Paul's Retail Pty Ltd v Morgan

[2009] NSWSC 1222

Reported Decision: 76 ACSR 26

New South Wales

Supreme Court

CITATION:	Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1222
HEARING DATE(S):	22/10/09
JUDGMENT DATE :	13 November 2009
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Orders for review of remuneration. Order that conduct and determination of review be referred to registrar.
CATCHWORDS:	CORPORATIONS - voluntary administration - remuneration of administractor in voluntary administration - remuneration of administrator of deed of company arrangement - where remuneration determined by meeting of creditors - application for review of remuneation by the court - whether administrator precluded by contract or estoppel from seeking such review - certain factual questions canvassed - meaning of words spoken in conversation between two experienced insolvency practitioners - references to "cap" and "capped" in relation to remuneration - discussion of process of "review" of remuneration by court - whether "review" warranted in this case - the form of the "review"
LEGISLATION CITED:	Corporations Act 2001 (Cth), Part 5.3A. ss 435C(1(b), 436E, 449E, 473, 499(3), 1480(6), Corporations Amendment (Insolvency) Act 2007 Supreme Court (Corporations) Rules 1999, rule 9.2A
CATEGORY:	Principal judgment
CASES CITED:	Berjaya Group (Aust) Pty Ltd v Ariff [2009] NSWSC 569 Gidley re Aliance Motor Body Pty Ltd [2006] FCA 102; (2006) 150 FCR 345 GIS Electrical Pty Ltd v Melsom [2001] WASC 314 R v Toohey; Ex parte Meneling Station Pty Ltd [1982] HCA 69; (1982) 158 CLR 327 Re Anderson Group Pty Ltd; Mann v Anderson [2002] NSWSC 764; (2002) 20 ACLC 1607 Re Carlovers Carwash Ltd [2005] NSWSC 879; (2005) 54 ACSR 696 Re Jick Holdings Pty Ltd [2009] NSWSC 574; (2009) 72 ACSR 387 Re Korda; Stockford Ltd [2004] FCA 1682; (2004) 140 FCR 424 Re Solfire Pty Ltd (No 2) [1999] 2 QdR 182 Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229
PARTIES:	Paul's Retail Pty Ltd - First Plaintiff Paul Andrew Dwyer - Second Plaintiff John Maxwell Morgan - Defendant
FILE NUMBER(S):	SC 6211/08
COUNSEL:	Mr M A Ashhurst SC - Plaintiffs Mr S M Golledge - Defendant
SOLICITORS:	W Lawyers - Plaintiffs Blake Dawson - Defendant

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

FRIDAY 13 NOVEMBER 2009

6211/08 PAUL ANDREW DWYER & ANOR v JOHN MAXWELL MORGAN

JUDGMENT

Background

1 Mr Morgan became the administrator of Paul’s Retail Pty Ltd (“Pauls”) under Part 5.3A of the Corporations Act 2001 (Cth) on 24 January 2008. A deed of company arrangement was executed on 21 April 2008. Mr Morgan thereupon became the administrator of the deed of company arrangement.

2 This case concerns the quantification of Mr Morgan’s remuneration both as voluntary administrator in the Part 5.3A administration and as administrator of the deed of company arrangement the execution of which put an end to that administration.

3 The plaintiffs are Pauls itself and its sole director and shareholder, Mr Dwyer. I shall refer presently to the relief they seek in their second further amended originating process. Mr Morgan is the defendant. He also seeks relief, having filed an interlocutory process in the nature of a cross claim.

4 Two main matters are raised by the parties’ contentions. The first is whether, in the particular circumstances, Mr Morgan is precluded from access to statutory provisions for the review by the court of remuneration already determined. The second main question arises if the first is answered in the negative: should Mr Morgan’s remuneration be reviewed by the court?

Resolutions passed and not passed

5 Before describing the relief sought by the parties, I should set out text of three resolutions passed by creditors at the second meeting of creditors in the Part 5.3A administration. The meeting was held on 1 April 2008. The resolutions were as follows:

First resolution:
“That the remuneration of the Administrator, his partners and staff be approved for the period 24 January 2008 to 1 April 2008 to [sic] be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants & Business Advisors and that the Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, fixed in the amount of $540,000 exclusive of GST and disbursements.”
Second resolution:
“That the remuneration of the Administrator, his partners and staff be approved for the period 2 April 2008 to the execution of the Deed of Company Arrangement be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants & Business Advisors and that the Administrator be authorised to make periodical payments on account of such accruing remuneration at their discretion, up to a cap of $90,000 exclusive of GST and disbursements.”
Third resolution:
“That the remuneration of the Administrator of the Deed (if appointed), his partners and staff be approved for the period from the execution of the Deed of Company Arrangement to the effectuation of the Deed of Company Arrangement be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants & Business Advisors and that the Deed Administrator be authorised to make periodical payments on account of such accruing remuneration at their discretion, up to a cap of $120,000 exclusive of GST and disbursements.”

6 It was at this meeting of creditors held on 1 April 2008 that creditors resolved to execute the deed of company arrangement that was ultimately executed on 21 April 2008 (it may be accepted that remuneration of a deed administrator may be determined prospectively by the meeting of creditors that resolves to adopt the deed of company arrangement: Gidley re Aliance Motor Body Pty Ltd [2006] FCA 102; (2006) 150 FCR 345) .

7 A committee of creditors appointed at the 1 April 2008 meeting pursuant to s 436E in the voluntary administration (which, of course, ended upon execution of the deed of company arrangement: s 435C(1)(b)) continued as a committee of inspection for the purposes of the deed of company arrangement. At a meeting of the committee held on 4 December 2008, Mr Morgan, as chairman, moved motions as follows:

First motion
“That the remuneration of the Deed Administrator, his partners and staff be approved for the periods 22 April 2008 to 30 June 2008 to be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants & Business Advisors and 1 July 2008 to 22 September 2008 to [sic] be calculated on a time basis and charged at the hourly rates of Rodgers Reidy Chartered Accountants and that the Deed Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, fixed in the amount of $215,000 exclusive of GST and disbursements.”
Second motion
“That the remuneration of the Deed Administrator, his partners and staff be approved for the period 23 September 2008 to the conclusion of the Deed of Company Arrangement be calculated on a time basis and charged at the hourly rates of Rodgers Reidy Chartered Accountants and that the Deed Administrator be authorised to make periodical payments on account of such accruing remuneration at their discretion, up to a cap of $40,000 exclusive of GST and disbursements.”

8 There being no seconder, the chairman, in each case, “declared that the resolution had been defeated” (these are the words appearing in the minutes).

9 A meeting of creditors was held on 26 March 2009. Each of the following proposed resolutions was determined by poll, with none of them being passed:

First proposed resolution
“That the additional remuneration of the Administrator, his partners and staff be approved for the period of 24 January 2008 to 31 March 2008 be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants and that the Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, fixed in the amount of $170,231 exclusive of GST and disbursements.”
Second proposed resolution:
“That the additional remuneration of the Administrator, his partners and staff be approved for the period 1 April 2008 to 21 April 2008 be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants and that the Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, fixed in the amount of $60,590 exclusive of GST and disbursements.”
Third proposed resolution:
“That the additional remuneration of the Deed Administrator, his partners and staff be approved for the period of the 22 April 2008 to 30 June 2008 be calculated on a time basis and charged at the hourly rates of PKF Chartered Accountants and that the Deed Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, fixed in the amount of $76,882 exclusive of GST and disbursements.”
Fourth proposed resolution
“That the additional remuneration of the Deed Administrator, his partners and staff be approved for the period of the 1 July 2008 to 31 January 2009 be calculated on a time basis and charged at the hourly rates of Rodgers Reidy Chartered Accountants and that the Deed Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, fixed in the amount of $176,492 exclusive of GST and disbursements.”
Fifth proposed resolution
“That the additional remuneration of the Deed Administrator, his partners and staff be approved for the period of the 1 February 2009 to the effectuation of the Deed of Company Arrangement be calculated on a time basis and charged at the hourly rates of Rodgers Reidy Chartered Accountants and that the Deed Administrator be authorised to make periodical payments on account of such accruing remuneration at his discretion, up to an interim cap of $50,000 exclusive of GST and disbursements.”

