Hume v Carey [No 2]
[2022] WASC 377
•4 NOVEMBER 2022
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: HUME -v- CAREY [No 2] [2022] WASC 377
CORAM: HILL J
HEARD: 1 NOVEMBER 2022
DELIVERED : 1 NOVEMBER 2022
PUBLISHED : 4 NOVEMBER 2022
FILE NO/S: COR 68 of 2022
BETWEEN: ALISTAIR DAVID HUME
Plaintiff
AND
NORMAN PHILLIP CAREY
First Defendant
GOLDBLAZE NOMINEES PTY LTD
Second Defendant
HHA ARCHITECTS PTY LTD (IN LIQ)
Third Defendant
Catchwords:
Corporations - Application to terminate winding up of company - Remuneration of liquidators - Liability to pay liquidators' reasonable remuneration - Costs of application - Turns on own facts
Legislation:
Corporations Act 2001 (Cth) s 482, s 556
Insolvency Practice Schedule 2016 (Corporations) (Cth), s 60-5
Result:
Stay of winding up
On payment by plaintiff of remuneration of liquidators, winding up of third defendant is terminated
If payment is not made, stay will be lifted and application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | In Person |
| First Defendant | : | S M Radovanovic |
| Second Defendant | : | S M Radovanovic |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | In Person |
| First Defendant | : | Mony De Kerloy |
| Second Defendant | : | Mony De Kerloy |
| Third Defendant | : | No appearance |
Cases referred to in decision:
El-Fahkri v Elfah Pty Ltd (in liq) [2002] FCA 1469
Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (No 2) (1896) 5 NSWLR 227
HILL J:
(This judgment was delivered ex temporaneously and has been edited from the transcript.)
On 5 August 2022, I delivered reasons for my decision on the application of the plaintiff, Mr Hume, to terminate the winding up of the third defendant, HHA Architects Pty Ltd (in liquidation) (HHA). In those reasons, I indicated that I was satisfied that HHA had been wound up in circumstances that it should not have been, and that this weighed very heavily in favour of granting the application of the plaintiff.
The primary outstanding question at that stage was the question of the costs of the liquidation, both as to the amount of the costs of the liquidators and who should be liable to pay these costs.
On that date, I stayed the winding up until further order. As I indicated on that date, in the event that I considered the plaintiff should be liable for some or all of the liquidators' costs, if these costs could be secured or paid, the winding up would be terminated. If the plaintiff was unable to do this, the stay would be lifted and HHA will remain in liquidation.
The matter came back before me for directions on 4 October 2022. At that time, I adjourned the application for four weeks. The primary reason for this was that at that time, I had received a report from the liquidators in response to a query from the court. The remuneration report that was provided to my chambers by email and provided to the parties stated that the total remuneration sought by the liquidators was $65,273. It also indicated that an amount of $31,800.50 had previously been approved by creditors.[1] At that time, I expressed the view that I wanted to give the liquidators an opportunity to be heard on the quantum of their costs before making any orders.
[1] Letter to Supreme Court from Liquidators dated 2 September 2022.
On 25 October 2022, I received a further communication from the liquidators. On the basis that the liquidators considered it was 'highly unlikely' that any amount would be paid to them in respect of the remuneration that had been incurred, the liquidators agreed to limiting their claim for remuneration to $31,800.50 (plus GST).[2]
[2] Letter to Supreme Court from Liquidators dated 25 October 2022.
The plaintiff says that in circumstances where the defendants did not have standing to bring the application for winding up, it is the defendants who should bear the costs of the liquidators as well as the costs of the application.
In contrast, the defendants say that the court does not have power to require the defendants to pay the costs of the liquidators and submitted that the plaintiff 'must be prepared' to pay the costs of the liquidation that cannot be met from HHA's assets as a condition of obtaining relief under s 482(2) of the Corporations Act 2001 (Cth).[3]
[3] First and second defendants' submissions dated 16 September 2022 [10].
At the hearing, counsel for the defendants provided me with a copy of the Deed of Assignment of Rights Under an Insurance Policy (Deed). Under the specific terms of the Deed, which is dated 22 September 2021, the reasonable costs incurred by the liquidators in dealing with this assignment and the policy generally shall be paid by the assignee, which is the defendants, within seven days of the assignee obtaining payment of any benefit under the insurance policy.[4]
[4] Deed of Assignment of Rights Under an Insurance Policy dated 22 September 2021, cl 6(b).
As counsel noted, this only covered the liquidator's reasonable costs of dealing with the assignment deed and did not extend to the entire costs of the liquidation.
Legal Principles
Under s 60-5 of the Insolvency Practice Schedule 2016 (Corporations) (Cth), an external administrator is entitled to receive remuneration for the necessary work that was properly performed by them in relation to the external administration of a company. That is, it is a statutory right which is not dependant on the continued existence of an order appointing them as liquidator.[5] As a consequence, the liquidator is entitled to remuneration even if the court that appointed them lacked power to make such an order.
[5] Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (No 2) (1896) 5 NSWLR 227.
Under the express terms of s 556(1)(a) of the Act, a liquidator has a statutory right to be paid their costs, charges, and expenses in priority to other claims in the liquidation.
A liquidator has a charge or lien over the assets of the company in order to secure that priority and 'Usually it would not be right to stay or terminate a liquidation unless the liquidator's possession is protected'.[6]
[6] El-Fahkri v Elfah Pty Ltd (in liq) [2002] FCA 1469 [6].
Disposition
In this case, I accept that the liquidators of HHA are statutorily entitled to remuneration for the work that was properly done by them in relation to the winding up of HHA. Having reviewed the information provided by the liquidators, I accept that the amount of $31,800.50 (plus GST) is properly recoverable by the liquidators against the assets of HHA.
In circumstances where the liquidators' remuneration is recoverable from the assets of HHA, I accept that if the plaintiff wishes to have the winding up of HHA terminated, it is necessary for him to pay or secure the liquidators' fee to a sum of $20,000 (plus GST). The reason that I have selected the sum of $20,000 is that I accept that under cl 6 of the Deed, an amount may be recoverable by the liquidators from the first and second defendants in respect of any payment that is made under the insurance policy for the work that was done.
From my assessment of the liquidators' costs and expenses, it is likely, in my view, that this amount is likely to be in the order of $12,000. If the sum of $20,000 is paid or secured within a reasonable time by the plaintiff, the order of the court will be that the winding up of HHA will be terminated. If the plaintiff is unable to pay this amount, the stay will be lifted and HHA will remain in liquidation.
My preliminary view is that a reasonable time for the plaintiff to pay or secure these fees is a period of three months but I will hear from the parties before making any final orders.
In relation to the costs of the application, whilst the general rule is that the costs would follow the event, as a matter of policy, self-represented applicants are not entitled to costs. For this reason, in my view, the appropriate costs order is that there be no order as to the costs of the application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
HW
Associate to the Honourable Justice Hill
4 NOVEMBER 2022
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