Re PPI Corporation Pty Ltd
[2014] VSC 366
•5 August 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S CI 2013 00524
IN THE MATTER OF P.P.I. CORPORATION PTY LTD (ADMINISTRATORS APPOINTED) (ACN 010 656 005) (and others according to the attached schedule)
| DAVID MCEVOY, STEPHEN LONGLEY & MICHAEL OWEN IN THEIR CAPACITY AS JOINT AND SEVERAL ADMINISTRATORS OF P.P.I. CORPORATION PTY LTD (ADMINISTRATORS APPOINTED) (ACN 010 656 005) (and others according to the attached schedule) | Plaintiffs |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 16 June, 22 July 2014 | |
DATE OF JUDGMENT: | 5 August 2014 | |
CASE MAY BE CITED AS: | In the matter of P.P.I. Corporation Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 366 | |
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CORPORATIONS — External administration — Application by former administrators for determination of remuneration pursuant to s 449E(1)(c) of the Corporations Act 2001 (Cth) — Application for determination of remuneration after the administration had concluded for work done at request of liquidators to assist in transition from administration to winding up — Order made pursuant to s 447A determining remuneration for such work — Remuneration sought for work done by administrators and their staff in connection with preparation of application for determination of remuneration.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr O. Bigos | Herbert Smith Freehills |
HIS HONOUR:
On 4 June 2014, the plaintiffs, who are the former administrators of P.P.I. Corporation Pty Ltd (PPI Corporation), made application by interlocutory process pursuant to s 449E(1)(c) of the Corporations Act 2001 (Cth) (the Act) for orders that their remuneration as the joint and several administrators of PPI Corporation be determined by the Court.
The plaintiffs’ application is supported by affidavits of two of the plaintiffs, Stephen Longley of 1 April 2014 and David McEvoy of 4 June 2014, and an affidavit of Alan Mitchell of 13 June 2014.
I am satisfied that the plaintiffs have complied with the requirement of Rule 9.2 of the Supreme Court (Corporations) Rules 2013 (Vic) by serving a notice of intention to apply for the remuneration in Form 16, together with the principal affidavit in support, on all creditors. On 19 June 2014, subsequent to the hearing of the application, the plaintiffs filed an affidavit of Tim Sturrock, which addressed concerns I had about service of the application on the liquidators of PPI Corporation, whom I considered could be potential contradictors to the application. One of the liquidators, Ms Newman, was provided with a copy of the interlocutory process and the affidavits of Messrs Longley and McEvoy by email on 12 June 2014. Ms Newman acknowledged receipt of that documentation the same day. The liquidators have not sought to appear in the application.
As PPI Corporation is a wholly owned subsidiary of PPI Corporation Holdings Pty Ltd, which is also currently in liquidation with the same liquidators, service in compliance with r 9.2(2)(d) was not required.
The plaintiffs were appointed as administrators of PPI Corporation on 15 January 2013. They were appointed as administrators to four other companies in the PPI group of companies on the same day, but the present application only relates to their remuneration as the administrators of PPI Corporation.
PPI Corporation was the only entity within the group that traded and held any assets, save for PPI Corporation Holdings Pty Ltd, which had an intercompany loan account with PPI Corporation. The remainder of the group was dormant.
The administration of PPI Corporation ended at the second meeting of creditors on 13 August 2013 when the creditors resolved that it be wound up; however, the creditors did not appoint the plaintiffs as the liquidators in the winding up.
The first meeting of creditors of PPI Corporation was held on 25 January 2013. Prior to this, the plaintiffs provided the creditors of the group with a first report to creditors dated 16 January 2013. The plaintiffs informed the creditors that remuneration would be sought on a time based/hourly rate. It was estimated that the remuneration could be up to $1m plus GST.
The creditors were provided with a schedule of rates at which remuneration would be sought. The schedule set out the hierarchy of the plaintiffs’ firm and the hourly rates that would be respectively applied for the work performed by those persons.
The plaintiffs provided a more detailed estimate of the fees at the first meeting of creditors, when it was indicated that the plaintiffs’ fees could be up to $1,500,000.00. This estimate assumed a four week non-trading period, but it was indicated by the plaintiffs that the estimates were difficult to accurately provide as they would be affected by the time at which the sale of the group’s business could be achieved. A committee of creditors was appointed at the first meeting.
