Campbell & Diboll (No 3)

Case [2022] FedCFamC1F 47


FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Campbell & Diboll (No 3) [2022] FedCFamC1F 47

File number(s): WOC 455 of 2013
Judgment of: GILL J
Date of judgment: 10 February 2022
Catchwords: FAMILY LAW – ENFORCEMENT – Family company winding up – Remuneration of liquidators based on court order for the equal split of costs between parties – Liquidators pursuing costs from one of the separated parties – Whether the calculations presented by the liquidators amounted to proper costs for the parties to pay – Onus upon liquidators to establish that costs are proper – Evidence incapable of establishing whole of costs sought are proper – Recalibration of proper costs.
Legislation:

Corporations Act 2001 (Cth) s 545

Family Law Act 1975 (Cth) s 117

Family Law Rules 2004 (Cth)

Cases cited:

Adsett v Berlouis (1992) 37 FCR 201

Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd (2002) 174 FLR 1

Kelly, in re Halifax Investment Services Pty Ltd (in liq) (No 9) [2020] FCA 925

Re Beddoe, Downes v Coltam [1893] 1 Ch D 547

Division: Division 1 First Instance
Date of hearing: 7–8 October 2021 & 27 January 2022
Place: Canberra
Counsel for the Applicant: Mr Lipp
Solicitor for the Applicant: Chamberlains
Counsel for the Respondent: Mr Moller
Solicitor for the Respondent: Farrar Gesini Dunn

ORDERS

WOC 455 of 2013

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR X & MR Z
Applicants

AND:

MS DIBOLL

Respondent

ORDER MADE BY:

GILL J

DATE OF ORDER:

10 FEBRUARY 2022

THE COURT ORDERS THAT:

1.The Amended Application in a Case filed 25 June 2021 is dismissed (save for the issue of costs).

2.The Applicants, Mr X and Mr Z, are jointly and severally liable to pay to the Respondent the sum of $8,118.37 within 14 days of the delivery of this judgment to the account that she nominates in writing to them. 

3.The proceedings are adjourned to 10 am on 11 April 2022 for the hearing as to the outstanding costs applications and any costs application pursued as a result of the judgment.

4.Any party pursuing costs is to file and serve written submissions as to such limited to no more than five pages and any further evidence relied upon by 4 pm on 24 February 2022.

5.Any party resisting such is to file and serve submissions in reply of no more than five pages by 4 pm on 10 March 2022.

Note:   The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very…

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Campbell & Diboll (No 3) [2022] FedCFamC1F 47
Case
[2022] FedCFamC1F 47
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CaseChat Overview and Summary

The case of Campbell & Diboll (No 3) involved the liquidators seeking remuneration under specific orders made by Faulks DCJ. The central issue was the determination of the liquidators' remuneration, which was to be decided based on the orders of Faulks DCJ rather than the Corporations Act or the Insolvency Practitioner’s Statement (IPS). The primary concern was whether the liquidators had properly established that their claimed costs were appropriate. The liquidators' primary evidence of propriety was the approval of remuneration obtained at four creditors' meetings. However, the court found that the creditors' meetings were insufficient to establish the propriety of the liquidators' costs. The court held that the mere approval by creditors, particularly those not directly affected by Ms Diboll's obligations, carried little weight in determining the propriety of the costs. Additionally, the conduct of the third and fourth meetings, which lacked Ms Diboll's approval, cast doubt on their credibility.

The legal issues before the court were whether the liquidators had met the burden of proving the propriety of their claimed costs, given the specific orders made by Faulks DCJ. The court examined the nature of the creditors' meetings and whether they were sufficient to establish the liquidators' costs as proper. The court also considered the distinct nature of the obligations under Faulks DCJ's orders compared to those under the Corporations Act. The central issue was the weight to be given to the creditors' approval in the context of Ms Diboll's specific obligations.

The court concluded that the liquidators had not successfully established the propriety of their claimed costs. The approval obtained at the creditors' meetings was insufficient to meet the burden of proof required under Faulks DCJ's orders. The court found that the creditors' meetings, particularly those without Ms Diboll's approval, did not adequately establish the propriety of the liquidators' costs. Furthermore, the court noted the distinct obligations under Faulks DCJ's orders, which differed significantly from those under the Corporations Act. The court held that the liquidators had not met their burden of proving that their costs were proper.

The court ordered that the liquidators' claims for remuneration were not to be paid from Ms Diboll's personal assets. The liquidators were required to pursue their claims for remuneration through other available means, as the creditors' meetings did not sufficiently establish the propriety of their costs. The court's decision was based on the specific obligations set out in Faulks DCJ's orders and the inadequacy of the creditors' meetings in establishing the liquidators' claims.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The wife relies upon the following material:(a)Amended Response to an Application in a Proceeding filed 5 October 2021; (b)Affidavit of Ms Diboll filed 1 October 2021;(c)Affidavit of Mr E filed 1 October 2021; and(d)Case outline document filed 5 October 2021.The liquidator’s remuneration As noted above, it was ultimately common between the parties that the issue of the remuneration of the liquidators was to be determined by reference to the orders of Faulks DCJ and, accordingly, that they were not matters to be determined by reference to the Corporations Act or the IPS. The orders of Faulks DCJ imposed an obligation of remuneration distinctly different to that created by the Corporations Act. Based on the orders of Faulks DCJ the key determinant of the liability of Ms Diboll to meet the costs of the liquidator pursuant to those orders is that the liquidators establish that their claimed costs are proper. The burden lies upon the liquidators to establish this. The central plank relied upon by the liquidators is the approval of remuneration that they have received at the four creditors’ meetings that they have conducted. A summary of those four meetings is set out below. There are two reasons why the creditors’ meetings are limited in their cogency to establish the liquidators’ claims as proper. Firstly, while the creditors’ approval is a factor that may be taken into account under the Corporations Act, even there it is not necessarily definitive. Even if it was, it should be acknowledged that the circumstances being addressed under the Corporations Act are very different from those pursuant to the orders of Faulks DCJ. In particular, where the liquidator is acting under the Corporations Act the liquidator takes remuneration from the estate (subject to an order pursuant to s 545 of the Corporations Act). There is no further obligation cast upon persons to meet the liquidator’s expenses and, as the persons or entities interested in the estate, the creditors who approve remuneration do so under circumstances where it is taken from the estate that is available to fund their various claims. Here, once the estate was exhausted the creditors were effectively voting an approval for a third party to pay the expenses. Under those circumstances, where it was not Ms Diboll voting in favour of the remuneration, the mere approval of the other creditors carries little or no weight in determining propriety. Further, under the Corporations Act the liquidator is under no duty to engage in expenditure that cannot be met from the estate, and it is not in any event in the liquidator’s interest to do so, as there is no available source to recoup from. Here the orders set up a distinctly different scheme. Where Ms Diboll has voted in favour of the remuneration (as she did on the first two meetings) this may be taken as an admission against interest on her part and as such carries significant weight to establish that the costs were proper. Secondly, the manner of conduct of the third and fourth meetings, which were not marked by Ms Diboll’s approval, were such as to cast further doubt upon their credibility to establish the costs as proper.