10 It will thus be seen (and it is common ground) that the only resolutions actually passed on the subject of remuneration (whether of the voluntary administrator or of the administrator of the deed of company arrangement) were the three passed at the meeting of creditors of 1 April 2008.

The legislation

11 Relevant parts of s 449E of the Corporations Act as it has stood since 31 December 2007 should be quoted. By virtue of s 1480(6), it is that form of the section that applies to this case. The pertinent parts are:

“(1) The administrator of a company under administration is entitled to receive such remuneration as is determined:
(a) by agreement between the administrator and the committee of creditors (if any); or
(b) by resolution of the company's creditors; or
(c) if there is no such agreement or resolution--by the Court.

(1A) The administrator of a company under a deed of company arrangement is entitled to receive such remuneration as is determined:
(a) by agreement between the administrator and the committee of inspection (if any); or
(b) by resolution of the company's creditors; or
(c) if there is no such agreement or resolution--by the Court.

(1B) To be effective, a resolution under paragraph (1)(b) or (1A)(b) must deal exclusively with remuneration of the administrator.
Note: This means that the resolution must not be bundled with any other resolution.

(1C) The Court may determine remuneration under paragraph (1)(c) even if:
(a) there has been no meeting of the committee of creditors; or
(b) there has been no meeting of the company's creditors.

(1D) The Court may determine remuneration under paragraph (1A)(c) even if:
(a) there has been no meeting of the committee of inspection; or
(b) there has been no meeting of the company's creditors.

(2) Where remuneration is determined under paragraph (1)(a) or (b) or paragraph (1A)(a) or (b), the Court may, on the application of ASIC, of the administrator or of an officer, member or creditor of the company:
(a) review the remuneration; and
(b) confirm, increase or reduce it.


(3) Subsection (2) has effect despite section 437C.

(4) In exercising its powers under subsection (1), (1A) or (2), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a) the extent to which the work performed by the administrator was reasonably necessary;
(b) the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary;
(c) the period during which the work was, or is likely to be, performed by the administrator;
(d) the quality of the work performed, or likely to be performed, by the administrator;
(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 is likely to be, required to deal with extraordinary issues;
(g) the extent (if any) to which the administrator was, or is 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;
(i) whether the administrator was, or is likely to be, required to deal with:
(i) one or more receivers; or
(ii) one or more receivers and managers;
(j) the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company's creditors;
(k) if the remuneration is ascertained, in whole or in part, on a time basis:
(i) the time properly taken, or likely to be properly taken, by the administrator in performing the work; and
(ii) whether the total remuneration payable to the administrator is capped;
(l) any other relevant matters.
. . . “

12 This provision was given its current form by the Corporations Amendment (Insolvency) Act 2007. One change involved alteration of “fix” to “determine”, the word already used in the analogous s 473 (although “fix” was retained in the equally analogous s 499(3)). No reason for this change is stated in the Explanatory Memorandum circulated by the Parliamentary Secretary to the Treasurer. It may be that Parliament wished to dispel any lingering doubt that “fix” refers solely to prescribing a lump sum – a notion, in any event, not supported by the decision of Finkelstein J in Re Korda; Stockford Ltd [2004] FCA 1682; (2004) 140 FCR 424. I approach the present matter on the basis that cases on the section as it existed before 31 December 2007 are of continuing relevance notwithstanding substitution of “determine” for “fix”.

13 Section 449E is concerned with quantification. Section 449E(1) deals with the determination of the remuneration of a voluntary administrator in a Part 5.3A administration. Section 449E(1A) deals with the determination of the remuneration of an administrator of a company under a deed of company arrangement. No part of s 449E creates a right to be remunerated. The right to be paid what is quantified under that section has a different source in each case.

The right to be remunerated

14 As was noted in Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229, the right to be remunerated is, in the case of a voluntary administrator (but not in the case of the administrator of a deed of company arrangement), a statutory right. I quote paragraph [22] of the judgment concerning a voluntary administrator:

“In the case of the administrator under a voluntary administration (as distinct from a deed administrator), s 443D creates a right to be indemnified out of the company’s property for remuneration fixed under s 449E. By s 443E(1), the right of indemnity has priority over all the company’s unsecured debts — subject, however, to s 556 which will begin to operate in the event of subsequent winding up. Section 443F(1) provides that, to secure the right of indemnity under s 443D, the administrator has a lien on the company’s property. The property to which the lien extends is the property of the company as it existed at the time the right to remuneration accrued: Cinema Plus Ltd (Administrators Appointed) v Australia & New Zealand Banking Group Ltd (2000) 49 NSWLR 513; 35 ACSR 1; [2000] NSWCA 195 at [67].”

15 The administrator of a deed of company arrangement stands in a different position described at paragraph [23]:

“None of ss 443D, 443E and 443F applies to or in relation to remuneration to which the administrator of a deed of company arrangement is ‘entitled’ under s 449E. In fact, the Corporations Act is silent on the matter of satisfaction of that entitlement except in the case of a subsequent winding up. Upon such a winding up, remuneration of the administrator of a deed of company arrangement is within the s 556 definition of ‘deferred expenses’ and is cognisable in the application of assets under s 556 accordingly. Otherwise, as I have said, the Act does not specify the means of satisfying the s 449E entitlement of the administrator of a deed of company arrangement. In particular, there is nothing in the Corporations Act that says or implies that the company subject to the deed of company arrangement is obliged to pay the remuneration of the deed administrator.”

16 The judgment in Wellnora Pty Ltd v Fiorentino continues (at [24] – [26]):

“[24] The absence of any such statutory specification does not mean, however, that the administrator of a deed of company arrangement cannot resort to the company’s property for satisfaction of his or her remuneration duly fixed. I refer, in that connection, to the decision of Austin J in Cresvale Far East v Cresvale Securities (No 2) (2001) 39 ACSR 622 ; [2001] NSWSC 791 ( Cresvale ). After noting the distinction between the administrator under a voluntary administration and the administrator of a deed of company arrangement, the fact that voluntary administration comes to an end when a deed of company arrangement becomes operative (so that there can be no overlap in tenure between the two kinds of administrator) and the absence, in relation to the administrator of a deed of company arrangement, of equivalents of ss 443D, 443E and 443F, Austin J said:
‘In my opinion, however, Mr Gould had an equitable right to an indemnity and lien. As a deed administrator he was the agent of the company. That relationship was created by cl 1 of Sch 8A to the Corporations Regulations: see also cl 7.1 of the deed. Nothing in the deed (including cl 7.2) had the effect of detracting from the fundamental principal/agent relationship. That being so, Mr Gould was a fiduciary, in a position analogous, relevantly, to the position of a court-appointed receiver, who (analogously to a trustee) is recognised to have a well-established right of indemnity to recover fees and expenses out of property realised in the course of the receivership, supported by an equitable lien. In Shirlaw v Taylor (1991) 31 FCR 222 ; 102 ALR 551; 5 ACSR 767, the Full Federal Court extended the principle underlying the receiver’s indemnity and lien to the case of a provisional liquidator, and in Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64; 14 ACSR 343 Young J applied these principles to the case of a voluntary administrator, even though an administrator is not a court-appointed officer: see also Weston v Carling Constructions Pty Ltd . I see no relevant distinction, in the application of these principles, between the position of a voluntary administrator of a company under administration, who administers the business and affairs of the company as agent for the benefit of others, and the administrator of a company under a deed of company arrangement.’

