Queensland Judgments
Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

Stimpson v Allied Rural Pty Ltd (subject to deed of company arrangement)[2022] QSC 74

Stimpson v Allied Rural Pty Ltd (subject to deed of company arrangement)[2022] QSC 74

SUPREME COURT OF QUEENSLAND

CITATION:

Stimpson v Allied Rural Pty Ltd (subject to deed of company arrangement) & Ors [2022] QSC 74

PARTIES:

MICHAEL DAVID STIMPSON

(applicant)

v

ALLIED RURAL PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) ACN 141 306 229

(first respondent)

AND

WILLIAM DOOLAN

(second respondent)

AND

KATRINA PEREY

(third respondent)

FILE NO:

BS 3521 of 2021

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

9 May 2022

DELIVERED AT:

Brisbane

HEARING DATE:

18 and 19 October 2021

JUDGE:

Jackson J

ORDER:

The order of the court is that:

  1. 1.The remuneration determination made by the creditors of the first respondent at the second meeting of creditors on 10 May 2021 is varied to the amount of $228,891.00 plus GST.
  2. 2.The parties make submissions on costs in writing within 14 days.

CATCHWORDS:

CORPORATIONS – VOLUNTARY ADMINISTRATION – ADMINISTRATOR – REMUNERARTION – where the respondents alleged that the administrator was invalidly appointed either because the director did not form the opinion in good faith that the company was insolvent or the director appointed the administrator for an improper purpose – where the respondents approbated the administrator’s appointment to carry the administration through to the second creditors meeting and for administrator and the company to execute a deed of company arrangement – where the respondents  reprobated the appointment to deny the applicant the additional remuneration sought – whether the administrator had a duty to inquire as to the circumstances of his appointment – whether the respondents should be precluded from raising invalidity of the appointment as administrator or failure to prosecute an application to terminate the administration

CORPORATIONS – VOLUNTARY ADMINISTRATION – ADMINISTRATOR – REMUNERARTION – where creditors resolved that the remuneration of the administrator would be fixed on an “ad valorem” basis – whether the Court should review the remuneration determination – whether the Court should vary the remuneration determination

Creak v James Moore & Sons Pty Ltd (1912) 15 CLR 426, applied

Grundt v Great Boulder Mines Ltd (1937) 59 CLR 641, applied

Mighty River International Ltd v Hughes (2018) 265 CLR 480, cited

Mills v Mills (1938) 60 CLR 150, cited

Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597, cited

Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611, cited

National Australia Bank v Horne (2011) 253 FLR 205, cited

Park v Whyte (No 2) [2018] 2 Qd R 413, applied

Project Blue Sky Inc v Australian Broadcasting Commission (1994) 194 CLR 355, cited

Re AAA Financial Intelligence Ltd (in liquidation) (No 2) [2014] NSWSC 1270, cited

Re Condor Blanco Mines Ltd [2016] NSWSC 1196, distinguished

Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd [2015] NSWSC 244, cited

Sanderson as Liquidator of Sakr Nominees Pty Ltd v Sakr (2017) 93 NSWLR 459, cited

Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, cited

Corporations Act 2001 Part 5.3A

Corporations Act 2001 Schedule 2, s 60-11, s 85-5

COUNSEL:

L Copley for the applicant

M Martin QC for the first respondent

The second respondent appeared on his own behalf

SOLICITORS:

McInnes Wilson Lawyers for the applicant

Shand Taylor for the first respondent

The second respondent appeared on his own behalf

JACKSON J:

  1. [1]
    This is an application by an administrator appointed by a company under Part 5.3A the Corporations Act 2001 (Cth) (“CA”) (“voluntary administrator”) to review a remuneration determination of the creditors of the company and to set aside the remuneration determination and substitute another remuneration determination in the amount of $228,891 plus GST or, in the alternative, to vary the remuneration determination to the remuneration amount of $228,891 plus GST.  The application is made under s 60-11 of the Insolvency Practice Schedule (Corporations) (“IPSC”) in Schedule 2 to the CA.
  2. [2]
    The application is opposed by the company and two creditors, William Doolan and Kristina Perey (“opponents”).   The grounds of opposition are unusual.  So was the administration itself.  But it ended in a deed of company arrangement proposed by and for the benefit of those who now oppose the application to review the remuneration. 
  3. [3]
    The dispute is not that the claimed work of the administrator was not done.  It is not that the time-based charging rates were unreasonable.  It is that all or most of the work of the administration was not necessary, first, because the applicant was invalidly appointed as the administrator; second, because the applicant should have terminated the administration almost immediately and avoided the costs of the administration; and, third, that the remuneration should be limited to an amount described by the second respondent as an “ad valorem” amount,  being twenty percent of the value of the admitted proofs of creditors entitled to share in the fund provided for under the deed of company arrangement.
  4. [4]
    For the following reasons, all of the grounds of opposition to the application should be rejected.  The creditors’ remuneration determination should be reviewed.  The remuneration determination should be varied to $228, 891 plus GST.

Creation and shareholding of the company

  1. [5]
    In 2009, incorporation by registration of the first respondent as a company (“the company”) was organised by Tony Mifsud of Mifsud & Associates, accountants for the second respondent, William Doolan.  Josephine Doolan, Mr Doolan’s sister, was appointed sole director.  All the shares came to be held by her as trustee for the Doolan Trust.
  2. [6]
    On 31 December 2009, the Doolan Trust was settled.  That was also organised by Mr Mifsud.  Josephine Doolan was the trustee and principal of the trust.  The primary beneficiaries were Josephine Doolan and Mr Doolan’s daughter.  I infer, however, that from the beginning, Mr Doolan was the manager of the company’s business.
  3. [7]
    In 2012, Hugh Blennerhassett became a director through a company he controlled, Harfin Pty Ltd (“Harfin”).  At some unidentified time later, Josephine Doolan resigned as a director.  Accordingly, Mr Blennerhassett, in effect, replaced Josephine Doolan as sole director.
  4. [8]
    On 31 July 2013, Josephine Doolan was also replaced by Hugh Blennerhassett as trustee and principal of the Doolan Trust.  At some point around the same time, Mr Doolan replaced Josephine Doolan as one of the two primary beneficiaries of the Doolan Trust.
  5. [9]
    From that time, of the 210 issue shares in the company, Harfin as trustee for the H&L Blennerhassett Family Trust held 30 shares, and Mr Blennerhassett as trustee for the Doolan Trust held 180 shares.  As a matter of law, Mr Blennerhassett wholly controlled the company.

