators rely principally on the affidavit of the second named administrator, Simon Patrick Nelson sworn 12 December 2009. Mr Nelson deposes to his and Mr Cant’s appointment on 10 June 2008. The first meeting of creditors of the administration was conducted on 19 June 2008. The meeting which was required to be convened under s 439A of the Act was convened by notice dated 3 July 2008. The meeting was held on 11 July 2008 and was adjourned to 28 July 2008. The purpose of the adjournment was to enable a revised Deed of Company Arrangement Proposal to be formalised.
At the adjourned meeting on 28 July 2008, the creditors of the company resolved not to accept the Proposed Deed of Company Arrangement, that the company be wound up pursuant to s 439C(c) of the Act and appointed Mr Cant and Mr Nelson as liquidators of the company.
At the meeting on 28 July 2008 the creditors were asked to approve a resolution that the administrators’ remuneration for the period 5 July to 28 July 2008 be approved and fixed in the sum of $30,000 plus GST. Mr Hynes, who held 18 proxy votes mainly from former employees of the company, voted against the resolution for remuneration. This caused the resolution to be defeated despite it being supported by the majority in value of creditors. Accordingly, the administrators now make application for the remuneration to be fixed by the court pursuant to s 449E(1)(c) of the Act.
At the first meeting of creditors convened pursuant to section 439A of the Act on 11 July 2008, the creditors approved the administrators’ remuneration for the period 10 June 2008 up to 5 July 2008 at $71,992.45. Mr Nelson deposes that this was a 15% discount on the actual value of the time spent, according to the administrators’ time records, which was $84,697.
At the hearing of this application on 24 June 2009, I raised with Mr Rubenstein, Counsel for the administrators, what regard I should have to the administrators’ proposal at the meeting of 28 July 2008 to fix their remuneration at $30,000 plus GST. I accept his submission that I should not be bound by that figure when exercising my discretion in this application, as it was put to the creditors who, as a voting body, resolved to reject it. I therefore consider that I am at liberty to exercise my discretion in the matter having regard to the criteria set out in s 449E(4).
The affidavit of Mr Nelson of 12 December 2008 reveals that the administrators and their staff performed a significant amount of work in connection with the administration in the period for which remuneration is sought. Prior to being placed into administration, the company retailed and wholesaled voice, data and internet carriage services to businesses and residential users. The period for which remuneration is sought involved relatively intense activity requiring tasks ranging from sophisticated commercial negotiation to commonplace communication with creditors, most of whom who were disgruntled customers of the company.
The time spent by the various persons involved in the administration is the subject of a spreadsheet which forms part of Exhibit SPN-4 to Mr Nelson’s affidavit. I have examined that document carefully and the entries appearing in it conform with the chronicle of the administration set out in Mr Nelson’s affidavit.
The first segment of the document sets out various disbursements totalling $2,878.75. In Venetian Nominees Pty Ltd & Ors v Conlan,[1] the Full Court of the Supreme Court of Western Australia observed that disbursements should not be determined under the legislative precursor which applied in the circumstances of that case to the fixing of remuneration for provisional liquidators and I decline to enter upon an assessment of the propriety of those disbursements in this application.
[1](1998) 16 ACLC 1653 at 656.
The balance of this spreadsheet, from pages 4 to 14, records time spent at various tasks by the administrators’ employees. Although the task undertaken is summarised in very succinct terms, I am satisfied that the tasks carried out by those persons was appropriate having regard to their particular position in the hierarchy of the administrators’ organisation. I have asked the administrators to file an affidavit which identifies each of the persons named in the spreadsheet by reference to their position in the firm and their hourly rate. I am satisfied that the hourly rate charged against the time spent for the various tasks identified is within the general range of those charges of other insolvency practitioners practising in the Melbourne area.
Section 449E(4) of the Act provides:
In exercising its powers under subsection (1), (1A) or (2), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a)the extent to which the work performed by the administrator was reasonably necessary;
(b)the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary;
(c)the period during which the work was, or is likely to be, performed by the administrator;
(d)the quality of the work performed, or likely to be performed, by the administrator;
(e)the complexity (or otherwise) of the work performed or likely to be performed by the administrator;
(f)the extent (if any) to which the administrator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the administrator was, or is likely to be, required to accept higher level of risk or responsibility than is usually the case;
(h)the value and nature of any property dealt with, or likely to be dealt with, by the administrator;
(i)whether the administrator was, or is likely to be, required to deal with:
(i)one or more receivers; or
(ii)one or more receivers and managers;
(j)the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;
(k)if the remuneration is ascertained, in whole or in part, on a time basis:
(i)the time properly taken, or likely to be properly taken, by the administrator in performing the work; and
(ii)whether the total remuneration payable to the administrator is capped;
(l)any other relevant matters.”
Subsection 4 was inserted by an amendment to the Act which took effect from 31 December 2007.
In Re Stockford Pty Ltd[2] Finkelstein J of the Federal Court prescribed an approach to be taken in remuneration applications. His Honour stated at paragraph 47 of the decision:
[2](2004) 140 FCR 424.
