Coad v Vie Inspiree Pty Ltd (in liq)

[2008] WASC 31

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   COAD -v- VIE INSPIREE PTY LTD (in liq) [2008] WASC 31

CORAM:   MASTER SANDERSON

HEARD:   14 FEBRUARY 2008

DELIVERED          :   12 MARCH 2008

FILE NO/S:   COR 122 of 2007

MATTER                :VIE INSPIREE PTY LTD (ACN 116 438 941) (in liq)

BETWEEN:   SIMON ROGER COAD (in his capacity as former voluntary administrator of VIE INSPIREE PTY LTD (in liq))

Plaintiff

AND

VIE INSPIREE PTY LTD (in liq)
First Defendant

WELLNESS PURSUIT PTY LTD (in liq)
Second Defendant

Catchwords:

Corporations law - Application by administrator for approval of remuneration and to be paid out of funds subject to a fixed charge in favour of second defendant - Application of 'salvage' principle

Legislation:

Corporations Act 2001 (Cth), s 443D, s 443E, s 443F

Result:

Amount of remuneration approved
Order for payment out of funds subject to charge refused

Category:    B

Representation:

Counsel:

Plaintiff:     Ms S J Gepp

First Defendant              :     No appearance

Second Defendant         :     Mr M F Holler

Solicitors:

Plaintiff:     Christensen Vaughan

First Defendant              :     No appearance

Second Defendant         :     Galic & Co

Case(s) referred to in judgment(s):

Hamilton v Donovan Oates Hannaford Mortgage Corporation Ltd [2007] NSWSC 10

Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171

Shirlaw v Taylor (1991) 31 FCR 222

1. MASTER SANDERSON:  By amended originating process, the plaintiff sought approval of his remuneration in respect of his appointment as a voluntary administrator of the first defendant in an amount of $19,712.  The plaintiff sought a further order that the approved amount be paid out of funds held on trust by a third party.  The second defendant did not oppose the amount of remuneration claimed by the plaintiff.  But it did object to this remuneration being paid from the funds held by the third party.

2. There was no dispute as to the facts and they may be shortly stated.  The plaintiff was appointed the voluntary administrator of the first defendant on 7 July 2006.  Consequent upon his appointment, the plaintiff performed certain work.  The work that he undertook is set out in pars 8 and 9 of the plaintiff's affidavit sworn 22 August 2007.  Without going through these two paragraphs in detail, it is fair to say that the plaintiff did what might reasonably be expected of an administrator.  This included running the business and eventually selling the business assets.  The fact that the actions taken by the plaintiff were unexceptional is an important point to which I will return later in these reasons.

3. At the time of the plaintiff's appointment, the assets and undertakings of the business run by the first defendant were the subject of three charges.  The second defendant held the third ranking charge.  The holders of the first and second ranking charges have been paid out in full.  Were it not for the claim for payment of remuneration by the plaintiff, the money held in trust by the third party would pass to the second defendant.  It is the second defendant's position that the plaintiff has no entitlement to his remuneration which would entitle him to priority over the second defendant.

4. The plaintiff enjoys a statutory right of indemnity and a lien for his fees and expenses as administrator of the company which has priority over a floating charge on the company's assets. This is the effect of s 443D to s 443F of the Corporations Act 2001 (Cth). But the priority is limited to debt secured by a floating charge: see s 443E(1)(b). The second defendant's charge by deed was a fixed charge: see cl 4 of the deed and the definition of 'Property' at cl 1.1(15) of the deed which is annexure 'B' to the affidavit of Ricardo Cacho sworn 12 February 2008. The fixed charge accordingly takes priority over the statutory lien of the plaintiff and any equitable lien: see Hamilton v Donovan Oates Hannaford Mortgage Corporation Ltd [2007] NSWSC 10 [28] ‑ [32] (Barrett J). None of this was disputed by the plaintiff.

5. Both parties accepted that there may be circumstances where actions taken by an administrator (or a provisional liquidator or a liquidator) may override the statutory provisions and allow that person to be remunerated for his or her efforts.  This principle is generally traced back to the judgment of Dixon J in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171. The principle was explained by the Full Court of the Federal Court (Sheppard, Burchett and Gummow JJ) in Shirlaw v Taylor (1991) 31 FCR 222 in the following way:

   [I]n addition to equitable liens arising from contractual dealings in property, equity may raise liens based either upon general considerations of justice or upon the principle that he who seeks the aid of equity in enforcing some claim (eg in an administration of assets) must admit the equitable rights of others directly connected with or arising out of the same subject matter (228).

6. The court went on then to outline what has, in a number of cases, been referred to as 'the principle of salvage'.  The court said (230 ‑ 231):

   In addition to the anxiety of the court to protect the position of its officer, in particular, lest there be in the future an absence of persons willing to take such appointments, the claims of the officer under a court‑appointed administration may be seen as in the nature of 'salvage'.  The principle is that those taking the benefit of the administration should not escape bearing the burden of the proper cost of it:  see In the Matter of Tharp (1852) 2 Sm & Giff 578; 65 ER 533 and Re Berkeley Applegate (Investment Consultants) Ltd (In liq); Harris v Conway [1989] Ch 32 at 51. In the latter decision, it was held (at 50 ‑ 51) that there was:

   ' ... a general principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property.  It is a discretion which will be sparingly exercised; but factors which will operate in favour of its being exercised include the fact that, if the work had not been done by the person to whom the allowance is sought to be made, it would have had to be done either by the person entitled to the equitable interest … or by a receiver appointed by the court whose fees would have been borne by the trust property …; and the fact that the work has been of substantial benefit to the trust property and to the persons interested in it in equity …'

7. During the course of submissions, counsel for the plaintiff sought to amend the amount claimed in the originating process to a sum of $11,770 plus fees and expenses.  This, it was said, was an amount which reflected work undertaken by the plaintiff in the nature of 'salvage'.

8. It was the second defendant's position that the plaintiff had done nothing above and beyond his duties as an administrator which was of incontrovertible benefit to the company and which would have entitled him in equity to the remuneration he claimed.  I accept that submission.  An analysis of the affidavit evidence filed by the plaintiff reveals that he acted in all respects in a way consistent with his position as a voluntary administrator.  Put another way, he did nothing out of the ordinary.  That much is made plain by the paragraphs of his affidavit to which I have earlier referred.

9. That being so, although I would approve the plaintiff's remuneration, I would not order that it be paid out of funds presently held in trust by the third party.  Those funds are subject to a lien held by the second defendant and nothing done by the plaintiff entitles him to a priority over the second defendant.

10. I will allow the parties to bring in a minute of orders consistent with these reasons and I will hear submissions with respect to costs.