Dispute between the relevant interest holders

  1. [10]
    In February 2019, Mr Blennerhassett said to Mr Doolan that he wanted to buy Mr Doolan’s interest in the company.  Nothing came of the proposal.
  2. [11]
    In March 2020, Mr Blennerhassett said that he wanted to be released from his guarantees of the company’s liabilities. 
  3. [12]
    In April 2020, Mr Blennerhassett stopped any day-by-day involvement in the management of the company.   Mr Doolan carried out the role of general manager from then on.
  4. [13]
    On 24 August 2020, Mr Doolan met with Mr Blennerhassett and requested that he resign as director of the company and as trustee of the Doolan Trust.  Mr Blennerhassett did not agree.  Mr Doolan left unsigned forms for the resignation with Mr Blennerhassett to consider.  When Mr Doolan returned later that day, Mr Blennerhassett said he wanted to talk about what Mr Blennerhassett wanted (I infer to exit the company).  Mr Doolan said he did not want to talk about that until Mr Blennerhassett resigned as director and trustee.
  5. [14]
    On 16 November 2020, Mr Doolan filed an originating application in this court for an order restraining the company, Mr Blennerhassett, and two others from selling land described as Lot 499 on SL12079, at Logan.  On 15 December 2020, the application was amended for an order removing Mr Blennerhassett as trustee of the Doolan Trust as well as other relief.
  6. [15]
    On or about 11 December 2021, if not earlier, Mr Blennerhassett became aware that his access to the company’s accounts maintained online on the Xero accounting platform had been terminated.  He was aware that the company’s internal accountant and its external accountant, Mr Mifsud, had administrator rights that could remove his access.  He sent an email to the internal accountant demanding that his access to the Xero accounts be reinstated immediately.
  7. [16]
    On 15 December 2021, Mr Blennerhassett sent an email to Mr Mifsud requiring access to the Xero accounts be reinstated and requesting a user name for his email address in the email.
  8. [17]
    On 17 December 2021, Mr Mifsud sent an email in reply.  He referred Mr Blennerhassett to the internal accountant, who he said was sorting out “former staff members [who] still had Xero access”.  In the light of later events, it was a dissembling reply.
  9. [18]
    On 22 December 2021, Mr Blennerhassett sent a further email to both Mr Mifsud and the internal accountant, again requiring access to the Xero accounts. 
  10. [19]
    On 22 December 2021, Mr Mifsud sent an email in reply stating: “I am unable to attend to any Xero access matters as Xero has advised that a dispute over the account has been notified to them.”  In the light of later events, it was a dissembling reply.
  11. [20]
    On 24 December 2020, Robinson Locke Lawyers, Mr Doolan’s lawyers in the dispute with Mr Blennerhassett, wrote to Mr Blennerhassett’s lawyers, alleging that the company owed Mr Doolan and his family members debts repayable on demand as follows:
    1. (i)
      $347,233.70 to Mr Doolan as trustee for the Doolan Family Trust;
    2. (ii)
      $22,500 to Mr Doolan’s daughter (a minor) on account of a loan; and
    3. (iii)
      $35,055 to Mr Doolan for unpaid wages.

Those amounts were demanded.

  1. [21]
    On 6 January 2021, the third respondent, Katrina Perey, who had worked for the company since 2015 and lived with Mr Doolan as his partner, wrote to the company’s internal accountant, demanding repayment of a personal loan she had made to the company in the amount of $19,203.26.  She alleged that Mr Blennerhassett had taken monies from the company account “in disregard of the company’s risk of insolvency” placing her “unsecured loan to the company at an unacceptable risk”.
  2. [22]
    On 13 January 2021, in response to a request for information from Mr Blennerhassett’s lawyers, Mr Mifsud sent an email explaining how he had come to alter the company’s records to show Mr Doolan as a director when there had been no appointment of Mr Doolan as a director.  As to another request for information from Mr Blennerhassett’s lawyers about the alleged loans mentioned above, Mr Mifsud said:

“… given that you have indicated that certain creditor demands have been made to the company, we have some concerns that the solvency of the company may be compromised and at risk, and accordingly as an unsecured creditor we have concerns that a creditor application to wind up the company may be a possibility and accordingly, we will be issuing the company with an invoice for our services… which will require payment prior to us providing any further services…”

  1. [23]
    As will appear later in these reasons, after the applicant was appointed in March 2021 and Mr Doolan was asserting to the applicant in heated exchanges in the presence of both Ms Perey and Mr Mifsud that the company had always been solvent, the opponents in effect pretended that neither Ms Perey nor Mr Mifsud had made those allegations of insolvency.
  2. [24]
    On 15 February 2021, an email was sent by staff of the company to customers of the company directing them to make payments due to the company to an account of Bosag Pty Ltd.  Bosag Pty Ltd was a company owned and controlled by Mr Doolan.  When the applicant was appointed on 2 March 2021, the balance in the Bosag Pty Ltd account was $142,480.  On at least three occasions, the applicant demanded of Mr Doolan that Bosag Pty Ltd repay the redirected amount to the company’s account.  It was not repaid at that time.  A response was made on Bosag Pty Ltd’s behalf on 15 March 2021 by letter from Robinson Locke Lawyers to the applicant mentioned below.
  3. [25]
    On 24 February 2021, Mr Blennerhassett sent an email to Mr Mifsud, stating that to provide financial information required by the bank, he needed access to the Xero accounts; that Robinson Locke Lawyers (the lawyers for Mr Doolan) had confirmed that his account access would be reinstated; and that Xero had confirmed that a person in Mifsud & Associates had “manager user” status and could provide access.
  4. [26]
    On 1 March 2021, Mr Mifsud responded that he understood there was an allegation that certain company data and records had been deleted.  He asserted that he had a professional duty to ensure the company records were preserved and matters before the courts were not prejudiced.  He refused to reinstate Mr Blennerhassett’s access to the Xero accounts unless served with a court order. 
  5. [27]
    In the result, there can be no dispute that when Mr Blennerhassett as the company’s sole director appointed the applicant as administrator, both the internal accountant and the external accountant had denied Mr Blennerhassett (as the sole director of the company) access to the company’s online accounting records for 2 months and 17 days or that the external accountant had alleged possible insolvency of the company to Mr Blennerhassett 1 month and 19 days beforehand.

Appointment of the administrator

  1. [28]
    On 2 March 2021 at 7:00am Mr Blennerhassett as sole director of the company resolved:
  1. “1.That in the opinion of the Director, the Company is insolvent or is likely to become insolvent at some future time, and an administrator of the Company should be appointed.
  2. 2.That David Michael Stimpson… be appointed Administrator of the Company by the Board of the Company under Part 5.3A of the Corporations Act 2001 (Cth).”
  1. [29]
    On 2 March 2021 at 9:00am approximately, the applicant and his staff attended at the company’s offices and gave notice of the appointment signed by Mr Blennerhassett to the company’s staff.
  2. [30]
    At the hearing of the application, counsel for the company and Ms Perey cross-examined the applicant as to his discussions with Mr Blennerhassett and his solicitor before the appointment.  Most of the answers are not significant.
  3. [31]
    However, in those discussions, the applicant was informed that Mr Blennerhassett had no access to records, that Mr Doolan had arranged for the company’s receivables to be paid into another account so that the funds of the company were being diverted (to Bosag Pty Ltd) and that the company’s tax was not up to date.