On 8 February 2013, the plaintiffs made application for an extension of the convening period for the second meeting of creditors pursuant to s 439A(6) of the Act. The application came before me and I extended the convening period to 12 August 2013.
On 24 April 2013, the plaintiffs convened a meeting of the committee of creditors at which they sought and obtained approval for their remuneration pursuant to s 449E(1)(a) of the Act for the period 15 January 2013 to 31 March 2013 in the sum of $2,857,918.25 plus GST. The plaintiffs advised the committee of creditors that, as the convening period had been extended, the remuneration sought was for a period of ten weeks and, when broken down on a weekly basis, was in accordance with the estimate provided at the first meeting of creditors.
On 24 July 2013, the plaintiffs convened another meeting of the committee of creditors and during this meeting the plaintiffs sought and obtained approval for their remuneration for the period 1 April 2013 to 30 June 2013 in the sum of $1,019,509.00 plus GST.
The second meeting of creditors convened pursuant to s 439A of the Act took place on 13 August 2013. Only the meeting for PPI Corporation proceeded as it was not possible to assemble a quorum for the remaining members of the group. The creditors resolved that PPI Corporation be wound up. A resolution was proposed to approve the remuneration of the plaintiffs for the period 1 July 2013 to 13 August 2013, but this resolution was not passed. The creditors resolved that Ms Newman and Mr Fielding of the firm BDO be appointed as liquidators of PPI Corporation.
Accordingly, at the point when the administration came to an end, the committee of creditors had approved the plaintiffs’ remuneration from 15 January 2013 (the beginning of the administration) to 30 June 2013 in the sum of $3,877,427.25 plus GST. The plaintiffs now seek an order pursuant to s 449E(1)(c) that they be entitled to remuneration for the period 1 July 2013 to 13 August 2013 (when the administration ended) in the sum of $262,065.00 plus GST. They also seek an order that their remuneration for the work done in the period after 13 August 2013, that is, after the end of the administration and while the company was in liquidation, be allowed in the sum of $145,393.00.
Section 449E of the Act provides for the determination of remuneration of administrators, as follows:
449E Remuneration of administrator
(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)… [Not relevant]
(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)… [Not relevant]
(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.
(5)Before remuneration is determined under paragraph (1)(a), the administrator must:
(a) prepare a report setting out:
(i)such matters as will enable the committee of creditors to make an informed assessment as to whether the proposed remuneration is reasonable; and
(ii)a summary description of the major tasks performed, or likely to be performed, by the administrator; and
(iii) the costs associated with each of those major tasks; and
(b)give a copy of the report to each member of the committee of creditors at the same time as the member is notified of the relevant meeting of the committee.
(6)… [Not relevant]
(7)Before remuneration is determined under paragraph (1)(b) or (1A)(b), the administrator must:
(a) prepare a report setting out:
(i)such matters as will enable the company’s creditors to make an informed assessment as to whether the proposed remuneration is reasonable; and
(ii)a summary description of the major tasks performed, or likely to be performed, by the administrator; and
(iii) the costs associated with each of those major tasks; and
(b) give a copy of the report to each of the company’s creditors at the same time as the creditor is notified of the relevant meeting of creditors.
The criteria mentioned in s 449E(4) direct the Court to the factors that are to be taken into account, but ultimately the question is whether the remuneration claimed is reasonable. I note here that the remuneration sought by the plaintiffs after the administration ended is not provided for under the terms of s 449E(1) because the plaintiffs were no longer administrators of the company under administration.
In Thackray & Ors v Gunns PlantationsLtd & Ors,[1] Davies J summarised the principles to be applied in applications regarding insolvency practitioners’ remuneration by reference to the decision of the Full Court of the West Australian Supreme Court in Venetian Nominees Pty Ltd v Conlan[2] as follows:
[1](2011) 85 ACSR 144.
[2](1998) 20 WAR 96 (“Venetian Nominees”).
(a)A summary procedure is involved, not unlike that applicable to the taxation of solicitors’ costs, which is not necessarily subject to all the rules that would apply in an action.
