Q. I suggest to you Mr Ariff you said that because you were conscious of the rotational minute that you had referred to you, having no recourse whatsoever to CCA or CCL for the deed administrator's remuneration? I am suggesting that is why you said what you said in the final paragraph?
A. I also knew that I could draw funds from the other assets of the company."
57 Having regard to the whole of the evidence, I am satisfied that the representation made by Mr Ariff in the letter of 9 September 2004 was not some part of a larger arrangement concerning variation of the deed of company arrangement, with the representation to be operative only if and when the deed was varied. There are four particular factors leading to that conclusion. First, the letter itself did not express any such condition. Although the letter was prepared in something of a rush, Mr Ariff would have taken care to see that reference to the condition was included, if in reality the representation was intended by him to be conditional.
58 The second factor is the uncontradicted evidence of several witnesses about words spoken by Francis Lee at the management meeting that took place in Mr Ariff's office immediately after the smaller meeting at which the letter was signed and delivered by Mr Ariff. All of John Sewerle, Lee Teck Chuan and Ricky Hiew gave evidence of hearing Francis Lee say that Mr Ariff had agreed to cap his fees to Deed Fund 1, or words to that effect. The evidence is consistent in placing Mr Ariff among those present at the management meeting. There is no suggestion that he sought to correct what Francis Lee said.
59 The third factor is the content of the resolution "C" circulated with Mr Ariff's letter of 9 September 2004 to the committee members. Resolution "C" was one of three resolutions submitted to members for simultaneous attention. Resolutions "A" and "B" were for the approval of Mr Ariff's remuneration, while resolution "C", dealing with the same topic, purported to make remuneration - or, more precisely, "all future remuneration of the Deed Administrator" - recoverable only out of Deed Fund Number 1, with "no recourse whatsoever" to the companies themselves.
60 The fact that documents "A", "B" and "C" were circulated together by Mr Ariff shows that, in his dealings with the committee members, he invited them to approve particular remuneration amounts together with the proposition that he should in future be confined to Deed Fund Number 1 for remuneration. Nothing was said about any condition regarding variation of the deed of company arrangement. Rather, the committee members were invited to prescribe (probably ineffectively, as a legal matter) a regime of limited recourse for future remuneration while at the same time approving particular remuneration for past services. The limitation as to the future might well have enhanced members' willingness to give approval for the past remuneration.
61 The fourth factor is the statement in the letter of 12 November 2004 from Berjaya's solicitors (see paragraph [44] above). There was there a clear statement to Mr Ariff's solicitors of an established understanding "that Mr Ariff has agreed to restrict his entitlement to draw remuneration to the deed funds". At no time did Mr Ariff's solicitors challenge that understanding.
62 It is, of course, necessary to recognise that Yazni Ariff's notes (see paragraph [27] above) suggest a link between the representation embodied in the 9 September 2004 letter and variation of the deed of company arrangement. That does not mean, however, that the link was maintained when the letter was in due course signed and delivered. The link had clearly been abandoned, at the latest, by the time Mr Ariff embodied the same proposition with respect to future remuneration in resolution "C" circulated to committee members on the same day in company with resolutions "A" and "B". Furthermore, the absence of any such link was confirmed by Mr Ariff in his 2005 affidavit (see paragraph [54] above).
63 Accepting, then, that Mr Ariff made, through his letter of 9 September 2004 set out at paragraph [6] above, an unconditional representation in the terms there set out, what follows?
64 The plaintiffs' pleaded case is as follows:
"20. By his letter dated 9 September 2004 addressed to Mr Francis Lee and handed to him that day, the defendant confirmed his agreement to limit any future claim for his remuneration to the money available out of Deed Fund 1.
21. By Rotational Minutes last signed by the duly authorised representative of the plaintiffs on the Committees of Inspection on 20 September 2004, the Committees approved the remuneration which was sought by the defendant for the period 5 December 2003 to 31 August 2004, on the express basis that any future remuneration was to be paid from the moneys available out of Deed Fund 1 and the defendant was to be denied other recourse against CCA and CCL for any such future remuneration.
22. The plaintiffs' support to the defendant's claim to remuneration being determined in accordance with the Rotational Minutes was secured by the defendant's representation that any future claim by him for remuneration would be made in conformity with the agreement described above."
65 This does little to elucidate the basis of the plaintiffs' case. It was explained in submissions, however, that the claim is as outlined at paragraphs [5] and [15] above.
66 The main propositions advanced by the plaintiffs are that a contract was formed or an estoppel arose. Opening submissions of counsel for the plaintiff put the matter thus:
"The plaintiff's acceptance of the defendant's claim for remuneration set out in the rotational minutes was given by the defendant's promise that any future claim for remuneration by him was to be made from the money available in Deed Fund 1. A binding contract has been made out: see Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at 458
In the alternative, should it be found that adequate consideration is absent, then the defendant is estopped from claiming remuneration for work completed from 1 September 2004 to 1 November 2007, other than from Deed Fund 1 on the basis that the departure from such an assumption set out above, would place the plaintiffs in a material disadvantage if departure from the assumption is permitted: see Legione v Hateley (1983) 152 CLR 406."
