Yeomans, R.J. v Cape, W.T
[1993] FCA 780
•1 Nov 1993
JUDGMENT No. ., ........ 780 193 , .... ,., .,....,...~
IN THE FEDERAL COURT OF AUSTRALIA ) AUSTRALIAN CAPITAL TERRITORY ) DISTRICT REGISTRY
) NO. ACT G36 of 1993 GENERAL DIVISION )
APPLICATION FOR LEAVE TO APPEAL FROM THE SUPREME COURT OF THE
AUSTRALIAN CAPITAL TERRITORY
RE: REDARB PTY LIMITED (RECEIVER AND
MANAGER APPOINTED);
ROBERT JOHN YEOMANS
Applicant
WILLIAM TIMOTHY CAPE
Respondent
CORAM: Gallop, Sheppard and Burchett JJ.
PLACE: Canberra
DATE : 1 November 1993 02 NoV 1993
AUSTRALIA PRINCIPAL
REASONS FOR JUDGMENT REOISTRY
THE COURT:
This is an application for leave to appeal from a decision of a judge of the Supreme Court of the Australian Capital Territory, in relation to certain disbursements included in accounts presented to the Supreme Court by the applicant as receiver and manager of Redarb Pty Limited. The order with respect to the accounts of the receiver and manager was interlocutory, because the appointment of the receiver and manager was itself interlocutory: Cape v. Redarb Pty Ltd (rec and mqr apptd) (1991) 6 ACSR 359 at 362-363. Accordingly, leave is required if the appeal is to proceed. At the request of the parties, the Court heard full argument so that, if it granted leave, it could by the same judgment dispose of the
appeal.
We should say at once that the case is one in which it is clearly appropriate, applying the principles which were settled by this Court in Decor Corporation Pty Ltd v. Dart Industries Inc (1991) 33 FCR 397, for leave to be granted. The decision of the judge was effectively a final one in respect of a substantial sum of money, although procedurally it was interlocutory. And, as will appear, the applicant has made out a strong case that the decision was infected by error.
To understand the present dispute, it is necessary to go back to certain orders made on appeal by this Court in Cape v. Redarb Pty Ltd (supra) at 376-377. It was pursuant to those orders that the receiver and manager filed his accounts, claiming payment of his proper remuneration, and allowance of his proper disbursements. The orders included the following:
"That the remuneration of the receiver and manager of Redarb Pty Ltd and the Redarb Unit Trust be calculated as from 8 August 1989 until further order, or until otherwise agreed between the parties and the receiver and manager, in accordance with the scale of rates prescribed by the Insolvency Practitioners Association of Australia."
The receiver and manager, having filed accounts, sought an allowance in accordance with those accounts for disbursements paid to the accountants Duesburys, the services of whose staff had been utilized in the execution of his duties as receiver and manager. Mr Yeomans is a partner in Duesburys. Among the staff members in respect of whose services disbursements were paid to Duesburys, was one Warwick Davis. The sole question directly in issue between the parties upon the application for leave to appeal is whether so much of the disbursements, as related to payments in respect of Davis, ought to have been allowed as being "in accordance with the scale of rates prescribed by the Insolvency Practitioners Association of Australia", within the meaning of the order to which we have referred. It was not in dispute that the words quoted were applicable to such a disbursement as well as to payments strictly to be described as remuneration.
Payments in respect of Mr Davis fell into two periods. Between 22 August 1989 and 31 January 1990, these payments were made on the basis that the work done by him was to be remunerated, initially, on a scale mid way between that described as Senior Grade 1 and that described as Supervisor, and, at the end of the period, on the scale appropriate to the grade described as Supervisor. Payments during the period 1 February 1990 to 10 May 1991 were made on the basis that his
Manager. The learned judge at first instance held that the work was to be remunerated at the rate applicable to a accounts should be adjusted, so as to classify Mr Davis at Senior Grade 2 for the period ending 30 June 1990 and Senior Grade 1 from 1 July 1990. In reducing the level of remuneration applicable to Mr Davis, the learned judge referred to his lack of relevant qualifications, and to what his Honour regarded as his limited experience. Having held that these considerations required a reduction of the amount claimed, his Honour made a discretionary decision to allow amounts calculated at the rates specified by him.
