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

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,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] NSWSC 1222
Decision Date: 13 November 2009

CaseChat Overview and Summary

Paul's Retail Pty Ltd, the subject of a voluntary administration, sought review of the remuneration of the administrator, appointed under a deed of company arrangement. The application for review was contested by the administrator, who argued that contractual and estoppel principles precluded the court from conducting such a review. The matter was heard in the Federal Court of Australia, where the court was required to determine the legal principles governing the review of administrator remuneration and whether there were any contractual or estoppel barriers to the court's intervention.

The primary legal issues before the court were whether the administrator was precluded by contract or estoppel from seeking a review of the remuneration, and if so, what the implications of such a bar would be for the court's jurisdiction to conduct a review. The court needed to interpret the meaning of certain words used in conversations between the administrator and another insolvency practitioner, specifically whether the terms "cap" and "capped" related to the remuneration. The court also had to consider the nature and scope of the review process, and whether such a review was warranted in this particular case.

The court held that the administrator was not precluded by contract or estoppel from seeking a review of the remuneration. The conversation between the administrator and the other insolvency practitioner did not indicate any contractual limitation on the court's jurisdiction to review the remuneration. The court found that the terms "cap" and "capped" did not refer to a limit on the remuneration but rather to the process of setting the remuneration. The court further concluded that the review process was not an appeal but rather an opportunity for the court to ensure that the remuneration was fair and reasonable. The court determined that a review was warranted in this case and ordered that the remuneration be reviewed to ensure it was in line with industry standards.

The court ordered that the remuneration of the administrator be reviewed to ensure it was fair and reasonable, and that the administrator provide detailed information regarding the basis for the remuneration. The court also directed that the parties engage in further negotiations to reach an agreement on the remuneration, and if necessary, the court would make a final determination on the remuneration.

Orders