Vince v Hurley Transport Pty Ltd
[2008] VSC 637
•18 December 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7517 of 2008
| PETER ROBERT VINCE | Plaintiff |
| v | |
| HURLEY TRANSPORT PTY LTD | Defendant |
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JUDGE: | Efthim As J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 August 2008 |
DATE OF JUDGMENT: | 18 December 2008 |
CASE MAY BE CITED AS: | Vince v Hurley Transport Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2008] VSC 637 |
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CORPORATIONS – Remuneration of administrator – Whether remuneration of administrator is reasonable – Whether administrator entitled incur legal fees - Sections 447 and 449E(4) Corporations Act 2001 (Cth)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Kohn | Madgwicks |
| For the Creditor | Ms G Crafti |
HIS HONOUR:
Peter Robert Vince applies, pursuant to sections 447A and 449E of the Corporations Act 2001 (Cth) that:
- his remuneration be fixed in the sum of $37,635.45;
- his legal fees in his capacity as administrator be fixed in the sum of $4,131.86;
- his costs of and incidental to this application be paid;
- remuneration already approved by the creditors in the sum of $14,622 be paid out of the monies collected by him.
Background
On 26 May 2008, Mr Vince was appointed by the directors of Hurley Transport Pty Ltd (‘the company’) to act as administrator of the company pursuant to s 436A of the Corporations Act 2001 (Cth). In his first affidavit accompanying the application, Mr Vince has set out the tasks that were performed in the administration. He deposes to a significant amount of work taking place.
On 27 May 2008, he prepared a report to creditors in relation to the administration of the company and forwarded that report and a notice of a meeting to the known company creditors. On 28 May 2008, he published in The Age newspaper a notice of the meeting. On 5 June 2008, the first meeting of creditors took place with Mr Vince chairing the meeting. He noted at the meeting that correspondence had been received as to his replacement as an administrator and as a result a vote was taken. He was removed as administrator and Mr Ross McDermott, chartered accountant, was appointed as administrator of the company. Mr McDermott has been notified of this application, however he has chosen not to participate.
On 27 June 2008, a resolution was proposed and passed that the plaintiff’s remuneration be approved in the amount of $14,622.92 including GST of payment from the company funds.
As administrator, Mr Vince collected monies owed to the company. A sum of $85,453.07 was collected and deposited into Macquarie Bank, account number 168496.
Mr Vince has provided the Court with a document (Exhibit ‘PV-11’) which contains the hours worked by each respective class of persons who were engaged in the administration of the affairs of the company and the appropriate scale of charges for the work done. In that document there is a description of the type of work performed including work performed after the administration was terminated. Mr Vince has also provided a tax invoice served on him by Madgwicks Lawyers, for the legal costs incurred by him and acting as administrator.
Mr Vince’s remuneration has been challenged by Mr David Ivo Chapman, a consultant, who claims that he is a creditor of the defendant. Mr Chapman has raised the following objections:
- Many of the items referred to by Mr Vince could have been performed by junior members of Mr Vince’s practice thereby reducing the overall cost of total remuneration claimed by him and thus maximising the return to creditors.
- There is no record of any member of staff of Mr Vince conferring with prospective purchasers of the business as is alleged by Mr Vince in his summary.
- The legal advice provided to Mr Vince should not have been provided as Mr Vince is an experienced practitioner.
- The appointment of Mr Vince lasted for nine working days and there are no factors which may justify the remuneration that is sought by Mr Vince.
- Mr Vince, without authorisation from the administrator, presented a negotiable instrument in the sum of $39,637.31 with himself as the payee. Mr Vince has offered no explanation as to why this occurred, nor has the sum of $39,637.31 been returned to the defendant. (Mr Chapman regards this as a misappropriation.)
In response, Mr Vince has deposed that:
- Most of the expense incurred whilst he was appointed as administrator arose as a result of deciding the company should continue to trade.
- The $39,687.31 was transferred from a pre-administration bank account to a bank account controlled by Mr Vince’s capacity as administrator and in accordance with his statutory duties.
- The estimate of his remuneration given at a creditor’s meeting did not take into account any further work required to finalise his appointment.
Principles in relation to remuneration
In ACN 004 323 184 Pty Ltd,[1] Dodds‑Streeton J stated the principles by which a remuneration in a liquidation is to be determined:[2]
[1][2002] VSC 353.
[2]At [30].
30.Venetian Nominees Pty Ltd v Conlan, a decision of the Full Court of the Supreme Court of Western Australia, involved an appeal from a Master’s approval of a provisional liquidator’s claim for remuneration pursuant to s.473. Although the case concerned the remuneration claim of a provisional liquidator, in my opinion, the approach adopted by the Full Court applies with equal validity to a claim by a liquidator.
31.The propositions enunciated in Venetian Nominees which I consider applicable to a liquidator’s claim pursuant to s.473(3) of the Act include the following:
(a)The procedure for the determination is a summary one for fixing costs of an officer of the court as part of its supervisory function, in which strict observance of the rules of evidence is not ordinarily required.