[25] A longer passage in which this paragraph appears was approved by Campbell J in Bidald Consulting Pty Ltd v Miles Special Builders Pty Ltd (in liq) [2006] NSWSC 434 at [48] where it was noted that the reversal of Austin J’s decision on appeal did not affect the soundness of the legal principles set out in the passage he had quoted.

[26] Austin J implicitly recognised that the relevant deed of company arrangement might exclude, limit or modify the equitable right to indemnity and lien. This is, of course, a reflection of the binding force given to a deed of company arrangement by statute as against both the company and the deed administrator.”

17 As White J recognised in Re Jick Holdings Pty Ltd [2009] NSWSC 574; (2009) 72 ACSR 387, a company subject to deed of company arrangement is not liable to pay the deed administrator’s remuneration (as quantified under

s 449E) unless the liability is created by the deed of company arrangement itself. The deed may give the deed administrator recourse to the company’s property – or some part of it – for his or her quantified remuneration. It is therefore necessary to consider the deed provisions.

The deed of company arrangement

18 In the present case, the deed provides for the creation of a “Deed Fund” consisting of any cash at bank of Pauls at the date of execution of the deed, any cash received by Pauls after that date and the “Change of Contract Date” and moneys to be introduced from an outside source. The Deed Fund is said to be “available for the benefit of Admitted Creditors” and must be distributed in accordance with clause 11. It is sufficient to quote clauses 11.2 and 11.3:

“ 11.2 Preconditions to Distributions
(a) The Administrator need not make any distributions to any Admitted Creditors pursuant to this clause unless the Administrator is satisfied that the Deed Fund will be sufficient to fully pay:
(i) each Administration Liability; and
(ii) the Administrator’s Remuneration.
(b) Without limiting the effect of paragraph (a), the Administrator may in his absolute discretion withhold some or all of the Deed Fund from distribution.
11.3 Manner of Distribution
The Deed Fund shall be distributed by the Administrator in the following order of priority:
(a) the Administration Liabilities and the Administrator’s Remuneration;
(b) the liabilities of the Company to the Secured Creditor;
(c) Superannuation Claims and Retrenchment Claims;
(d) Priority Claims (excluding Administration Liabilities, the Administrator’s Remuneration, Superannuation Claims and Retrenchment Claims;
(e) a dividend of 60 cents in the dollar to Pool A Creditors in respect of their Admitted Claims; and
(f) the balance, if any, to be paid to the Company.

Creditors other than Pool A Creditors shall not have any entitlements to the Deed Fund.”

19 It is relevant to quote the definitions of “Administration Liability” and “Administrator’s Remuneration”. These are as follows:

“ Administration Liability means:
(a) any debts or other obligations incurred by the Company for which the Administrator is liable (whether as voluntary administrator of the Company or as deed administrator of this Deed) and which were incurred during the period from the Appointment Date to the Termination;
(b) any debts or other obligations incurred by the Administrator (whether as voluntary administrator of the Company or deed administrator of this Deed) during the period from the Appointment Date to the Termination Date, including without limitation, any moneys borrowed by the Administrator and interest thereon, any contracts adopted or otherwise agreed by the Administrator, any stamp duty payable by the Company or the Administrator on any deed, and any tax which the Administrator may be liable to remit or otherwise pay; and
(c) without limitation to paragraphs (a) and (b) above:
(i) any debts to which the statutory indemnity under section 443D of the Corporations Act applies;
(ii) any amounts in respect of which the Administrators are entitled to exercise a lien whether in law, equity or under section 443F of the Corporations Act on the property of the Company; and
(iii) any amount in respect of which the Administrator is entitled to the benefit of the indemnity as stated in clause 14 of this Deed,
but does not include the Administrator’s remuneration.”
“ Administrator’s Remuneration means the remuneration and other fees to which the Administrator is lawfully entitled (under section 449E of the Corporations Act, under the Deed or otherwise) by reason of the performance of his duties as voluntary administrator and deed administrator under this Deed during the period from the Appointment Date to the Termination Date.”

20 “Pool A Creditors” are seven named creditors.

21 The general effect of the deed provisions is that the fund is distributable in the order of priority stated in clause 11.3, with the result that, apart from those in the preferred classes referred to in earlier paragraphs, the only creditors who are to receive anything are the seven Pool A Creditors referred to in paragraph (e). Other creditors with non-preferred unsecured claims receive nothing. The Pool A Creditors, by contrast, are assured of some payment if some balance of the fund remains after the priority items in paragraphs (a) to (d) have been paid in full. Payment to the Pool A Creditors may not, however, exceed 60 cents in the dollar.

22 Two of the items afforded higher priority than payment to the Pool A Creditors are Administration Liabilities and Administrator’s Remuneration. They rank together on the highest rung of the clause 11.3 ladder. In addition, clause 11.2 allows the deed administrator to defer any payment to creditors unless and until the deed administrator is satisfied that the fund “will be sufficient to fully pay” all Administration Liabilities and the Administrator’s Remuneration.

23 The maximum dividend payable to the Pool A Creditors – 60 cents in the dollar – has been paid. The balance of the deed fund will accordingly accrue to Pauls, subject, in a practical sense, to the impact of any further “Administration Liabilities” and “Administrator’s Remuneration”.

24 Against this background, I come to the relief the parties seek.

The parties’ claims

25 Pauls and Mr Dwyer claim, as principal relief, an order that the “maximum remuneration” of Mr Morgan as administrator and deed administrator “be confirmed to be that which was determined by” the creditors’ resolutions of 1 April 2008. There is also a claim for an order that “the fees paid” to Mr Morgan be “reviewed” by a registrar of the court “having regard to those criteria described in section 449E(4) of the Corporations Act to determine the reasonable remuneration of [Mr Morgan], such sum being no greater than that determined by creditors on 1 April 2008”. It was made clear in written submissions, however, that the aim is to limit the remuneration to that determined on that day.

26 Mr Morgan, for his part, claims five separate orders:

“1. The Applicant’s remuneration for acting as administrator of the first plaintiff for the period from 24 January 2008 to 31 March 2008 (inclusive) be fixed in the sum of $710,231.00 (exclusive of GST).

2. The Applicant’s remuneration for acting as administrator of the first plaintiff for the period from 1 April 2008 to 21 April 2008 (inclusive) be fixed in the sum of $150,590.00 (exclusive of GST).

3. The Applicant’s remuneration for acting as deed administrator of the first plaintiff for the period from 22 April 2008 to 30 June 2008 (inclusive) be fixed in the sum of $196,882.00 (exclusive of GST).

4, The Applicant’s remuneration for acting as deed administrator of the first plaintiff for the period from 1 July 2008 to 31 January 2009 (inclusive) be fixed in the sum of $176,492.00 (exclusive of GST).

5. The Applicant’s remuneration for acting as deed administrator of the first plaintiff for the period from 2 February 2009 to effectuation of the DOCA be fixed in the sum of $80,000.00 (exclusive of GST).”

