Alcan Australia Administration Pty Ltd v Geraghty

Whether Messrs Vouris and Rapsey were validly appointed as administrators of the Companies

1. The initial question to be determined is whether Messrs Vouris and Rapsey were validly appointed as administrators of the Companies since that is the foundation of any right to remuneration under s 449E of the Corporations Act, subject to the further question noted below as to whether that section is available in an application by a former administrator of a company, and also subject to any order that may be made by the Court under s 447A of the Corporations Act. I put aside for the moment, and will return to below, the narrower question whether Mr Rapsey, or Mr Tonks, was appointed as administrator of LGPB Charleston together with Mr Vouris.
2. As I noted above, by their Amended Originating Process filed on 3 April 2014, the Plaintiffs, Messrs Vouris and Rapsey seek an order that they were validly appointed as administrators of the Companies. An order to the effect may be made, in a proper case, under s 447C of the Corporations Act which relevantly provides: "447C(1) If there is doubt, on a specific ground, about whether a purported appointment of a person as administrator of a company, or of a deed of company arrangement, is valid, the person, the company or any of the company's creditors may apply to the Court for an order under sub-section (2). 447C(2) On an application, the Court may make an order declaring whether or not the purported appointment was valid on the grounds specified in the application or on some other ground." An order made by the Court under this section is declaratory rather than curative: Smolarek v McMaster as Administrator of Eznut Pty Ltd [2006] WASCA 216 at [25]; Re HPI Australia Pty Ltd [2008] NSWSC 1106 at [8].
3. I should also address the legal principles applicable to the validity of an administrator's appointment, before turning to a closer review of the circumstances of the appointment in this case and the manner in which LGPB Charlestown and LGPB Hamilton put their case. Section 435A of the Corporations Act in turn sets out the purpose of Pt 5.3A of the Corporations Act, namely 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, or as much as possible of its business, continuing in existence or, if it is not possible for the company or its business to continue in existence, results in a better return for the company's creditors and members than would result from an immediate winding up of the company. An administrator can be appointed under s 436A of the Corporations Act if the board, relevantly Mrs Moshos, held the specified belief that the Companies were insolvent or were likely to become insolvent in the future.
4. Mr Mandoh submits, and I accept that, if a director's opinion as to insolvency is not held, or is not held genuinely or in good faith, a resolution passed by the directors to appoint an administrator under s 436A of the Corporations Act is invalid: Kazar v Duus above at 333 - 334; Londish v Sheahan - Re Valofo Pty Ltd [2010] NSWSC 337 at [27]. Mr Mandoh refers to the observation of Merkel J in Kazar v Duus above at 230 - 231 that it is implicit in the statutory requirement under s 436A of the Corporations Act that the relevant director's opinion as to the insolvency, or likely insolvency, of the company that the opinion be bona fide and genuinely formed. Statements of the directors' opinion are relevant to whether they have formed the requisite opinion but the court must approach that question objectively: Kazar v Duus above; Smolarek v McMaster as Administrator of Eznut Pty Ltd [2008] WASCA 234. Mr Mandoh also submits that it is not sufficient to support an administrator's appointment that directors are merely uncertain as to a company's solvency: Kazar v Duus above; Wagner v International Health Promotions (1994) 15 ACSR 419 at 421. Mr Mandoh also refers to the observation of Weinberg J in Downey v Crawford [2004] FCA 1264; (2004) 51 ACSR 182 at 218 that the question whether directors genuinely believed that a company was actually insolvent, or likely to become so at some future time, will depend largely upon whether they took adequate steps to satisfy themselves that the statutory requirements were met before resolving to appoint an administrator.
5. Mr Mandoh also points to the observation of Merkel J in Kazar v Duus above (at 335-336) that the exercise of the power to appoint an administrator will be invalid, and the purported appointment will be invalid, if that power is exercised for an ulterior or extraneous purpose and that purpose is substantial in the sense that the decision would not have been made but for the ulterior purpose. There is, of course, also other authority indicating that the appointment of an administrator for a collateral or ulterior purpose will be invalid: St Leonards Property Pty Ltd v Ambridge Investments Pty Ltd [2004] NSWSC 851; (2004) 210 ALR 265; Blacktown City Council v Macarthur Telecommunications Pty Ltd [2003] NSWSC 883; (2003) 47 ACSR 391.

