Re Timeshare Resort Club Ltd (in liq)

Case [2010] FCA 673

FEDERAL COURT OF AUSTRALIA

Huxtable, in the matter of Timeshare Resort Club Ltd ACN 009 085 358 (in liq) [2010] FCA 673

Citation: Huxtable, in the matter of Timeshare Resort Club Ltd ACN 009 085 358 (in liq) [2010] FCA 673
Parties: IN THE MATTER OF TIMESHARE RESORT CLUB LIMITED ACN 009 085 358 (IN LIQ); THE APPLICATION OF CARL ALAN LOUIS HUXTABLE
File number: WAD 80 of 2010
Judge: BARKER J
Date of judgment: 25 June 2010
Catchwords: CORPORATIONS – application for determination of administrator’s remuneration pursuant to s 449E(1)(c) of the Corporations Act 2001 (Cth) – whether legal fees constitute part of remuneration – legal fees held to be disbursements – remuneration does not include disbursements – remuneration for services rendered outside of the administration period cannot be determined by the Court
Legislation:

Corporations Act 2001 (Cth) s 443A, s 443D, s 447A, s 447E, s 449E, s 556
Federal Court (Corporations) Rules 2000 (Cth)

Code of Professional Practice for Insolvency Practitioners

Cases cited: Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
GIS Electrical Pty Ltd v Melsom [2001] WASC 314
National Australia Bank Ltd v Market Holdings Pty Ltd [2000] NSWSC 1009; (2000) 50 NSWLR 465
Re Bosnjac Holdings Pty Ltd [2005] FCA 275; (2005) 53 ACSR 8
Re Korda [2004] FCA 1682; (2004) 140 FCR 424
Re Motor Group Australia Pty Ltd [2005] FCA 985; (2005) 54 ACSR 389
Re Trustees Executors and Agency Co Ltd (1984) 9 ACLR 497
Skafcorp Ltd v Jarol Pty Ltd [2002] NSWSC 1183; (2002) 44 ACSR 138
Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96
Date of hearing: 11 May 2010
Date of last submissions: 20 May 2010
Place: Perth
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 91
Counsel for the Plaintiff: Ms M Chua
Solicitor for the Plaintiff: summerslegal

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

WAD 80 of 2010

IN THE MATTER OF TIMESHARE RESORT CLUB LIMITED ACN 009085358 (IN LIQ); THE APPLICATION OF CARL ALAN LOUIS HUXTABLE
Plaintiff

JUDGE:

BARKER J

DATE OF ORDER:

25 JUNE 2010

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.Pursuant to O 13, r 2(1) of the Federal Court (Corporations) Rules 2000 (Cth) the plaintiff have leave to amend the originating process in accordance with the minutes of amended originating process dated 20 May 2010.

2.Pursuant to s 449E(1)(c) of the Corporations Act 2001 (Cth), the plaintiff be entitled to remuneration for the period 14 February 2009 to 9 April 2009 (inclusive) in respect of the work performed by him (with the assistance of summerscorporate) during the administration of Timeshare Resort Club Limited ACN 009 085 358 (in liquidation) (the company) in such amounts as are assessed by this Court.

3.The plaintiff’s application for remuneration be referred to a registrar of this Court for assessment under order…

Details
AGLC
Re Timeshare Resort Club Ltd (in liq) [2010] FCA 673
Case
[2010] FCA 673
Decision Date

CaseChat Overview and Summary

In the case of Re Timeshare Resort Club Ltd (in liq), the plaintiff, a liquidator, applied to the Court for a determination of the remuneration he was entitled to receive for his services as administrator of the company under the Corporations Act 2001 (Cth). The primary issue before the Court was whether the remuneration for the administrator could include the legal fees incurred by the administrator prior to his appointment and during the administration period. Additionally, the Court needed to determine if it had the power to assess the legal fees incurred by the administrator and if the remuneration for services rendered outside the administration period could be fixed by the Court.

The Court held that the legal fees incurred by the administrator constituted disbursements rather than part of the remuneration. The Court found that the remuneration, as defined under the Corporations Act, did not include disbursements. Furthermore, the Court did not have the authority to assess the legal fees incurred by the administrator. Lastly, the Court determined that remuneration for services rendered outside the administration period could not be fixed by the Court.

The Court granted the plaintiff leave to amend the originating process and held that the plaintiff was entitled to remuneration for the period of 14 February 2009 to 9 April 2009, for the work performed during the administration of the company. The Court referred the plaintiff's application for remuneration to a registrar for assessment and determined that the costs of the application and assessment would be costs in the administration of the company, to be taxed on an indemnity basis and paid out of the liquidation of the company.