27 It will be seen that the first of these orders relates to remuneration as administrator under the Part 5.3A administration for the period referred to in the first of the resolutions of 1 April 2008 less one day. The second resolution is concerned with like remuneration for roughly the period covered by the second resolution of 1 April 2008. The third, fourth and fifth orders concern remuneration as deed administrator up to the effectuation of the deed and therefore cover, between them, the same ground as the third resolution of 1 April 2008.

28 The claims advanced by Mr Morgan are such that

(a) for the period of the administration up to 31 March 2008 (or 1 April), $710,231 is sought as against the fixed sum of $540,000 determined by creditors on 1 April 2008 (the increase of $170,231 being the same as that sought but not granted at the creditors meeting of 26 March 2009;
(b) for the balance of the voluntary administration, $150,590 is sought as against a time-based fee capped at $90,000 determined by creditors prospectively on 1 April 2008 (the excess of $60,590 over the cap being the same as the additional remuneration sought but not granted at the creditors meeting of 26 March 2009;
(c) for the whole of the period as deed administrator, a total of $453,374 is sought as against a time-based fee capped at $120,000 determined prospectively by creditors on 1 April 2009 (the excess of $333,374 over the cap being greater by $30,000 than the aggregate of the amounts sought but not granted at the creditors meeting on 26 March 2009.

29 Although Mr Morgan’s claims are framed as claims to have remuneration “fixed” by the court, they are really claims to have the court review remuneration already determined. Each resolution of 1 April 2008 fixed remuneration under s 449E(1) or s 449E(1A) in respect of a particular period, with the periods together covering the whole of the voluntary administration and the whole of the duration of the deed of company arrangement. The situation is thus one described in the opening words of s 449E(2), so that the function of the court is to review the remuneration already determined.

Has Mr Morgan forfeited access to the remuneration review process?

30 The first matter in contest between the parties is whether it is open to Mr Morgan to claim the remuneration that would be awarded to him if the five orders he seeks were made. Pauls and Mr Dwyer say that, although the court has, under s 449E(2), jurisdiction to review remuneration determined by a resolution of creditors passed on 1 April 2008 (whether under s 449E(1) or s 449E(1A)) and to “confirm, increase or reduce it”, Mr Morgan is precluded, as against Pauls (or perhaps Mr Dwyer), from invoking that jurisdiction. Implicit in the claims of Pauls and Mr Dwyer, however, is the proposition that they are not denied access to the s 449E(2) jurisdiction and may ask the court to reduce remuneration determined by a 1 April 2008 resolution.

31 The contention of Pauls and Mr Dwyer that Mr Morgan may not resort to s 449E(2) with a view to having the court determine remuneration higher than that set by a resolution of 1 April 2008 is put on two alternative bases: first, that Mr Morgan is subject to a contractual obligation not to seek or receive remuneration beyond, in one case, the fixed sum and, in the others, the “cap” referred to in the resolution; and, second, that he is estopped from doing so.

32 The contract or estoppel by which Mr Morgan is constrained is said by Pauls and Mr Dwyer to have arisen as a result of words spoken by Mr Morgan on 1 April 2008 in the period immediately before the start of the meeting of Pauls’ creditors that took place on that day. It will be recalled the resolutions set out at paragraph [5] above were passed at that meeting.

33 Relevant words were spoken by Mr Morgan on 1 April 2008 in the course of a one-on-one conversation he had with Mr John Vouris. As will be seen presently, there is no real dispute as to what was said on that occasion. Pauls and Mr Dwyer say that relevant words were also spoken by Mr Morgan in the course of a one-on-one conversation with Mr Dwyer shortly afterwards. There is, however, a question whether that conversation occurred.

The conversations of 1 April 2008

34 Before the time appointed for the creditors’ meeting on 1 April 2008, Mr Dwyer, together with certain of his associates and family members, met with Mr Morgan. There was some discussion about the subject of remuneration that was on the agenda of the creditors’ meeting. One of the members of Mr Dwyer’s party was Mr Vouris, an insolvency practitioner who had been retained by Mr Dwyer as an adviser. Mr Dwyer and one or more of those with him expressed dissatisfaction about the proposal concerning Mr Morgan’s remuneration which was considered too high.

35 After the gathering just mentioned had dispersed and before the meeting of creditors began, there was a conversation between Mr Morgan and Mr Vouris in the absence of other persons. Each of them gave evidence about it. They were, at the time, either just outside the room in which the creditors’ meeting was soon to be held or in another part of the same premises. Mr Vouris says that Mr Dwyer was inside the meeting room at the time. It is clear that Mr Dwyer was not part of the conversation and that the only participants were Mr Vouris and Mr Morgan.

36 Mr Morgan’s version of the conversation contained in his affidavit is as follows:

“12. I went down to level 2 where the meeting room for Reconvened Second Creditors’ Meeting was located. I was standing in the corridors when Mr Vouris came to me and said words to the following effect:
‘John, what can we agree on? What is the way forward?’
13. I cannot recall the exact words that Mr Vouris said to me, but I recall that he mentioned various numbers and I replied with different numbers until the figure of $540,000 was raised. I then said words to the effect of:
‘My fees for work done to date is $630,000. I am writing off $90,000 if it’s $540,000. Is that what you want me to do?’
14. I cannot now recall what words Mr Vouris said to me in reply. However, I do recall that Mr Vouris was satisfied with this amount and said to me the words to the effect of:

‘You owe me lunch for this.’
15. Mr Vouris then said to me words to the effect of:

‘What about the rest of the administration?’
16. I then replied in words to the effect of:
‘From 2 April to execution of the DOCA, it’s a cap of $90,000 plus GST and disbursements and then for the DOCA period it’s a cap of $120,000 plus GST and disbursements.’”

37 Mr Vouris deposed as follows in paragraph 6 of his first affidavit:

“6. I then had a meeting with Mr Morgan just outside the meeting room where the creditors meeting was, where words to the following effect were used:
Morgan said: ‘I will agree to fix my fees in the following manner’.
‘1: Work done to date. I incurred $630,000 billable time. I will fix this at $540,000.
‘2: 2 April to signing of DOCA, I will cap it at $90,000 plus GST and disbursements.
‘3: For the DOCA period, I will cap it at $120,000 plus GST and disbursements.
I said I will advise Paul to agree to that and get him to move the motions approving your fees.”

38 In a later affidavit, Mr Vouris said:

“3. In my First Affidavit, at paragraph 6, the following words should be added to the second last sentence:
Mr Morgan: ‘If Paul agrees to put my fee proposal to the creditors, I will agree to discount my fees for work done to date and cap my fees for future work. This is a 90 k discount on the work done to date.’”

39 Mr Morgan and Mr Vouris were cross-examined on these parts of their affidavits. Their versions are consistent. Nothing of significance emerged in cross-examination. I accept their evidence.

40 After Mr Vouris and Mr Morgan had concluded their conversation, Mr Vouris spoke to Mr Dwyer. Mr Vouris’s evidence is that the conversation between them was as follows:

“I said: ‘I have had a discussion with Mr Morgan and he has agreed to discount his fees and cap the future fees to a maximum, if you recommend it to the creditors and the creditors accept it. The deal is as follows:

1. fixed fees of $540,000 plus GST and disbursements. He will discount his fees incurred by $90,000.

2. April to signing of DOCA, he will cap it at $90,000 plus GST and expenses.

3. DOCA period he will cap it at $120,000 plus GST and disbursements.

Paul said: ‘I don’t like it. It is too expensive’.

He then said: ‘Ok. I will accept it.’”