The circumstances of the appointment of the administrators to the Companies

1. I now turn to the evidence as to the circumstances of appointment of the administrators to the Companies.
2. At the time of the appointment of the administrators, Mr Moshos and Mrs Moshos were experiencing marital difficulties. Mr Moshos' evidence is that, in October/November 2012, his wife and he were experiencing relationship difficulties and she told him that she wanted him to separate (Mr Moshos 29.8.2014 [38]). His evidence, admitted with a limitation under s 136 of the Evidence Act 1995 (NSW) that it was not proof of the asserted facts, is that he was informed by the Companies' accountant that Mrs Moshos had asked to be given 50% of the shares in the Companies and he also refers to a conversation with Mrs Moshos to the same effect, and that he rejected that request and advised Mrs Moshos that she would be removed as a director of the Companies. Mr Moshos' evidence (admitted with a limitation that it was not proof of the asserted fact) is that he advised the Companies' accountant to remove Mrs Moshos as a director and the Companies' accountant then resigned by reason of a conflict of interest (Mr Moshos 29.8.2014 [38] - [42]).
3. Mrs Moshos' evidence is also that, in late October/early November 2012, she and Mr Moshos were experiencing significant relationship difficulties and her intention at that point was to separate from Mr Moshos and commence proceedings under the Family Law Act 1975 (Cth) (Mrs Moshos 13.12.2013 [6]). Mrs Moshos' evidence, admitted with a limitation under s 136 of the Evidence Act that it was limited to her understanding, was also that she was "concerned to become a 50% shareholder in the Companies, so I could have an income, pending the resolution of my proposed Family Law proceedings" (Mrs Moshos 13.12.2013 [7]) and was "very concerned by [Mr Moshos'] intention to remove me as a director and failure to agree to make me a 50% shareholder" (Mrs Moshos 13.12.2013 [9]). Mrs Moshos' evidence is that, on 6 November 2012, she was contacted by the Companies' accountant who advised her of Mr Moshos' intention to remove her as a director of the Companies, and of the conflict of interest that now faced that accountant. Mrs Moshos led more detailed evidence of conversations with the Companies' accountant on 5 and 6 November 2012 in a further witness statement dated 12 February 2015, which she adopted in the witness box (Ex R7).
4. In her further witness statement, Mrs Moshos also gives evidence that her father arranged for her to be placed in contact with a solicitor with family law expertise (Ex R7, [4] - [9]). Mrs Moshos' evidence (admitted with a s 136 limitation that it was not proof of the asserted facts) is that she had a conversation with that solicitor, in which she was advised that the way to prevent her removal as a director was to "put the Companies into voluntary administration while you're still director" (Mrs Moshos 13.12.2013 [12]). Mrs Moshos gives evidence that the solicitor arranged a conference for her, and her father, with Mr Vouris' firm on 16 November 2012 (Mrs Moshos 13.12.2013 [14]). There is some evidence that suggests that the solicitor may also have contacted and met with Mr Vouris' staff prior to the meeting on 16 November 2012, although Mrs Moshos' evidence is that she was not aware of that matter (Mrs Moshos 13.12.2013 [21]).
5. Mrs Moshos' evidence (Mrs Moshos 13.12.2013 [16]) is that, at the meeting with Mr Vouris on 16 November 2012, he initially asked her whether she understood what voluntary administration involved and she responded "not really", although also indicating that she knew her husband had previously been involved with companies that were put into liquidation. Her evidence is that Mr Vouris then asked whether the businesses were making any money and she responded that: "They are. They're basically our only source of income." Mr Mandoh submitted that statement should have indicated to Mr Vouris that the Companies were solvent. I do not accept that submission, since a company may well be earning income and providing income to its directors or shareholders, but nonetheless be insolvent because it is not meeting debts owed to other creditors or tax liabilities as and when they fall due.
6. Mrs Moshos' evidence is that Mr Vouris then noted (correctly, for the reason noted above) that the companies could be insolvent although they were making money and asked where Mrs Moshos know if the companies were insolvent and her evidence is that she responded: "No, they're not insolvent." In cross-examination, Mr Vouris rejected the proposition that Mrs Moshos had stated to him at the meeting on 16 November 2012 that the Companies were not insolvent (14.11.2014 T51). I do not think it likely, on the balance of probabilities, that an experienced insolvency practitioner would have accepted appointment as a voluntary administrator after he had been specifically informed by the sole director of the Companies that they were not insolvent, at least without further inquiry, and I prefer Mr Vouris' evidence to Mrs Moshos' evidence in that regard.
7. Mrs Moshos' evidence is that Mr Vouris then said that: "To put a company into voluntary administration, you have to believe, as a director, that the companies, at least, could be insolvent." Her evidence is that Mr Vouris then suggested that the companies would owe some debts and she responded: "I don't really know. I wasn't involved with the businesses very much. [Mr Moshos] looks after that. I am pretty sure there are debts for tax and super though."
8. On Mrs Moshos' account, Mr Vouris responded "Oh well, there you go then" and then indicated he had documents for Mrs Moshos to sign; Mrs Moshos inquired what happens with voluntary administration and Mr Vouris described (in somewhat broad terms) the effect of administration, that the administrators would arrange for someone to run the businesses while the Companies were in administration and that Mrs Moshos' father would be "perfect" for that role since he was an experienced pizza shop operator; and Mr Vouris then handed Mrs Moshos "some documents" to sign. Mrs Moshos' evidence is that she then signed the documents, which were presumably the directors' resolutions to place the Companies in voluntary administration (Mrs Moshos [13.12.2013 17]). Mrs Moshos' evidence is also that she did not, before 16 November 2012, provide documents to Mr Vouris as to the financial details of the Companies (Mrs Moshos 13.12.2013 [24]).
9. As I noted above, Mr Vouris denied in cross-examination that Mrs Moshos had told him, at the meeting on 16 November 2012, that the Companies were not insolvent (14.11.2014 T51). Mr Vouris' evidence in cross-examination was that Mrs Moshos was concerned about the level of tax liabilities that the Companies had incurred and was concerned that she may be personally liable for those liabilities and that she couldn't pay them (14.11.2014 T51). Mr Vouris' evidence was that he did not seek to verify Mrs Moshos' statements in that regard, but accepted what she told him (14.11.2014 T51). It was put to Mr Vouris in cross-examination that he did not inquire whether that tax liability was being paid off and he responded that he had been told that the Companies could not pay the tax liabilities (14.11.2014 T52). It seems to me that that statement necessarily indicated either that there was no arrangement for the Companies to meet the relevant tax liabilities, or such an arrangement if it existed, could not be met. Mr Vouris' evidence was that the Companies' then tax liabilities were in fact in the region of about $90,000 (14.11.2014 T52) and he pointed out that the Australian Taxation Office proved for its debt at the creditors meeting in respect of LGPB Hamilton in the amount of $38,282, for LGPB Darby Street in the amount of $20,358 and for LGPB Charlestown in the amount of $9,627 (14.11.2014 T53 - 54), which total in the order of $70,000. Mr Vouris reiterated in cross-examination that Mrs Moshos told him there was no money to pay the tax debts, she was concerned about incurring credit while insolvent and she was concerned about her director's responsibility and personal liability (14.11.2014 T55).
10. The proposition that Mr Vouris could not determine the Companies' solvency at the point of his appointment was also put to him, many times and in many forms, throughout his cross-examination, and he responded by pointing to Mrs Moshos' advice to him that the Companies could not pay their tax liabilities (for example, see 12.2.2015, T6). Mr Vouris also acknowledged that his inquiries were limited to the information that had been given to him by Mrs Moshos and that: "She advised me that the company could not pay its debts, they had an issue with the Tax Office, tax liabilities were outstanding, there was no monies to pay expenses, and the information was limited to what I was told." (12.2.2015 T8) Mr Vouris' position was that, on the information that was given to him, it was clear that the Companies could not pay their debts, because there was no money to pay those debts, on the information provided to him by Mrs Moshos (12.2.2015 T8). Mr Vouris acknowledged that Mrs Moshos had not provided him any documentary evidence for that advice (12.2.2015 T9). However, that would not be particularly surprising to the extent that a company did not maintain adequate records or, for whatever reason, its director did not have access to those records.
11. It was also put to Mr Vouris in cross-examination that Mrs Moshos had also told him, at the meeting on 16 November, that her husband Mr Moshos was "the shadow director". Mr Vouris denied that proposition. I accept his evidence in that regard. I formed the strong view, after observing Mrs Moshos' in the witness box, that she was unlikely to have used the legalistic term "shadow director" in the ordinary course.
12. The statements which Mr Vouris attributed to Mrs Moshos in cross-examination were not wholly consistent. Some of the more emphatic descriptions, in indirect speech, of Mrs Moshos' position seemed to me to have reflected a degree of frustration on Mr Vouris' part as his cross-examination repeatedly recanvassed this conversation and he was repeatedly asked to address essentially the same question without any matter being put to him that was likely to change the substance of his answer to it. I accept that Mrs Moshos at least identified the existence of unpaid tax liabilities of the Companies in this conversation and also identified an inability or likely inability of the Companies to meet those liabilities.
13. That finding is consistent with her own account of her motivations in an email dated 11 December 2012 to the administrators' firm (Ex A6), which Mrs Moshos' affidavit evidence did not address. That email stated that: "I as director of Lime Gourmet Pizza Bar felt the need to enter the business into voluntary administration due to the debts to the Taxation Department, superannuation and other creditors that had built up. In addition to this, the businesses were not viable and continuing to trade would have increased this debt." It is not necessary to determine whether Mrs Moshos deliberately omitted reference to that email from her evidence or did not recall it until prompted by being shown it in cross-examination, since either position calls into question the completeness of her affidavit evidence.
14. At least when prompted by being shown that email in cross-examination, Mrs Moshos sufficiently recalled it to give evidence of the circumstances in which it was sent. However, Mrs Moshos' evidence as to that email was contradictory, including both affirming and denying its truth. Mrs Moshos' evidence was initially that that email was not true when she sent it; however she then denied that the document was false and accepted that, at the time of sending it, it was her intention that the administrators rely on the information contained in (13.2.2015 T158 - 159). She also accepted that the email was in her own words, although she was subsequently sent a draft of a more expanded statement by the administrators that she did not sign (13.2.2015 T162). Mrs Moshos then changed her position again in giving further evidence in re-examination that the statement contained in the email was false (13.2.2015 T163). These matters seem to me to reflect the difficulty of the position in which Mrs Moshos now finds herself, having appointed the administrators and subsequently reconciled with her husband who opposed that appointment, but they also lead me to conclude that little weight can be given to her evidence as to these matters.

