ACN 004 323 184 Pty Ltd v Spark

Supreme Court of NSW|2005-06-10|Before: Barrett J

Reported Decision : 54 ACSR 11 (2005) 23 ACLC 1276

CITATION : Walker & Anor as Liquidators of One.Tel Ltd [2005] NSWSC 557

Equity Division JURISDICTION : Corporations List

Bankruptcy Act 1966 (Cth), s.30 LEGISLATION CITED : Corporations Act 2001 (Cth), ss.446A, 473(3), 495(1), 499(3), 504, 511

ACN 004 323 184 Pty Ltd v Spark [2002] VSC 353 Adsett v Berlouis (1992) 37 FCR 201 Doolan v Dare [2005] FCAFC 69 Jefferson and Stevenson v Official Trustee in Bankruptcy (2000) 175 ALR 671 Mayne v Jaques (1960) 101 CLR 169 Re Amalgamated Syndicates Ltd [1901] 2 Ch 181 CASES CITED : Re Brighton Motors Pty Ltd [1932] VLR 241 Re Carton Ltd (1923) 39 TLR 194 Re Colgate; Ex parte Trustee of the Property of the Bankrupt [1986] Ch 439 Re Smith; Ex parte Hamilton v Muir (1986) 11 FCR 341 Re Stockford Ltd; Korda (2004) 52 ACSR 279 Re The Daily Telegraph Newspaper Co Ltd (1931) 48 WN (NSW) 236

Peter Murray Walker and Stephen John Sherman in their capacities as Liquidators of One.Tel Limited (In Liquidation) - Plaintiffs PARTIES :

COUNSEL : Mr B.A.J. Coles QC/Ms V. Whittaker - Plaintiffs

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

3299/05 - PETER MURRAY WALKER & ANOR IN THEIR CAPACITIES AS LIQUIDATORS OF ONE.TEL LIMITED (IN LIQUIDATION) JUDGMENT 1 By originating process filed on 3 June 2005 and heard by me on 6 June 2005, Mr Walker and Mr Sherman, the liquidators of One.Tel Limited, seek orders as follows: "1. Pursuant to Section 511(1)(a) of the Corporations Act an Order that if the Committee of Inspection of One.Tel Limited (in liquidation) ("One.Tel"): (a) Fails to fix the remuneration to be paid to the Plaintiffs in their capacity as liquidators of One.Tel: or (b) Fails to agree such remuneration with the Plaintiffs, the creditors of One.Tel may, by a resolution passed at a duly convened meeting of creditors, determine the remuneration to be paid to the Plaintiffs. 2. Pursuant to Section 511(1)(b) of the Corporations Act an Order that in the absence of the creditors of One.Tel passing a resolution determining the remuneration to be paid to the Plaintiffs in their capacity as liquidators of One.Tel, the Court may determine such remuneration pursuant to the provisions of Section 473(3) of the Corporations Act . 3. An Order that any application to the Court to determine the liquidators' remuneration pursuant to Order 2 above, be made by an interlocutory process filed in these proceedings and in accordance with Rule 9.4 of the Supreme Court (Corporations) Rules 1999." 2 I should at once set out s.511 of the Corporations Act 2001 (Cth): " Application to Court to have questions determined or powers exercised (1) The liquidator, or any contributory or creditor, may apply to the Court: (a) to determine any question arising in the winding up of a company; or (b) to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.

(1A) APRA may apply to the Court under subsection (1) in relation to a company that is a friendly society within the meaning of the Life Insurance Act 1995 and which may be wound up voluntarily under subsection 180(2) of that Act.