(b)The initial task of the court is to consider whether the liquidator has made out a prima facie case on the evidence before the court that the remuneration claimed is fair and reasonable. The court must make that assessment “bringing an independent mind to bear on the relevant issues” even though at that point there is no objector.
(c)There is no absolute rule regarding the amount of detail required to support a remuneration claim. But the evidence relied on should be sufficient to enable potential objectors to review the amounts claimed and ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.
(d)If the liquidator establishes a prima facie case, the court should allow for an objection procedure to enable objections to be made.
(e)If there are objectors to the claim or any part, the court should then establish the validity of those objections.[3]
[3](2011) 85 ACSR 144 at [60] (citations omitted).
At [63] and [64], Davies J stated:
…
Nevertheless, the receivers accepted that the principles set out [in] Venetian Nominees are persuasive and that they should put sufficient evidence before the court to enable the court to determine that the amounts claimed are fair and reasonable. That involved providing sufficient detail of the work that was done and the expenses claimed for the court to assess the reasonableness of the remuneration claimed for that work and the reasonableness of the expenses incurred by the receivers. The reasonableness of remuneration may be adduced by evidence for example of an appropriate benchmark, such as the Insolvency Practitioners Association of Australia rates, for comparative work by persons with the relevant status and qualifications for that kind of work and justification of the hours spent. That amount can then be adjusted up or down to reflect other factors including:
(a)complexity above the norm for the kind of work involved;
(b)novelty and difficulty of the issues faced;
(c)the ultimate outcome obtained by the claimant.
The court is looking for evidence of overcharging. Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the “reasonableness” of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim.[4]
[4](2011) 85 ACSR 144 (citations omitted).
In ASIC v Australian Foods Co Pty Ltd,[5] in an application for remuneration by a court appointed receiver and manager, the receiver manager put forward a detailed statement of time, costs and disbursements, itemising the details of the work done, the identity of the persons who did the work, the grade of the person who did the work, the time taken to do the work, and the rates charged. The annexures to the supporting affidavit provided considerable detail as to what was done. Master Sanderson stated:
There is nothing surprising in any of this material. Clearly, it is drawn from time sheets maintained by each of the individuals concerned. If necessary, those original time sheets could be called for, but in all probability they would add little to the information provided by the receiver. The way in which the receiver and his staff have recorded the time spent accords with standard commercial practice. The actions taken by each individual concerned are adequately, if cryptically, described. It is difficult to see what further information could have been provided.[6]
[5][2005] WASC 110.
[6][2005] WASC 110 at [16].
Master Sanderson concluded that the information provided established prima facie that the work was done and the costs were reasonably incurred. His reservations were first, that the material did not provide a sense of what the receiver and his colleagues were attempting to achieve and the overall purpose behind those actions, and, secondly, the fact that such significant costs had been incurred in a relatively short space of time.
In Re ACN 004 323 184 Pty Ltd v Spark,[7] Dodds–Streeton J considered an application for remuneration by a liquidator under section 473(3)(b) of the Act. In the affidavit in support of the application, the liquidator summarised the tasks performed by each staff member with that person’s charge rate, level or position, hourly rates and total hours worked, together with full descriptions of the work performed. At [43], her Honour stated:
I accept Mr Woodward’s submission that the material adduced by the respondent in this case satisfies the requirements of r 9.4(7) of the Corporations Rules. It also satisfies the basic principle of Venetian Nominees, in that there is sufficient information provided for the Court to determine that the amounts claimed are fair and reasonable. The material sets out the person performing the work, the grade or level of the relevant person, the task and dates, time spent on the task and the relevant rate according to the level of the person carrying out the task. It is undisputed that the work was carried out for the purpose of the winding up.
[7][2002] VSC 353. Although this decision predated the introduction of s 449E of the Act, the principles set out still have application.
In Venetian Nominees,[8] the Court stated that the applicant for remuneration must provide adequate evidentiary material to enable the Court to determine whether the amounts claimed are fair and reasonable. The evidence should be presented as a statement of account reflecting in appropriate itemised form, details of work done, the identity of the persons who did the work, the time taken for doing the work and the remuneration claimed accordingly which is verified by affidavit. The Court observed that such a document should be similar in form to a bill of costs in taxable form provided by a solicitor to their client.