The case put by LGPB Charlestown and LGPB Hamilton

1. As I noted above, Mr Mandoh submitted that Mrs Moshos had not formed a view, in good faith and on reasonable grounds, that the Companies were insolvent or likely to become insolvent for the purposes of s 436A of the Corporations Act and also that Mrs Moshos had the sole purpose, in resolving to appoint administrators, of advancing her position in respect of the then marital issues between Mr and Mrs Moshos and preserving her position as a director of the Company.
2. In oral submissions, Mr Mandoh submitted that the resolutions for appointment for the administrators were invalid "because they were not based on the genuine belief [of] the director of the Companies as to the insolvency of the Companies or the likely insolvency of the Companies at that time" (14.11.2014 T6). Mr Mandoh submitted that the inference could be drawn from Mrs Moshos' evidence that the marital difficulties with her husband were the motivation for her decision to appoint the administrators. Mr Mandoh also adopted the position in closing submissions that the Companies contended that the "sole motivation for placing these Companies into administration was the marital difficulties and the marital difficulties, in effect, caused Mrs Moshos to appoint the administrator" and that no other factors were involved and there was no objective consideration of solvency by Mrs Moshos or by Mr Vouris (13.2.15 T193). Mr Mandoh later emphasised that the Companies' case was that Mrs Moshos' improper purpose in appointing administrators was not the substantial purpose of the appointment, but the only purpose of the appointment, namely her motivation to retain control of the Companies (13.2.2015 T198). Mr Mandoh also submitted that Mrs Moshos did not have a genuine and good faith belief that the Companies were insolvent or likely to become insolvent (13.2.2015 T198).
3. Mr Mandoh refers to Mrs Moshos' affidavit evidence as to a conversation with Mr Vouris on the day she signed the resolutions for the appointment of administrators and points out that Mrs Moshos did not provide financial statements to Mr Vouris and Mr Rapsey on or before that date. I have referred to and reached findings as to that conversation above. Mr Mandoh submits that, at most, the conversation between Mrs Moshos and Mr Vouris indicated that she was uncertain as to whether the Companies were insolvent, and that would be insufficient for the purposes of a resolution under s 436A of the Corporations Act. I do not accept that submission, which is not consistent with the evidence of that conversation given by Mr Vouris in cross-examination or Mrs Moshos' later email setting out her position. I infer that Mrs Moshos had actual knowledge of unpaid taxation debts, where that is implicit in what she told Mr Vouris and in her reference to the debts to the Australian Taxation Office having "built up" in her email of 11 December, and I am not persuaded by Mrs Moshos' evidence to the extent she suggested she had no knowledge of the companies' position, given the difficulties with that evidence to which I referred above. It seems to me that I can more readily draw that inference where Mrs Moshos could readily have acquired such knowledge within a marital relationship, even one that was difficult at the point of the administrators' appointment; where common sense would suggest she would take at least some interest in that issue, where she was the sole director of the companies and, on what she told Mr Vouris, knew that Mr Moshos had been involved in companies that had previously been placed in liquidation.
4. I also note, although it is not necessary to that finding, that the Companies asserted that they were not in fact insolvent at the relevant time, but led none of the evidence that might readily have proved that matter if it were the fact. In particular, no adequate evidence was led by LGPB Charlestown and LGPB Hamilton to establish the existence of or the terms of the arrangements with the Australian Taxation Office for which they contended, or that the Companies had complied with them if they existed. Mr Mandoh accepted in closing submissions that he was unable to identify any evidence led in the proceedings to establish the existence of arrangements to pay either the tax debts or the superannuation debts in instalments (13.2.15 T196). I infer that such evidence that they could have led would not have assisted to establish either the existence of or compliance with such arrangements.
5. What is required to establish reasonable grounds to form a view that a company is likely to be insolvent will not doubt depend on the circumstances but, in the case of a simple trading business, actual knowledge of an inability to pay tax debts seems to me to be sufficient to establish a reasonable basis for that view. I therefore find that Mrs Moshos did hold a genuine belief, although not founded in any substantial inquiry, that the Companies could not pay their tax liabilities and were insolvent or likely to become insolvent for that reason, notwithstanding any lack of inquiry as to other aspects of the Companies' financial position.
6. LGPB Charlestown and LGPB Hamilton also contended, as I noted above, that Mrs Moshos had a sole (and not merely a predominant or substantial) improper purpose in appointing the administrators. Mr Mandoh maintained that submission in strong terms even after I had raised with him, in oral submissions, what the position would be if Mrs Moshos had a substantial or predominant improper purpose rather than a wholly improper purpose in making the appointment. That confined approach may have had the perceived advantage for LGPB Charlestown and LGPB Hamilton of putting their case at its strongest; avoiding the need to address any possibility that Mrs Moshos might have had any reason for concern as to the Companies' then financial position; and not acknowledging any associated possibility that Mrs Moshos in fact had mixed purposes, both proper and improper, with the associated risk that any improper purpose was not substantial, in the sense that Mrs Moshos would have appointed administrators to the Companies even if it had not existed.
7. As I noted above, Mrs Moshos' evidence is that she placed the Companies in administration to prevent Mr Moshos from removing her as a director of the Companies and because Mr Moshos had not agreed to her having a 50% shareholding in the Companies in a family law property settlement (Mrs Moshos 13.12.2013 [9]). I give limited weight to Mrs Moshos' evidence of subjective purpose, given her difficult position and the other difficulties with her evidence noted above. However, it seems to me that the fact that Mrs Moshos' request to be given an interest in the Company, Mr Moshos' refusal of that request and the threat of her removal as a director occurred shortly before Mrs Moshos took steps to appoint administrators to the Companies would support a finding that Mrs Moshos had a collateral purpose (and possibly a substantial collateral purpose) in that appointment, namely to preserve her position as a director of the Companies or advance her claim to a shareholding in them.
8. These matters do not, however, exclude another purpose on the part of Mrs Moshos, consistent with her statements to Mr Vouris at the time of the appointment and her 11 December email, of making that appointment, wholly or partly, by reason of her understanding that the Companies could not pay their tax debts and a concern as to her potential liability for unpaid taxes, possibly brought into focus by the then difficulties between Mr and Mrs Moshos. I have not neglected the fact that it may not have been entirely logical for Mrs Moshos at once to be concerned as to the Companies' financial position and to wish to preserve an interest in them and remain as director of them. However, it must also be recognised that human behaviour, particularly in circumstances of marital stress and financial difficulty, is not always entirely logical.
9. Mr Mandoh also accepted in closing submissions that, in order to accept his submission as to Mrs Moshos' sole improper purpose in making the appointment of preserving her control of the Companies or acquiring an interest in them, I would have to find that at least one version of Mrs Moshos' evidence as to the email of 11 December (namely that that email was true) was false (13.2.15 T193). I am not satisfied, on the balance of probabilities, that the email which Mrs Moshos had drafted in her own words, and the falsity of which she at one point denied in cross-examination, was false, notwithstanding that at other points in her cross-examination she denied its accuracy.
10. LGPB Charlestown and LGPB Hamilton also rely on the administrators' grant of a licence to operate the business of the Companies to Lampri Pizza Pty Ltd ("Lampri Pizza"), a company associated with Mrs Moshos' father, Mr Lamprianidis, both to establish an improper purpose of Mrs Moshos in appointing the administrators and to impugn their conduct of the administration. Mr Mandoh submits that the presence of Mrs Moshos' father, Mr Lamprianidis, who was a competitor in the local pizza business with the Companies, at the meeting with Mr Vouris on 16 November casts doubt on whether the decision to place the Companies into administration was given in good faith (Mrs Moshos 13.12.2013 [12], [18]; Mrs Moshos 23.1.2014 [8]). The Companies also rely on the fact that Mr Lamprianidis or interests associated with him subsequently made an offer to purchase the Companies' business. I will deal with the terms of the appointment of Lampri Pizza here and with criticisms of Lampri Pizza's subsequent conduct of the businesses below.
11. The notice of the first meeting of creditors dated 22 November 2012 recorded that, upon the administrators' appointment, a licence deed was executed to allow Lampri Pizza to continue trading the business and stated that that licence deed: "was executed to preserve the goodwill of the business whilst we investigate the Companies' affairs, sell the business as a going concern and/or await a Deed Proposal to be submitted". By letter dated 22 November 2012 from Hani Mosh's then solicitors to Mr Vouris' firm, to which I referred above, Hani Mosh raised complaint as to the fact that Lampri Pizza had been appointed to manage the relevant businesses. The administrators' solicitors set out the basis on which Lampri Pizza had been appointed to maintain the relevant businesses in a letter from their solicitors to Hani Mosh's solicitors dated 28 November 2012 (Ex A1, p 212) which observed that: "We note the reservations you raise in relation to the licensing of the Companies' businesses. In circumstances where the administrators are anxious to ensure that the Companies' businesses remain as going concerns in order to preserve their value, it is, in our view, entirely appropriate that they have entered into the Licence Agreement."
12. I do not accept that the Licence Deed with Lampri Pizza, or Mr Lamprianidis' involvement allows, in itself or with other matters, a finding that Mrs Moshos had a sole improper purpose in respect of the appointment, or indeed that the administrators acted improperly in that regard. So far as Mrs Moshos' purpose is concerned, Mr Lamprianidis' involvement is at least equally inconsistent (as Mr Vouris recognised in cross-examination) with assisting his daughter generally, and specifically with a wish to assist her in preserving the value of the businesses of the Companies once they were placed in administration. I am not persuaded that Mrs Moshos placed the Companies in administration to afford her father the somewhat limited opportunities of operating them for a short time under licence or buying them if no higher bidder emerged, which is all that an administration would provide.
13. The fact that Lampri Pizza was licensed to operate the businesses and the terms of that licence also do not support any wider inference of improper purpose in the appointment of the administrators. LGPB Charlestown and LGPB Hamilton criticise the fact that Lampri Pizza was appointed by the administrators to operate and manage the Companies' businesses while they were in administration, under the terms of a Business Licence Deed, despite the fact that Mr Lamprianidis had business interests in other pizza restaurants in competition with the business of the Companies. I do not accept that criticism. It seems to me that, as a matter of practicality, the administrators were correct in their expressed view that appointment of a person experienced in operating a pizza restaurant to operate the businesses was necessary to preserve their value, and it is logical that such an appointment would likely need to be a person situated in the local area with experience of its trading conditions. LGPB Charlestown and LGPB Hamilton do not identify any other person, other than Mr Moshos, who was apparently suitable for appointment at the relevant time and it seems to me self-evident that Mr Moshos would not have cooperated with the administrators whose appointment he did not accept. I also do not accept the criticism that there was no consultation with creditors or shareholders of the Companies before that appointment was made, where it was a decision that would have to be made by the administrators with a degree of urgency in order to preserve the Companies' continuing business.
14. The terms of the Business Licence Deed (Ex R1, p 34) between the Companies and Lampri Pizza also do not seem to me to be unreasonable. By that Business Licence Deed, Lampri Pizza was granted an exclusive licence to use the Business Assets (as defined) and conduct the business on behalf of the Companies on the basis that Lampri Pizza would pay a licence fee, of a relatively small amount, but would also assume obligations as to the maintenance of the Business Assets (cl 3.2) and the general operation and conduct of the business and would be entitled to the takings and profits of the business during the term of the licence agreement and would be responsible for liabilities of the business incurred during that term (cl 4). It seems to me that the course of entry into such an agreement was reasonably open to administrators, who sought to preserve the value of the businesses so as to seek to realise that value, but presumably were not prepared to assume personal liability by themselves conducting the businesses.
15. Mr Mandoh also emphasises that Messrs Vouris and Rapsey did not lead evidence from Mr Lamprianidis and submits that a Jones v Dunkel ((1959) 101 CLR 298) inference should be drawn that his evidence would not have assisted them in any relevant matter. Where a party would be expected to, but does not, call a witness who could give evidence on a relevant matter, and the failure to call that evidence is unexplained, an inference may in appropriate circumstances be drawn that the uncalled evidence would not have assisted the party's case: Jones v Dunkel above; Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 at [63]-[64] per Heydon, Crennan and Bell JJ; MSPR Pty Ltd v Advanced Braking Technology Ltd [2013] NSWCA 416 (at [53]) per Macfarlan JA (with whom Ward and Gleeson JJA agreed). However, such an inference will less readily be drawn where there is an explanation why the witness is not called, and the reason why the witness was not called had no relevant relationship with the fact in issue: Fabre v Arenales (1992) 27 NSWLR 437 at 449-450 per Mahoney JA (with whom Priestley and Sheller JJA concurred). It seems to me that, first, there is no more reason to think that Mr Lamprianidis would be available to the administrators than that he would be available to LGPB Charlestown and LGPB Hamilton, where his daughter was giving evidence in their case; and, second, the fact that he was not called by the administrators would be consistent with an attempt to conduct the proceedings proportionately to the fact that they were, at least in its origin, a relatively narrow application for approval of an amount of remuneration that could readily be exceeded by (and very likely has in fact been substantially exceeded by) the costs of the application. Where these alternative explanations are available, I draw no inference from the fact that Mr Lamprianidis did not give evidence in the administrators' case, or indeed in the case of LGPB Charlestown and LGPB Hamilton.
16. As I noted above, LGPB Charlestown and LGPB Hamilton ultimately put their case in a manner that did not allow for any possibility that Mrs Moshos had any good faith belief in the Companies' insolvency or likely insolvency or anything other than a wholly improper purpose in appointing the administrators. Their case was that Mrs Moshos was wholly motivated by an improper purpose of preserving her control of the Companies or obtaining an interest in them. The findings that I have reached above that LGPB Charlestown and LGPB Hamilton must fail in that case. Even if LGPB Charlestown and LGPB Hamilton had ultimately put a case that Mrs Moshos had a substantial improper purpose, in the sense that she would not have appointed administrators to the Companies but for that purpose, they would have had at least an evidentiary onus of establishing the facts necessary to support that conclusion. I would also not have been persuaded, given the evidence to which I have referred above, and particularly Mrs Moshos' reference to unpaid taxation debts at the time of the appointment and in her 11 December email, that the appointment would not have been made but for any improper purpose.
17. I am satisfied that it is appropriate to make the declaration as to the validity of the administrators' appointment in those circumstances.