(2) The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just." 3 The winding up is a creditors' voluntary winding up of the kind produced by s.446A of the Corporations Act 2001 (Cth). The application is made in circumstances where the liquidators have failed in attempts to have the committee of inspection fix their remuneration for periods since 30 September 2004. In December 2004, the liquidators sought, by what Mr Sherman's affidavit terms "circular resolution", the committee's approval of a sum for remuneration for October/November 2004. Three members out of a committee of six indicated approval, two indicated disapproval and the sixth expressed no opinion. Mr Sherman says that the liquidators, taking the view that determinations of a committee of inspection could only be made at a meeting, intended to seek confirmation of this result at the next meeting of the committee. In April and May 2005, however, two members of the committee resigned. Those who resigned were the member who had abstained on the "circular resolution" and one of those who had indicated approval. The question of the liquidators' remuneration for October/November 2004 had not been considered by a meeting of the committee of inspection before these resignations occurred, as there was no other business making it necessary to convene a meeting. 4 A meeting of the committee of inspection was convened for 14 April 2005. The agenda included a proposed resolution approving the liquidators' remuneration for the period December 2004 to March 2005. Supporting materials were provided with the notice of meeting. The meeting was postponed by the liquidators on two occasions. A meeting (or, perhaps, each of two meetings called by different persons) was held on 13 May 2005. Before the 13 May 2005 meeting, the liquidators sent members of the committee a letter informing them that the liquidators would also be seeking approval of their April 2005 remuneration at the meeting. Again, supporting materials were provided. Members were sent an agenda in which the proposed resolutions as to remuneration appeared. Also sent to members were materials prepared by one member on matters relevant to the quantification of remuneration. Those materials included legal advice the member had obtained concerning the duties of a committee of inspection in performing the function of fixing a liquidator's remuneration. The advice questioned the adequacy of the information the liquidators had provided in support of their claims. 5 At the meeting on 13 May 2005, the several proposals for the fixing of the liquidators' remuneration were not agreed to. Proposed resolutions about steps that might be taken to test the reasonableness of the liquidators' claims, including by some form of reference to the court, were also not agreed to. On every substantive motion, two members of the committee voted in favour and two voted against. At this point, therefore, the liquidators are in a position where there has been no fixing of their remuneration in respect of services rendered after September 2004, although it is fair to say that the meeting of 13 May 2005 is the only meeting of the committee of inspection at which the matter of fixing such remuneration has been considered and that that meeting engaged in extensive discussion and debate on the subject. It is against this background that the liquidators seek the orders I have set out. Their proposed manner of proceeding, if the orders they seek are made, is stated in Mr Sherman's affidavit: "20. Subject to the Court making the orders sought in this application, the Plaintiffs propose to seek a determination of their remuneration for the October/November Period, the December/March Period and the April Period by way of a resolution determining the Liquidators' remuneration for those periods to be voted upon at the annual general meeting of creditors of One.Tel which I propose to hold within the next month. The Plaintiffs intend to include in the notice convening the annual general meeting of creditors the following: (a) The fees budget provided to the Committee in 2004; (b) The information relating [to] their remuneration for the October/November Period circulated to the Committee under cover of the circular dated 8 December 2004; (c) The information relating to their remuneration for the December/March Period circulated to the Committee under cover of the circular dated 11 April 2005; (d) The information relating to their remuneration for the April Period circulated to the Committee under cover of the circular dated 6 May 2005; and (e) A copy of any order this Court may make in these proceedings. 21. If the creditors do not fix the Plaintiffs' remuneration for the above periods at the forthcoming annual general meeting, the Liquidators propose, again subject to any order this Court may make, to have their fees determined by the Court in accordance with the procedure set out in the Supreme Court (Corporations) Regulation 9.4." 