A great deal of evidence was led concerning the capacity and other qualities of Mr Davis. Between 22 August 1989 and 31 December 1989, he was employed by Duesburys, but not full time, to work solely on the receivership of Redarb Pty Limited. By December 1989, he was working almost full time. From 1 January 1990 to 8 April 1991, he was employed full time as manager of the insolvency division of Duesburys, and subsequently he continued to work a great many hours part time in relation to the receivership. The receiver and manager personally swore an affidavit in which he stated that, during the period 22 August 1989 to 8 April 1991, Mr Davis "was in charge of this receivership under my control, and other Duesbury staff who worked on the receivership worked under his direction. Since then he has continued to have authority to direct them." In another affidavit, Mr Yeomans made more detailed comments about the period of the retainer of Mr Davis
until 31 December 1989, in this receivership, as a consultant. He stated: "I charged the time spent by Davis at what I then
considered and still consider to be an appropriate rate having regard to his age, experience, competence and responsibilities. The rate also reflects my consideration of my attendant overheads and responsibilities in the matter. I regarded and treated him throughout this period as a member of Duesburys staff and, indeed, in late 1989 Davis was appointed as a full time staff member."
The affidavit continued:
"From 1 January 1990 until his resignation in April 1991, Davis undertook and fulfilled duties at least equivalent to the expectations I would have of a senior manager. I have at all times been most satisfied with the work done by him."
The affidavit also expressed agreement with certain facts and opinions set out in a separate affidavit made by a Mr Glanville, a chartered accountant and registered liquidator who has been the managing partner of Duesburys since about 1984. One of the paragraphs of Mr Glanville's affidavit expressly endorsed by Mr Yeomans reads as follows:
"In my opinion, Mr Davis brought to his appointment, whether as a part time consultant or otherwise, an appropriate level of competence incorporating a unique blend of practical experience, incorporating legal, accounting, audit and research disciplines. Although lacking in formal technical training, his knowledge, experience, productivity and maturity, in my opinion combine to warrant his classification by this firm as a manager and as an insolvency
manager. "
It is important to note that neither Mr Yeomans nor Mr Glanville was cross-examined in respect of these statements about the services of Mr Davis. In the circumstances, there is simply no proper basis for a finding that Mr Davis was not capable, during the relevant period, of carrying out efficiently the duties of a manager. Indeed, there is no suggestion in the reasons of the learned judge that any lack of competence had been shown in respect of the work actually done by Mr Davis. That is in itself significant, since the
full court which heard Cape v. Redarb Pty Ltd (supra) made it clear (at 368) that "the receivership has been a substantial and complex one".
There was a great deal of other evidence about the capability and qualities of Mr Davis. Although his experience directly as an insolvency practitioner was limited, he had had a number of years of experience as collection manager of a finance company, followed by experience as its lending and finance manager and two years as its branch manager in Canberra. He had also had about four years of experience as a management consultant. He had a highly favourable reference from another official liquidator, a partner of Ferrier Hodgson
& CO, who also made an affidavit. Other material, from
persons apparently competent to judge, attested to his capacity for research and analysis in commercial and accounting matters, and to the high regard in which he is held in areas which would be relevant to the work of an insolvency manager. Counsel for the respondent did not point to any
material which could be regarded as significantly qualifying this evidence.
The respondent relied on the facts that Mr Davis did not, at the relevant time, hold any accountancy qualification (he was a student for a Bachelor of Commerce degree), and that he had had limited experience in doing what might be termed pure insolvency work. However, the respondent's own evidence did not suggest that professional qualifications were a necessity. A letter, for example, on which the respondent relied, from Price Waterhouse contained the express reservation that the firm did not say it would not employ "an appropriate staff member" who was without "relevant professional qualifications" at "manager levels". A statutory member of the Australian Securities Commission certified the following:
"(M)y own opinion on this matter, which is in line with the general experience and knowledge of my staff, is that it is the responsibility of an insolvency appointee to grade his or her staff on the basis of a number of factors, such as level of experience, training, educational qualifications and practical ability. This is a matter for the discretion and professional judgement of each practitioner and 1 am not aware of any prescribed requirement that a manager in an insolvency practice must have passed the professional year examinations or other equivalent, although such qualification would be commonplace as evidenced by the level of insolvency experience expected of a manager and supervisor in the IPAA Scale of Fees Definitions."