(b)The onus is on the liquidator to establish that the remuneration claimed is fair and reasonable.
(c)The function of the court is to make an independent determination, based on the material proffered, of whether the remuneration claimed is fair and reasonable.
(d)If the liquidator establishes a prima facie case on the basis of the proffered material, which may include evidence which would not be admissible pursuant to strict observance of the rules of evidence, the court should then consider the validity of any objections.
(e)The mere listing of the persons who performed the work, the hours worked and the amounts claimed may be insufficient for the court to reach a determination. Ordinarily, the liquidator will provide “a statement of account reflecting in the appropriate 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 accordingly.”
(f) the statement of account should be verified by affidavit.
32.In my opinion, the approach of the Full Court of the Supreme Court of Western Australia in Venetian Nominees, in rejecting an absolute rule in detailed terms for the statement of account to be provided by a provisional liquidator, is equally applicable to the case of a liquidator. More or less particularised statements may be appropriate in different cases, and “every case depends on its own circumstances”. I agree with the Full Court’s articulation of the overriding principle in this context, namely, that “sufficient information must be provided to the court to enable it to perform its function” under s.473(3)(b)(ii).
Finkelstein J in Re Stockford Ltd,[3] took a new approach to how remuneration should be determined. His Honour stated:[4]
[3](2004) 140 FCR 424.
[4]At [47].
[47] It seems to me that the proper approach is first to establish what in the United States cases fixing the fees of trustees and attorneys under the Bankruptcy Code is called the “lodestar” amount. This amount is reached by the number of hours reasonably spent by the insolvency practitioner multiplied by a reasonable hourly rate: Re Boston and Maine Corp v Moore 776 F 2d 2 at 7 (1st Circ 1985); Copeland v Marshall 641 F 2d 880 at 891 (DC Circ 1980). This step will require the tribunal to decide whether the work performed was necessary to the administration, whether it was performed within a reasonable time and whether the rate is reasonable having regard to what the practitioner, and other practitioners, usually charge their clients. The “lodestar” amount should then be adjusted (up or down) to reflect other factors including the quality of the work performed, the complexity in the administration over and above the normal complexity of such work, the novelty and difficulty of the issues that confronted the administrator as well as the ultimate result obtained by him.
[48] To have his fees fixed it will be necessary for the administrator to do more than simply state the amount of time spent and the rate to be charged for that time, as happened in this case. The amount of detail to be provided in support of a claim must be proportionate to the size of the estate and the amount of time spent. A useful discussion of what is required appears in Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NZLR 145 at 155 :
In our view the exercise which must be undertaken by the court in fixing the reasonable costs of the liquidator is similar to that which is undertaken when approving solicitor and client costs or costs for legal aid purposes. In each case what is required is enough information to enable an assessment to be made as to whether the total costs charged are reasonable.
As a minimum it seems to us that what is required is a statement of the work undertaken during the course of the liquidation, together with an expenditure account sufficiently itemised to enable the charges to be made related to the work done. The detail would have to be sufficient to enable the judicial officer to determine whether the personnel involved in the liquidation and their respective charge-out rates were appropriate to the nature of the work undertaken. This information may in some cases raise concerns as to whether there has been overservicing and overcharging. If there are suggestions of this in the information provided, the Court can request further information.
See also Mirror Group Newspapers Plc v Maxwell (No 2) [1998] 1 BCLC 638 at 648 : (“[The office holder] must explain the nature of each main task undertaken, the considerations which led them to embark upon that task and, if the task proved more difficult or expensive to perform than at first expected, to persevere in it. The time spent needs to be linked to this explanation, so that it can be seen what time was devoted to each task”); Re Solfire Pty Ltd (in liq) (No 2) [1999] 2 Qd R 182 at 191 : (“[W]hen a provisional liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in taxable form provided by a solicitor to his client …”); Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 103 : (“It may well be that in a particular case information particularised as suggested by [the judge in Re Solfire Pty Ltd (in liq) (No 2)] would be appropriate. In other cases less detailed information may be required. Every case depends on its own circumstances. But the overriding principle remains: sufficient information must be provided to the court to enable it to perform its function …”).
After Re Stockford Pty Ltd was handed down, the Corporations Act was amended and takes into account the principles put forward by Finkelstein J in Stockford.
Section 449E(4) of the Corporations Act 2001 provides:
(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.
The determination of remuneration
I have perused and in effect audited timesheets of the liquidator and his staff between the period of 26 May 2008 to 30 May 2008. Those timesheets are in accordance with the summaries referred to in Exhibit ‘PV-11’ to the affidavit of Mr Vince sworn 26 August 2008.