6 Before addressing the question whether there is jurisdiction to make the orders sought and, if so, whether they should be made, I should emphasise an important point. A liquidator in a creditors' voluntary winding up, as in any other winding up, has an entitlement to be remunerated and an entitlement to have the remuneration fixed. In any type of winding up, the situation is not one in which the remuneration fixing function includes a discretion to decide that no remuneration will be allowed. The right to remuneration is not subject to negotiation or discretionary withdrawal. Statutory provisions about to be mentioned say that a liquidator is "entitled to receive such remuneration … as is determined" in a particular way; or speak of fixing "the remuneration to be paid" to a liquidator. The decision-making to be undertaken by the body or authority given by the Act the function of determining or fixing remuneration is decision-making as to quantum only. The position of a liquidator in any type of winding up is, as to remuneration, the same as that of a trustee in bankruptcy: see Mayne v Jaques (1960) 101 CLR 169; Adsett v Berlouis (1992) 37 FCR 201; Doolan v Dare [2005] FCAFC 69 (4 May 2005). The entitlement, in this respect, of the liquidator in a voluntary winding up was recognised by Dodds-Streeton J in ACN 004 323 184 Pty Ltd v Spark [2002] VSC 353. 7 The Corporations Act provides for three different methods of determining or fixing a liquidator's remuneration, according to whether the winding up is a winding up by the court, a members' voluntary winding up or a creditors' voluntary winding up. In the case of a winding up by the court, determination of remuneration is by agreement between the liquidator and the committee of inspection if there is one; or, if there is no such committee or the liquidator and the committee fail to agree, by resolution of the creditors; or, if no such resolution is passed, by the court. This is provided for in s.473(3): "A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined: (a) if there is a committee of inspection - by agreement between the liquidator and the committee of inspection; or (b) if there is no committee of inspection or the liquidator and the committee of inspection fail to agree: (i) by resolution of the creditors; or (ii) if no such resolution is passed - by the Court." 8 In the case of a members' voluntary winding up, the power to fix the liquidator's remuneration is conferred by s.495(1) on the company in general meeting: "The company in general meeting must appoint a liquidator or liquidators for the purpose of winding up the affairs and distributing the property of the company and may fix the remuneration to be paid to him, her or them." 9 The relevant provision in a case of creditors' winding up such as the present is s.499(3): "The committee of inspection, or, if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator." 10 I mention also s.504 which applies to members' voluntary winding up and creditors' voluntary winding up alike: " Review of liquidator's remuneration Any member or creditor, or the liquidator, may at any time before the deregistration of the company apply to the Court to review the amount of the remuneration of the liquidator, and the decision of the Court is final and conclusive." 11 Section 504 is the only provision which directly confers jurisdiction upon the court in relation to remuneration of a liquidator in a voluntary winding up. There is no equivalent of s.473(3)(b)(ii). Section 504 works upon an implicit assumption that the machinery for the fixing of remuneration will always operate to produce a remuneration sum and that the only need for the court's involvement will be to review the sum so fixed. The provisions dealing expressly with voluntary winding up do not contemplate the fixing of remuneration by the court. In a creditors' voluntary winding up, the function of fixing remuneration is given exclusively to the committee of inspection if there is one and devolves upon the creditors only if there is no committee of inspection. The body upon which such a power is conferred by statute may not transfer or delegate it to another body: see, as to a like power to fix the remuneration of voluntary administrators, Re Stockford Ltd; Korda (2004) 52 ACSR 279. The present application poses the question whether a default power to fix remuneration can be seen to be exercisable by the court via s.511. 12 The scheme reflected in the provisions of the Corporations Act 2001 (Cth) as to liquidators' remuneration is sufficiently similar to that under earlier legislation to cause decided cases and textbook comment on earlier provisions to be instructive. Provisions under which remuneration in the case of a court-ordered winding up is to be fixed by the court in default of other mechanisms specifically provided for have long existed. Also of long standing are provisions under which the company in general meeting fixes remuneration in a members' voluntary winding up and the committee of inspection (or, if there is no committee, the body of creditors) does so in a creditors' voluntary winding up. No ultimate default power is expressly vested in the court in cases of voluntary winding up. Such a power has, however, been recognised as existing. 13 Textbook comment on the matter includes a statement at p.668 of Part II (Winding Up) of the seventeenth edition (1960) of "Palmer's Company Precedents", edited by R.A.K. Wright and R. Buchanan-Dunlop: "Where the remuneration of a liquidator has been fixed by a general meeting, the court has increased the remuneration in the case of a winding up by the court by s.242(2). This power was exercised by Chitty J in Northern Counties Bank , April 15, 1883, where a supervision order had been made, and there seems no reason to doubt that the same jurisdiction exists in a voluntary winding up by reason of the general power to apply [see Re Brighton Motors Pty Ltd [1932] VLR 241], under s.307, to the court to exercise all powers which the court could exercise under a winding up by the court. Occasionally the court has ordered a meeting of creditors to be convened to consider the remuneration of the liquidator." [emphasis added]

