Jindal Transworld Pvt Ltd v Scottsdale Homes NO. 10 Pty Ltd (No 2) - [2010] SASC 210

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
JINDAL TRANSWORLD PVT LTD v SCOTTSDALE HOMES NO. 10 PTY LTD (No 2)
[2010] SASC 210
Reasons of Judge Lunn a Master of the Supreme Court
13 July 2010
CORPORATIONS
Application by liquidator to Court to fix his remuneration under s 473(3) of the Corporations Act 2001 – objection by creditor to competence of the application on basis that a precondition of the Committee of Inspection (COI) having not agreed the remuneration was not satisfied – whether COI validly established under s 548(1) of the Act – held not validly established as no meeting of the contributories convened as required by s 548(1) – held preconditions for jurisdiction of Court under s 473(3) satisfied – objection on competence fails.

JINDAL TRANSWORLD PVT LTD v SCOTTSDALE HOMES NO. 10 PTY LTD (No 2)
[2010] SASC 210
JUDGE LUNN:
Reasons on plaintiff’s preliminary objection to the liquidator’s application for the Court to fix his remuneration

The defendant company is being wound up by order of this Court. Its liquidator is Nicholas David Cooper (“the Liquidator”). The plaintiff is its only creditor. Narender Sethi (“Mr Sethi”) is the plaintiff’s director. The defendant only had one shareholder, ACN 106 964 694 Pty Ltd (“the shareholder”).
By an application of 8 January 2010, FDN 12, the Liquidator has sought under s 473(3) of the Corporations Act 2001 (“the Act”) an order that his remuneration for the period from 1 December 2008 to 16 October 2009 be set at $28,998 plus GST and his remuneration for the period after 17 October 2009 be approved without further order up to $15,000 plus GST. These orders have been opposed by the plaintiff.
By agreement of the parties, I directed that I would determine certain preliminary issues about the entitlement and quantum of the Liquidator to his remuneration. These preliminary issues were set for oral evidence and argument on 18 May 2010. At the outset of that hearing counsel for the plaintiff, who had not previously been involved in the matter, indicated that the plaintiff also wished to take a preliminary objection to the competence of the Liquidator’s application. It was agreed that I would nonetheless proceed with the preliminary issues and I ruled on them by reasons published on 9 June 2010.
These reasons concern the plaintiff’s objection to the competence of the Liquidator’s application. That application is made under s 473(3) of the Act which provides:
(3) [How remuneration determined] A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:
(a) if there is a committee of inspection—by agreement between the liquidator and the committee of inspection; or
(b) if there is no committee of inspection or the liquidator and the committee of inspection fail to agree:
(i)by resolution of the creditors; or
(ii)if no such resolution is passed—by the Court.
The plaintiff submits the application is not competent because sub-s (3)(a) has not been satisfied. It contends this is a condition precedent to the Court having jurisdiction to fix the remuneration.
This objection to competence by the plaintiff is somewhat belated and technical. It must be determined whether the Court does have jurisdiction.[1]However, if it was to be upheld, it would merely mean that the Liquidator would have to start again the processes to satisfy sub-s (3)(a) and (b) of s 374, but without any real prospect that this would assist in resolving the dispute about the Liquidator’s remuneration. In effect, it is an argument about some of the costs of the present application. While many interesting points were raised in the course of argument, I do not intend to canvass more than one point which is sufficient to establish that this Court does have jurisdiction.
[1] Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corporation [1981] QB 368 at 736.
Compliance with sub-s (3)(a) was only necessary if there was a Committee of Inspection (“COI”) validly appointed in the liquidation of the defendant. If there was no COI, the evidence shows sufficient compliance with sub-ss (3)(b)(i) and (ii) to give this Court jurisdiction to entertain the Liquidator’s application.
At a meeting of the creditors of the defendant on 18 December 2008 steps were taken towards the appointment of a COI. The only evidence of it is the minutes of that meeting which read:
COMMITTEE OF INSPECTION: The Chairman suggested that a committee of inspection be formed.
“That a Committee of Inspection be formed consisting of Mr Narendar Pal Singh Sethi.”
Moved: Narendar Pal Singh Sethi
MOTION CARRIED.
The question is whether this was sufficient for the purposes of the Act to constitute a valid COI for the purposes of s 473(3)(a).
The establishment of COIs under the Act is governed by s 548 of the Act, which relevantly provides:
548 Convening of meetings by liquidator for appointment of committee of inspection
(1) [Where liquidator must convene meetings] The liquidator of a company must, if so requested by a creditor or contributory, convene separate meetings of the creditors and contributories for the purpose of determining:
(a) whether a committee of inspection should be appointed; and
(b) where a committee of inspection is to be appointed:
(i)the numbers of members to represent the creditors and the contributories, respectively; and
(ii)the persons who are to be members of the committee representing creditors and contributories, respectively.
(2) [Court to determine between meeting outcomes] If there is a difference between the determination of the meeting of creditors and the determination of the meeting of contributories, the Court may resolve the difference and make such order as it thinks proper.
It was not disputed that no meeting of the contributories of the defendant for the purposes of s 548(1) has ever been convened or held. The crux of the issue is whether the resolution of the creditors’ meeting, quoted above, is sufficient to have established a valid and effectual COI in the liquidation of the defendant in the absence of any meeting of the contributories of the defendant. As far as I am aware, there is no reported authority on the point.