(This was written at a date after the relevant period, and after the adoption by the Insolvency Practitioners Association of Australia of certain definitions to which reference will be
made, which were not in existence at any time during the relevant period.) It will be recalled that the order of the court, set out early in these reasons, refers to the scale of rates prescribed by the Insolvency Practitioners Association of Australia. Effective from 1 July 1989, there was a scale which included hourly rates for persons described as Managers, Supervisors, Seniors Grade 1, Seniors Grade 2, and by reference to other categories not relevant for present purposes. The document issued by the national secretary of the Association, containing these rates, also contained a number of notes, including the following:
"8. It is recognised that, in certain cases, alternative methods of calculation of remuneration ... will be warranted. Basically however, the Committee of this Association recommends the fixation of fees upon a basis of time spent and that practitioners ensure that staff of a level appropriate to the work is used.
9. It is not intended that this scale should operate as a fixation of charges in all administrations carried on in all areas of Australia. It is rather as a standard from which an appropriate scale of fees may be approved in each case and may include calculating a percentage variation to the rates set out, having regard to the complications and other circumstances."
There was no definition of the expressions "Manager", "Supervisor", "Senior Grade 1" and "Senior Grade 2", or of the other words describing categories of person the subject of the fixation of rates.
Variations of the rates appeared as from 1 November 1990 and 1 July 1991. It was not until 10 January 1992, after the period with which we are concerned, that the Association issued a revised document, including what was called a Schedule of Job Descriptions. This schedule commenced as
follows :
"IPPA SCHEDULE OF JOB DESCRIPTIONS
Classification Level of Insolvency Experience Principal Appointee/ The registered liquidator or his/her Partners partner bringing special skills to
the insolvency task.Managers
Normally 6 years. Answerable to the appointee but otherwise responsible for all aspects o f any administration. Should be constantly alert to opportunities to meet clients' needs and to improve the clients' future operation either by revenue enhancement or by reducing costs and improving efficiency. Controls a number of staff.
Supervisors 4-6 years. PY complete. Will have had conduct of minor administrations and experience in control of 1-3 staff. Assist planning and control of medium to larger clients.
Seniors Grade 1 2-4 years. Professional year (or equivalent) would normally be completed within this period. Assists planning and control of small to medium sized jobs as well as performing some of the more difficult work on larger jobs.
Seniors Grade 2 1-2 years. Professional year (or equivalent) would normally commence during this period. Required to control the fieldwork on small jobs
and is responsible for assisting complete fieldwork on medium to large jobs.
It will be apparent that the Schedule of Job Descriptions does not contain a full or a precise definition of a "Manager"; rather, it makes some general comments, not limited to the subject of experience but under the heading of "Level of Insolvency Experience", and it indicates that such
experience will "normally", for a manager, be six years. Ample room is left for the case which is other than normal. On the evidence, this is a case which is not normal, Mr Davis being an exceptional person with a wide experience in relevant areas, although not as an insolvency practitioner.