The reference here to s.307 is a reference to a provision of the Companies Act 1948 (Eng) generally similar to the present s.511 and containing elements corresponding, in concept, with both s.511(1)(a) and s.511(1)(b). 14 The following passage appears at p.718 of "The Australian Companies Acts" (1937) by N.G. Pilcher, A.H. Uther and W.J. Baldock: "In a creditors' voluntary winding up, the committee of inspection, or, if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator (see s.276(1) post ). If the remuneration is not fixed by the members or the creditors, it may be fixed by the court , and each case will then be considered in relation to its own particular circumstances (Re Amalgamated Syndicates Ltd [1901] 2 Ch 181). A special order is necessary ( Re Daily Telegraph Newspaper Co (1931) 48 NSWWN 236." [emphasis added] 15 At page 972 of the 42nd edition (1972) of "Gore-Browne on Companies" edited by A.J. Boyle, the following is said after a reference to the power of the company in general meeting to fix the liquidator's remuneration in a members' voluntary winding up: "If the company does not fix the remuneration, the liquidator should apply to the Court to exercise its power in this respect , as section 285 only prescribes that the company may fix such remuneration." [emphasis added]

There follows a footnote: "Under the powers conferred in the court by section 242(2), which are applicable to voluntary liquidation by reason of section 307."

Section 242(2) of the Companies Act 1948 (Eng) empowered the court to direct the amount of the remuneration of a court appointed liquidator. As I have said earlier, s.307 of that Act was a provision generally corresponding with the present s.511. 16 Alfred Emden, in the third edition (1889) of "Practice and Forms in Winding Up Companies", referred (at p.138) to the power of the company in general meeting to fix remuneration in a members' voluntary winding up and continued: "If necessary or desirable, as in the case of insolvent companies, application can be made to the Court to fix the remuneration."

This statement follows a reference to the power of the company in general meeting under s.133(3) of the Companies Act 1862 (Eng) to fix the remuneration of the liquidator in a voluntary winding up. The statement itself is supported by a reference to s.138 of that Act, a provision similar to the present s.511. 17 The various statements quoted are not necessarily supported, in any explicit way, by the cases cited, although those cases do show a willingness of courts to decide matters relevant to the fixing of liquidators' remuneration in voluntary windings up. Re Brighton Motors Pty Ltd [1932] VLR 241 was a case in which a liquidator made an application under an equivalent of s.511, being s.194(1) of the Companies Act 1928 (Vic) containing elements generally corresponding with both s.511(1)(a) and s.511(1)(b). The winding up was a members' voluntary winding up. The liquidator's remuneration had been fixed by the company in general meeting. After a certain time, the liquidator formed the opinion that the duties he had performed exceeded those ordinarily required of a liquidator. He therefore made an application to the court seeking increased remuneration. An advisory committee of creditors was informed of his intention to do so and approved of the application being made. The application was made ex parte. Counsel for the liquidator referred to a passage in the thirteenth edition of "Palmer's Company Precedents" to the same effect as the above passage in the seventeenth edition but, of course, without the footnote referring to the Brighton Motors case. The judgment of Sir Leo Cussen, Acting Chief Justice, was brief: "I think I should adopt the practice referred to in Palmer's Company Precedents , which seems to be a reasonable one. I should have thought that it would be particularly so where the liquidator's remuneration has been fixed at an early stage, before it could be known what has actually been done by the liquidator. I will fix the remuneration at 105 l . Order that the liquidator be at liberty to retain out of the assets of the company the sum of 105 l . as remuneration and 11l.7s.6d. his costs and charges of the liquidation, together with 12l.12s. the costs of this application." 18 In Re Amalgamated Syndicates Ltd [1901] 2 Ch 181, referred to by Pitcher, Uther and Baldock, the court increased the remuneration of a voluntary liquidator of each of three companies in circumstances where another company (Amalgamated Syndicates) in the course of being wound up by the court was, by contract, bound to pay the remuneration of the liquidator in the voluntary windings up. The proceedings were by summons taken out in the proceedings in which Amalgamated Syndicates was being wound up by the court. The order sought was an order for an account by the liquidator in the voluntary windings up of the three other companies. It was in that quite indirect way that the appropriate quantum of the remuneration of the liquidator in the voluntary windings up came before the court for consideration. 19 The circumstances in Re The Daily Telegraph Newspaper Co Ltd (1931) 48 WN (NSW) 236 were similar to those in the Brighton Motors case. The winding up was a members' voluntary winding up. The liquidator's remuneration was fixed by the resolution of members appointing him. Remuneration was to be 0.75% on realisations, plus out of pocket expenses and legal fees. At the commencement of the winding up, a contract for the sale of a major asset was in place and it was expected that the liquidator would only have to attend to its completion. But the purchaser defaulted and the contract was renegotiated so that a consideration consisting principally of debentures of another company was substituted. Upon default under the debentures, the liquidator had had to go into possession of property of the mortgagor as receiver and take other enforcement action. The liquidator sought under s.137 of the Companies Act 1899 (a provision containing both limbs of the present s.511(1)) direction from the court as to whether he was entitled to commission of 0.75% on the value of the realisations through enforcement of the debentures. The application was ex parte. Again, the judgment of the court (Harvey CJ in Eq) is short and may be quoted in full: "Upon the evidence brought before me by the liquidator, as it appears reasonable, I allow him ¾ of 1% on the sum of £285,000 for his work done in connection with the realisation of the Daily Telegraph building in King Street up to the end of the year 1929. As it is difficult to estimate what work will have to be done in respect of the further realisation of the assets now held by the liquidator, I reserve liberty to the liquidator to apply either to a meeting of shareholders, or to the Court, to fix a further remuneration as from the 1st January, 1930." 20 Reference should also be made to Re Carton Ltd (1923) 39 TLR 194, an appeal to a judge from a decision of a registrar. The registrar had fixed the remuneration of the liquidators in a members' voluntary winding up at 1,050 pounds and ordered that the balance of a greater sum (2,126 pounds and one shilling) retained by them for remuneration be returned. P.O. Lawrence J began by observing: "The facts giving rise to this application are somewhat out of the ordinary."