Application under s 1322 of the Corporations Act

1. As I noted above, Messrs Vouris and Rapsey seek an order under s 1322 of the Corporations Act curing any defect in relation to the resolution for their appointment as administrator of the Companies. LGPB Charlestown and LGPB Hamilton respond, so far as this relief is sought in respect of the appointment of Mr Rapsey to LGPB Charlestown, that there was no resolution purporting to appoint Mr Rapsey as administrator of LGPB Charlestown.
2. I noted above that the resolution in respect of LGPB Charlestown provided for the appointment of Messrs Vouris and Tonks as joint and several administrators under s 436A of the Corporations Act. It seems to me that the reference to Mr Tonks in that resolution is merely a typographical error, since each of the relevant consents to appointment was executed by Mr Vouris and Mr Rapsey on 16 November 2012 (Ex A3) and the Notice of Appointment for LGPB Charlestown also referred to the appointment of Messrs Vouris and Rapsey as administrators of LGPB Charlestown, notwithstanding the reference to Mr Tonks in the resolution. A circular to creditors dated 20 November 2012 also referred to the appointment of Messrs Vouris and Rapsey as administrators of the Companies.
3. It does not seem to me that it is necessary for the administrators to rely on s 1322 of the Corporations Act to address the issue as to the erroneous reference to Mr Tonks in the resolution to appoint administrators to LGPB Charlestown. As a matter of construction, words may be corrected in an instrument to correct a manifest error, without need for an application for rectification: Wilson v Wilson (1854) 5 HLC 40 at 67; 10 ER 811 at 822 (reading "Mary" for "John"); Fitzgerald v Masters (1956) 95 CLR 420 at 426-427; Alcan Australia Administration Pty Ltd v Geraghty (Supreme Court (NSW), Young J, 3 October 1993, unrep) and see the cases cited in JD Heydon, MJ Leeming and PG Turner, Meagher Gummow & Lehane's Equity: Doctrines & Remedies, 5th ed, 2015, [27-100]. In the present case, it seems to me that the surrounding circumstances and documents make clear that the reference to Mr Tonks should be read, in the resolution appointing administrators to LGPB Charlestown, as a reference to Mr Rapsey, as a matter of construction. The typographical error in that resolution provides no basis for a finding that Messrs Vouris and Rapsey were not validly appointed as administrators of that company.
4. I should add, for completeness, that, in Wagner v International Health Promotions above at 422, Santow J held that s 1322 of the Corporations Act was not sufficiently wide to cure failure with a mandatory requirement for a resolution under s 436A of the Corporations Act, which was not a procedural irregularity for the purposes of that section and went to the underlying statutory basis for the appointment of an administrator. For the same reason, it seems to me that s 1322 of the Corporations Act would not be sufficiently wide to cure the failure to satisfy the statutory basis for an administrator's appointment where a director makes that appointment for an improper purpose. However, that issue does not arise where LGPB Charlestown and LGPB Hamilton did not establish their case that Mrs Moshos had appointed the administrators without a reasonable basis to believe that the Companies were insolvent or likely to become insolvent or for a wholly improper purpose.