[8](1998) 20 WAR 96, 15.
The plaintiffs’ evidence
In his affidavit, Mr Longley exhibits detailed fee schedules for the respective periods for which remuneration is sought.[9] In my view, a review of those exhibits results in a conclusion that they show in appropriately itemised form the matters required to be demonstrated according to Venetian Nominees. These include details of the work done, the identity of the persons who did the work, the time taken for doing the work and the remuneration claimed. I agree with the submission of Dr Bigos that the fee schedules satisfy the evidentiary requirements so that the Court is able to embark on an assessment of the reasonableness of the remuneration claimed.
[9]Exhibits SL-16 and SL-18.
As I have noted, the plaintiffs seek approval first, for the work performed during the period of the administration and, secondly, for the work performed after the administration had concluded and the liquidation began.
Remuneration for period of administration
In Mr Longley’s affidavit he details the work performed by the plaintiffs during the period of administration as follows:
(a) assessment of the viability of continued trading;
(b) recommencement of trading and customer management;
(c) extension of the convening period for the second meeting of creditors;
(d)investigation of PPI Corporation’s affairs, including allegations raised by Keith O’Connor;
(e)asset identification and realisation process;
(f)comprehensive sale of business process, which resulted in a successful going concern sale;
(g)settlement of retention of claims;
(h)employee, creditor and shareholder enquires;
(i)insurance issues;
(j)first and second creditor meetings and related reports and Committee of creditors meetings and reports; and
(k)coordination of directors’ report as to affairs.
As I have observed previously in the cases of Re Fehring Livestock Pty Ltd (in liquidation)[10] and Re CVResort Pty Ltd,[11] the factors mentioned in sub-paragraphs (a), (b) and (c) of s 449E(4) are in my view each concerned with an assessment as to whether the work performed and described in the administrators’ material was reasonably necessary and whether the time taken for their performance was reasonable.
[10][2012] VSC 326.
[11][2013] VSC 73.
In my view, an examination of exhibit SL-16 to Mr Longley’s affidavit indicates that the plaintiffs undertook the work that would be expected of them in running this type of administration. It does not appear from the examination of that document that they performed tasks that were obviously unnecessary to be performed or for which the time engaged appears to be unreasonable. In going about this assessment, I have not examined each and every entry closely, but have chosen 100 entries at random with a view to ascertaining the position. I consider that, on an examination of the narratives in respect of the work done, the tasks appear to have been carried out by people of an appropriate position and experience within the plaintiffs’ firm. It also appears by reference to the narrative that the time involved in the performance of the tasks I have randomly chosen was reasonable.
Section 449E(4)(d) is concerned with the quality of the work performed. It is said that the plaintiffs ran a highly successful administration. The secured creditor was entirely paid out, all employee entitlements were satisfied, and three significant retention of title claims were resolved. It is forecast that unsecured creditors will receive a return of between 31.04 and 46.16 cents in the dollar.
As to the complexity of the administration as mentioned in s 449E(4)(e), it is said that PPI Corporation had assets and property located around Australia. It leased five warehousing and sales facilities across New South Wales, Victoria, Tasmania, Queensland and Western Australia. It also maintained various fixed assets and inventory at its sites around the country in connection with its manufacturing, warehousing and distribution functions. As to s 449E(4)(h), the value and nature of property dealt with, the assets were valued in the order of $13,000,000.00 and the inventory $11,000,000.00. PPI Corporation was a significant industrial enterprise and the administration involved considerable responsibility.
Section 449E(4)(f) is concerned with whether the plaintiffs in going about the administration were required to deal with extraordinary issues. The evidence reveals that during the course of the administration, the plaintiffs dealt with Mr Keith O’Connor who had earlier been an executive director of entities within the group and held shares in the holding company of the group, PPI Corporation Holding Pty Ltd, through his family investment company. Mr O’Connor approached the plaintiffs verbally and in writing on numerous occasions, making accusations of misconduct by various directors, shareholders and stakeholders. It is said that Mr O’Connor’s accusations could be catalogued into 32 claims of alleged misconduct in respect of which the plaintiffs conducted a full investigation, reviewing materials provided by Mr O’Connor and examining relevant books and records. Ultimately, the plaintiffs considered that the accusations fell into the category of shareholder disputes and did not warrant further action at the cost to the creditors. Mr O’Connor was discontented with this and the plaintiffs engaged their solicitors, Herbert Smith Freehills to conduct a review of Mr O’Connor’s allegations and the supporting materials. The result of that review was that it was considered that the allegations did not have any merit. It is said that the plaintiffs’ interactions with Mr O’Connor were very much out of the ordinary.