He described a catalogue of events involving replacement of liquidators and allegations of wrongdoing by liquidators. He referred to a purported fixing of remuneration by the committee of inspection. This was invalid because, in the particular case, the power to fix remuneration resided with the company in general meeting. At a later stage, a general meeting was convened with a view to passing a resolution approving remuneration in the sum of 2,126 pounds and one shilling already retained by former liquidators. The proposed resolution was not passed and the meeting purported to resolve that the remuneration of the former liquidators be fixed at 1,050 pounds. The current liquidator then took out a summons asking that the remuneration of the former liquidators be fixed by the court. 21 P.O. Lawrence J described the course of proceedings when the summons came before the registrar for determination: "The Registrar, on the hearing of this summons, felt himself somewhat embarrassed by the resolution passed at the general meeting of the company on May 29, 1922. Section 186(ii) provides that the company in general meeting may fix the remuneration to be paid to the liquidators, and in the absence of fraud or of some obvious injustice it is not the practice of the Court to review the decision of the company as to the amount of the remuneration to be paid to its liquidators. As, however, all the parties concerned seemed anxious to have the remuneration of the former liquidators fixed by the Court, the Registrar was persuaded to hear the summons on the footing that no remuneration had been fixed by the company. I think that in the circumstances of this case he was right in so doing." 22 His Lordship went on to say that the resolution of the general meeting fixing remuneration at 1,050 pounds was irregular since a proposal to pass that resolution had not been included in the notice of meeting. He also said that it would have been "most unsatisfactory" to rely upon the resolution because it had been passed by the votes of interested persons. He then proceeded to determine the appeal from the registrar's decision. No jurisdictional basis was stated, but the fact that the ordinary processes of determination by a general meeting had, in effect, broken down was obviously a major factor in the registrar's initial decision to entertain the summons and the judge's willingness to deal with the appeal. 23 The passage I have quoted from "Palmer's Company Precedents" suggests that the power of the court to fix the remuneration of a liquidator in a voluntary winding up arises by virtue of the power to exercise, in such a case, the powers exercisable in a winding up by the court. In the context of the present legislation, s.511(1)(b) is the relevant provision and it is necessary to decide whether, under the current Act, s.473(3) can be seen to be, with the aid of s.511(1)(b), the source of power for the court to make Order 2 as sought in the originating process (see paragraph [1] above). 24 Section 511(1)(b) empowers the court to exercise, in a voluntary winding up, "all or any of the powers that the Court might exercise if the company were being wound up by the Court". The assumed circumstance upon which the section is predicated (that is, that the winding up is a winding up by the court) includes, of necessity, an assumption that the liquidator is a liquidator appointed by the court in relation to the court-ordered winding up, so that s.473(3) is the applicable provision. Under that section the court is empowered to determine the remuneration of a liquidator in a court-ordered winding up