I do not accept the submission of the plaintiff’s counsel that unless and until a meeting of the contributories of the defendant was convened and held, and made some inconsistent determination to that of the meeting of creditors, the COI was validly established and had the composition determined by the meeting of creditors. There is nothing in s 548(1), or elsewhere, which gives any determination about the COI by either the creditors or the contributories precedence over the determination of the other. If they do not agree, the Court has a general discretion under s 548(2) to resolve the question. There is nothing in s 548(1) to say whether the meeting of the creditors or of the contributories should be held first. One cannot obtain precedence over the other merely because the Liquidator chooses to convene one before the other. In my view, the proper interpretation of s 548(1) is that no COI is established under it until both the meetings of the creditors and the contributories have been held, and, if they differ, that the Court has made an order under sub-s (2).
The plaintiff’s counsel submitted that the Liquidator was in default in not having convened the necessary meeting of contributories. I am not sure this is correct. Under sub-s (1) it would appear that the plaintiff had to request the liquidator to convene separate meetings of the creditors and contributories. There is no evidence before me that the plaintiff did request the Liquidator to convene a meeting of the contributories.[2]
[2] There is also no evidence that the plaintiff requested the convening of the meeting of creditors, but it is implicit in the motion for the appointment of the COI, as quoted above, that the plaintiff must have at least implicitly requested the meeting of creditors for this purpose. If the plaintiff did not request a meeting of contributories, that may be another ground why the requirements of s 548(1) for the establishment of a COI have not been satisfied.
I accept that it is still open in the liquidation of the defendant for a meeting of contributories to be called under s 548. However, even if resolved in similar terms to the meeting of the creditors, it would still not mean that any COI was formed before that resolution of the contributories was passed. Hence, for the purposes of s 473(3)(1) on the present application, there would have been no COI in existence.
I do not accept the plaintiff’s submission that the Liquidator is estopped, or precluded by his own wrongdoing, from now contending that there was no COI in existence for the purposes of the present application. Certainly the Liquidator has acted on the basis that there has been a validly established COI in existence. However, there is no evidence that the plaintiff was misled by these actions of the Liquidator, or acted to its detriment by reason of them, so as to constitute an estoppel. If the plaintiff did not request the Liquidator to convene a meeting of the contributories, it would be at least as equally at fault as the Liquidator in not having pursued the necessary steps for the appointment of a valid COI. If it did make that request to the Liquidator, of which there is no evidence before me, it is likely it was aware that the Liquidator had not pursued the request. If the point was to be pursued by the plaintiff, it should have been raised by it much earlier.
The plaintiff’s objection to the competency of the application goes to a question of jurisdiction that the conditions precedents in s 473(3) for the Court to fix the remuneration of the Liquidator have not been fully satisfied. The Court cannot obtain such jurisdiction by agreement of the parties.[3]Likewise, it cannot be established by any estoppel operating against a party, or by any party being precluded from relying on its own wrongdoing, to preclude facts being put before the Court relevant to the determination of the question of jurisdiction.
[3] Turner v Kostoglou Full Court, 17 June 2004, [2004] SASC 174.
For these reasons, I hold that the preliminary objection as to the competency of the application fail.
Challenge to future remuneration
The plaintiff’s counsel submitted that there was no proper application in respect of remuneration after 17 October 2009 because the terms of the order sought for the remuneration, as outlined above, did not correspond to what had been put to the creditors’ meeting for such remuneration on 9 November 2009. The minutes of that meeting record “the Chairman sought creditor approval for his future remuneration for services in the liquation from 17 October 2009 to be approved to a cap for $15,000 plus GST calculated at the applicable hourly rates of BRI Ferrier (SA) Pty Ltd”. That resolution was not moved or passed. Section 473(3), as quoted above, does not require the determination of the remuneration by the Court to be in terms of the resolution which was before the creditors’ meeting. This point merely goes to part of the application and is not an objection to its competence as a whole. It is better left to be dealt with as part of the determination of the remuneration by the Court.[4]
[4] It may be arguable that the Court can determine remuneration for the period for which it was sought from the meeting of creditors irrespective of the amounts which were then sought by the liquidator.
In an addendum to his written submissions of 15 June 2010, counsel for the plaintiff referred to a very recent decision of Barrett J of the New South Wales Supreme Court in Onefone Australia Pty Ltd v One.tel Ltd.[5] In that decision on s 499(3) of the Act, which is an equivalent, but not identical, provision for creditors’ voluntary windings-up to s 473(3), Barrett J said at [33]:
A liquidator is “entitled to receive” only such remuneration as is “fixed”. He or she has no right to receive some form of contingent payment on account of remuneration to be fixed; nor does a committee of inspection have any right or power to award any payments on account of future remuneration.
The plaintiff’s counsel contends on the basis of this authority the Liquidator’s application is incompetent insofar as it seeks approval of future remuneration. The Liquidator has not responded to this submission.
[5] 7 May 2010, [2010] NSW SC 401.
There are a number of differences between the wording of the provisions relating to court windings-up and creditors’ voluntary windings-up on how liquidators’ remuneration is to be fixed. How significant those variations might be will be a matter of debate. I am not prepared to determine at this stage whether the Court’s power to fix remuneration under s 473(3)(b) (ii) for the work encompassed by the resolution of the meeting of creditors is subject to any restrictions where the meeting of creditors did not approve of what was sought by the Liquidator. It may be arguable that at least where the work has been done by the time the Court fixes the remuneration the Court can fix the remuneration for it. I will hear the parties further on the point.
I will give further directions on how the matter is to proceed on Tuesday 3 August 2010 at 9.20am.