In my view, the evidence demonstrates that the scale of PPI Corporation’s operation was of a complexity and size that took the administration beyond an ordinary run of the mill Part 5.3A administration. I also note that there were several retention of title claims that went to mediation and culminated in the execution of payment of commercial settlements with the three alleged title holders.
Receivers were not in office during the administration and s 449E(4)(i) has no application in these circumstances.
Section 449E(4)(j) is concerned with the number, attributes and behaviour of the company’s creditors. PPI Corporation had one secured creditor and 580 unsecured creditors at the beginning of the administration. By the time of the second meeting of creditors, a number of substantial creditors’ claims had been discharged, as well as all employee entitlements. At the second meeting of creditors there were 40 creditors in attendance with a voting value of approximately $3,900,000.00. The plaintiffs also held 16 proxies with a voting value of approximately $326,000.00.
There were apparently tensions between the plaintiffs and some creditors and in fact, as I have noted above, at the second meeting of creditors on 13 August 2013, the creditors did not approve of the plaintiffs’ remuneration and passed a resolution to appoint other insolvency practitioners as the liquidators. The plaintiffs exercised their casting vote in favour of this resolution as they were mindful of the friction between some creditors and themselves, as well as wishing to avoid any perception that they were acting in their own interest.
Dr Bigos submits that in light of the foregoing, the amount of the “lodestar”[12] figure, that is, the amount claimed by the plaintiffs and demonstrated to have been reasonably incurred, should be awarded on an application of the relevant factors listed in s 449E(4) and not reduced.
[12]See Re Stockford Ltd (2004) 52 ACSR 279 at [48].
On an application of the above criteria I agree with that submission and will order, pursuant to s 449E(1)(c), that the plaintiffs’ remuneration for the period 1 July 2013 to 13 August 2013 be determined in the sum of $262,065.00 plus GST.
Remuneration following period of administration
I now turn to the second part of the plaintiffs’ application. After the administration concluded and the group went into liquidation, the plaintiffs undertook further work to complete a number of tasks. These included finalisation of various commercial aspects of the administration as well as providing assistance to the liquidators in handing over the conduct of the winding up to them. Mr Longley in his affidavit states that at the time PPI Corporation was placed into liquidation, there were a number of issues that were being dealt with by the plaintiffs in their capacity as administrators. He deposes that on 16 August 2013, he spoke on the telephone with Ms Newman, one of the liquidators, and briefed her on the outstanding matters in the administration. He states that during this telephone conversation it was agreed that the plaintiffs would undertake a range of important tasks to conclude various commercial aspects of the administration and put things in order so as to hand over the insolvency administration to the liquidators. He deposes that the plaintiffs and their staff regularly communicated with the liquidators. The various matters attended to are set out below.
On 17 September 2013, the plaintiffs and Ms Newman conducted a teleconference. Among other things, the plaintiffs discussed the time costs incurred by them in discharging the various handover tasks described below. Mr Longley deposes that it was agreed that these time costs would need to be approved by the Court and Ms Newman suggested it would be appropriate to use the lower, hourly rates proposed to be charged by the liquidators in such an application. Mr Longley states that as he had agreed at the second meeting of creditors that the plaintiffs would adopt the liquidators’ hourly rates for the liquidation if appointed liquidators, the plaintiffs would seek remuneration at these rates for all work they performed after the second meeting of creditors.