Application under s 447A of the Corporations Act

1. As I noted above, Messrs Vouris and Rapsey also seek an order under s 447A of the Corporations Act that Part 5.3A of the Corporations Act is to operate in relation to each of the Companies such that the provisions of s 449E of the Corporations Act and rule 9.2 of the Supreme Court (Corporations) Rules operate as though the Companies and were still in administration at the time the application for remuneration was made by them.
2. An initial issue arises as to whether such an order is necessary. That issue turns upon the scope of s 449E of the Corporations Act which provides that: "449E(1A) The administrator of a company under a deed of company arrangement is entitled to receive such remuneration as is determined: (a) by agreement between the administrator and the committee of inspection (if any); or (b) by resolution of the company's creditors; (c) if there is no such agreement or resolution - by the Court. 449E(2) Where remuneration is determined under paragraph 1(a) or (b) or paragraph (1A)(a) or (b) the Court may, on the application of ASIC, of the administrator or of an officer, member or creditor of the company: (a) review the remuneration; and (b) confirm, increase or reduce it."
3. Mr Mandoh submits that Messrs Vouris' and Rapsey's application for remuneration is not properly made under s 449E of the Corporations Act and r 9.2 of the Supreme Court (Corporations) Rules as the Companies were not under administration at the time the Plaintiffs' Originating Process was filed. The reference to r 9.2 of the Corporations Rules may immediately be put aside, since that is procedural in character and not the source of the Court's statutory power to determine such remuneration. Mr Mandoh submits that s 449E of the Corporations Act applies, in its terms, to an application by an "administrator of a company under administration" and r 9.2 of the Corporations Rules (I interpolate, if it were relevant for this purpose) applies to an application by the administrator of a company under administration or of a deed of company arrangement. Mr Mandoh submits that it was not open to Messrs Vouris and Rapsey to bring a claim to have their remuneration determined under that section after the administration was terminated at the second meeting of creditors. That submission is of general application so, if it is correct, any administrator would not be entitled to bring a claim for his or her remuneration under that section if the administration was terminated at the second meeting without his or her remuneration being approved by creditors.
4. Mr Mandoh's submission faces two immediate difficulties. First, it depends on reading the reference to "administrator" in s 449E of the Corporations Act as referring not to a person who was, at a relevant time, an administrator but a person who remains an administrator at the time an application is made to the Court under s 449E(1)(c) of the Corporations Act. There seems to me to be no reason to read the section in that way, where the reference to the administrator in the opening words of the section is directed to identifying the person who has a claim to remuneration, namely an administrator of a company under administration, and does not contain any indication that a person who once satisfied that description so as to have that claim must continue to do so at the time of his application to, or a decision by, the Court as to his or her remuneration. Second, that reading of the section is inconsistent with the views expressed by Besanko J in Strazdins v DNPW Pty Ltd [2013] FCA 1368, where his Honour noted (at [34]ff) that several cases, prior to the amendment of s 449E by the Corporations Amendment (Insolvency) Act 2007 (Cth), had accepted that it was at least arguable that a former administrator had standing to apply to the court for approval of his or her remuneration after his administration had come to an end. His Honour also observed (at [41]) that: "I am unable to see anything in the terms of s 449E which requires an applicant to be an existing administrator at the time of his or her application or at the time that the application is determined by the court. The fact that the section uses the word, "administrator" and that that word is defined in the way it is in the Dictionary section, does not advance the matter. On the other hand, I think the fact that an administration might come to an end quite quickly (ss 435C, 439C) is a reason to construe the section broadly, not narrowly. In most cases there will be a practical limit to delayed applications by former administrators in the form of the continued existence of a company's property. In my opinion, a former administrator may bring an application for a determination of his or her remuneration under s 449E of the Act."
5. I referred to that judgment, without disapproval, in Re Bestcare Foods Ltd (subject to a deed of company arrangement) [2014] NSWSC 1630 at [7] and I consider that his Honour's reasoning is compelling. I am unable to see what legislative purpose could have been served by placing administrators generally in the position that they would not be remunerated, other than on a complex application for quantum meruit, if they were removed at the second meeting of creditors and creditors did not choose them to approve their remuneration. That result seems to me to have difficulties, not only for the particular administrators involved, but for the public interest generally, since it is less likely that administrators would accept appointment if they were regularly to be exposed to that risk.
6. Mr Mandoh relies, in support of the reading of s 449E of the Corporations Act as limited to a person who is still an administrator at the time the application is made to the court (or, possibly, determined) on my judgment in Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) [2013] NSWSC 1322 at [4] - [5], where I referred, in an ex tempore judgment where my attention had not been drawn to the decision in Strazdins v DNPW Pty Ltd above, to the scope of r 9.2 of the Corporations Rules. That decision was addressed to the question whether an application for approval of remuneration should have been served upon contributories of the relevant company, once it was no longer in administration and they and not creditors had the substantial economic interest in the company, and not to the scope of the statutory power under s 449E of the Corporations Act. It does not seem to me to provide the Companies with any assistance.
7. It follows that, where I have found that Messrs Vouris and Rapsey were validly appointed as administrators of the Companies, they may rely on s 449E of the Corporations Act to seek approval of their remuneration, without the need to rely on s 447A of the Corporations Act, and subject to the issue of the quantum of their remuneration which I will address below.
8. I should nonetheless refer to the potential application of s 447A of the Corporations Act in respect of the remuneration of Messrs Vouris and Rapsey, against the contingency that an appellate Court may take a different view as to the proper scope of s 449E of the Corporations Act. That section is widely expressed, providing, relevantly, that: "The Court may make such order as it thinks appropriate about how this Part is to operate in relation to a particular company."
9. In Brash Holdings Ltd (admin apptd) v Katile Pty Ltd [1996] 1 VR 24; (1994) 13 ACSR 504 at 507-8, the Full Court of the Supreme Court of Victoria noted that that section: "evidently proceeds on the view that Pt 5.3A is inadequate in the provision which it otherwise makes for the new form of administration and that it is therefore necessary to enable gaps in the Part to be filled by the exercise by the court of wide powers to make such orders as it thinks appropriate about how the Part is to operate in relation to a particular company."
10. In Australasian Memory Pty Ltd v Brien [2000] HCA 30; (2000) 200 CLR 270 at [17]-[18], [23]-[24], the plurality of the High Court noted that: "The power is not cast in terms of a power to make orders to cure defects or to remedy the consequences of some departure from the scheme set out in the other provisions of Pt 5.3A. Its operation is not confined to such cases. Nor is there anything on the face of s 447A(1) that suggests that it should be read down. In particular, the words of the provision are wide enough to confer power to make orders which will have effect in the future but which are occasioned by something that has been done (or not done) under the other provisions of Pt 5.3A before application is made under s 447A(1). … [T]he orders contemplated in the examples go beyond a curial determination of what is the effect of the existing provisions of the Part on a particular company in the circumstances that may be established in a proceeding; the orders contemplated are orders that alter how the Part is to operate in relation to a particular company, not how the Part does operate in relation to that company."
11. In Cawthorn v Keira Constructions Pty Ltd (1994) 33 NSWLR 607; 13 ACSR 337 at 341, Young J similarly noted that the section confers "plenary powers" on the court "to do whatever it thinks is just in all the circumstances", having regard to the rights of the various groups of persons affected by the administration. In Shirlaw v Graham [2001] NSWSC 612 at [14], Young CJ in Eq similarly noted that s 447A of the Corporations Act is a plenary power which may be used to overcome a defect in compliance with the appointment procedure under s 436A of the Corporations Act. In Calabretta v Redpen Developments Pty Ltd (in liq) [2010] FCA 81; (2010) 183 FCR 47 at [37], Yates J in turn observed that: "The discretion whether to exercise the power [under s 447A] is undoubtedly a plenary one, to be exercised having regard to all the circumstances of the case that have been brought to the Court's attention by the applicant for relief and by those who have an interest in the matter and who may be affected by the granting of that relief. One relevant consideration is whether substantial injustice would be caused by effectively validating an otherwise invalid appointment: McIntosh [(as joint and several admins of CMX Technologies Pty Ltd) v CMX Technologies Pty Ltd (admins apptd) (2005) 56 ACSR 283] at [32]". His Honour also observed at [41] that substantial injustice was not established (albeit in circumstances where an administrator's right of indemnity would depend on the extent of recoveries by the liquidator) by validating an administrator's appointment and thereby establishing his right to remuneration under the Corporations Act, where he had carried out the work required of an administrator and that work had been of value.
