IMO Fehring Livestock Pty Ltd (in liq)
[2012] VSC 501
•12 October 2012
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2011 5026
IN THE MATTER of FEHRING LIVESTOCK PTY LTD (IN LIQUIDATION) (ACN 122 163 562)
BETWEEN
| BRUCE NEIL MULVANEY in his capacity as former administrator of Fehring Livestock Pty Ltd (in liquidation) (ACN 122 163 562) | Plaintiff |
| v | |
| CHRIS CHAMBERLAIN in his capacity as liquidator of Fehring Livestock Pty Ltd (in liquidation) (ACN 122 163 562) | Defendants |
| and | |
| FEHRING LIVESTOCK PTY LTD (in liquidation) (ACN 122 163 562) |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | As no contradictors appeared to oppose the application it was considered in chambers | |
DATE OF JUDGMENT: | 12 October 2012 | |
CASE MAY BE CITED AS: | IMO Fehring Livestock Pty Ltd (in liq) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 501 | |
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CORPORATIONS – External administration under Part 5.3A of Corporations Act 2001 - Application by administrator for his remuneration under Section 449E.
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APPEARANCES: | Counsel | Solicitors |
| For the Administrator, Mr B. Mulvaney | Mr J. Kohn | Tress Cox Lawyers |
HIS HONOUR:
The plaintiff, who is the former administrator of Fehring Livestock Pty Ltd (in liquidation) (“the company”) makes application for orders in respect of his remuneration as administrator of the company pursuant to s 449E of the Corporations Act2001 (Cth) (“the Act”).
In an earlier decision,[1] I set out the factual background in respect of the administration of the company, which commenced on 27 September 2010. One of the directors of the company, Mr Walter Fehring, commenced a proceeding challenging the appointment of Mr Mulvaney as administrator and, at about the same time, made it known that he opposed any award of remuneration to Mr Mulvaney.
[1]Fehring Livestock Pty Ltd [2012] VSC 326.
Both the application for remuneration by Mr Mulvaney and Mr Fehring’s application were made returnable on 6 December 2011. As my reasons in the other proceeding reveal, Mr Fehring discontinued his application to challenge Mr Mulvaney’s appointment as administrator. Counsel appearing on his behalf that day also indicated that Mr Fehring no longer sought to contradict Mr Mulvaney’s application for remuneration.
Several affidavits have been filed on behalf of Mr Mulvaney in support of his application for remuneration and they are as follows:
(i)Bruce Neil Mulvaney sworn 24 August 2011;
(ii)Nichole Shane Lier sworn 23 September 2011;
(iii)Nigel Lawson Watson sworn 27 September 2011;
(iv)Bruce Neil Mulvaney sworn 15 December 2011;
(v)Nigel Lawson Watson sworn 15 December 2011.
The principal affidavit in support of the application is that of Mr Mulvaney sworn on 24 August 2011, which I shall refer to below. Ms Lier’s affidavit deposes to service of the present application on the liquidator of the company, Mr Christopher Chamberlain, Mr Walter Fehring and Mr Alan O’Meara of Kinkorra Contractors Pty Ltd. Mr O’Meara had previously indicated in a letter dated 20 September 2011 (on behalf of Kinkorra Contractors Pty Ltd) by notice to Mr Watson, Mr Mulvaney’s solicitor, that he opposed the award of remuneration. That letter was apparently sent in response to service of the requisite documentation under the Supreme Court (Corporation) Rules 2003 (Vic) on behalf of Mr Mulvaney, informing the creditors of the company of his intention to apply for remuneration. Kinkora Contractors Pty Ltd did not appear on the return of this application in Court to oppose the application.
Mr Kohn, counsel for Mr Mulvaney, indicated that there will be a shortfall of approximately $130,000 between the amount claimed by Mr Mulvaney and the funds which are available to meet such a claim.
The liquidator appointed to the company, Mr Chamberlain, did not appear to oppose the application for remuneration despite being served with notice of it. I directed that Mr Chamberlain be notified that it would be assumed in his absence that there was no opposition by him to the current application and of my intention to proceed to consider the application for remuneration. Mr Watson’s affidavit of 15 December 2011 confirms that Mr Chamberlain has been so notified. His absence is perhaps explained by the shortfall in funds to which I have referred to above.