The work performed by the plaintiffs after the administration concluded and when the group was in liquidation are summarised in Mr Longley’s affidavit. They included the following:
(a) preparing and lodging minutes for the second meeting of creditors;
(b)preparing communications to creditors on the outcome of the second meeting of creditors;
(c) finalising administration accounts;
(d) conducting a reconciliation of the Plaintiffs’ bank accounts;
(e) submitting a final Business Activity Statement;
(f)contacting various suppliers and following up on the reconciliation of supplier accounts;
(g)compiling documents for hand-over to the Liquidators, including a schedule of residual assets and outstanding liabilities, briefing materials relating to the Plaintiffs’ investigation into the affairs of PPI Corporation and the multiple allegations made by Mr O’Connor, a summary of all employee distributions and materials relating to the retention of title claims;
(h)answering queries from the Liquidators and former employees;
(i)assessing final debtor positions;
(j)dealing with relevant government agencies;
(k)retrieving and delivering PPI Corporation books and records to the Liquidators; and
(l)preparing the Longley affidavit.
Of course, this work was not performed by the plaintiffs in their capacity as administrators and as such the Court is not exercising its jurisdiction to determine remuneration under s 449E. In Re Timeshare Resort Club Ltd (in liq),[13] Barker J of the Federal Court held that an administrator is not entitled to remuneration under the Corporations Act for work done before his appointment as administrator or after termination of the administration. Barker J stated at [73] and following:
One of the factors that will be relevant in this case – which gives rise to another issue – is that referred to in s 449E(4)(c), namely, the period during which the work was performed by the administrator. In my view, the administrator will not be entitled, under the Act, to be remunerated for administration work done by him or others employed by Sumpart Pty Ltd or summerscorporate (or summerslegal), or by summerslegal to advise him, that was undertaken either before the formal appointment of the plaintiff as administrator or following the termination of the administration: see Skafcorp Limited v Jarol Pty Ltd (2002) 44 ACSR 138; NSWSC 1183 (Skafcorp), Austin J at [16] and [17].
Skafcorp also supports the proposition that pre‑administration work – and one would necessarily also include post-administration work – will only be subject to remuneration from the company if there was an express or implied contract between the administrator (or some other entity engaged to undertake such work) and the company in respect of such work. The alternative suggestion is that the administrator may be entitled to recover reasonable payment on a quantum meruit basis: see Skafcorp at [16]. However, in the case before the Court, those alternative bases for seeking remuneration from the company have not been raised. Nor would one expect them to be raised on an application such as the present, which is made under the Act. There would need to be a separate action by the administrator or other entity against the company making such a claim or claims, if there is a basis for them. …
[13][2010] 187 FCR 13.
I consider that the evidence demonstrates that the liquidators have engaged the plaintiffs to perform the post-administration work in effect as the liquidator’s agents. In my view, the plaintiffs are entitled to be remunerated for such work but this will require an order under s 447A of the Act to modify the operation of Part 5.3A of the Act. I consider this to be a more economic and practical approach than requiring that the plaintiffs seek to recover such payments on a quantum meruit basis as contemplated by Austin J in Skafcorp. The evidence indicates that the creditors benefitted by the work done, and that it was much more conveniently done by the plaintiffs than by the liquidators because of the plaintiffs’ familiarity with the affairs of the company gained during the period of the administration.
Similarly to the evidence in regard to the work performed during the period of the administration, exhibit SL-19 to Mr Longley’s affidavit provides details of the work done, the identity of the persons who did the work, the time taken for doing the work and the remuneration which was claimed for the post-administration period. It includes work done by Mr Longley and members of his staff in preparing this application, in particular Mr Longley’s affidavit. I shall have more to say about this part of the application below. The rate at which such remuneration is claimed has been reduced to the rate which the liquidators were charging on an hourly basis.
As with my appraisal of exhibit SL‑16, I have not, save for those items concerned with the plaintiffs’ remuneration in regard to making this application (to which I shall refer below), examined each and every item closely. I have randomly chosen 50 entries in the exhibit in applying the criteria. In my view, when the exhibit is examined in the way I have described, it meets the criteria of Venetian Nominees set out above. It shows in itemised form details of the work done, the identity of the persons who did the work, the time taken for doing the work and the remuneration claimed.