41 Mr Dwyer’s account of his conversation with Mr Vouris is as follows:

“Vouris said: I had discussion with Mr Morgan and he has agreed to discount his fees and cap the future fees to specified maximums. If you agree to recommend it to the creditors and the creditors accept it. The deal is as follows:
‘Stage 1: For all the work already performed. He will fix his fees of $540,000 plus GST and disbursements. This is a discount of $90 k.’
‘Stage 2: 2 April to signing of the DOCA, he will cap his fees to a maximum of $90,000 plus GST and expenses.’
‘Stage 3: DOCA period he will cap his fees at $120,000 plus GST and disbursements. That works out to about $10 k per month for 12 months. If it finishes earlier, he will not charge the full $120 k plus GST and expenses.’
‘Stages 2 and 3 are capped to a maximum and you will not have to pay anything more.’
I said: ‘I don’t like it. It is too expensive, but at least I know what it is going to cost, and I would rather the certainty.’
Vouris said: ‘I think you should take it.’
I said: ‘Ok. I will accept it.’”

42 Mr Vouris accepted in cross-examination that, in his conversation with Mr Dwyer about what Mr Morgan had said, he did not in fact use the word “maximum”

43 Mr Dwyer deposes that he later had a one-on-one conversation with Mr Morgan. I quote from his affidavit:

“Mr Morgan came over and said the words to the following effect:

I said: “I will accept your offer on the basis I do not have to pay a cent more. No more surprises.’

Morgan said: ‘Yes that is right. Not a cent more. It is fixed and capped to a maximum. Stage 1 is work that is already done. I will fix this at $540,000 and give you a discount of $90,000. Stage 2 is the remainder of the admin at a cap up to a maximum of $90,000. I have capped stage 3 to maximum of $120,000. If the DOCA finishes earlier, I will not charge the $120,000, as I based it on $10k per month. GST and Disbursements are obviously on top.’

Mr Morgan read out the proposed resolutions to me. These were the same resolutions that I subsequently proposed to the creditors.

Mr Morgan said: ‘This is a good deal. You should get the creditors to approve it.’”

(The apparent blank after the first line above appears in the affidavit itself.)

44 According to Mr Dwyer, this happened either in the room in which the creditors’ meeting was about to begin or just outside it.

45 When the meeting of creditors proceeded to business, Mr Dwyer moved the adoption of each of the resolutions in the form set out at paragraph [5] above and those resolutions were passed.

46 Mr Morgan has no recollection of having had the conversation with Mr Dwyer referred to at paragraph [43] above. He says that, had such a conversation occurred, he would not have used the words attributed to him by Mr Dwyer and that he would only have repeated what he said to Mr Vouris. Mr Vouris’s evidence is that he was with Mr Dwyer continuously (or almost continuously) after the conclusion of the Morgan-Vouris conversation and until the start of the creditors’ meeting. Mr Vouris testified that he had no recollection of any conversation having taken place between Mr Morgan and Mr Dwyer.

Did the conversation with Mr Morgan alleged by Mr Dwyer take place?

47 There are significant differences about what was said by Mr Morgan to Mr Vouris (as related by both of them) and what Mr Dwyer says was said by Mr Morgan to him. For that reason and because the evidence of Mr Morgan and Mr Vouris already mentioned casts substantial doubt on whether the conversation with Mr Morgan alleged by Mr Dwyer actually took place, it is necessary for me to decide that question. I find, on the balance of probabilities, that it did not occur. There are five reasons for this. First, it is significant that neither Mr Morgan nor Mr Vouris has any recollection of such a conversation. Given the circumstances at the time and the proximity of the persons to one another, Mr Vouris would almost certainly have been aware had Mr Morgan and Mr Dwyer had a one-on-one conversation.

48 Second and as Mr Morgan deposed, there was no reason for him to convey to Mr Dwyer a message different from that which he had conveyed to Mr Vouris only minutes earlier.

49 Third, Mr Vouris was acting for Mr Dwyer and Mr Morgan knew this. The arrangement that Mr Morgan reached in his conversation with Mr Vouris must have been, in his mind, complete. Having completed that arrangement, Mr Morgan had no reason to make virtually immediately an unsolicited approach direct to Mr Dwyer. Mr Dwyer says, “Mr Morgan came over and said words to the following effect”. There is, in objective terms, no reason why Mr Morgan would have chosen to do this.

50 The fourth reason for finding that the conversation between himself and Mr Morgan deposed to by Mr Dwyer did not occur is the successful attack made by counsel for Mr Morgan on the reliability of other parts of Mr Dwyer’s evidence. In the course of cross-examination, Mr Dwyer was challenged on no less than six parts of his affidavit evidence. It is instructive to review the results:

1. Mr Dwyer said on affidavit that there had been no response by Mr Morgan to a letter of 28 July 2008 sent to Mr Morgan by Mr Dwyer’s solicitors. He was compelled in cross-examination to accept not only that Mr Morgan had responded by letter dated 29 July 2008 but that that response had been exhibited to another of his affidavits. He then fell back to saying that the response did not give the answers that had been sought.
2. Mr Dwyer said on affidavit that funds used for payment of 60 cents in the dollar to the Pool A Creditors “were from external sources”. He confirmed in cross-examination that, by “external sources”, he meant sources other than funds available to Mr Morgan as deed administrator. It was then put to him that his statement was incorrect. He later accepted that funds available to Mr Morgan (and therefore not “external sources”) to the extent of about $ 1 million had been used for the stated purpose. He then conceded that the statement in his affidavit was “partially incorrect” (and later “partially correct”). The following exchange is instructive:
“Q. How do you explain then the existence of that statement in paragraph 21?
A. Just confused.”
3. Mr Dwyer said on affidavit that a particularly identified document had been attached to an email from Mr Morgan to a Ms Newman. In cross-examination he initially continued to maintain that the document “had come from his emails” (referring to Mr Morgan). When taken to the emails, he eventually accepted that the document had been an attachment to an email sent by Ms Newman to Mr Morgan, not vice-versa.
4. Mr Dwyer said on affidavit:
“As I explained from paragraph 22 onwards, Mr Morgan made claims to me for additional fees only after he left PKF.”
Mr Morgan left PKF on 30 June 2008. The part of Mr Dwyer’s cross-examination dealing with the passage just quoted began:
“Q. But in fact he had made it clear to you from as early as 6 June 2008 that he was intending to claim an amount of an additional $440,000 for deed administration fees?
A. No, not - no way in the world.”
Mr Dwyer was then taken to a letter his adviser Mr Vouris had written to Mr Morgan on 14 July 2008 referring to cash flow summary notes “handed to the director of the abovenamed company” (this was obviously a reference to Mr Dwyer). Mr Vouris attached a copy of the cash flow summary notes to the letter. It bears the date 6 June 2008 and contains an item of “reserve” for $440,000 designated “administrator’s remuneration, disbursements and costs”.
Mr Dwyer did not accept that Mr Vouris had given him this document. He did not remember it; but added “I don’t look at cash flow summaries”.
Yet in an email to Mr Morgan dated 19 June 2008, Mr Dwyer had said:
“… you have just billed me another $440k”.
It was put to him that this was a reference to the $440,000 reserve referred to in the cash flow summary. He said that the $440,000 was part of the $540,000 approved by creditors. This does not explain why he referred in the email to “another” $440,000. Mr Dwyer was obviously referring to $440,000 over and above established remuneration and the inference is irresistible that he was, at 19 June 2008 – more than ten days before Mr Morgan’s departure from PKF - aware of a request or demand by Mr Morgan for an additional $440,000 in remuneration.
5. Mr Dwyer referred in one of his affidavits to three notices of meeting issued by Mr Morgan, one for the meeting of the committee of inspection on 25 September 2008, one for a continuation of that meeting after adjournment and one for the meeting of creditors on 26 March 2009. Each was referred to in a separate paragraph of the affidavit. The next paragraph was:
“The proposed resolutions named [sic] in the above 3 paragraphs of Mr Morgan were defeated unanimously in all instances.”
The cross-examination on this paragraph was as follows:
“Q. Did you go to the meeting on 26 March this year?
A. No.