12. An order made under this section may have retrospective effect so that, as and from the date of the order, no-one can assert that a previous transaction is invalid: Panasystems Pty Ltd v Voodoo Tech Pty Ltd [2003] FCA 428; (2003) 21 ACLC 842; Re Vouris; Epromotions Australia Pty Ltd & Relectronic-Remech Pty Ltd (in liq) [2003] NSWSC 702; (2003) 47 ACSR 155 at [70].
13. Mr Mandoh submits that the Plaintiffs' application under s 447A of the Corporations Act invites the Court to treat a fact, namely that the Companies were under administration, as in existence at a time when it was not in existence. He submits that the application attempts to circumvent the limitation contemplated by the legislation that an application for remuneration by an administrator could only be made when the company was under administration, or subject to a deed of company arrangement. I have not accepted that s 449E of the Corporations Act has that limitation. If it does, it seems to me plain that s 447A of the Corporations Act would be sufficiently wide to modify its operation in an appropriate case.
14. LGPB Charlestown and LGPB Hamilton also advance wider criticisms of the conduct of Messrs Vouris and Rapsey, so far as that conduct is relevant to the exercise of the Court's discretion under s 447A of the Corporations Act. Mr Vouris was prepared to accept in cross-examination that he had a duty prior to accepting the appointment as administrator on 16 November 2012 to "ensure" that his appointment was valid (12.2.2015 T3). Mr Mandoh in turn submits that the administrators had a duty to be satisfied as to the validity of his or her appointment at or immediately after that appointment and refers to Deputy Cmr of Taxation v Portinex Pty Ltd (No 2) [2000] NSWSC 557; (2000) 34 ACSR 422. It seems to me that both Mr Vouris' concession and Mr Mandoh's formulation of that duty overstate the level of inquiry required of an administrator on his appointment, which is not some form of independent verification of the factual basis on which the directors proceed in that appointment, but a review of whether the resolution appointing the administrator appeared, on its face, to be valid: Portinex (No 2) above at [5].
15. It was put to Mr Vouris in cross-examination that Mr Moshos, as a "shadow director" of the Companies, dealing with their business on a day-to-day basis, and knowledgeable about their operation, "should be alerted that the Companies were about to be placed in voluntary administration". I do not accept that Pt 5.3A of the Corporations Act imposed any such obligation on the Administrators. It was also put to Mr Vouris in cross-examination that he ought to have inquired of Mr Moshos about what was being done to pay off the Companies' tax debts (12.2.2015 T13). I do not accept that proposition, where I have held that Mrs Moshos had in fact told Mr Vouris of the existence of unpaid tax and possibly also superannuation liabilities of the Companies. An unqualified reference to unpaid tax liabilities implied that there was either no arrangement for their payment or that arrangement was not being complied with. In any event, that lack of inquiry is immaterial where there is no adequate evidence that such an arrangement existed or was being complied with.
16. Mr Mandoh also submits that Messrs Vouris and Rapsey ought to have been aware that the purported resolution appointing them was invalid from its inception. Mr Mandoh also submits that Mr Vouris, instead of pressing Mrs Moshos for further information as to why the Companies could be considered insolvent, encouraged and facilitated the resolution by providing Mrs Moshos with resolutions for signature, before a genuine assessment as to solvency had been conducted. In oral submissions, Mr Johnson, who appears for Messrs Vouris and Rapsey, responded that, if an administrator is told by a director of a company or companies that there are debts for taxation and superannuation, then he or she need not take a further investigation of the company's financial affairs before accepting appointment (13.2.15 T188). I understand that submission to be concerned with information provided by the director as to taxation and superannuation debts that could not be paid in a timely way, and on that basis I would accept that submission. Where I have held that Mrs Moshos had in fact told Mr Vouris of the existence of unpaid tax liabilities of the Companies, I do not consider that further inquiry as the Companies' financial position was either feasible, given that Mrs Moshos did not have detailed knowledge of their affairs or access to their records, or necessary. I also do not accept the Companies' submission that Mr Vouris was obliged to make inquiries of Mr Moshos, since there was no reason then or now to think that he would have cooperated with such inquiries or that Mr Vouris could have reasonably relied on the information then provided to him, if it was contrary to the information provided by Mrs Moshos who was the Companies' sole director.
17. LGPB Charlestown and LGPB Hamilton also place substantial weight on a statement made by Mr Vouris' and Mr Rapsey's solicitors, in a letter dated 28 November 2012 that, on 28 November 2012, nearly two weeks after their appointment, they were "unable, at this stage, to form an opinion as to the solvency or otherwise of the Companies" (Ex A1, pp 212 - 215). That statement does not seem to me to assist them. The assessment exercise involved in a director determining, based on his or her own knowledge, whether a company is or is likely to become insolvent, or in an administrator reaching a view as to the validity of his or her appointment at that time, is quite different from the level of investigation which is to be undertaken by an administrator, inter alia, to determine the company's solvency as a matter of fact, prior to the second meeting of creditors. It does not seem to me that an administrator must conduct, prior to appointment, the level of investigation that he or she would conduct between appointment and the second meeting of creditors, if he or she were appointed. That proposition would impose an unreasonable burden on potential administrators, particularly where they could be replaced at the first meeting of creditors. That proposition would also impose an unreasonable burden on directors, particularly those who fear insolvent trading liability or have not maintained adequate company records, where the appointment of an administrator would, on the Companies' case, have to be delayed and their exposure to liability prolonged for however long it took for the administrators to conduct such investigation to reach a concluded personal view as to the Company's solvency or insolvency.
18. LGPB Charlestown and LGPB Hamilton also advance particular criticisms of the manner in which Lampri Pizza operated the business after the entry into the Business Licence Deed between the Companies and Lampri Pizza and refer to a letter dated 11 December 2012 from Hani Mosh to Mr Vouris' firm in that regard (Ex R1, p 71). The particular criticisms relate to one pizza shop having no working telephone line for five days; no EFTPOS being available for customer use (although a contrary criticism was also made that Lampri Pizza used its own EFTPOS at the premises (Mr Moshos 29.8.2014 [82])) and that one store was closed on one day. Mr Vouris' firm responded to the criticisms in relation to the conduct of the businesses by letter dated 5 December 2012, advising that the phone services for the Hamilton store had been briefly disconnected and then reinstated; the Darby Street store was closed for a short time by reason of the disconnection of gas services, which had since been reconnected, and that the licence agreement would be maintained during the administration in order to minimise costs (Ex R2). There is no evidence as to whether the disconnection of telephone or gas services related to a failure by the Companies to meet liabilities incurred prior to or by Lampri Pizza to meet liabilities during the period of that licence agreement.
19. It does not seem to me that those criticisms are material to the issues which need to be determined in these proceedings, as distinct from any claim by the Companies against the Administrators which has presently been stayed. In any event, I note that the Business Licence Deed between the Companies and Lampri Pizza included appropriate commercial terms in respect of the operation of the business, and it does not seem to me that the Administrators can be treated as responsible for operational failures on Lampri Pizza's part. I also do not accept the criticism of use of Lampri Pizza's EFTPOS machines, which was consistent with the structure of the licence arrangement, namely that Lampri Pizza would receive the takings and bear the expenditures relating to the business during the licence period.
20. It seems to me that the matters to which I referred above in dealing with the construction of s 449E of the Corporations Act would support an order extending the operation of that section to a former administrator, who could not otherwise access the mechanism for Court approval of his or her remuneration and would be left to a claim in quantum meruit, if (contrary to my view) that section were not available to that former administrator on its proper construction. Had it been necessary to determine the question, I would have held that Messrs Vouris and Rapsey have established that an order should be made under s 447A of the Corporations Act that s 449E of the Corporations Act operates in relation to each of the Companies as though the Companies were still in administration at the time the application for remuneration was made by them