67 The contractual formulation of the case raises immediate questions: who are the parties to the contract and to whom was the relevant representation made?
68 There are seven plaintiffs in these proceedings - the three Berjaya companies and the four Carlovers companies. If any contract was created by Mr Ariff's 9 September 2004 letter, it cannot be a contract between him and all seven plaintiffs. This is because of the way the letter was addressed: see paragraph [6] above. It was addressed to "Mr Francis Lee" and began "Dear Sir". One possibility, therefore, is that Francis Lee, who is not a party to the proceedings, was the person with whom Mr Ariff contracted, if any contract was made. Another possibility is that the relevant communication was between Mr Ariff and the two companies mentioned, Berjaya Group (Cayman) Limited and Berjaya Group (Aust) Pty Limited. That, in my view, is the correct construction.
69 The communication made by Mr Ariff by means of the letter should therefore be accepted as directed to those two Berjaya companies. It was not a communication to any of the Carlovers companies.
70 With the two Berjaya companies identified as the recipients of the message in the letter, it is relevant to consider the source of Mr Ariff's entitlement to remuneration in his capacity as deed administrator. That entitlement was at all times governed by s 449E of the Corporations Act as it stood before amendments made by the Corporations Amendment (Insolvency) Act 2007 came into effect on 31 December 2007. That section dealt with quantification but said nothing about the manner of satisfaction of the entitlement to remuneration. In particular, the section does not say that the company subject to the deed of company arrangement is obliged to pay. Questions about satisfaction of the entitlement and the sources from which it is to be satisfied must be answered by reference to the deed of company arrangement itself: Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; (2008) 66 ACSR 229.
71 The deed provisions about remuneration are set out at paragraphs [10] to [13] above. Clause 6 says that the deed administrator "will be … remunerated by the Company", that is, the company subject to the particular deed of company arrangement. By virtue of s 444G, a deed of company arrangement binds, among others, the company and the deed administrator. In relation to remuneration, therefore, Mr Ariff, as the deed administrator, had a statutory right of recovery as against each particular Carlovers company and each such company had a statutory obligation to pay Mr Ariff.
72 Because it was addressed to the two Berjaya companies, the letter of 9 September 2004 cannot have formed the basis of any contractual supplement to or qualification upon the stipulations with respect to remuneration that had statutory force as between the Carlovers companies and Mr Ariff through the deeds of company arrangement. The Berjaya companies were not privy to that part of the deed of company arrangement provisions
73 The matter must therefore be approached on the footing that any contract in the formation of which the 9 September 2004 letter played a part was a contract between Mr Ariff and the two Berjaya companies to which the letter was addressed; also, that if any estoppel arises from the making of the statements in the letter, it is an estoppel in favour of the two Berjaya companies.
74 As far as the contractual claim is concerned, Ms Francois of counsel submitted on behalf of Mr Ariff that a number of difficulties attend the concept of a contract by which Mr Ariff bound himself to the two Berjaya companies to act, in the matter of his remuneration, in the way stated in the letter and not otherwise.
75 A particular point made by Ms Francois comes from the terms of the letter itself. The letter begins by referring to future approvals of remuneration by the committee of inspection of CCA or CCL, as appropriate. Once a particular approval of remuneration was given, two things were to happen: first, the approved remuneration was to be paid from the particularly designated bank account; and, second, "no recourse whatsoever" was to be had to CCA or CCL "for the Deed Administrator's remuneration as approved". The last two words are important. The contractually accepted restraint (if that is what it was) upon "recourse" to CCA and CCL for the deed administrator's remuneration applied only to remuneration "as approved" in the manner stated in the letter itself, that is, by the committee of inspection of CCA or CCL.
76 In fact, the committee of inspection did not have, in September 2004, any power or ability to approve the deed administrator's remuneration. To the extent that it was understood, at that time, that such a power existed, the understanding was based on a decision made at the meetings of creditors that had resolved that the deeds of company arrangement be executed. Each such meeting had purported to resolve:
"That the Deed Administrator's remuneration be approved in accordance with the Stuart Ariff Insolvency Administrators rates of charge, by the Creditors or a Committee of Inspection, if approved."
77 This resolution was passed on 3 November 2003. When the letter of 9 September 2004 was written, all concerned believed that the resolution enabled the committees of inspection to fix the deed administrator's remuneration. The understanding was, however, exploded on or soon after 21 December 2004 when Finkelstein J published his decision in Re Stockford Ltd; Korda [2004] FCA 1682; (2004) 52 ACSR 279. His Honour held that creditors have no power to delegate to an elected committee the function of fixing a deed administrator's remuneration.