The current application concerns the award of remuneration only. I note that paragraphs 3 and 4 of the originating process seek an order pursuant to s 443D of the Act in respect of disbursements for expenses and legal fees of Johnson Winter Slattery incurred in the performance and exercise of Mr Mulvaney’s functions and powers as administrator. As was pointed out in the decision of the Full Court of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd v Conlan,[2] it is not part of the function of a court when considering remuneration applications, to provide sanction for the payment of disbursements.[3]
[2](1998) 16 ACLC 1,653 (“Venetian Nominees”).
[3]Ibid at 1,657
As my reasons for judgment in the earlier proceeding reveal, the Part 5.3A administration of the company in this instance would not be described as a run of the mill appointment. This was apparent from the evidence filed in the earlier proceeding and from Mr Mulvaney’s affidavit on 24 August 2011. The affairs of the company were complicated. Mr Mulvaney deposes that in the first several days of the administration he became concerned that the affairs of the company had been misrepresented to him. He stated that the company’s financial position was significantly more complex and worse than he had been previously informed. Various aspects of the administration, which are detailed in Mr Mulvaney’s affidavit under the headings “the Ostrich debts”, “the Wellard debt”, “the Urquhart agreement”, “Brighter Directions Pty Ltd’s litigation”, “the Donoghue property”, “the Jebrod calves”, reveal that the administration was tumultuous and that Mr Mulvaney was required to deal with aggressive creditors. Mr Mulvaney was required to be closely involved in significant meetings and complex negotiations involving the company’s affairs.
On 7 October 2010, Mr Mulvaney chaired the first meeting of creditors. He indicated at that meeting that the remuneration for the period from the time of his appointment on 27 September 2010 until 5 October 2010 was $45,000 plus legal costs. Queries were raised at that first meeting about the level of fees. A committee of creditors was appointed for the first meeting and met immediately afterwards.
On 21 October 2010, Mr Mulvaney sent to creditors notice of the second creditors’ meeting and the other usual documentation, including a statement by the director setting out the details of the proposed Deed of Company Arrangement, his report pursuant to s 439A of the Act and his remuneration report.
On 29 October 2010, Mr Mulvaney chaired the second meeting of creditors at which numerous questions were raised concerning the assets and liabilities of the company. Questions were also asked as to his remuneration. A resolution was put that his remuneration, as set out in the remuneration report for the period 27 September 2010 to 17 October 2010, be fixed and paid in the sum of $88,000. However, that resolution was not seconded. The second meeting of creditors was adjourned to 29 November 2010 so that the company’s assets and liabilities could be further investigated.
The disquiet as to the level of remuneration being claimed by Mr Mulvaney continued. On 18 November 2010, notice of the adjourned second creditors’ meeting was posted to the creditors. On 23 November 2010, Mr Mulvaney received a written response from the committee of creditors in relation to the remuneration issue. They stated that they had sought independent advice on the appropriateness of the fees charged and had been advised that the fees were far in excess of normal administrator’s fees. The committee also indicated that the creditors would vote on the administrator’s remuneration at the adjourned meeting on 29 November 2010.
On 26 November 2010, Mr Mulvaney sent a supplementary report to those creditors who had provided him with an email address. That supplementary report contained details of a new proposed Deed of Company Arrangement put forward by Mr Fehring which Mr Mulvaney regarded as being unrealistic. The supplementary report also contained updated financial information concerning the company and his remuneration.
On 29 November 2010, the adjourned second creditors’ meeting was held. At that meeting, Mr Mulvaney advised the creditors that the new proposal for a Deed of Company Arrangement would fail very quickly and that the company would go into liquidation. However, the creditors accepted the new proposal and resolved that Mr Chamberlain be appointed as deed administrator. No resolution was put forward in respect of Mr Mulvaney’s remuneration.
On 7 December 2010, the committee of creditors met. Mr Mulvaney chaired the meeting via telephone. He explained what work had been done as administrator and remuneration sought. The committee of creditors, however, resolved not to approve the remuneration.