(a) if there is a committee of inspection and (i) the liquidator and the committee "fail to agree" the remuneration; and (ii) no resolution of creditors determine the remuneration; or

(b) if there is no committee of inspection and no resolution of creditors determines the remuneration. 25 In an attempt to draw an analogy with the circumstances of the present case, one might say that the situation is akin to that in the immediately preceding item (a), with the result that, if the liquidator and the committee of inspection "fail to agree" the remuneration and, thereafter, there is no resolution of creditors determining the remuneration, the court has power to determine it. From that point, it might be argued that if, in the present case, the committee of inspection does not fix the remuneration, it becomes possible for the creditors to do so by resolution and, if the creditors do not do so, the power of the court to fix remuneration becomes exercisable. I am of the opinion that such an argument cannot be supported by reference to s.511(1)(b). In the case of a court-ordered winding up in which there is a committee of inspection, the residual or default power of the court under s.473(3) arises only if the liquidators and the committee fail to agree and there is no determination by resolution of creditors. In the case of a creditors' voluntary winding up in which there is a committee of inspection, however, the creditors are, by s.499(3) denied power to fix remuneration. In such a case, therefore, the final step before the residual or default power of the court becomes exercisable can never occur and, for that reason, a remuneration fixing power of the court somehow imported by means of s.511(1)(b) can never arise. That section does not allow the court to confer functions and powers on decision-making bodies. 26 I consider next whether s.511(1)(a) permits the court to make the first of the orders sought. In doing so, I must refer to some bankruptcy cases that provide valuable guidance and indicate the scope of s.511(1)(a). The first of the bankruptcy cases is Re Colgate; Ex parte Trustee of the Property of the Bankrupt [1986] Ch 439. The court was asked to fix the remuneration of a trustee in bankruptcy where the direct power to do so was, by s.82 of the Bankruptcy Act 1914 (Eng), vested in a meeting of creditors. On no less than six occasions, the trustee duly gave notice of a meeting of creditors but no creditor attended. There was therefore no resolution of creditors fixing the trustee's remuneration. The trustee made application to the court for directions under a provision enabling him to do so and also called in aid s.105(1) of the Act of 1914: "Subject to the provisions of this Act, every court having jurisdiction in bankruptcy under this Act, shall have full power to decide all questions of priorities, and all other questions whatsoever, whether of law or fact, which may arise in any case of bankruptcy coming within the cognizance of the court, or which the court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case ... " 27 The trustee thus invoked what May LJ, in the Court of Appeal, called "the wide general powers given to the court by s.105(1)". The similarity between that provision and s.511(1)(a) of the Corporations Act 2001 is obvious. The trustee's application first came before a registrar and was refused. That decision was reversed by the Court of Appeal. May LJ (with whom Lloyd LJ and Sir David Cairns agreed) said (at p.445-6): "In my judgment the object of section 105 is to give this court or the bankruptcy court wide powers of doing justice in a particular case, and in the particular circumstances of the instant appeal one must invoke those powers to do justice, because the machinery laid down by section 82 of the Act of 1914 has in the event, and after numerous attempts to make it work, broken down. With all respect to the registrar, in my view the remedy does not lie in the hands of the creditors themselves. They have been offered six opportunities to deal with this question of remuneration of the trustee, and on each occasion none of them has seen fit to attend at the meetings called. In my judgment the remedy for that situation lies in the hands of the court pursuant to its general powers under section 105 of the Act." 28 It is also pertinent to quote in full the concurring judgment of Lloyd LJ: "I agree. Where the machinery under section 82 of the Act of 1914 for fixing the trustee's remuneration is available, it must be used. The power of the court under section 105 in such a case is excluded by the opening words of the section. But where the machinery under section 82 has broken down, as it has here, or is not available for any reason, then I have no doubt that the court has residual power under the wide words of section 105 to fix the trustee's remuneration, despite the opening words of section 82. Otherwise there would be an impasse. I agree that the appeal should be allowed and that we should fix the remuneration in the sum which May LJ has proposed." 