Q. Have you seen the minutes of that meeting?
A. No, but I was told that we won the vote.

Q. On what basis did you say the resolution was defeated unanimously?
A. I heard it was well over 80 percent that voted for us.
Q. Do you understand what unanimous means?
A. I thought vast majority.
Q. No, you understand unanimous means without consent [sic; scil “dissent”] from any creditor?
A. No I don’t. I thought unanimous was the vast majority or not – I apologise for my ignorance I didn’t.”
6. Mr Dwyer was taken to a long passage in one of his affidavits concluding with (and put forward as a basis for) the statement that, as at 22 July 2008, Mr Morgan had sufficient funds to implement the deed of company arrangement in full “and still have $513,462.20 surplus in the Deed Fund” (which surplus would have been retained by Pauls under clause 11.3(f)). Mr Dwyer accepted in cross-examination that, according to the affidavit, Mr Morgan had $2,248,640.39 available. The cross-examination continued:

“Q. The trouble is that the quantum payable to the pool A creditors required a payment of $2.6 million?
A. That's right.

Q. So, there is no possibility that Mr Morgan had available as at 22 July enough money payable to pay the pool A creditors?
A. No.

Q. It only became possible?
A. I don't know how to usually do this.

Q. It only became possible for him to discharge, the obligation under the deed of company arrangement to pay the pool A creditors, after external funds of $1.5 million were paid to two of those creditors in late October 2008 isn't that right?
A. That's correct.

Q. So, unless and until that happened there was no capacity for Mr Morgan to complete the deed of company arrangement and pay those creditors?
A. We would have always had to put money in exactly. But we wanted to do that in July or August sometime we didn't want to do it in December.

Q. You hadn't done it by 22 July?
A. We couldn't.”

51 These matters 1 to 6 persuade me that Mr Dwyer’s evidence – particularly his affidavit evidence - is in general unreliable except where undisputed or corroborated. It is clear that he included statements in his affidavits helpful to his case and critical of Mr Morgan that were simply not true. I do not need to decide whether he has a bad memory or impaired understanding, is prone to unconscious but convenient reconstruction, is careless or chooses to be untruthful. The finding of unreliability is alone sufficient.

52 This leads me to the fifth reason for finding that the one-on-one conversation between himself and Mr Morgan alleged by Mr Dwyer did not occur. An email was sent by Mr Dwyer to Mr Morgan on 4 December 2008 (the date of the meeting of the committee of inspection referred to at paragraph [7] above) in these terms:

“Attached is my proxy, in the event I cannot attend the meeting today.
I vote ‘yes’ to paying the creditors in full by 4 December 2008.
I vote ‘no’ to fix the remuneration of the Deed Administrator. My reasons are that the committee of inspection has not been provided with the following information by the Administrator to form an informed decision as the following has not been provided:
i. not been provided with sufficient information, such as time sheets, detail tasks and charges for these tasks.
ii. not been provided with the amounts paid to PKF by the administrator.
iii. details of tasks performed by PKF.
iv. tasks not performed by PKF to complete the DOCA.
v. PKF fees that were approved by the administrator.
vi. work done by Rogers Reidy.”

53 There is a conspicuous absence from this email of any allegation of a promise made by Mr Morgan to Mr Dwyer in the terms later said by Mr Dwyer to have arisen from the alleged conversation between them on 1 April 2008. Had Mr Dwyer really believed that Mr Morgan had made such a promise on that occasion, he would have referred to it in the email as a reason for opposing the proposed resolutions fixing additional remuneration.

54 In concluding that the alleged one-on-one conversation between Mr Morgan and Mr Dwyer did not take place, I do not overlook the fact that, at the meeting of creditors itself, Mr Morgan said (as recorded in a transcript):

“We have had a discussion with the director and his advisers in relation to our fees this morning and we have reached an agreement that we will discount our fees . . .”

55 A “discussion with the director and his advisers” took place in the course of, successively, the meeting between Mr Morgan and Mr Dwyer together with certain of his associates and family members (see paragraph [34] above) and the conversation between Mr Morgan and Mr Vouris before the meeting of creditors. Mr Morgan’s statement just quoted was perfectly consistent with those facts and in no way lends support to the contention that the still later one-on-one conversation between Mr Morgan and Mr Dwyer took place.

The conversation between Mr Morgan and Mr Vouris

56 Relieved of the need to consider the significance to the contract and estoppel questions of the content of the one-on-one conversation with Mr Morgan alleged by Mr Dwyer, I turn to the significance of the conversation between Mr Morgan and Mr Vouris about which each gave evidence in generally similar terms (see paragraphs [36] – [38] above).

57 The context in which the conversations occurred was that the meeting of creditors was about to address the question of the remuneration of Mr Morgan as voluntary administrator and deed administrator (assuming that the deed proposal was approved). Mr Morgan recognised that it would be helpful to his cause to have Mr Dwyer’s support at the meeting.

58 Mr Morgan and Mr Vouris, as experienced insolvency practitioners, were aware of the generally prevailing principles and practices concerning fixing of remuneration by resolutions of creditors or committees of creditors. In particular, each gave evidence that he was aware of the content of the practice note entitled “Information Sheet for creditors on approving remuneration in external administrations” forming part of the Code of Professional Practice published by the Insolvency Practitioners Association of Australia. The practice note reads in part as follows:

“Committee members/creditors may be asked to approve fees for work already performed or fees based on an estimate of work yet to be carried out.

If the work is yet to be carried out, it is advisable for creditors to set a maximum limit (‘cap’) on the amount that the administrator may receive. For example, ‘future fees are approved calculated on hours worked at the rates charged (as set out in the provided rate scale) up to a cap of $X’. If the work involved then exceeds this figure, the administrator will have to ask the creditors’ committee/creditors to approve a further amount of fees, after accounting for the fees already incurred.”

59 Mr Morgan and Mr Vouris were also aware of important court decisions concerning the fixing of the remuneration of administrators and deed administrators. In particular, they were familiar with the decision of

Gyles J in Gidley re Aliance Motor Body Pty Ltd (above) to the effect that the “determining” (or, as it then was, “fixing”) concept reflected in s 449E, as it relates to meetings of creditors and meetings of committees, extends to approving a regime under which stated hourly or other rates, objectively ascertainable and clearly defined, are to be applied.

60 The two basic principles which must be taken to have been in the minds of Mr Morgan and Mr Vouris are, first, that it is possible for remuneration to be fixed or determined prospectively by a resolution that adopts and imposes a clearly stated scale of rates; second, that a limit – referred to in the industry as a “cap” – may be included in such a resolution; and, third, that such a “cap” serves to limit the total of the remuneration that can properly be sought and paid under the authority of the resolution concerned and by reference to the particular scale.

61 Neither Mr Morgan nor Mr Vouris claimed to be under any impression that a “cap” imposed by a resolution could operate to displace statutory provisions permitting the approval of further remuneration or review (by increase or decrease) of remuneration already fixed. It is obvious that a resolution determining remuneration can have no force greater than that given to it by the statute; or, putting this another way, that if the statute permits and requires the payment of such remuneration as is fixed by a resolution, the effect of the resolution is no more than to cause the permission and requirement to arise.