The narrative in exhibit SL‑19 describes the types of tasks that one would expect to be carried out in the transition period from administration to liquidation. As with the administration period, I consider that on my perusal of the exhibit the various tasks described have been carried out by persons with an appropriate level of experience and seniority within the plaintiffs’ firm. An examination of the narrative supports a submission by Dr Bigos that the work requested by the liquidators appears to have been both reasonable and necessary, as they were key tasks required by the liquidators in order to complete the successful winding up of PPI Corporation. The criteria mentioned in s 449E(4), when applied to this period, result in the same conclusion as I found to be the case for the administration period.
I turn to the claim for remuneration in connection with the making of this particular application. As I noted in the decision of Barbo Group Pty Ltdv Investment and Construction Enterprise Pty Ltd,[14] this issue has had limited judicial consideration. In Re Reiter Brothers Exploratory Drilling Pty Ltd,[15] Zeeman J of the Supreme Court of Tasmania considered that the work done in preparing a claim for remuneration was susceptible of an award for remuneration. At pages 441-442 his Honour observed:
A very large proportion of the remuneration claimed relates to the work done by the applicant to prepare his claim for remuneration. On my assessment, in excess of $11,000 is claimed for such work. Counsel for the Company submitted that no part of it, whether done before or after the termination of the applicant’s appointment, ought to form part of the remuneration to be fixed by me but that it ought to be treated as being part of the costs of the application. I do not accept that submission. The dictum from Day v Mount (supra) to which I have referred would suggest the contrary to be the case. It is difficult to see how remuneration of such work would form part of the costs of the application in the normal sense. In my view work properly done by the applicant by way of preparing his claim for remuneration falls to be dealt with as part of his remuneration.
[14][2012] VSC 71 at [36]-[37].
[15](1994) 12 ACLC 430.
With respect, I agree with his Honour’s view that such work does not form part of the costs of the application and that it should be characterised as work that should be assessed in the context of the application for remuneration.
I have more closely analysed the entries in exhibit SL‑19 that are concerned with the preparation of the current application. As best as I can tell, that analysis reveals that almost $30,000 is claimed for remuneration in connection with the preparation of the material in support of this application. Mr Longley makes a claim for approximately nine hours in connection with this and claims $5,096 for remuneration. Mr Sturrock is shown as having spent approximately 35 hours on this category of task, resulting in a claim for $15,002.50. Ms Zhang, a supervisor at the plaintiffs’ firm, spent approximately 17 hours on the task, resulting in a claim for remuneration of $6,177.50. Ms Underwood, an analyst, spent approximately 16 hours, resulting in a claim for remuneration of $3,078. These amounts are in addition to the amounts which will presumably be sought for the plaintiffs’ solicitors’ costs in connection with this application. The principal affidavit in support of the application is that of Mr Longley of 1 April 2014, which was supplemented by other short affidavits of Mr McEvoy and Mr Sturrock. Mr Longley’s affidavit is 28 pages in length and consists of 105 paragraphs and 19 exhibits contained in two lever-arch folders. If my analysis is correct, nearly 80 hours has been spent by the persons to whom I have referred in the preparation of that and the shorter affidavits.
After having had opportunity to carry out the above analysis, I requested that counsel for the plaintiffs, Dr Bigos, make further submissions on this issue, which he did in both written and oral form. Dr Bigos submitted that a significant amount of time was spent by the plaintiffs and their staff in preparing the supporting affidavit of Mr Longley because they had a detailed understanding of the significant complexities of the administration, which included their numerous interactions with Mr O’Connor and the post-administration handover to the liquidators. He submitted that in light of these complexities and the plaintiffs’ greater understanding of the matters concerned, the plaintiffs were required to have extensive involvement in the drafting of the supporting affidavit. In doing so, he submitted, they minimised the legal costs that might have been incurred as disbursements had the solicitors been required to take detailed instructions of these matters from the plaintiffs and their staff for the purpose of drafting the affidavit.
Dr Bigos submitted that as to Mr Longley’s contribution, much of his time was spent reviewing his affidavit and this reflected the length and detail of the affidavit which Mr Longley was required to ultimately depose to as being accurate. As to Mr Sturrock, the senior manager, he had the carriage of drafting large portions of the affidavit and updating the affidavit in response to feedback from the solicitors and Mr Longley. Mr Sturrock was also involved in reviewing the work of the juniors in compiling supporting fee schedules for the application. Ms Zhang and Ms Underwood were the junior resources on the matter and were primarily responsible for the drafting of the supporting fee schedules which were critical to the application.
