Re Bosnjak Holdings Pty Ltd - [2005] FCA 275

FEDERAL COURT OF AUSTRALIA
Lombe, in the matter of Bosnjak Holdings Pty Ltd (Administrators appointed)
[2005] FCA 275
CORPORATIONS – administration – fixing remuneration of administrators prior to a s 439A meeting – variation of operation of Act
Corporations Act 2001 (Cth), ss 436A, 439A, 436F(1), 447A(1), 447E, 449E(1), 449E(2)
Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 applied
Korda, In the matter of Stockford Limited (Subject to Deed of Company Arrangement) [2004] FCA 1682 cited
IN THE MATTER OF BOSNJAK HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 341 435; BOSNJAK BROS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 107 264; BOSNJAK ENTERPRISES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 648 260; BOSNJAK INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 911 446; BOSNJAK PROPERTY DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 040 960; BOSNJAK’S COACH LINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 001 085 918; BOSNJAK’S INTERNATIONAL SALES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 648 242; BLUE RIBBON BUS COMPANY PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 088 325 615; ENIWILL PTY LTD (ADMINISTRATORS APPOINTED) ACN 003 160 370; PARRAMATTA BUS CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 449 436; SMITHFIELD COACH IMPORTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 001 224 415; ST. MARYS BUS SERVICES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 532 534; and WESTBUS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 201 267 (collectively, the VA Companies)
DAVID JOHN FRANK LOMBE AND PETER GEORGE YATES
NSD 372 OF 2005
GYLES J
21 MARCH 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 372 OF 2005

IN THE MATTER OF BOSNJAK HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 341 435; BOSNJAK BROS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 107 264; BOSNJAK ENTERPRISES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 648 260; BOSNJAK INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 911 446; BOSNJAK PROPERTY DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 040 960; BOSNJAK’S COACH LINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 001 085 918; BOSNJAK’S INTERNATIONAL SALES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 648 242; BLUE RIBBON BUS COMPANY PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 088 325 615; ENIWILL PTY LTD (ADMINISTRATORS APPOINTED) ACN 003 160 370; PARRAMATTA BUS CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 449 436; SMITHFIELD COACH IMPORTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 001 224 415; ST. MARYS BUS SERVICES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 532 534; and WESTBUS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 201 267 (collectively, the VA Companies)

DAVID JOHN FRANK LOMBE and PETER GEORGE YATES
APPLICANTS

JUDGE:

GYLES J

DATE OF ORDER:

11 MARCH 2005

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1. Leave to file application returnable before me instanter.
2. Pursuant to s 447(A(1) of the Corporations Act 2001 (Cth) (the Act) Pt 5.3A of the Act is to operate in relation to each of the VA Companies as if:
(a)Section 449E(1)(a) of the Act also provided that the Applicants in their capacity as administrators of the VA Companies, are entitled to such remuneration for work performed in relation to all the…

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: [2005] FCA 275
Decision Date: 11 MARCH 2005

CaseChat Overview and Summary

In the matter of Bosnjak Holdings Pty Ltd, the applicants sought an order from the Court to allow for the remuneration of administrators to be fixed before the second meeting of creditors. The dispute arose from the need to establish remuneration for the administrators of several companies in administration, as the traditional process of fixing fees at the second creditors' meeting was deemed impractical due to the scale and complexity of the administration. The Court had to determine whether there was a mechanism within the Corporations Act 2001 (Cth) that allowed for the remuneration of administrators to be fixed before the second meeting of creditors, and if not, whether the Court had the authority to make an order to facilitate this.

The Court considered the statutory framework and found that the Act only provided for the fixing of fees at the second meeting, which was not practical for large-scale administrations. Finkelstein J's reasoning in Stockford highlighted that fees would be fixed retrospectively, which was not suitable for the scale of the current administration. The Court also noted that while the Act allowed for the Court to fix remuneration under certain circumstances, it was not the ideal body to make such a complex and commercially sensitive decision. The Court therefore exercised its power under s 447A of the Act to make an order that allowed for the remuneration to be fixed prior to the second creditors' meeting. The order specified that the remuneration would be fixed by a resolution of the committee of creditors after they had been given at least seven days' notice of the amount claimed by the administrators.