The rates charged by the liquidator and his staff are as follows:
Employee Position $/Hr (Ex GST) Peter Vince Appointee 400.00 Kylie Wright Director 300.00 Danielle Peluso Manager 260.00 Christine Cantwell Senior 180.00 Rebecca Curry Intermediate 140.00 Kylie Robertson Intermediate 140.00 Amy Overton Senior Secretary 120.00 Carole McDougall Computer Operations Operator (Accounts Processor) 120.00 Adam Preiner Administrative Assistant 100.00 Emma Ridgway Administrative Assistant 100.00 David Lee Administrative Assistant 100.00
I am familiar with the rates charged by liquidators. The above rates are reasonable when compared with rates charged by other liquidators in the State of Victoria. Mr Vince’s rates for himself and staff is well within the range allowed to liquidators.
Mr Vince claims not only remuneration for the time he acted as an administrator but seeks remuneration tasks completed after he was removed. He deposes that he has:
- corresponded with creditors of the company;
- corresponded with debtors of the company;
- corresponded with Mr McDermott;
- corresponded with ASIC;
- corresponded with the Australian Tax Office;
- corresponded with legal advisers in relation to issues arising from the conclusion of his role as administrator of the company, including issues arising as a result of the objection raised by Mr David Chapman at the last hearing of the present application in August 2008; and
- attended to payment of ‘trading on’ liabilities incurred on behalf of the company.
The task of determining administrator’s administration after the amendments to the Corporations Act has become extremely onerous. I have perused and considered all of the items in Exhibit ‘PV-11’. I am to have regard as to whether the extent to which the work took place was necessary. I have a one-line description of each item of work that was completed by Mr Vince and his staff. It is impossible to be absolutely sure that the work performed was necessary. To come to such a conclusion, I would need to cross‑examine Mr Vince and his staff in relation to each item of work and check every letter and file note in the files. This would take longer than any taxation of costs that would be undertaken by the Taxing Master. I would estimate approximately two weeks would be spent on this task for a very small administration. It would make the operation of the section unworkable.
Section 449E(f)(a) provides that I am to take into account whether the work was reasonably necessary. On reading all of the items in Exhibit ‘PV-11’, I have been able to come to a view that most of the work was reasonably necessary. I repeat, I cannot be sure that the work was absolutely necessary. I am only required to determine whether it is reasonable. I do not accept the objections raised by Mr Chapman are correct.
In my view, the following items should not be allowed:
Employee Item Person Amount Penny Zuydwyk 2nd item no date No description $36.00 Kylie Wright 21.5.2008 Work done prior to appointment $150.00 21.5.2008 $30.00 22.5.2008 $600.00 Amy Overton 21.5.2008 Work done prior to appointment $72.00 David Lee 19.6.2008 to 20.8.2008 No description $300.00 $1,188.00
I have allowed Mr Vince his fees in preparing his remuneration and addressing objections. That work is required to be undertaken and should form part of the administration. The position is analogous to that of a solicitor. If a solicitor’s bill is to be taxed, then a solicitor is entitled to costs of preparing a bill in taxable form. I have also allowed remuneration after Mr Vince’s term of office was terminated as that work was reasonably incurred. (See Re Reiter Brothers Exploratory Drilling Pty Ltd; Ex Parte, Andrew Charles Robert Lee (1994) 12 ACLC 430.)
There is nothing in time sheets and description of work which indicate that work performed by Mr Vince should have been performed by more junior staff. The objection raised by Mr Chapman is not valid. I note that most of the work in the administration was not undertaken by Mr Vince.
Some of the factors I am required to take into account include the period during which the work was performed, the quality of the work performed, the complexity of the work performed and the value and nature of the property dealt with or likely to be dealt with.
I note that Mr Vince was in office for a very short period, ten days. The administration was not complex and Mr Vince collected $85,453.07 whilst he was in office. On the other hand, the rates charged by Mr Vince are reasonable. The legislation calls on me to make an adjustment similar to a ‘Lodestar’ amount which is referred to by Finkelstein J. I will reduce the remuneration by ten per cent. In other words, I will multiply the remuneration assessed by 0.9.
I assess Mr Vince’s remuneration as follows:
Amount claimed $37,635.45 Less disallowed items $1,188.00 $36,447.55 Discounted by ten per cent $32,802.80
Legal fees
Mr Vince is entitled, as an administrator, to legal advice and I do not accept the objection of Mr Chapman that legal advice should not have been provided to Mr Vince because Mr Vince is an experienced practitioner.
In relation to legal fees incurred between 29 May 2008 to 30 June 2008, the only document before me was an account from his solicitors. I requested and was provided with time recording sheets of the solicitor. After perusing those time recording sheets, I am satisfied that the rates charged were not excessive and that the fees are reasonable. Legal fees in the sum of $4,131.86 will be allowed.
Mr Vince also claims legal fees in the sum of $6,055.39 from 1 July 2008 to 31 July 2008, and $9,178.99 from 1 August 2008 to 30 August 2008. Those fees were incurred due to the objections raised to his remuneration. There has been a small deduction to the remuneration charged by Mr Vince. The costs incurred in challenging the remuneration completely outweighs the reduction to Mr Vince’s fees. Those costs will be ordered to be taxed by the Taxing Master. The parties will be given an opportunity to be heard as to who should bear those costs.
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