After the appointment

  1. [32]
    On 2 March 2021, when the applicant and his firm’s employees attended the company’s premises, they met Mr Juett, the company’s operations manager.  He contacted Mr Doolan. 
  2. [33]
    Later that morning, the applicant spoke to Mr Doolan via telephone.  Mr Doolan said that the company was not insolvent and that he had applied to remove Mr Blennerhassett as trustee of the Doolan Trust, and consequently as director of the company.  That statement was half-true.  Mr Doolan’s application, as previously mentioned, was to remove Mr Blennerhassett as trustee of the Doolan Trust and other relief.  It was not to remove him as director of the company.
  3. [34]
    Mr Doolan said that he was looking to make an application to the court to have the administration terminated.  By then, it seems likely that Mr Doolan had already received legal advice as to his options.  The applicant said that upon provision of the records indicating solvency he would support an application to terminate the administration.
  4. [35]
    On 2 March at 1:10pm, the applicant sent an email to Mr Doolan referring to the telephone discussions that morning and confirming that Mr Doolan had said he was considering applying to the court to end the administration on the basis the company was solvent.  The applicant said that apart from notifying the employees and giving them formal notice of his appointment and contacting the bank as secured creditor he would hold off taking any further action to take control of the business operations and notifying creditors and other stakeholders until close of business on 3 March 2021, pending Mr Doolan’s confirmation he intended to proceed with the application.  The applicant sought further information and action from Mr Doolan in the meantime.  That was not provided.
  5. [36]
    I reject that the applicant gave any assurance to Mr Doolan beyond that.  To do so would have been contrary to the applicant’s duty upon appointment under the Part 5.3A of the CA simply because of Mr Doolan’s assertion of solvency in the telephone call. 
  6. [37]
    Mr Doolan says that at the same time as, or immediately after, the telephone call between them, the applicant moved to secure control of the company’s business.  In his affidavit sworn and relied upon in support of the opponent’s submissions, Mr Doolan says that was “in contradiction to his assurances of an intention to support the termination of the solvent company and to stay his actions in the interim.”  I reject that assertion.
  7. [38]
    The point is only worth mentioning because it is the first of many similar assertions and arguments made by Mr Doolan in his affidavit that I do not accept.  When the whole of the affidavit is read and assessed against the background objective facts, the proper conclusion is that Mr Doolan’s evidence should be treated with care in all respects unless those objective background facts support it.  As well, his many allegations in his affidavit that are not evidence that could be given orally, which is the condition of including evidence in an affidavit,[1] should be disregarded.  I note that Mr Doolan confirmed at the hearing that he had legal assistance in preparing his affidavits, although no lawyer appeared for him.
  8. [39]
    On 2 March 2021, Malcolm Robinson, Mr Doolan’s solicitor, sent an email to the applicant querying the time of the applicant’s appointment and alleging the resolution appointing the applicant was invalid because the minutes containing that resolution stated a time after the applicant had attended the company’s premises.  It turned out the time inserted in the minutes was erroneous and the appointment had been made earlier in the morning.
  9. [40]
    On 3 March 2021, Mr Robinson sent a letter to the applicant stating that Mr Doolan intended to apply urgently to the Supreme Court to end the administration.
  10. [41]
    On 4 March 2021, Robinson Locke Lawyers sent a draft application by Mr Doolan to end the administration and copies of sworn supporting affidavits by Mr Robinson, Mr Doolan and others.  The affidavit material included statements intended to support inferences that the company was solvent and that Mr Blennerhassett’s motivation in appointing the applicant was “an ulterior purpose of serving his own personal interests in relation to the dispute”, meaning the originating application brought by Mr Doolan against Mr Blennerhassett and others.  Mr Doolan’s draft application to terminate the administration was never filed.  An explanation for not doing so was not given at the time or in evidence.[2]

First meeting of creditors

  1. [42]
    On 12 March 2021, the first meeting of creditors was held.  The applicant as chair decided on the creditors’ debt values for the purposes of the meeting.  He then outlined a number of matters of financial information he had sought from stakeholders that had not been provided.  Mr Doolan interrupted with questions and challenges.  The applicant tried to respond to the interruptions and challenges.  The discussion ranged over a number of issues.
  2. [43]
    At the meeting, Mr Doolan again raised the assertion that the applicant was invalidly appointed by the company.  The applicant said that he understood the question to be whether the company was insolvent and that was not something that could be determined then.  Mr Doolan interjected, as he did so often, and said that the question of improper purpose in the appointment was also raised.  He referred to a decision of Chief Justice Holmes in the prior year (impliedly a reference to Emperor Investment Group Pty Ltd v Delta Law Pty Ltd[3]) in a fashion intended to show how “brushed up” he was on the law.
  3. [44]
    The applicant responded that he was not aware the company was solvent before he took the appointment.  Mr Doolan challenged whether the applicant knew that the resolution was made for an improper purpose.  The applicant did not accept that he did.
  4. [45]
    Discussion proceeded about the applicant’s awareness of solvency.  The applicant said that comments were made on all sides before his appointment about insolvency.  Mr Doolan challenged who made the comments.  The applicant responded by referring to Mr Blennerhassett.  Mr Doolan responded derisorily: “please don’t quote him.” 
  5. [46]
    At that point, Ms Perry, Mr Mifsud and, I infer, Mr Doolan well knew that an assertion of possible insolvency of the company had been deployed by Mr Mifsud to Mr Blennerhassett and by Ms Perer to the company’s internal accountant before the applicant’s appointment. 
  6. [47]
    At one point, the company’s accountant, Mr Mifsud, who had been in control of access to the company’s Xero accounts, and who it appears acted in conjunction with and possibly on the instructions of Mr Doolan said that “there are no legal obligations under the Corporations Act to have online access to records.  The director would have all the authority to maintain an access to such records.  So it’s very perplexing.”  At another point, Ms Perey said “[Ms Blennerhassett] has access to records if he just went to the warehouse”.  The point is only worth mentioning as an example of the disruptive humbug in which Mr Doolan and those aligned with him, including Mr Mifsud and Ms Perey, were prepared to engage in to obstruct the applicant in carrying out his statutory duties.
  7. [48]
    Eventually, the meeting resolved to appoint a committee of inspection, populated by Mr Doolan and Mr Mifsud and Mr Juett, who both were supporters of Mr Doolan, and an independent member.
  8. [49]
    Mr Doolan then proposed a resolution of the meeting of creditors directing the applicant to remove Mr Blennerhassett as director by exercising the administrator’s power under s 442A of the CA.  The motion was carried on the voices.  It was ineffective in law to oblige the applicant to remove the director, although he was required to have regard to it.[4]
  9. [50]
    The first meeting of creditors was then adjourned for the applicant to send notice to creditors advising of his intention to make an application to the court to terminate the administration.
  10. [51]
    On 12 March 2021, the applicant sent a notice to creditors of the reconvened first meeting of creditors for 22 March 2021 to consider a resolution that the administration end and any other business properly brought forward.
  11. [52]
    On 15 March 2021, Robinson Locke Lawyers wrote to the applicant, referring to the applicant’s earlier demands that Bosag Pty Ltd restore to the company money received from company debtors that had been diverted from the company’s bank account into an account in Bosag Pty Ltd’s name.  Mr Robinson wrote:

“You are also aware that [Bosag Pty Ltd] claims set-off in relation to substantial amounts of money that are owed to it.  All of these amounts are [sic] owed prior to commencement of the administration.”

  1. [53]
    On 18 March 2021, the applicant completed the solvency report of the company for the purposes of the proposed application to terminate the administration under s 447A of the CA.  The conclusion reached was that assuming that the debts of Bosag Pty Ltd and Mr Doolan were non-current liabilities (that is, not repayable within 12 months) the company was solvent.  No formal assurance had then been given by either Bosag Pty Ltd or Mr Doolan that their claims were not payable as current liabilities.  This was not a matter of oversight.
  2. [54]
    On 22 March 2021, the reconvened first meeting of creditors was held.  There was discussion about the debt claimed by Bosag Pty Ltd of $1,056,000 and the debts claimed by Mr Doolan totalling $521,240.  The applicant sought clarification whether the debts were presently payable.  Mr Doolan obfuscated.  The applicant referred to the debts being demanded by solicitors acting for Mr Doolan in December 2020.  That was impliedly a reference to the letter from Robinson Locke Lawyers to Mr Blennerhassett dated 24 December 2020.  I have already referred to Mr Robinson’s letter to the applicant dated 15 March 2021 as to Bosag Pty Ltd’s alleged debt.  The applicant sought an assurance in writing that the alleged creditors were not claiming the amounts as presently payable.  At the meeting, Mr Doolan said that was not a problem.  In fact, despite requests, a formal assurance was not given by Bosag Pty Ltd or Mr Doolan at that time.
  3. [55]
    The meeting continued with fractious argument and assertions led by Mr Doolan who was again disruptive.  In the context of an argument raised by Mr Doolan complaining that the applicant had not removed Mr Blennerhassett as director yet, Mr Doolan asserted that the applicant had said that Mr Blennerhassett was “a danger to the company”.  The applicant demurred, saying he had never said that.  Mr Doolan, backed up by Mr Juett, again asserted that he had.  Ms Perey said the applicant had also put it in an email.  The email did not say it and I reject that the applicant had said it.  The episode is another instance of the disruptive humbug engaged in by Mr Doolan and his supporters.
  4. [56]
    As moved by Mr Doolan, the meeting resolved on the voices “that the administration be terminated on Monday the 29th of March 2021 allowing for the applicant to remove Mr Blennerhassett to replace him as directed [sic], failing that for court orders protecting the company from Mr Blennerhassett or any person disadvantaged by any irregularity in the meeting or resolution to apply to court and for the applicant to cease his administration immediately and return authority to the staff and consultants of Allied Rural Pty Ltd.”
  5. [57]
    The resolution was not effective in law to terminate the administration.  The creditors did not have the power to terminate the administration at the first creditors meeting.  Mr Doolan was aware of that because the applicant’s solicitor said so at the meeting.  Viewed objectively, it was another strategy intended to apply pressure to the applicant to exercise the administrator’s power under s 442A of the CA to remove Mr Blennerhassett as director of the company so as to achieve one of the ultimate purposes of Mr Doolan’s ongoing litigation against Mr Blennerhassett.