The Court's decision was based on the necessity to accommodate the unique circumstances of the administration and to avoid the impracticality of fixing fees retrospectively. The order allowed for the administration to proceed efficiently and ensured that the administrators were compensated in a timely manner. The Court also ordered that the costs of the application be costs in the administration, and set a date for further proceedings.

Orders

Orders of the court

1. Leave to file application returnable before me instanter.

2. Pursuant to s 447(A(1) of the Corporations Act 2001 (Cth) (the Act) Pt 5.3A of the Act is to operate in relation to each of the VA Companies as if:

(a) Section 449E(1)(a) of the Act also provided that the Applicants in their capacity as administrators of the VA Companies, are entitled to such remuneration for work performed in relation to all the VA Companies as is fixed by a resolution of the committee of creditors appointed to Westbus Pty Ltd (Administrators Appointed) passed after the members of that committee have received no less than 7 days written notice of the amount of remuneration claimed by the Applicants, together with details of the manner in which the amount claimed is comprised and calculated.

(b) Section 436F(1) of the Act also provided that one of the functions of the committee of creditors of Westbus Pty Ltd (Administrators Appointed) is to fix, by resolution of that committee, the remuneration of the Applicants in their capacity as administrators of all the VA Companies, after the members of that committee have received no less than 7 days prior written notice of the amount of remuneration claimed by the Applicants together with details of the manner in which the amount claimed is comprised and calculated.

3. An order that the plaintiffs’ costs of this interlocutory application be costs in the administration of the VA Companies.

4. Stand over the matter to Friday, 29 April 2005 at 10.00 am.

5. Liberty to apply on 24 hours’ notice.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GYLES J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: GYLES J

As noted by Finkelstein J in Korda, In the matter of Stockford Limited (Subject to Deed of Company Arrangement) [2004] FCA 1682 (Stockford) at [6], one of the features about administration pursuant to s 436A is that the Act only provides for the fixing of fees of the administrators at the second meeting of creditors – which is virtually the end of the administration. Section 449E relevantly provides:‘Remuneration of administrator(1)[Entitlements of administrator] The administrator of a company under administration, or of a deed of company arrangement, is entitled to:(a)such remuneration as is fixed by a resolution of the company’s creditors passed at a meeting convened under section 439A, or under section 439A or 445F, as the case may be; or(b)if no remuneration is so fixed—such remuneration as the Court fixes on the application of the administrator.(2)[Court may review entitlements] Where remuneration is fixed under paragraph (1)(a), the Court may, on the application of the administrator or of an officer, member or creditor of the company:(a)review the remuneration; and(b)confirm, increase or reduce it.’That means that almost all of the work of an administrator will be complete at the time fees are fixed and, in that sense, fees will be fixed retrospectively. That may be practical in a small scale administration where what is at stake in substance is the time of the administrator or in an administration which is completed within tight time limits. It is not practical in an administration on this scale where, in effect, the resources of a large firm of chartered accountants are required to be employed and the expenditure of considerable sums of money is required to fund those resources. I need not discuss here the question as to the proper line between s 449E remuneration on the one hand and disbursements on the other in a case such as the present (Stockford at [50]; Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96, 100; (1998) 16 ACLC 1653). I am satisfied that the scale and complexity of the affairs of the companies under administration and the length of the administration require that provision be made for the fixing of fees prior to the s 439A meeting. Does Pt 5.3A of the Act provide for that to be done? It is arguable that application could be made to the Court pursuant to s 449E(1)(b). That subsection may or may not have any force prior to the s 439A meeting. Even if it has, the Court is not a desirable first port of call in making a judgment of some complexity which has commercial overtones. That exercise would also be very expensive. I was thus persuaded that this is a proper case to exercise the power granted by s 447A to make such order as the Court thinks appropriate about how Pt 5.3A is to operate in relation to these companies. The extent of that power is established by the decision in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 and has been exercised in many circumstances. The potential use of the section on a comparable issue was adverted to by Finkelstein J in Stockford at [23] and [37].

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 372 OF 2005

DAVID JOHN FRANK LOMBE and PETER GEORGE YATES APPLICANTS
JUDGE:	GYLES J
DATE OF ORDER:	11 MARCH 2005
WHERE MADE:	SYDNEY