29 The other bankruptcy cases are both decisions of the Federal Court under the Bankruptcy Act 1966 (Cth). In Re Smith; Ex parte Hamilton v Muir (1986) 11 FCR 341, the trustee's remuneration had been fixed by the registrar under a provision enabling the registrar to act where there had been no determination by the creditors or the committee of inspection. There was a dispute as to whether the registrar had had power to make a determination. The court (Sheppard J) decided that s.30 of the Bankruptcy Act 1966 (corresponding, in material respects, with the provision relied upon in the Colgate case) provided a basis that the matter be referred to the registrar for redetermination by the court. 30 The second Australian case is Jefferson and Stevenson v Official Trustee in Bankruptcy (2000) 175 ALR 671. The trustees of the estate of a bankrupt made several attempts to secure proper remuneration through the normal statutory channels. After referring to these events, the decision in the Colgate case and s.30 of the Bankruptcy Act 1966, Dowsett J held that that section provided a sufficient basis for the court to review a decision of the creditors denying adequate remuneration. 31 These bankruptcy cases recognise and endorse the principle that statutory mechanisms for determining or fixing remuneration are concerned with the quantum to be paid in satisfaction of a statutory right to be remunerated which exists independently of those mechanisms. The cases show that where the prescribed statutory mechanism for deciding quantum proves unworkable in practice, the court's general power (also statutory) to determine any question arising in the particular administration extends to deciding the question of quantification. It follows, in the Corporations Act context, that if the explicit power to fix the remuneration of a liquidator in a creditor's voluntary winding up (being, in the circumstances of a case such as the present, the power reposed by s.499(3) in the committee of inspection) proves to be incapable of being exercised, the court's power under s.511(1)(a) to "determine any question arising in the winding up of a company" is available to ensure that what would otherwise be a situation of paralysis is resolved. There can be no doubt that resolution of such an impasse would be, in the words of s.511(2), "just and beneficial". This, in my view, is the rationale for the references to provisions corresponding with s.511 in the textbook passages I have quoted and goes some way towards explaining the basis for the decisions in Re Brighton Motors Pty Ltd, Re The Daily Telegraph Newspaper Co Ltd and Re Carton Ltd (or, at least, the last of them). 32 But will s.511(1)(a) support the particular order the liquidators seek upon this application, being Order 1 at paragraph [1] above? That form of order contemplates that, if the committee of inspection fails to fix the liquidators' remuneration or fails to agree their remuneration with them, the creditors may, by resolution passed at a meeting of creditors, make the necessary decision. I see no basis in s.511(1)(a) for the creation in this way, by order of the court, of a power of the creditors, as a body, that the Act itself does not confer on the creditors. All the section permits the court to do is "determine" a "question". Section 499(3) is clear: if there is, as here, a committee of inspection, that committee has power to fix the remuneration to be paid to the liquidators. Only if there is no such committee may a meeting of creditors fix the remuneration. There is no power for the court to invest a meeting of creditors with functions not given to it by the Act. 33 In the present case, if the liquidators, having exhausted all reasonable avenues of discussion and debate with the committee of inspection, considered that they had reached an impasse, they might possibly think it appropriate to consult with the general body of creditors with a view to either ascertaining the wishes of creditors concerning possible reconstitution of the committee or obtaining some indication of creditors' attitude to the matters causing the impasse. In referring to these possibilities, I am not to be taken to be suggesting that it is necessary or advisable that the liquidators proceed in either of the ways outlined. It is a matter for them. If the statutory means of fixing the liquidators' remuneration prescribed by s.499(3) are ultimately shown to be unworkable (as in, for example, the Colgate case), the court will be in a position where it can, upon an appropriate application being made, itself determine the quantum of remuneration pursuant to s.511(1)(a). The "question" of the quantum will be in need of determination and its determination will, in the circumstances postulated, be "just and beneficial". Section 511(1)(a) will not, however, justify Order 1 as now sought since that order envisages unauthorised action by the court to empower a meeting of creditors. 34 The appropriate disposition of the present application is that it be dismissed (with the liquidators' costs being payable out of the assets of the company as an expense of the winding up), but without prejudice to the ability of the liquidators to apply, in due course, for an order under s.511(1)(a) in conformity with these reasons. **********

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Companies Act 1928(Vic)

At a glance

Court

Decision date

Before

Source

Judgment (20 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (6)