Wider issue as to relief under s 447A of the Corporations Act

1. I should also note, for completeness, the question of a potentially wider application of s 447A of the Corporations Act to validate the appointment of Mr Vouris and Rapsey. In oral closing submissions, Mr Mandoh submitted (13.2.2015 T197) that that section could not and should not be used to validate the appointment of the administrators where Mrs Moshos had a wholly improper purpose in respect of that appointment. In particular, he submitted that an order under s 447A of the Corporations Act was only available in respect of defects in the appointment that were of a procedural nature and that (at 13.2.2015 T198): "Section 447A will cure an invalid appointment of an administrator and allow curative orders to be made where the administrator has been appointed pursuant to a defective resolution but only if it's defective in formal respect or in purely procedural matters. That case [Deputy Commissioner of Taxation v Portinex] does not consider defects in appointment which were defects of such a fundamental importance as a breach of [s]ection 4[3]6A that relate to the director's belief as to the insolvency. That decision does not relate to a decision where a director does not have a genuine or bona fide belief that the companies were insolvent when they passed the resolution falsely stating that, in effect."
2. Mr Johnson in turn accepted in closing submissions that an appointment of an administrator for a wholly improper purpose could not be validated under s 447A of the Corporations Act (13.2.15, T205). Mr Johnson did not address any potential application of s 447A of the Corporations Act to an appointment made for a partly improper purpose, presumably because, as I noted above, that was not the basis on which LGPB Charlestown and LGPB Hamilton ultimately put their case.
3. I have referred above to the wide scope of s 447A of the Corporations Act generally, and it seems to me that the scope of that section is substantially wider than Mr Mandoh accepted in submissions. It is not necessary to express a view, and I do not express a view, as to the correctness of Mr Johnson's concession in respect of the application of that section to an improper appointment. I note that, in the particular context of the invalid appointment of an administrator, in Shirlaw v Graham above; Panasystems Pty Ltd v Voodoo Tech Pty Ltd above, Merkel J noted at [19] that the Court "should hesitate to exercise the power under s 447A to overcome a failure to comply with a statutory requirement for a valid appointment of an administrator", but nonetheless made such an order in circumstances that a company was in fact insolvent and it was necessary for the directors to take steps to address the position, and the failure to pass a resolution complying with s 436A was the result of inadvertence. In Rodgers v Radly [2000] VSC 570; (2000) 37 ACSR 158 at [31]-[32], Warren J similarly emphasised the relevance of the actual or potential insolvency of a company, albeit to the somewhat different question whether the Court should terminate an administration under s 447A of the Act where a company had been placed in administration for an improper purpose.