On 16 December 2010, the Deed of Company Arrangement was executed. One of its terms was that it was a condition precedent, if coming into effect, that the committee of inspection agree to the fees of Mr Mulvaney before any payments were made to Mr Mulvaney. This was to be “by negotiation with the subcommittee or by court mediation or by court ruling”.
On 15 March 2011, the committee met to consider and vote on the remuneration request which had been sent to them by Mr Mulvaney in late January 2011. Mr Mulvaney subsequently became aware that no resolution was carried as to his remuneration request.
On 5 July 2011, Mr Mulvaney was informed by Mr Chamberlain that the creditors had voted at a meeting of creditors to terminate the Deed of Company Arrangement. Mr Chamberlain had indicated to him that there had been no payment made by the party who was to put up funds to support the proposal, that the directors had paid only $1,000 of the $50,000 payable under the Deed and that as a result, the company had been placed into liquidation.
The evidence in support of the remuneration application
In his principal affidavit, Mr Mulvaney details the receipts and payments made during the period ending 31 July 2011. As at that date, he had retained $238,902 in a separate bank account. In the latter part of his principal affidavit, Mr Mulvaney gives details of the persons who carried out the work during the company’s administration. In addition to himself, the following persons conducted work and were charged out on the timesheets at the hourly rates identified:
Name
Job Title
Charge out rate per hour
Marlene Mulvaney
Clerical support and filing
$123
Matthew Mulvaney
Professional junior accountant 2
$163
Emilyne Tan
Senior professional accountant and analyst 2
$240
Brigitt de Mare
Client administrator and bookkeeper
$240
Mr Mulvaney’s time was charged out at $505 per hour.
Mr Mulvaney exhibits a work in progress report for the period 27 September 2010 to 16 December 2010. I understand this document to be a summary of the timesheets compiled by the various persons who performed work during the administration. It is a 39 page document with numerous entries consisting of the date that the work was performed, the person who performed it, the number of units of time involved in the completion of the task (a unit being six minutes), the total charge for the task and a narration containing a description of the task performed.
I do not have the benefit of a contradictor and I must, as best as I can, review that document and form an assessment as to whether the remuneration claimed is fair and reasonable.
In my decision of Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd,[4] I reviewed[5] the principles which should be applied in these types of applications. As was pointed out by the Full Court of the Supreme Court of Western Australia in Venetian Nominees,[6] the applicant must provide adequate evidentiary material to enable the Court to determine whether the amounts claimed are fair and reasonable. In Venetian Nominees, the Court stated:[7]
Ordinarily to commence the proceedings, the provisional liquidator will need to provide the Court with a statement of account reflecting in appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly. …
The statement of account should be verified by affidavit. When the remuneration claimed involves work carried out by the provisional liquidator and his staff, the verifying affidavit need state merely that the work described in the statement of account was done by the provisional liquidator or under his personal supervision, and that from personal knowledge or from the records kept by the provisional liquidator or his firm, or from some other appropriate source, he believes that the information contained in the statement of account is correct.
[4][2012] VSC 71 (“Barbo Group”).
[5]Ibid, [14]-[18].
[6](1998) 16 ACLC 1653.
[7](1998) 16 ACLC 1653 at 1657.
The Full Court in Venetian Nominees quoted from the decision of Shepherdson J in Re Solfire Pty Ltd (in liq) (No 2)[8] where his Honour stated:
In my view, when a provisional 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 taxable form provided by a solicitor to his client … He should identify the person or persons and the grade or grades of the person or persons engaged in the particular task concerning the provisional liquidation, he should identify that task and dates on which the time was spent on it, the amount of time spent on it and he should identify the relevant rate, according to the grade of the person or persons performing the work. …
[8][1992] Qd R 182.
In Re Stockford Pty Ltd (subject to deed of company arrangement); Korda and Anor (as joint and several deed administrator),[9] Finkelstein J of the Federal Court referred to a decision of the High Court of New Zealand of Re Medforce Healthcare Services Limited (in liq),[10] where the Court stated:[11]
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 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 a 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 over servicing or over charging. If there are suggestions of this in the information provided, the Court can request further information.