Application to terminate administration

  1. [58]
    On 26 March 2021, the applicant filed an application to terminate the administration under s 447A of the CA, returnable on 1 April 2021.  The application was supported by an affidavit of the applicant referring to his conditional opinion that the company was solvent, if the alleged debts to Bosag Pty Ltd and Mr Doolan were non-current.  He also opined that the ongoing dispute between Mr Doolan and Mr Blennerhassett and its impact risked the trading activities of the company and would ultimately result in the insolvency of the company. 
  2. [59]
    On 29 March 2021, Harfin, the member of the company controlled by Mr Blennerhassett, filed an application for the company to be wound up on the just and equitable ground.  The application was supported by an affidavit of Mr Blennerhassett, setting out his version of the dispute between him and Mr Doolan and the breakdown of relations between him and the employees and consultants of the company.  He deposed further as to his bases for forming the belief as to the insolvency of the company.  He expressed concerns as to the future activities of Mr Doolan and key employees, if the administration ended, and sought an order in that event that the company be wound up on the just and equitable ground.
  3. [60]
    On 29 March 2021, it appears that Mr Doolan had a change of heart as to whether the administration should be terminated.  On that day, Mr Robinson, on Mr Doolan’s behalf, suggested to the applicant that the applicant and the company should enter into a deed of company arrangement as proposed by Mr Doolan, instead of the applicant proceeding with his application to terminate the administration.  That course would have removed the basis of Harfin’s application to wind up the company on the just and equitable ground.
  4. [61]
    On 30 March 2021. Mr Robinson wrote to the applicant referring to his email sent late the day before.  He urged acceptance of the proposal for a deed of company arrangement as viable because it was not greatly dissimilar to one raised by the applicant’s employee on 8 March 2021 (that had been rejected at that time by Mr Doolan) and the committee of inspection supported it.  He contended that “[a]ll previous plans regarding termination of the administration are superseded” by the presentation of the proposal.  That was a complete about face from the previous assertions and resolutions by Mr Doolan and his supporters that the administration should be terminated as soon as possible and by any means possible.  The letter also referred to the application to wind up that had been filed by Harfin and contended that application must be adjourned unless it was in the interests of creditors to proceed.
  5. [62]
    On 31 March 2021, the applicant’s solicitor responded to Mr Robinson’s email of 29 March 2021.  He requested further details of any deed of company arrangement proposed by Mr Doolan, and advised that the applicant would be happy to meet with Mr Doolan after the hearing of the application to terminate the administration, if it were not terminated, to discuss any proposal.
  6. [63]
    On 31 March 2021, another lawyer, Scott Butler, wrote to the applicant stating that he had been approached by Mr Doolan on behalf of the committee of inspection, to reiterate their request that the applicant’s application to terminate the administration be adjourned until after a second meeting of creditors could be held and a deed of company arrangement can be put to and considered by creditors.
  7. [64]
    On 1 April 2021, following an informal agreement between the lawyers for the applicant and Mr Doolan, the court made orders that the convening period for the second meeting of creditors be extended to 30 April 2021, that Part 5.3A of the CA operate so that the second creditors meeting could be held within 5 business days of the extended convening period, that the applicant was to give notice of the order to creditors and that the application to terminate the administration was adjourned to a date to be fixed.

Second meeting of creditors

  1. [65]
    On 6 April 2021, Mr Doolan and the other members of the committee of inspection wrote to the applicant complaining that the extended date for convening the second meeting of creditors was not the earliest day possible.
  2. [66]
    On 29 April 2021, the applicant completed the required administrator’s report to creditors for the second creditors meeting.[5] 
  3. [67]
    The report reconsidered the question of solvency.  The applicant referred to his opinion in the report for the adjourned first meeting of creditors that the company was solvent, conditional on the alleged debts of Bosag Pty Ltd and Mr Doolan being non-current.  The applicant changed that conclusion on the basis that those parties now were unwilling to forbear on their debts unless a deed of company arrangement was executed.  His changed conclusion was that the company was insolvent.
  4. [68]
    As part of the report, the applicant expressed the opinion, as a required statement under the relevant section[6] that it was in the best interests of the creditors to resolve that the company execute the deed of company arrangement proposed by Mr Doolan. 
  5. [69]
    The report also dealt with the applicant’s remuneration and proposed a resolution that the remuneration be approved in the amount of $155,148 to 16 April 2021 and at stated rates from 17 April 2021 until 9 May 2021, being the day before the second creditors meeting was to be held.  There was an attached remuneration approval report dated 29 April 2021 containing summary statements of the work carried out by the applicant or on his behalf.
  6. [70]
    On 10 May 2021, the second creditors meeting was held.  With two agreed amendments, the meeting resolved that the company execute the proposed deed of company arrangement and that the applicant be appointed the deed administrator of the company. 
  7. [71]
    As to the applicant’s remuneration, the resolutions proposed by the applicant’s report for his remuneration as voluntary administrator were lost on the voices.  The applicant tabled a detailed work in progress report, but Mr Doolan commented there was insufficient information to confirm how the administration expenses had been incurred.  Instead, Mr Doolan proposed resolutions and the creditors resolved that the remuneration of the applicant as voluntary administrator “be fixed on an ad valorem basis” and that “the remuneration of the [applicant] be fixed in the administration to 20 per cent of the creditor value as admitted for dividend purposes in the deed of company arrangement in the event that the appointment is valid.”  This is the remuneration determination that is the subject of this application.  A signal of the opponents’ ground of opposition to this application may be seen in the last phrase of that resolution.

Deed of company arrangement

  1. [72]
    On 24 May 2021, the company, the applicant, Ms Perey as director and Ceanfergail Pty Ltd as trustee of the Doolan Family Trust, Bosag Pty Ltd, Mr Doolan and Mr Doolan as guardian for his daughter entered into the deed of company arrangement with the applicant as deed administrator. 
  2. [73]
    It is not necessary to detail much about the deed of company arrangement.  Only a few points are relevant.  First, it was a precondition to its operation that under s 442A of the CA the applicant remove Mr Blennerhassett as director of the company and replace him with Ms Perey.  Second, the company was to pay $220,000 into a fund over six months from which the deed administrator was to pay unsecured creditors on an admitted list and as incurred or arising at the rate of 100 cents in the dollar.  Third, Ms Perey, Bosag Pty Ltd and Mr Doolan both personally and as guardian of his daughter were not included in those creditors entitled to participate in distribution from the fund.