But in our opinion his Honour erred when he treated the relevant categories for which the scale of fees provided as "defined ... by reference to an IPAA Schedule of Job Descriptions". The job descriptions were not applicable at any relevant date. It is true, as his Honour held, that when the job descriptions were adopted they were 'Idesigned to reflect the degree of insolvency experience made available to the task in question". (However, this was qualified by their lack of precise definition and by the plain indication that the periods of experience for which they provided were only for the normal case.) But before these descriptions were adopted, the scale simply prescribed rates in respect of persons performing functions. If a person was engaged as a
manager, and performed the work of a manager satisfactorily, there was nothing to suggest that the appropriate scale of remuneration did not apply to that person. In the present case, the order of the Court, which has been quoted earlier in these reasons, stated the remuneration of the receiver and manager was to be "in accordance with the scale of rates prescribed by the Insolvency Practitioners Association of Australiaw. That scale was varied from time to time, and the order can only sensibly be construed as having an ambulatory operation, requiring payment to be assessed in accordance with the scale applicable at the time of performance of the work. At the time the work the subject of dispute was performed, Mr Davis unquestionably performed duties falling within the classifications adopted in the accounts of the receiver and manager, and performed those duties very satisfactorily indeed. It was, accordingly, a fundamental error to deny that payment was due under the order of the Court in respect of the services of Mr Davis at the rates claimed, simply because a job description later published might have raised a question had there been a dispute about the later period.
It was argued for the respondent that his Honour's decision was a discretionary one, and the usual strictures against appellate interference with exercises of discretion were relied upon. However, in this case, the learned judge only came to exercise that discretion because of an erroneous
terms of the order. Had it been held, as in our view it finding that the fees paid did not fall fairly within the should have been, that they did, there would have been no basis for the exercise of a discretion to disallow them. As we have pointed out, there was not even cross-examination of the receiver and manager and his managing partner upon their evidence attesting to the status of the positions held by Mr Davis over the periods in question and the quality of his work.
For these reasons, the application for leave to appeal should be granted, and the appeal should be allowed. A question has arisen as to the form of the application for leave. It was filed naming Redarb Pty Limited (receiver and manager appointed) as the applicant and William Timothy Cape as the respondent. There is no doubt Mr Cape is a proper respondent, since it was he who objected to the allowance of the amounts of remuneration and disbursements claimed upon the filing of the accounts of the receiver and manager. However, it does not seem to us that the company in receivership is the proper applicant. When the point was raised by the Court during the hearing (no objection to the constitution of the application having been taken on behalf of the respondent), counsel for the applicant applied for leave to make any necessary amendment, and made it clear that the receiver and manager wished personally to pursue the application for leave to appeal, and to appeal if given leave. In our opinion, the proceedings should be amended to accord with the reality by showing the receiver and manager himself as the applicant,
amount of his remuneration which is in question. We grant since it is his application to pass his accounts and fix the leave for the proceedings to be amended accordingly, and have prefixed these reasons with the appropriate amended
intltulement.It should also be noted that, during the course of the hearing, an appropriate order was made by consent to permit the application for leave to appeal to be pursued, notwithstanding that it was filed out of time.
The following orders should now be made:
That leave to appeal be granted.
2. That the appeal be allowed and the order requiring adjustment of the accounts for the purpose of ascertaining the remuneration of the receiver and manager for the period ending 31 December 1991 so as to apply amended classifications to Mr W. Davis be set aside.
3 . That the classifications of Mr Davis in accordance with which the accounts were submitted be confirmed as the classifications on the basis of which the remuneration of the receiver and manager should be determined and on the basis of which the appropriateness of disbursements paid by him should be determined; and that the matter be remitted to Higgins J. to make appropriate orders allowing the remuneration and disbursements of the this Court. receiver and manager in accordance with the reasons of
That the respondent pay the costs of the receiver and manager incurred by reason of the objection to the items in question including the costs of the receiver and manager of the proceedings below and the costs of the receiver and manager of the application for leave to appeal and of the appeal.
5. That the receiver and manager have out of the assets of the company any costs not recouped under the order for costs against the respondent.
We have made order (3) in this form because of reservations we have about the power of the Registrar to pass accounts. In the circumstances, we think it better to refer the matter back to the judge to make the appropriate orders.
I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Court.
Acting Associate: A- Date: 1 November 1993
Counsel for the Applicant: Mr P.M. Biscoe Q.C. Solicitors for the Applicant: Messrs Gallens Crowley & Chamberlain Counsel for the Respondent: Mr D.J. Crossin Solicitors for the Respondent: Messrs Crossin Barker
& Gosling
Date of hearing: 26 October 1993
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