62 Mr Vouris confirmed in cross-examination that he had himself often adopted the course of obtaining a resolution based on a scale of rates subject to a “cap” and afterwards calling a further meeting of creditors to seek approval of remuneration beyond the “cap”.

63 It is noteworthy that the conversation between Mr Morgan and Mr Vouris, as related by each of them, referred in several places to a “cap” and that there was no reference to a “maximum”. In their conversation, they were talking the language of their profession as understood by members of it and reflected in the publication of the professional association already quoted. Mr Vouris accepted that he used the word “maximum” when he spoke to Mr Dwyer about the position he had reached with Mr Morgan. But that can have no effect on the content and effect of the agreement between Mr Morgan and Mr Vouris.

64 It is relevant to refer, in this connection, to Mr Vouris’s evidence about the meeting of creditors on 26 March 2009 at which resolutions for increased remuneration were proposed but not passed (see paragraph [9] above). Mr Vouris said in his affidavit that he said at that meeting words to the following effect:

“I said: ‘The fees were fixed up to 1 April 2008 at $540,000. It was capped up to $90,000 for the remainder of administration. The remainder was capped up to $120,000. Nothing more. The creditors voted on this.’”

65 Mr Vouris’s account of a response by Mr Morgan was:

“Mr Morgan said: ‘I am entitled to go to court to have these fees increased, even if the creditors have not approved it.’”

66 Cross-examination of Mr Vouris on this part of his affidavit was as follows:

“Q. And you say in particular that there was a cap of 90,000 for the remainder of the administration and the remainder was capped up to 20 - 120,000, you see that portion of your affidavit?
A. Yes.

Q. And you say that you said to the meeting the words nothing more the creditors voted on this? Do you see that?
A. Yes.

Q. Now, you don't say that you suggested it to any other creditor or to Mr Morgan at that meeting that those limits existed by reason of anything said or done by you during your discussions with Mr Morgan, do you?
A. No.

Q. I mean what you say give rise to the limitation or the prohibition on further fees was the reference to the creditors' vote, that's what you said to the meeting, is that right?
A. Yes.

Q. You didn't say that Mr Morgan you don't get any more money because you and I have come to a binding agreement on this matter, do you?
A. No.

Q. And because in your mind at least it was the creditors' resolution rather than anything said between you and Mr Morgan which established the limits that existed in respect of his fee entitlements, is that right?
A. At the end of the day the creditors control the amount of fees they - an administrator can have approved.”

67 Mr Vouris here accepted that a resolution of creditors may award remuneration over and above that granted by an earlier resolution; and that this is so even if the earlier resolution incorporates a “cap”. Implicit in Mr Vouris’s evidence is that the court’s power to review remuneration may be exercised despite any “cap” referred to in a remuneration-fixing resolution of creditors.

68 It is, to my mind, clear that the discussion between Mr Morgan and Mr Vouris before the meeting of creditors on 1 April 2008 was not the occasion of any promise or representation by Mr Morgan that, come what may, he would never seek remuneration as administrator beyond the fixed sum stated in the first resolution eventually approved by creditors on that date plus a sum calculated in accordance with (and subject to the “cap” in) the second resolution or remuneration as deed administrator beyond the “cap” in the third resolution.

69 The agreement reached in the conversation as to “caps” was an agreement about the content of the resolutions that would be put to creditors at the meeting that was about to take place. The agreement was reached on the clearly implied footing that a resolution of creditors fixing remuneration represents part only of the overall machinery created by s 449E for fixing remuneration and that other parts of that overall machinery may operate to cause remuneration already fixed to be supplemented by additional remuneration or to be increased or reduced.

The contract and estoppel cases advanced by Pauls and Mr Dwyer fail

70 The promise upon which Pauls’ contract case is advanced was not made. The representation upon which Pauls’ estoppel case is advanced was not made. It is accordingly not necessary to address the several submissions made on behalf of Pauls and Mr Dwyer on the basis of Berjaya Group (Aust) Pty Ltd v Ariff [2009] NSWSC 569. In particular, there is no need to address the question (left at large in that case) whether an entitlement to remuneration on the part of a voluntary administrator or the administrator of a deed of company arrangement can be impinged upon by contract.

71 There will be no order that the “maximum remuneration” of Mr Morgan as administrator and deed administrator “be confirmed to be that which was determined by” the creditors’ resolution of 1 April 2008. Nor will there be an order that any review of Mr Morgan’s remuneration be on terms that remuneration be “no greater than that determined by creditors on 1 April 2008”. The s 449E machinery is fully available for appropriate use in this case, without regard to any limit or maximum created by contract or estoppel.

Matters remaining

72 Remaining for consideration, therefore, are:

(a) the application of Pauls and Mr Dwyer for an order that Mr Morgan’s remuneration “be reviewed by a registrar of this court having regard to those criteria described in section 449E(4) of the Corporations Act to determine the reasonable remuneration”, but so as not to be greater than the remuneration determined by the resolutions of 1 April 2009; and
(b) the application of Mr Morgan for
(i) an order fixing his remuneration as voluntary administrator for the period 24 January 2008 to 31 March 2008 in the sum of $710,231 (compared with the sum certain of $540,000 fixed by resolution of creditors on 1 April 2008);
(ii) an order fixing his remuneration as voluntary administrator for the period from 1 April 2008 to 21 April 2008 in the sum of $150,590 (compared with a sum calculated at specified hourly rates subject to a “cap” of $90,000 fixed by resolution of creditors on 1 April 2008);
(iii) three separate orders in respect of remuneration as deed administrator, each fixing a sum certain in respect of a particular period of that administration, with the three sums together totalling $453,374 (compared with a sum calculated at specified hourly rates subject to a “cap” of $120,000 fixed by resolution of creditors on 1 April 2008).

73 As I have said (see paragraph [29] above), Mr Morgan’s application is really an application for review under s 449E(2).

The review process under s 449E(2)

74 There are thus competing s 449E(2) applications, one purportedly by Pauls and Mr Dwyer and several by Mr Morgan. To the extent that Pauls purports to apply under that section, the application is a nullity because the relevant company is not given standing to apply. The matter must therefore be approached on the footing that it is an application by Mr Dwyer alone, he having standing as (at least) an officer and the sole member of Pauls.

75 The power of the court made exercisable by the two applications now before it is the power to review the remuneration and, having done so, to confirm, increase or reduce it. The power applies separately to the remuneration of the voluntary administrator and the remuneration of the deed administrator.

76 Section 449E(4) says that, in exercising the power, the court must “have regard to” a single matter, that is, “whether the remuneration is reasonable” (this refers, clearly enough, to the initially fixed remuneration to which the review application relates). A direction that a court “have regard to” a particular matter sometimes does no more than require that it “give weight to” the matter “as a fundamental element” in coming to a conclusion: R v Toohey; Ex parte Meneling Station Pty Ltd [1982] HCA 69; (1982) 158 CLR 327 at 333 per Gibbs CJ. Here, however, it is my opinion that the question whether the remuneration already fixed is reasonable – or unreasonable because either too high or too low – is the only question to be addressed. I say this because of approaches taken in decided cases concerning the remuneration of administrators and liquidators. In Re Korda; StockfordLtd (above), a case about initial fixing of remuneration, Finkelstein J referred to the need for those making the determination to have “information which would enable them to determine whether the fees claimed were reasonable”. In Re Solfire Pty Ltd(No 2) [1999] 2 QdR 182, Shepherdson J said that decision makers must be given sufficient detail to enable them to make “a properly informed decision on the reasonableness or otherwise of the remuneration”. That observation was approved by the Full Court of the Supreme Court of Western Australia in the later case of Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96. Thus, although the statute says nothing about the aim of the initial remuneration fixing process, the objective has been accepted by the courts as that of producing a reasonable remuneration. It must follow, in my view, that the aim of the review process is to determine whether the initial fixing process has miscarried, in the sense that the initially fixed remuneration can be seen to be not reasonable remuneration and, if it has, to substitute a reasonable remuneration for that originally fixed. So much was accepted by Bredmeyer M in GIS Electrical Pty Ltd v Melsom [2001] WASC 314 at [68] when he said that a person seeking review must show that the remuneration initially fixed is not fair and reasonable.