[47]It seems to me that the proper approach is first to establish what in the United States cases fixing the fees of trustees and attorneys under the Bankruptcy Code is called the “lodestar” amount. This amount is reached by the number of hours reasonably spent by the insolvency practitioner multiplied by a reasonable hourly rate: Re Boston and Maine Corp v Moore 776 F 2d 2 at 7 (1st circ 1985); Copeland v Marshall 641 F 2d 880 at 891 (DC Circ 1980). This step will require the tribunal to decide whether the work performed was necessary to the administration, whether it was performed within a reasonable time and whether the rate is reasonable having regard to what the practitioner, and other practitioners, usually charge their clients. The “lodestar” amount should then be adjusted (up or down) to reflect other factors including the quality of the work performed, the complexity in the administration over and above the normal complexity of such work, the novelty and difficulty of the issues that confronted the administrator as well as the ultimate result obtained by him.
[48]To have his fees fixed it will be necessary for the administrator to do more than simply state the amount of time spent and the rate to be charged for that time, as happened in this case. The amount of detail to be provided in support of a claim must be proportionate to the size of the estate and the amount of time spent. A useful discussion of what is required appears in Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NXLR 143 at 155:
In our view the exercise which must be undertaken by the court in fixing the reasonable costs of the liquidator is similar to that which is undertaken when approving solicitor and client costs or costs for legal aid purposes. In each case what is required is enough information to enable an assessment to be made as to whether the total costs charged are reasonable.
As a minimum it seems to us that what is required is a statement of the work undertaken during the course of the liquidation, together with an expenditure account sufficiently itemised to enable the charges to be made related to the work done. The detail would have to be sufficient to enable the judicial officer to determine whether the personnel involved in the liquidation and their respective charge out rates were appropriate to the nature of the work undertaken. Their information may in some cases raise concerns as to whether there has been overservicing or overcharging. If there are suggestions of this in the information provided, the Court can request further information.
See also Mirror Group Newspapers Plc v Maxwell (No 2) 1 BCLC 638 at 648: (“[The office holder] must explain the nature of each main task undertaken, the considerations which led them to embark upon that task and, if the task proved more difficult or expensive to perform that at first expected, to persevere in it. The time spent needs to be linked to this explanation, so that it can be seem what time was devoted to each task”); Re Solfire Pty Ltd (in liq) (No 2) [1999] Qd R 182 at 191: (“[W]hen a provision liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in takable form provided by a solicitor to his client…”); Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 103: (“It may well be that in a particular case information particularised as suggested by [the judge in Re Solfire Pty Ltd (in liq) (No 2)] would be appropriate. In other cases less detailed information may be required. Every case depends on its own circumstances. But the overriding principle remains: sufficient information must be provided to the court to enable it to perform its function…”).
The approach of Finkelstein J differs from the approach taken by Dodds-Streeton J (as she then was) in a remuneration application of Re ACN 004 323 184 Pty Ltd [2002] VSC 353 which in turn followed the decision of the Full Court of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd v Conlan to which I referred above. The approach taken by Finkelstein J is, in my view, appropriate for application in remuneration applications under s 449E(4).
I consider that the amount sought by the administrators in their application, $48,853 with additional GST of $4,885.30, is an appropriate figure for use as the ”lodestar” amount in the circumstances. That amount is reached by the number of hours reasonably spent by the insolvency practitioner multiplied by a reasonable hourly rate. As I have said, the time spent by the administrators and their employees as recorded in the spreadsheet is reasonable having regard to the tasks performed vis-à-vis hourly rates applied. One then has to apply the statutory criteria set out in s 449E(4). The administrators set out in paragraphs 16 to 40 of Mr Nelson’s affidavit of 12 December 2008 the various factors which they say should be applied by me in the exercise of my discretion. As to the various factors, I observe as follows:
· So far as it is possible for me to do so I have assessed the entries on the spreadsheet, which is exhibit SPN-4, and have come to the view that the work described was reasonably necessary;
· I consider that the various tasks undertaken appear to have been performed by persons who are appropriate to perform them. The administrators conducted the sophisticated commercial negotiations and superintendence of the tasks performed by their employees and, at the other end of the scale, what might be described as the menial level communications with creditors were undertaken by employees at the relevantly junior level in the hierarchy of the administrators’ office;
· The administration is a relatively complex one which on occasion required involved negotiations. For the period in which remuneration is sought in this application the company no longer traded but the administrators were required to deal with the aftermath of that trading;
· The level of risk and responsibility undertaken by the administrators was significant, made more risky by the apparent failure of an indemnity which was to be provided by RSI Securities Pty Ltd. That indemnity was to enable the administrators to meet the costs of trading of business during the administration;
· The debtors ledger for the company recorded amounts owing to it of $1.1 million, however thus far only $77,907.08 has been collected;
· Although the company had charges registered against it, neither of the two charge holders appointed receivers to the company which required interaction with receivers.
In all the circumstances I consider it appropriate to reduce the “lodestar” figure by 15%. I am to a degree influenced by the application by the administrators themselves to a discount of that percentage to the remuneration approved by the company’s creditors for the period dating from the administrators’ appointment to 5 July 2008.
I order pursuant to s 449E(1)(c) of the Act that the remuneration of the Plaintiffs as administrators of Blitz Telecom Operations Pty Ltd (in liq) for the period 5 July 2008 to 28 July 2008 be fixed in the sum of $41,525 plus GST of $4,152. I also order that the Plaintiffs’ costs of the application and the proceeding, including reserved costs be costs in the administration.
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