Statutory context

  1. [74]
    Perhaps unexpectedly, the opponents’ grounds of opposition raise questions about the nature of and qualifications to an administrator’s right to remuneration.  There are prior cases it will be necessary to consider.  And there are analogies thrown up by other relationships in the context of company law that have been referred to in some of the cases.  At the end of the day, however, the right of a voluntary administrator to remuneration against the company and its property is a statutory right.  The extent and limits upon the right must be found and ascertained as a matter of construction of the statute.
  2. [75]
    Part 5.3A of the CA provides for the administration of a company’s affairs with a view to executing a deed of company arrangement.  The object of the part is to provide for the business property and affairs of an insolvent company to be administered in a way that maximises the chances of the company continuing in existence.[7]
  3. [76]
    That object and its origins are further detailed as follows:

“The Harmer Report’s recommendation was adopted in 1992 by the introduction of what is now Pt 5.3A of the Corporations Act. Although Pt 5.3A implemented numerous changes to the creditors’ voluntary winding up process, it continued the major underlying principle of existing legislation, namely, “orderly dealing with a company’s affairs”. Indeed, as the plurality of this Court observed in Lehman Bros Holdings Inc v City of Swan, the general premises of the administration process – including that the future of the company is committed to a body of all creditors as a whole – had “long underpinned statutory compositions and arrangements in individual bankruptcy”. The chief difference between Pt 5.3A and earlier provisions for statutory composition and arrangements in corporate insolvency was “the role played by the Court. Earlier provisions required court approval before the scheme was effective; Pt 5.3A provides for disallowance by the Court after the deed has been made.’”[8]

  1. [77]
    Administration under the part begins with the appointment of an administrator and ends when one of a number of events occurs.[9] 
  2. [78]
    Relevantly, an administration may begin with appointment of an administrator by the company if the board of directors has resolved to the effect that in the opinion of the directors voting for the resolution the company is insolvent or is likely to become insolvent at a future time.[10]
  3. [79]
    Also relevantly, administration may end by the execution of a deed of company arrangement by the company and the deed’s administrator.[11]
  4. [80]
    An administrator appointed by the company must convene a. meeting of the company’s creditors in order to determine whether to appoint a committee of inspection within 8 business days after the administration begins (“first meeting of creditors”).[12]
  5. [81]
    While the company is under administration, the administrator has control of the company’s business, property and affairs and may perform any function and exercise any power that the company or its officers could perform or exercise if the company were not under administration.[13]
  6. [82]
    As soon as practicable after appointment, the administrator must investigate the company’s business, property, affairs and financial circumstances and form an opinion as to whether it would be in the interests of the company’s creditors for the company to execute a deed of company arrangement or for the administration to end or for the company to be wound up.[14]
  7. [83]
    An administrator must convene a meeting of the company’s creditors within a specified convening period (“second meeting of creditors”).[15]  At the meeting, the creditors may resolve that the company execute a deed of company arrangement specified in the resolution or that the administration should end or that the company be wound up.[16]
  8. [84]
    An “external administrator” of a company is “entitled to receive remuneration for necessary work properly performed by him or her in relation to the external administration, in accordance with the remuneration determinations (if any) for the external administrator.”[17]  “External administrator” is an expression defined to include an administrator of a company under administration.[18] 
  9. [85]
    The right to remuneration is for “necessary work properly performed” and the value of the right, whether under a “remuneration determination” or determined or upon review by the court is “whether the remuneration is reasonable” taking into account any or all of the specified matters.[19]
  10. [86]
    A remuneration determination may be made (in order of precedence) by resolution of the creditors or resolution of the committee of inspection or the court.[20]  If a remuneration determination is made by the creditors, the administrator[21] (inter alia) may apply to the Court for a review of the remuneration determination. 
  11. [87]
    The Court may review the remuneration determination if it considers it appropriate to do so and after reviewing the remuneration determination must affirm, vary or set aside the remuneration determination.[22]

Invalid appointment

  1. [88]
    The opponents contend that the applicant is not entitled to additional remuneration on review of the remuneration determination because the applicant’s appointment as administrator by the company was invalid.  Two grounds of invalidity are raised: first, that the directors did not genuinely form the opinion in good faith before voting for the resolution that the company is insolvent or is likely to become insolvent at a future time; and second, that the directors resolved to that effect and appointed the applicant as administrator for an improper purpose.
  2. [89]
    In Condor Blanco Mines Ltd,[23] it was held that one of two directors who voted for a resolution that the company was insolvent or likely to become insolvent at a future time did not hold a genuine opinion formed in good faith to that effect with the consequence that the statutory pre-condition to appointment of an administrator by the company was not satisfied and the appointment of the administrator was invalid, void and of no effect.[24]  In the same case, it was held that the other director was motivated by an improper purpose of negativing the power and influence of incoming directors and defeating the will of the members of the company who were about to put those directors into office, and that an order ending the administration under s 447A of the CA should have been made, if it had been required.[25]
  3. [90]
    In Condor, the claim was for declaratory relief as to the invalidity of the appointment, which was granted.  The only defendant was the administrator who took a neutral stance on the relevant issues as to validity.[26]  The question of costs was debated by reference to the (invalidly appointed) administrator’s responsibility for the invalidity.  It was observed that if an administrator is put on notice of possible invalidity of his or her appointment, a duty of inquiry may exist.[27]  However, the court opined that the duty was restricted to seeing that the board adopted due process to pass a resolution in appropriate terms, in all but very exceptional circumstances[28] and it is not part of the administrator’s responsibility to delve into the purpose or motive of the directors beyond that of resort to company administration as a response to actual or impending insolvency.[29]  Possible exceptional circumstances were identified as where it is “plain as pikestaff, without inquiry”, (before appointment) that directors were resorting to administration for an extraneous purpose, in which case the insolvency practitioner should decline to accept the appointment.[30]  After appointment, if there were exceptional circumstances, a putative administrator might apply for an order terminating the administration under s 447A or declaring (in)validity under s 447C of the CA.[31]
  4. [91]
    Possible difficulties inhere in the reasoning in Condor
  5. [92]
    The conclusion that a resolution that the directors are of the opinion that the company is insolvent or likely to become insolvent at a future date is invalid if the directors do not hold that genuine opinion formed in good faith, with the consequence that the statutory pre-condition to appointment of an administrator by the company is not satisfied and the appointment is void and of no effect, may be an application of the doctrine of jurisdictional fact[32] going to the jurisdiction of the person or body exercising the power.[33]  Such a conclusion may raise the vexed question of the distinction between a “void” decision and a “voidable” decision[34] and the relationship with saving provisions of the CA, designed to answer the company law application of the principle of ultra vires[35] and to ameliorate procedural irregularities.[36]
  6. [93]
    The conclusion that the resolution will be “voidable”,[37] in any event, if the directors were motivated by an improper purpose may be recognisable as an application of the equitable principle, applied to the exercise of fiduciary powers by directors of a company under the constitution in the supervision of the internal affairs of companies, that to exercise a power for a purpose other than that for which the power was conferred may be invalid and voidable as an abuse of power applied.[38]
  7. [94]
    In either case, an important aspect of Part 5.3A of the CA is the scope of the power conferred by s 447A.  It enables the Court, in effect, to validate an otherwise invalid appointment of an administrator by an order that Part 5.3A is to operate as though the purported (but invalid) appointment was valid.[39]
  8. [95]
    I have a doubt as to a general statement in Condor of an appointee’s duty of inquiry or a responsibility to inquire as to the validity of his or her appointment, or other similar cases.[40]  Some simple analogies may assist in explaining why.  First, in the case of a court appointed liquidator or receiver, there is no duty on the appointee to inquire into the validity of the appointment.  Second, it is an everyday problem in the appointment of a receiver out of court that the appointment may be invalid.  If so, the unauthorised receiver’s actions may render the receiver civilly liable in a number of ways and the receiver will not be entitled to indemnity from the assets or undertaking to which he or she was appointed.  But none of that is because of a duty to inquire as to the validity of the appointment.  Third, recent statements of the suggested duty appear to have been assumed, without analysis of the principle or relationship in which the duty is based.
  9. [96]
    What then, is it about an out of court appointed administrator that creates a duty or responsibility of the appointee to inquire into the validity of the appointment?  And what is the consequence of a “breach” of the duty?  In Condor, it affected the appointee’s exposure to an order for costs as respondent to an application for a declaration of invalidity.  That was an unusual question.  More likely scenarios, perhaps, are where an application is made under s 447A of the CA for an order that Part 5.3A is to operate as though the purported (but invalid) appointment was valid or declaring (in)validity under s 447C of the CA or for associated or similar relief under s 1322 of the CA.  In each of those contexts, the conduct and knowledge of the appointee in relation to the challenged appointment may be relevant to the grant of relief.  But that will be because of the operation of the statutory provisions, properly construed, not because of some general duty or responsibility to inquire.
  10. [97]
    However, it is not necessary to consider these potentially complex questions further in this case.  The discussion in Condor occurred in a different context.  The question at issue in Condor was as to the validity of the appointment of the administrator.  In the present case, the question of possible invalidity is not raised in a similar way. 
  11. [98]
    The question is raised in the present case as a ground for refusing to review the remuneration determination of the creditors as to the administrator’s remuneration and for not varying the amount of the remuneration determination.[41]  It is significant in the present case that it is not raised in circumstances where the administration was terminated.  It is raised after a number of significant steps in the administration have occurred and it passed into a deed of company administration that was carried into effect. 
  12. [99]
    First, although Mr Doolan challenged the validity of the appointment of the applicant at the outset and gave notice to him of an application to terminate the appointment or have it declared invalid, Mr Doolan chose not to bring the application for reasons not adequately explained.  Second, although the applicant brought an application to terminate the administration before calling the second meeting of creditors, the opponents requested the applicant, and the applicant agreed, not to press that application so that the second meeting of creditors could be convened to consider a resolution for a deed of company arrangement proposed by Mr Doolan.  Third, at the adjourned second meeting of creditors, the creditors, including the opponents, resolved that the company should enter into a deed of company arrangement with the applicant, as proposed by Mr Doolan.  Fourth, the deed of company arrangement was made between the company and the applicant as administrator and was carried into effect so as to confer benefits on the opponents, including by the applicant as administrator exercising the power[42] to remove Mr Blennerhassett as director of the company.  Fifth, the opponents were among the creditors who purported to exercise the power of the second meeting of creditors to make a remuneration determination of the applicant’s entitlement to remuneration and in this proceeding rely upon that determination as the only amount that may be properly payable to the applicant.
  13. [100]
    Accordingly, it can be seen that the opponents deliberately chose to approbate the validity of the applicant’s appointment as administrator so as to carry the administration through to the second meeting of creditors and into a deed of company arrangement and a remuneration determination, but now wish to reprobate that validity to deny the applicant any entitlement to additional remuneration from the amount of the remuneration determination under the provisions of the CA.
  14. [101]
    Had the administrator’s appointment been successfully challenged shortly after it was made most of the work for the claimed remuneration would not have been necessary or done.  Alternatively, had the appointment been challenged, applicant might have brought an application under s 447A for an order that Part 5.3A is to operate as though the purported (but invalid) appointment was valid.
  15. [102]
    In those circumstances, should the Court consider whether the appointment was invalid on the hearing of this application?  In Scottish law, there is a doctrine against permitting a person to “approbate and reprobate” that is recognised in English law as a species of equitable election or estoppel, and was championed in the High Court by Isaacs J.[43]   The principle was stated thus, in Creak v James Moore & Sons Pty Ltd:

“The principle of what is called “approbate and reprobate” was stated by Honyman, J, in Smith v Baker, LR 8 CP 350, in these terms that a man: “cannot say at one time that the transaction is valid and thereby obtain some advantage, to which he would only be entitled on the footing that it is valid, and at another time say it is void for the purpose of securing some other advantage.” The word "thereby" is all-important. This was accepted as the true principle by the Court of Appeal in Roe v Mutual Loan Fund, 19 QBD 347, at 350.”[44]

  1. [103]
    Later, it was said in Grundt v Great Boulder Mines Ltd:

Where a person obtains advantages by relying upon rights which can exist only upon the basis of an assumed state of facts, he is not permitted thereafter to rely upon other rights in relation to the same person which are inconsistent with the existence of the rights formerly asserted. The relevant principle is that stated by Scrutton L J in Verschures Creameries v Hull and Netherlands Steamship Co: — “A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction.” So, in Thompson v Palmer, the general principle upon which estoppel in pais is based was expressed by Dixon J in the following words: — “The object of estoppel in pais is to prevent an unjust departure by one person from an assumption by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other’s detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct.”[45] (footnotes omitted)

  1. [104]
    The opponents should be precluded from raising the question of invalidity of the applicant’s appointment as administrator by the company by the doctrine of approbate and reprobate.

Termination of the administration

  1. [105]
    The same considerations as those discussed concerning the opponent’s ground of opposition based on invalidity of the applicant’s appointment apply to the ground of opposition based on the applicant’s failure to prosecute an application to terminate the administration.
  2. [106]
    The opponents should also be precluded from raising the question whether the applicant should have pursued his application to terminate the administration of the company on the ground that it was solvent by the doctrine of approbate and reprobate.

Review of the remuneration determination - reasonable remuneration based on the “ad valorem” amount

  1. [107]
    It is useful to identify in the cases what is meant by “ad valorem” remuneration in relation to the remuneration of a company liquidator, administrator or receiver (“insolvency practitioners”).  The phrase “ad valorem” is conventionally used in the context of duties or rates to describe a rate of duty or tax and in the field of legal costs to describe differential scale rates for items allocated according to the relevant value band of the amount in dispute.
  2. [108]
    In the context of insolvency practitioners’ remuneration, an early use of the expression is as follows:

“While ad valorem remuneration has its own shortcomings, it seems to attract less opprobrium than time-based costing. This is probably because it is proportionate, and because it incentivizes the creation of value, rather than creating ‘an incentive to run up hours and to do too much work in relation to the stakes of the case’ [Kirchoff v Flynn (1986) 786 F 2d 320 (Easterbrook J)]. As Finkelstein J explained in Re Stockford Ltd (at [25]–[26]), until the development of the Insolvency Practitioners Association of Australia time-based scale in the 1960s, conventionally a liquidator’s fee was either a fixed amount or a percentage of the assets under administration [see also Re Universal Distributing Co]. In Re Carton Ltd, Lawrence J described remuneration on a percentage basis as the most satisfactory method. (In that case, a proposal that remuneration be 5% on realisations and 5% on distributions was described as one which would require ‘special circumstances which would justify the fixing of such a large commission’; about half that amount was allowed). That a commission or percentage basis of remuneration remains an appropriate one, despite the current prevalence of time-based costing, is reflected in Corporations Act, s 473(3)…”[46]