77 The assessment whether the initially fixed sum is fair and reasonable will be made in the light of all relevant circumstances brought to the court’s attention upon the review. These may include circumstances that were not known or foreseen at the time the remuneration was fixed. They may include the circumstance that some work actually done was outside the proper performance of the administrator’s functions or was unnecessary, although allegations of misfeasance or breach of duty should not be determined upon a review of remuneration; also notions of punishment are foreign to the process: Re Anderson Group Pty Ltd; Mann v Anderson [2002] NSWSC 764; (2002) 20 ACLC 1607.

78 Similar principles are reflected in s 449E(4) which, after the opening direction that the court is to “have regard to whether the remuneration is reasonable”, sets out a number of things to be “taken into account” in addressing reasonableness. The last of the things to be “taken into account” is “any other relevant matters”. The inquiry into reasonableness is thus to focus upon all relevant matters.

79 When an application for review comes before it, the court must first decide whether, in the light of the statutory provisions, it is just that a review be conducted. Because the s 449E(2) power is obviously discretionary, there is a threshold question whether there is some demonstrated need to inquire into the appropriateness of the originally determined quantum. Only if some need is shown will the court actually proceed to a review.

The need for a review in this case

80 In the present case, the question whether a need for review has been shown must be asked separately in relation to the several elements of the remuneration already fixed.

81 The first element is the remuneration as voluntary administrator for the period 24 January 2008 to 1 April 2008, being the remuneration determined by the first resolution of creditors passed on 1 April 2008. By that resolution, the remuneration for the period ending on the date of the passing of the resolution was “fixed in the amount of $540,000 exclusive of GST and disbursements”.

82 Reference has already been made to the fact that, in the pre-meeting discussion on 1 April 2008, Mr Morgan referred to the fact that billable time in the administration to that point was $630,000 and that he was writing off $90,000 by agreeing to the figure of $540,000 which was put to the meeting and approved. This matter was also referred to by Mr Morgan when he addressed the meeting of creditors. A transcript of the meeting records him as saying:

“We have had a discussion with the director and his advisors in relation to our fees this morning and we reached a resolution that we will discount our fees by $90,000 off the first amount of $630,000 so what we’re looking to do is get a resolution that our fees be approved at $540,000 exclusive of GST.”

83 He then went on and recited the form of resolution proposed, making it clear that the fixed sum of $540,000 exclusive of GST related to the period 28 January 2008 to the date of the meeting itself.

84 I see no need for a review of this element. All relevant work had been completed. Mr Morgan informed creditors that the time-based amount of $630,000 was not sought – making it clear that he could have sought it but was content to seek only $540,000. The situation was one in which the administrator, obviously aware of the extent of the work actually done, asked for remuneration of $540,000 and the creditors acceded to that request. He made and communicated a decision to seek less than he might otherwise have sought for completed work. The situation was not one in which the creditors, by their vote, forced upon the administrator a reward for that completed work smaller than that he sought from them.

85 I am not satisfied that, in those circumstances, the court should embark on a review. The circumstances themselves leave no room for a possibility that the remuneration determined by resolution of creditors for past services was not a fair and reasonable remuneration. There was informed and free consent on both sides to the particular quantum.

86 The same cannot be said of the several elements determined prospectively on 1 April 2008. I refer, of course, to the determinations in respect of the period of the voluntary administration after 1 April 2008 and the whole of the period as deed administrator. In relation to each of those elements both Mr Morgan and the creditors asked to determine remuneration were, in a real sense, dealing with the unknown. The “cap” was, in each case, applied in the sense to which reference has already been made, that is, to mark a limit beyond which there could be no remuneration without either a further determination of creditors or an order of the court. The existence of the “cap” did not imply that remuneration could never exceed the stated amount.

87 It is no doubt relevant that both the committee of inspection and a meeting of creditors were later asked to determine additional remuneration and that each did not do so. The proposal was, in each case, raised at the relevant meeting but not approved. But the relevance of that matter is not such as to indicate that the court should not embark upon a review – merely that there is a need for it to be particularly astute and vigilant. If the committee and the meeting of creditors were unwilling to vote additional remuneration, there is a need to be sure that anything more is indeed reasonable.

88 This leads to another point. The court, upon a s 449E(2) review, is not confined to adopting the position for which the administrator contends or that for which an objector contends. As the section makes plain, the court may “confirm, increase or reduce” the remuneration determined by creditors. Once the matter is before it, the court must simply decide, in accordance with s 449E(4), the appropriate quantum.

The form of review

89 Mr Morgan’s application for review has been made in the manner required by rule 9.2A of the Supreme Court (Corporations) Rules 1999. This is established by his affidavit of 10 July 2009. In particular, he gave notice in accordance with Form 16A as required by rule 9.2A(3). This was done on or about 8 April 2009. Mr Morgan deposes that no one to whom notice was given served on him a notice under rule 9.2A(4).

90 It was recognised in both Re Korda; Stockford Ltd (above) and Re Carlovers Carwash Ltd [2005] NSWSC 879; (2005) 54 ACSR 696, the view was taken that a registrar of the court is best equipped to perform the court’s function of determining remuneration. The same assessment holds good in relation to a s 449E(2) review.

Disposition

91 I have not so far mentioned the claim of Pauls and Mr for an order that Mr Morgan “do all acts necessary to complete” the deed of company arrangement. Since remuneration has not been finally quantified and full effectuation of the deed is not possible in the absence of that quantification, no such order will be made.

92 In relation to Mr Morgan’s interlocutory process (see paragraph [26] above), there will be no order in terms of paragraph 1.

93 As to the balance of the matters before the court, there will be orders as follows:

1. Order that the remuneration determined by the Second Resolution set out at paragraph [5] of reasons for judgment published in these proceedings on 13 November 2009 be reviewed pursuant to s 449E(2) of the Corporations Act 2001.
2. Order that the remuneration determined by the Third Resolution set out at paragraph [5] of reasons for judgment published in these proceedings on 13 November 2009 be reviewed pursuant to s 449E(2) of the Corporations Act 2001.
3. Pursuant to Item 7 of the delegation under s 13 of the Civil Procedure Act 2005 made on 9 April 2009, order that there be and is hereby referred to a registrar the matter of conducting and determining each of the reviews so ordered.
4. Direct that evidence admitted upon the hearing of these proceedings on 16 and 22 October 2009 be evidence upon the review, subject to any determination as to relevance of any part of it to the review.

94 As to costs, my inclination is to think that there should be an order that Pauls and Mr Dwyer pay Mr Morgan’s costs of the proceedings to date. If Pauls and Mr Dwyer consider that there should be some other order, they must so inform Mr Morgan and my Associate within seven days. In that event, I shall make directions for submissions on costs.

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