It is unfortunate that the involvement of such resources in the preparation of the affidavit was so costly, but ultimately I am not inclined to reduce the amount of remuneration by reason of the matters submitted by Dr Bigos. Because of the circumstances, it was necessary to make application to the Court for determination of the remuneration rather than have recourse to the mechanisms provided under s 449E(1)(a) or (b): that is, by agreement with the committee of creditors or by resolution of the company’s creditors, which would have avoided the necessity and expense of an application to the court. In having to approach the Court it was, of course, necessary to adduce affidavit evidence in appropriately detailed form. It appears that the preparation of the principal affidavit was delegated to those persons with appropriate seniority in the firm and that the time spent was proportional to the exercise.
Objections to the application
As a result of service in compliance with Rule 9.2 of the Supreme Court (Corporations) Rules 2013 (Vic), the plaintiffs received objections from three creditors, all in identical form and generic and formulaic in their content. The objections do not specifically challenge the necessity of the reasonableness of any specific work conducted, but complain that the plaintiffs’ fees are excessive. The complaint is made that staff from Melbourne and Sydney were used to undertake the work in the administration, rather than using Brisbane based staff. In this regard, the plaintiffs respond that it was entirely appropriate for them to base their work out of Melbourne, as the matter was initiated in Melbourne. The secured creditor, GE Commercial Corporation (Australia) Pty Ltd and the principal shareholder (Lazard) are both based in Melbourne. I note that the group’s offices, assets and stakeholders were located around Australia and there was no particular connection with Brisbane.
Further, by way of general response, the plaintiffs submit that they fully disclosed their rates to creditors in their first report to creditors of 16 January 2013, with the rates being set out in a schedule to the report. Subsequently the committee of creditors unanimously approved two resolutions put in regard to the plaintiffs’ remuneration, calculated on the basis of the rates set out in the first report to creditors. There is no record of any creditor objecting to the rates adopted by the plaintiffs during the administration and so approved by the committee. It is submitted by Dr Bigos, and I agree, that the objections do not cast doubt on the reasons or the necessity of the work performed by the plaintiffs and provide little assistance to the Court in determining whether the remuneration claimed is reasonable.
The three objecting creditors have been served with Mr McEvoy’s affidavit and were advised of the date and time of the hearing of this application. Mr O’Connor has also been provided with Mr McEvoy’s affidavit and been notified of details of the hearing. Mr O’Connor, who is not a creditor and has no standing as such to oppose the orders, took issue with various aspects of Mr Longley’s affidavit. None of these parties have sought to make submissions or participate as interested parties at the hearing of this application. In my view, with the greatest of respect to the three objecting creditors and Mr O’Connor, I am not persuaded that the matters raised by them should result in any reduction of the amount for which remuneration shall be determined.
I also consider it significant that the liquidators have been served with this application and have not sought to appear and be heard.[16]
[16]Affidavit of Tim Sturrock of 19 June 2014, paragraph 3.
I will order as follows:
1.Pursuant to s 449E(1)(c) of the Corporations Act (Cth) (the Act), the plaintiffs’ remuneration in relation to the administration of PPI Corporation Pty Ltd (ACN 010 656 005) (the company) for the period from 1 July 2013 to 13 August 2013 be determined in the amount of $262,065.00 plus GST.
2.Pursuant to s 447A of the Act, Part 5.3A of the Act is to operate in relation to the administration of the company such that the plaintiffs’ remuneration in relation to work performed after the conclusion of the administration on 13 August 2013 for the period from 13 August 2013 to 1 April 2014 is determined in the amount of $145,393.00 plus GST.
3.The plaintiffs’ costs of this application be costs in the administration of the company and be paid out of the company’s property retained by the plaintiffs.
SCHEDULE
| Entity | ACN |
| PPI Corporation Holdings Pty Ltd | ACN 127 184 212 |
| Poly-pipe Industries Pty Ltd | ACN 010 158 755 |
| PPI Industries Pty Ltd | ACN 010 132 448 |
| PPI Intellectual Property Pty Ltd | ACN 127 225 674 |
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