  1. [109]
    It will be seen at once that the percentage was of assets under administration or realised or distributed.  No prior case has remunerated an administrator appointed under Part 5.3A by a percentage of the amount of the admitted creditors’ debts for dividend purposes under a deed of company arrangement operating after the termination of the voluntary administration.  It should be remembered that the purposes of admitting proofs of debt during a voluntary administration under Part 5.3A of the CA is for the purpose of taking the votes upon a resolution of the creditors at either the first creditors meeting or the second creditors meeting and in forming opinions as to insolvency or the like. Not surprisingly, I have not found another case of remuneration of an administrator appointed under Part 5.3A by reference to an ad valorem amount of the proofs of debt for those purposes.
  2. [110]
    There are logical explanations for that.  A company may have huge debts but the work of an administration may not be great and vice versa.  There is no per se logical connection between the value or amount of the debts and the amount of the work.  Second, the work of an administrator in carrying out the relevant functions under Part 5.3A of the CA includes securing and preserving the assets of the company but does not usually include administering the assets for a lengthy period, or realising them or distributing them to creditors before the voluntary administration terminates.
  3. [111]
    What was the logic behind the “ad valorem” basis of remuneration based on the value of the admitted creditors for dividend purposes under the deed of company arrangement contended for by Mr Doolan and the creditors who approved it?  None was identified, except that it reduced the remuneration to 20 per cent of the value of the admitted debts for distribution of the fund to be provided under the deed of company arrangement.  It was not explained in submissions why that reduced amount was a measure of the reasonable remuneration for the work of the administration performed by the applicant before the voluntary administration terminated and the deed of company arrangement came into effect.  Two more points are apt.  First, the work of receiving and admitting proofs for the process of distribution of the fund under the deed of company arrangement is work remunerated under the deed, quite separately from the remuneration for the period of the administration under Part 5.3A, from the time of the appointment until the administration ended on the execution of the deed of company arrangement.  Second, the debts for distribution from the fund do not include the debt to Bosag Pty Ltd of $1,056,000 and the debts claimed by Mr Doolan for $521,240 that were proved in the administration.  Choosing the debts admitted to proof in the fund under the deed of company arrangement instead of the debts admitted to proof in the voluntary administration reduced the amount of the administrator’s remuneration by 20 per cent of the value of those debts, that is $315,448.
  4. [112]
    Given that “ad valorem” remuneration in other company insolvency or winding up contexts is of the assets under management or realised or distributed, it may not serve much purpose to examine where that method of assessing a reasonable remuneration is apt in order to examine the remuneration determination in the present case based on the value of the admitted debts for payment from the fund under the deed of company arrangement.  Nevertheless, some analysis of that context may assist, where there is no other comparable case or analysis for the remuneration decision made in the present case.
  5. [113]
    The leading case of Sanderson as Liquidator of Sakr Nominees Pty Ltd v Sakr[47] examined a number of the arguments for and against time-based remuneration and “ad valorem” based remuneration.  Importantly, the court emphasised the role of then s 473(10) of the CA which has an equivalent provision that applies to an administration now in s 60-12 of the IPSC.  The requirement is that: “the Court must have regard to whether the remuneration is reasonable taking into account any or all of the following matters:
    1. (a)
      the extent to which the work by the external administrator was necessary and properly performed;
    2. (b)
      the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;
    3. (c)
      the period during which the work was, or is likely to be, performed by the external administrator;
    4. (d)
      the quality of the work performed, or likely to be performed, by the external administrator;
    5. (e)
      the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;
    6. (f)
      the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;
    7. (g)
      the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
    8. (h)
      the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;
    9. (i)
      the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;
    10. (j)
      if the remuneration is worked out wholly or partly on a time-cost basis--the time properly taken, or likely to be properly taken, by the external administrator in performing the work;
    11. (k)
      whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;
    12. (l)
      if:
      1. a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and
      2. the matter is, or includes, remuneration of the external administrator;

the contents of the report on the review that relate to that matter;

  1. (m)
    any other relevant matters.”
  1. [114]
    The court concluded that “if a judge taking into account the evidence of the work done and the matters in s 473(10) came to the view that remuneration calculated by way of a particular proportion of assets recovered or assets distributed was reasonable, he or she would be entitled to fix remuneration on that basis. Similarly, if a judge after considering the work done and the relevant factors in s 473(10) concluded that remuneration calculated on a time basis was reasonable, he or she would be entitled to fix remuneration on that basis.”[48]
  2. [115]
    As to the remuneration determination in the present case, the initial question is whether the Court should review the remuneration determination.[49]  Having regard to the unusual basis for and the features of the remuneration determination in the present case, it is appropriate to do so.

Varying or affirming the amount of the remuneration determination

  1. [116]
    The report by the applicant prepared and provided to the creditors in advance of the second meeting of creditors and the information brought by the applicant to the meeting of creditors contained details of the claimed remuneration.  That detail was added to significantly by the applicant’s affidavit material in support of this application.
  2. [117]
    The claimed remuneration breaks down[50] as follows:

Arita Category

Amount

Asset Preservation

$22,329.00

Creditors

$66,201.00

Employees

$2,463.50

Trade On

$72,218.50

Investigations and Court Application

$43,524.00

Administration

$21,155.00

  1. [118]
    The applicant encountered complexities that added to the cost of the administration including:
    1. (a)
      the allegations by Mr Doolan of impropriety by the applicant;
    2. (b)
      difficulty in obtaining the books and records of the company that required numerous notices to be issued to various parties;
    3. (c)
      dealing with Mr Doolan and his lawyers about the re-direction of funds to Bosag Pty Ltd;
    4. (d)
      difficulties in the relations between the applicant’s staff and the company’s staff during the trade on period;
    5. (e)
      holding the adjourned first meeting of creditors to deal with the resolutions to terminate the administration and to remove Mr Blennerhassett as director;
    6. (f)
      bringing the application to terminate the administration; and
    7. (g)
      complex dealings regarding the proposal for a deed of company arrangement.
  2. [119]
    Of the claimed amounts, 30 per cent, approximately, related to:
    1. (a)
      dealing with Mr Doolan and Bosag Pty Ltd, including over the allegations of impropriety and the re-direction of funds;
    2. (b)
      holding the adjourned first meeting of creditors to deal with the question of termination of the receivership of the administration; and
    3. (c)
      the Court application to terminate the administration including the report as to solvency and material for the Court.
  3. [120]
    During the period of the administration, the company continued to trade profitably.
  4. [121]
    At the time of the applicant’s appointment, the billing method for remuneration proposed and utilised by the applicant was notified to the stakeholders including Mr Doolan and employees of the company.  It included that the practice of the applicant’s firm was to charge in six-minute units and the different hourly rates applicable for the different levels of employees in the firm who may be required to do the work.
  5. [122]
    The applicant is an experienced insolvency practitioner and a registered liquidator. He has reviewed the work carried out by himself and his employees and has said that the amount claimed is fair and reasonable in his opinion.  The applicant stated in his affidavit that in his opinion appropriate and reasonable delegation of the work occurred having regard to the skill of each staff member to carry out the work for the company.  He says there was a write off of $2,825 of time recorded for correcting errors or charges he considered excessive having regard to the task undertaken.
  6. [123]
    The first and third respondents’ submissions were all directed to the ultimate contention that the appointment of the applicant was inconsistent with the objects of Part 5.3A so that the Court could not be satisfied that the remuneration was necessary or more importantly proportional to the benefit that was obtained from the work performed.  However, no challenge was made to the work performed as being necessary or properly carried out by reference to the tasks, times or rates relied upon by the applicant, if the contention that the appointment was inconsistent with the objects of Part 5.3A and was improperly made is not accepted.
  7. [124]
    In contrast, Mr Doolan’s written and oral submissions ranged over a large number of subject matters.  Not all require to be dealt with in these reasons.
  8. [125]
    One contention by Mr Doolan was that the inadequacy of the information provided by the applicant for the second creditor’s meeting in his remuneration report for that meeting made it not possible to form an opinion as to the reasonableness or otherwise of the charges.  I note that apart from the report, the applicant had a work in progress report available to the creditors at the meeting.  In any event, it is not necessary to examine that contention in detail in order to decide whether the remuneration determination was for a reasonable amount on this application.
  9. [126]
    Another contention made by Mr Doolan is that the information before the Court on the hearing of this application is still not sufficiently detailed.  He submitted that individual descriptions contain generalised descriptions of different items of work done by a particular person on a particular day without going into any detail of how much time was taken with each component.  He provides ten examples.  The examples show Mr Doolan’s hyper-critical approach.  Thus, he complains that an entry on 18 March 2021 of 1 hour for drafting letters back to Robinson Locke Lawyers was defective because no information was provided as to the number of letters involved. He also complains that an entry on 21 April 2021 of 2.3 hours for telephone discussions with Mr Robinson, review of the final deed of company arrangement and review of emails to and from the staff and Mr Doolan and (giving) instructions to staff concerning matters and confirming the agreement as to the terms of the deed of company arrangement was inadequately particularised. In both instances, I disagree. It is not necessary to deal with all the examples. In Park v Whyte (No 2) I said:[51]

“… in determining the remuneration it is not the function of the court to hypercritically assess the day by day activities or tasks carried out in the course of a complex administration over a lengthy period of time with the benefit of hindsight. In this context, it is sometimes remarked that the remuneration available to insolvency practitioners should be sufficient to encourage them to carry out the important public function of the administration of insolvent entities for the benefit of the creditors, investors (whether company members or fund members) and the public administration of the insolvency laws in general.