Quantum of remuneration

1. As I noted above, Mr Vouris and Mr Rapsey seek an order that their remuneration for acting as joint and several administrators of LGPB Charlestown be fixed in the sum of $29,572 plus GST and that they be entitled to $4,850.33 plus GST in respect of their expenses. Messrs Vouris and Rapsey seek an order that their remuneration for acting as joint and several administrators of LGPB Darby Street be fixed in the sum of $23,205 plus GST and that they be entitled to $3,243 plus GST in respect of their expenses. Messrs Vouris and Rapsey also seek an order that their remuneration for acting as joint and several administrators of LGPB Hamilton be fixed in the sum of $21,865 plus GST and they be entitled to $3,296.09 plus GST in respect of their expenses.
2. Mr Vouris gives evidence of the work undertaken during the period of his and Mr Rapsey's appointment as administrators of the Companies, including conducting preliminary investigations, advertising their appointment and notifying statutory authorities of that appointment, conducting meetings and conversations with the Companies' director, adviser and shareholder, holding concurrent meetings of creditors on 28 November 2012 and 21 December 2012; preparing and sending reports to creditors, reviewing proofs of debt and reviewing and executing the business licence deed with Lampri Pizza; advertising the businesses for sale and dealing with creditors and employees and lodging the requisite forms with the Australian Securities and Investments Commission (Vouris 15.3.2013 [18]). There was no challenge to the evidence that that work had in fact been undertaken, although several aspects of the proceedings involved criticisms of the approach which Mr Vouris and Mr Rapsey had adopted to particular matters as noted above. Mr Vouris' affidavit also exhibited detailed work in progress time summary reports and statements of receipts and payments in relation to the Companies. Mr Vouris led evidence that: "The work performed by me, Mr Rapsey and our staff was reasonably necessary in order to ascertain the financial position of each of the Companies [and LGPB Darby Street], properly assess the Proofs of Debt submitted, considered the offers for purchase of the business and make a recommendation to creditors as to the future of the Companies." (Vouris 15.3.2013 [28])
3. Mr Moshos' affidavit dated 28 or 29 August 2013 contains three exhibits (HM31 - HM 33) which set out his objections to the schedule of fees claimed for the Companies, which take the form of handwritten notations, some by way of commentary and some by way of question, in respect of the particular attendances. Many of those comments are cryptic and Mr Mandoh made no submissions to seek to support or elaborate upon them, or as to the quantum of remuneration recoverable, if the Court allowed the claim for remuneration in the relevant circumstances.
4. The primary question in setting an administrator's remuneration under s 449E of the Corporations Act is whether that remuneration was reasonable and the Court will have regard to the factors specified in s 449E(4) in addressing that question: Re Huxtable; Timeshare Resort Club Ltd (in liq) [2010] FCA 673; (2010) 78 ACSR 705 at [34]. The Court may also have regard to the rates of charge put forward by the administrators, the times taken by employees and the administrators in undertaking the administration and the total remuneration claimed and it is not necessary for the court to undertake an item by item assessment: Re Owen, in the matter of River City Motorway Pty Ltd (admins apptd) (recs and mgrs apptd) v Madden (No 2) [2012] FCA 312 at [22]-[23].
5. It seems to me that, for the purposes of s 449E(4) of the Corporations Act, Mr Vouris' evidence is sufficient to establish that the work performed by the administrators was reasonably necessary. There is no suggestion that the administrators were required to deal with extraordinary issues or accept a higher level of risk or responsibility than is usually the case; the value and nature of any property dealt with was not particularly substantial; the company's creditors were not particularly numerous, although it is plain that interests associated with Mr Moshos were not particularly cooperative. There seems to me no reason not to accept that the time claimed was properly taken by the administrators in performing the work, in the absence of any developed submission by LGPB Charlestown and LGPB Hamilton to the contrary. It seems to me that Mr Vouris' evidence is also sufficient to establish that the administrators' remuneration was reasonable, in overall terms, also in the absence of any developed submission by LGPB Charlestown and LGPB Hamilton to the contrary.
6. In these circumstances, it does not seem to me that no sufficient basis for a challenge to the administrators' remuneration has been identified to require that the matter again be referred to a Registrar for review, and their remuneration should be allowed in the amounts claimed. I will make no order as to the administrators' claim for expenses which is not properly the subject of a claim for approval of remuneration under s 449E of the Corporations Act:

Whether the Administrators should be remunerated on a quantum meruit basis

1. Messrs Vouris and Rapsey also addressed brief submissions to the possibility that an order for quantum meruit might be made in their favour, relying on the same matters as they advance to support their claim for remuneration on the basis that they were validly appointed. It is well-established that an administrator who has not been validly appointed may be entitled to remuneration on a quantum meruit basis: Sutherland v Take Seven Group Pty Ltd (1998) 29 ACSR 201 at 204; Coad v Wellness Pursuit Pty Ltd (in liq) [2009] WASCA 68; (2009) WAR 53; (2009) 71 ACSR 250. Messrs Vouris and Rapsey alternatively claim remuneration on that basis.
2. LGPB Charlestown and LGPB Hamilton respond that a quantum meruit claim was not "pleaded" in this application, although that submission has the difficulty that the application was brought by way of an Originating Process and affidavits and there are therefore no pleadings. LGPB Charlestown and LGPB Hamilton nonetheless made substantive submissions as to the quantum meruit claim, contending that they had not received any benefit from the administration and had instead incurred significant losses because of their actions and that: "As the [Companies] have not received any benefit, there is no unjust enrichment and accordingly, a claim for remuneration based on quantum meruit is not maintainable". LGPB Charlestown and LGPB Hamilton also submit that quantum meruit is an "equitable" concept and that the losses said to have been incurred by the administrators' conduct should lead to its refusal on that basis.
3. It is not necessary to determine this question given the findings that I have reached above.

Orders and costs

1. Messrs Vouris and Rapsey have been substantially successful in the proceedings and costs should follow the event. I therefore make the following orders: 1 Declare that John Vouris and Chad Robert Rapsey were validly appointed as administrators of Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) (ACN 147 100 883), Lime Gourmet Pizza Bar (Darby Street) Pty Ltd (formerly under administration) (in liquidation) (ACN 147 958 861) and Lime Gourmet Pizza Bar (Hamilton) Pty Ltd (formerly under administration) (ACN 147 100 838) on 16 November 2012. 2 The remuneration of John Vouris and Chad Robert Rapsey for acting as Joint and Several Administrators of Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) (ACN 147 100 883) be fixed in the sum of $29,572 plus GST and there be judgment for Messrs Vouris and Rapsey against Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) in that amount. 3 The remuneration of John Vouris and Chad Robert Rapsey for acting as Joint and Several Administrators of Lime Gourmet Pizza Bar (Darby Street) Pty Ltd (formerly under administration) (in liquidation) (ACN 147 958 861) be fixed in the sum of $23,205 plus GST. 4 The remuneration of John Vouris and Chad Robert Rapsey for acting as Joint and Several Administrators of Lime Gourmet Pizza Bar (Hamilton) Pty Ltd (formerly under administration) (ACN 147 100 838) be fixed in the sum of $21,865 plus GST and there be judgment for Messrs Vouris and Rapsey against Lime Gourmet Pizza Bar (Hamilton) Pty Ltd (formerly under administration) in that amount. 5 The costs of John Vouris and Chad Robert Rapsey of and incidental to this application, as agreed or as assessed, be paid jointly and severally by Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) and Lime Gourmet Pizza Bar (Hamilton) Pty Ltd (formerly under administration).

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 March 2015