Orders

Orders of the court

1. Pursuant to O 13, r 2(1) of the Federal Court (Corporations) Rules 2000 (Cth) the plaintiff have leave to amend the originating process in accordance with the minutes of amended originating process dated 20 May 2010.

2. Pursuant to s 449E(1)(c) of the Corporations Act 2001 (Cth), the plaintiff be entitled to remuneration for the period 14 February 2009 to 9 April 2009 (inclusive) in respect of the work performed by him (with the assistance of summerscorporate) during the administration of Timeshare Resort Club Limited ACN 009 085 358 (in liquidation) (the company) in such amounts as are assessed by this Court.

3. The plaintiff’s application for remuneration be referred to a registrar of this Court for assessment under order 2 and in accordance with these reasons for decision.

4. The costs of and incidental to this application and the assessment before the registrar be costs in the administration of the company to be taxed on an indemnity basis and paid out of the liquidation of the company.

Note:

Background

Background to the litigation

Issues remain concerning the power of the Court in this proceeding to cause an assessment of the legal fees incurred by the administrator, as well as work done – and primarily the subject of legal fees – before his appointment. FACTS The plaintiff is a liquidator registered under the Act. At material times he was “under the employment of Sumpart Pty Ltd” which company provides services to summerscorporate, an insolvency practice. Mr Darryl Kipping is a legal practitioner and partner of the legal firm, summerslegal, who specialises in the areas of commercial and corporate law. According to Mr Kipping in an affidavit made 14 April 2010, on 10 February 2009 Mr Huxtable, Ms Edwards (another partner at summerslegal) and he had a first preliminary meeting with the board of directors of the company. Ms Edwards and Mr Kipping attended “to provide legal advice and support” in respect of Mr Huxtable’s anticipated appointment as administrator and to “discuss issues that may arise during the administration given the structure of the timeshare scheme that the company was associated with”. Mr Kipping says that leading up to Mr Huxtable’s appointment and during the period of administration, he and Ms Edwards spent a significant amount of time reviewing scheme documents, documents relating to a Supreme Court action and the written and oral contentions of directors of the company in order to understand how the timeshare scheme operated and to assess the interest contended for by each stakeholder. He says it was “upon this foundational knowledge” that the solicitors were able to advise the administrator as to his rights and obligations and how to administer the company. Mr Kipping says that on 12 May 2009, Ms Edwards, Mr Huxtable and “his team”, and Mr Kipping, met to prepare and plan for Mr Huxtable’s appointment as administrator. Mr Kipping says that during the period of administration, summerslegal represented and advised the administrator on various issues arising from the administration. Mr Kipping produced time sheets showing the work that he and other members and employed solicitors of the firm and employees of the firm carried out. The amount of remuneration that Mr Huxtable claims is calculated in the following manner: Pursuant to r 9.2(2) of the Federal Court (Corporation) Rules 2000 (Cth) (Rules), on 23 December 2009 and 29 January 2010, Mr Huxtable provided notices in accordance with Form 16 of those Rules of his intention to apply for remuneration to the following persons by ordinary post:·Creditors who were present, in person or by proxy, at the meeting of creditors.·The shareholders whose shareholding ostensibly represents at least 10 percent of the issued capital of the Company.The company did not form a committee of creditors during the period of administration so no notice could be given to such a committee. Mr Huxtable says that he has not received any notice of objection to the remuneration claimed within 21 days after serving the documents.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

I accept that the creditors at the second creditors meeting as initially convened and reconvened failed to fix the administrator’s remuneration despite the reasonable efforts of the administrator to obtain a resolution.REMUNERATION OF ADMINISTRATOR By s 449E(1) of the Act, the administrator of a company under administration is entitled to receive such administration 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. In this case the administrator’s remuneration has not been fixed under either s 449E(1)(a) or (b). In those circumstances it is open to the administrator to apply to the Court to determine the remuneration to which the administrator is entitled in relation to the administration of the company, as provided for by s 449E(1)(c). While nothing in s 449E suggests that an administrator must have endeavoured to agree remuneration with a committee of creditors, where one exists, or to obtain a resolution of the company’s creditors before applying to the Court to fix remuneration, such steps are obviously preferred in order to avoid the possible expense and delay in obtaining an order of the Court. In this case, as may be seen from the facts as I have set them out above, the administrator endeavoured to secure a resolution at the second meeting of the company’s creditors but there was reluctance by the creditors to pass such a resolution. Mr Huxtable made it clear to the creditors at that meeting that, in the event the administrator was obliged to approach the Court for a determination of his remuneration, the Court’s determination may be higher than the $105,000 then proposed for the relevant period of administration. Section 449E(4) requires the Court, when exercising its power to fix remuneration under subs (1), to 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.