As well, the preparation of detailed affidavit material setting out extensive support for the correlation of individual or groups of line items and charges to particular tasks and functions of sufficient utility be classed as reasonable remuneration is itself a time consuming and expensive exercise. In the usual course, those costs must be added to the costs of the application for remuneration to be paid to the relevant administrators or liquidators.”

  1. [127]
    Mr Doolan’s submissions to what must be shown to demonstrate reasonable remuneration on an application such as this would reject that approach. By his examples, he would hypercritically assess some of the day-by-day activities or tasks and suggest that a general inference should be drawn as to inadequacy of information so that the claimed work should not be accepted as necessary or properly performed on a general basis.  I decline to do that on the evidence in the present case.
  2. [128]
    In the result, the remuneration determination should be varied to the amount of $228,891.00 plus GST.

Footnotes

[1] Uniform Civil Procedure Rules 1999 (Qld) r 430(1).

[2]  I have not overlooked Mr Doolan’s explanation proffered at the hearing that he did not file the application so that the applicant could investigate allegations of misconduct made against Mr Doolan.

[3]  [2019] QSC 307, [50]-[59].

[4] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 85-5.

[5] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 75-225(3).

[6] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 75-225(3).

[7] Corporations Act 2001 (Cth), s 435A(a).

[8] Mighty River International Ltd v Hughes (2018) 265 CLR 480, 488-489 [6].

[9] Corporations Act 2001 (Cth), s 435C(1).

[10] Corporations Act 2001 (Cth), s 436A(1).

[11] Corporations Act 2001 (Cth), s 435C(2)(a).

[12] Corporations Act 2001 (Cth), s 436E.

[13] Corporations Act 2001 (Cth), s 437A.

[14] Corporations Act 2001 (Cth), s 438A.

[15] Corporations Act 2001 (Cth), s 439A.

[16] Corporations Act 2001 (Cth), s 439C.

[17] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 60-5(1).

[18] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) ss 5-15 and 5-20

[19] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 60-12.

[20] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 60-10

[21] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 5-30.

[22] Corporations Act 2001 (Cth) s 600K; Insolvency Practice Schedule (Corporations) s 60-11.

[23] Re Condor Blanco Mines Ltd [2016] NSWSC 1196.

[24] Re Condor Blanco Mines Ltd [2016] NSWSC 1196 [83]-[84].

[25] Re Condor Blanco Mines Ltd [2016] NSWSC 1196 [114]-[115].

[26]  It does not seem to have been considered whether relief should not have been granted in the absence of a contradictor or whether it should have been refused because of the effect it might have on third parties or their transactions.

[27] Re Condor Blanco Mines Ltd [2016] NSWSC 1196 [138], referring to Correa v Whittingham (2013) 278 FLR 310, 336 [128].

[28] Re Condor Blanco Mines Ltd [2016] NSWSC 1196 [139].

[29] Re Condor Blanco Mines Ltd [2016] NSWSC 1196 [140].

[30] Re Condor Blanco Mines Ltd [2016] NSWSC 1198 [142].

[31] Re Condor Blanco Mines Ltd [2016] NSWSC 1198 [151]-[153].

[32]  See Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611, 652-654 [132]-[137].

[33] Project Blue Sky Inc v Australian Broadcasting Commission (1994) 194 CLR 355 [92].

[34] Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597, 612-613 [45]-[47], 614-616 [51]-[53], 631-632 [101]-[105].

[35] Corporations Act 2001 (Cth) s 124.

[36] Corporations Act 2001 (Cth) s 1322.

[37]  See Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, 294-295

[38] Mills v Mills (1938) 60 CLR 150; in Condor Blanco Mines Ltd, reference was made to a later similar case Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821.

[39] National Australia Bank v Horne (2011) 253 FLR 205, 215 [33].  See also Ross v GNC Homes Pty Ltd (2015) 110 ACSR 60, 69 [44]-[46]; Hayes v Doran (No 2) [2012] WASC 486 [263]-[279], [452]; Re Australian Art Investment Pty Ltd [2012] VSC 18 [5]; Xie v Crisp (2011) 248 FLR 265, 308-310 [223]-[233]; Re Wintech Group [2011] VSC 273 [9]; Calabretta v Redpen Developments Pty Ltd (in liq) (2010) 183 FCR 47, 53 [36]; Re HPI Australia Pty Ltd [2008] NSWSC 1106 [26]; McIntosh v CMX Technologies Pty Ltd (2005) 56 ACSR 283, 287 [32]; Re Pasdonnay Pty Ltd (2005) 53 ACSR 717, 721 [16]; Panasystems Pty Ltd v Voodoo Tech Pty Ltd (2003) 21 ACLC 842 [18]-[19]; Shirlaw v Graham [2001] NSWSC 612 [14]; Deputy Commissioner of Taxation v Portinex Pty Ltd (2000) 156 FLR 453, 462 [32]; Sutherland v Robert Bosch (Aust) Pty Ltd (2000) 33 ACSR 680, 690 [58].

[40]  See, eg, Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd [2015] NSWSC 244 [72] and Re Hughes as joint and several liquidators of Traditional Therapy Clinics Ltd (in liq) [2019] WASC 139 [16].

[41]  Compare Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd [2015] NSWSC 244, [72].

[42] Corporations Act 2001 (Cth), s 442A(a).

[43] Stewart v Williams (1914) 18 CLR 381, 408; Williams v Perpetual Trustee Co (1913) 17 CLR 469, 494; R v Associated Northern Collieries (1911) 14 CLR 387, 623; MacQueen v Frackleton (1909) 8 CLR 673, 708; Friedlander v Bank of Australasia (1909) 8 CLR 85, 114; Penny v Milligan (1907) 5 CLR 349, 367.

[44]  (1912) 15 CLR 426, 441.

[45]  (1937) 59 CLR 641, 657.

[46] Re AAA Financial Intelligence Ltd (in liquidation) (No 2) [2014] NSWSC 1270 [47].

[47]  (2017) 93 NSWLR 459.

[48]  (2017) 93 NSWLR 459, 470 [51].

[49] Insolvency Practice Schedule (Corporations), s 60-11(3)

[50]  The break-down by Arita category totals $227,891, but the variance is not significant in the overall assessment.

[51]  [2018] 2 Qd R 413 [163]-[164].

Close

Editorial Notes

  • Published Case Name:

    Stimpson v Allied Rural Pty Ltd (subject to deed of company arrangement) & Ors

  • Shortened Case Name:

    Stimpson v Allied Rural Pty Ltd (subject to deed of company arrangement)

  • MNC:

    [2022] QSC 74

  • Court:

    QSC

  • Judge(s):

    Jackson J

  • Date:

    09 May 2022

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.