[9](2004) 52 ACSR 279 (“Re Stockford”).
[10][2001] 3 NZLR 145 (“Medforce”).
[11]Re Stockford (2004) 52 ACSR 279, [48]; Medforce [2001] 3 NZLR 145, 155.
In my view, the material put forward by Mr Mulvaney in support of his application for remuneration for the period commencing on the date of his appointment, 27 September 2010 to the date of entry into the Deed of Company Arrangement, 16 December 2010 and the subsequent period of 17 December 2010 to 31 July 2011 meets the requisite standard described in Venetian Nominees. The evidence identifies the individual members of the administrator’s firm who conducted the work by reference to their position in the hierarchy of the firm, and details the hourly rate charged in relation to such person. The hourly rate charged by Mr Mulvaney, $505, is within the range of hourly rates said to be charged by insolvency practitioners in the numerous appendices that I sight in consents to act provided by liquidators in winding up applications, which come before the Court.
The level of fees charged for the other members of Mr Mulvaney’s staff, which are detailed in paragraph 73 of his affidavit are reasonable, having regard to the position that those persons occupy in the hierarchy of the firm.
Despite my initial reaction that the amount claimed for remuneration was high, my review of the work in progress reports for the respective periods does not reveal any obviously unnecessary task being performed and I am prepared to accept it as an appropriate “Lodestar” figure for the purposes of this application. No doubt a zealous contradictor could criticise certain tasks said to have been performed and the time claimed, but for my part I do not consider that there is any basis for doing so.
The tasks as described in the narrative appear to have been performed by appropriate staff members when regard is had to the nature of the task involved and that person’s position in Mr Mulvaney’s firm. Paragraphs 75 and 77 of Mr Mulvaney’s affidavit summarises the tasks which were performed and the amount charged for them over the 2 time periods involved. As I have observed, the amounts sought seem high ($214,822 and $52,280 respectively) but the works were performed over a period from September 2010 until the end of July 2011.
Section 449E of the Act requires the Court to take into account the various matters mentioned in sub‑paragraphs (a) to (l). Paragraphs (a), (b) and (c) are generally concerned with an assessment as to whether the work performed and described in the administrator’s material was reasonably necessary and the time taken for their performance was reasonable. I consider that Mr Mulvaney has established these matters to my satisfaction.
Sub‑paragraph (d) is concerned with the quality of the work performed by the administrator. In this case there is nothing to suggest that it did not meet the requisite standard for the tasks being performed.
Section 449E(4)(e), (f), (g) and (h) provide as follows:
(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 likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the administrator was, or was likely to be, required to accept a 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;
As I observed in Barbo Group, these criteria are concerned with very similar concepts and it is appropriate to deal with them collectively. The administration in this case was somewhat out of the ordinary and somewhat tumultuous. Those matters are detailed in Mr Mulvaney’s principal affidavit. I would not reduce the “Lodestar” figure by application of sub‑paragraphs (e) to (h). As to sub‑paragraph (i), no receivers were appointed during the administration.
Sub‑paragraph (j) provides:
The number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors.
On my count, there were just over 50 creditors and the details of the deliberations in the meetings of creditors reveal that they were quite antagonistic to Mr Mulvaney. Again, I would not reduce the amount being claimed as it seems that relations with creditors and Mr Fehring himself were difficult. There is no evidence to suggest that Mr Mulvaney contributed to this.
In the circumstances, I will order, pursuant to s 449E of the Act, that the remuneration of Mr Mulvaney as administrator of the company up to and including 16 December 2010 be fixed in the sum of $214,821 plus GST. For the latter period, from 17 December 2010 to 31 July 2011, I order pursuant to s 449E that his remuneration be fixed in the sum of $52,826 plus GST.
I will hear counsel on the other orders to be made. I consider it appropriate that Mr Mulvaney have his costs of this application, including any reserved costs as part of his costs as administrator.
The solicitors for Mr Mulvaney should submit minutes or orders in compliance with the above reasons.
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