78 Mr Ariff became aware of the Stockford decision some time in early 2005. On 22 June 2005, he filed an application seeking certain orders of the court with respect to his remuneration as deed administrator. The application was heard on 12 August 2005 and determined on 2 September 2005: see Re Carlovers Carwash Ltd [2005] NSWSC 879; (2005) 194 FLR 84.
79 In those proceedings, the court made an order under s 447A which had the effect of fixing certain past remuneration of the deed administrator in a sum equal to that which had purportedly been approved by the committees of inspection by means of the "rotational minute resolutions" referred to at paragraphs [52] and [53] above. It was accepted that those resolutions had been ineffective for the reason elucidated in the Stockford case.
80 In the 2005 proceedings, the court made a second order under s 447A. That order varied the operation of Part 5.3A in relation to the Carlovers companies to enable the committees of inspection to fix the deed administrator's remuneration. There were, however, two particular features of that regime. First, it applied only to the extent that remuneration "in respect of any completed period commencing after 30 June 2004 has not been fixed in accordance with s 449E(1)(a) or (1)(b)" (that is, by a meeting of creditors or by the court). Second, it required that the resolution of the committee of inspection be agreed to by a majority in number of the committee members voting on the resolution accounting for a majority by value of the debts of the creditors who are (or are represented by) the members voting on the resolution.
81 It was thus not until September 2005 that the committees of inspection had any effective power to determine or approve the deed administrator's remuneration. The determinations of the committees by means of the "rotational minute resolutions" of September 2004 were ineffective and meaningless. But, of course, the parties did not know that at the time. They thought that the committees had power to approve Mr Ariff's remuneration and that the determinations had legal effect.
82 It is important to note, however, that, when Mr Ariff made the application determined by the court on 2 September 2005, the Berjaya companies were given leave to be heard and made submissions to the court. They consented to the order under s 447A allowing remuneration for periods after 30 June 2004 to be determined by the committees of inspection. The Berjaya companies did not oppose the making of the order by which the court determined the remuneration for periods up to 30 June 2004 in the amounts that had been the subject of the "rotational minute resolutions". In that way, the Berjaya companies took, with respect to the fixing of the deed administrator's remuneration, actions that were valid and effective; and it may readily be inferred that they did so by reference to the representation made by Mr Ariff in the 9 September 2004 letter.
83 Because the immediately intended quid pro quo for the representation by Mr Ariff contained in the 9 September 2004 letter (that is, the remuneration fixing action of September 2004) was, in reality, ineffective and meaningless, I think that the claim in contract is not sustainable. The consideration, upon analysis, was illusory and non-existent.
84 The Berjaya companies' estoppel claim stands in a different light. Mr Ariff's representation induced in the Berjaya companies to which the 9 September 2004 letter was addressed an expectation that, as and when future remuneration was approved by the committees of inspection, Mr Ariff would draw that remuneration from Deed Fund No 1 and would refrain from resorting to other assets of the Carlovers companies. When the application determined on 25 September 2005 was in the course of preparation and the Berjaya companies were deciding their attitude to it, they must have had the representation of 9 September 2004 in mind. They were entitled to regard the first part of that application (involving what was really validation of the committee determinations that had miscarried) as advanced in fulfilment of the ineffective agreement previously made. More importantly, perhaps, they were entitled to regard the second part of the application (creating a regime under which the committees of inspection could, as to remuneration after 30 June 2004, validly and effectively do what they had purported to do in September 2004) as advanced by Mr Ariff in the knowledge of the representation of 9 September 2004. It must, in my view, be accepted that the Berjaya companies, in consenting to the second part of the application, were motivated by a well-based expectation that future determination of remuneration in accordance with the court-created regime would be subject to the very restraint, as to the method of satisfaction, that Mr Ariff had expressly acknowledged to the two Berjaya companies on 9 September 2004. And it must further be accepted that Mr Ariff knew when the Berjaya companies appeared on the hearing of the 2005 application that they were in that frame of mind as regards the subject matter of the representation made by him on 9 September 2004.
85 There was, on 9 September 2004, a representation by Mr Ariff as to his future conduct with respect to the drawing of remuneration approved by the committees of inspection. He must be taken to have had a reasonable expectation that the Berjaya companies' consent in 2005 to the creation by the court of an effective power for the committees to grant such approvals would be based on and encouraged by his previous representation. And it would be unconscionable for him now to depart from the representation, given the inducing role that it must be accepted as having played.
86 It may safely be inferred that, in the lead-up to the 2005 proceedings, Mr Ariff did nothing to warn the Berjaya companies that he intended to repudiate the 9 September 2004 representation. He allowed them to continue under the impression created by the letter of that date at the time it was given, as explained in the surrounding conversations, that is, that in return for Berjaya's co-operation at committee level in the matter of fixing his remuneration, Mr Ariff would confine himself to Deed Fund No 1 and not have recourse to other assets of the Carlovers companies.
87 The situation is thus one of promissory estoppel of the kind considered in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387. Equity will not permit Mr Ariff to act inconsistently with the representation in the 9 September 2004 letter.
88 It is significant that the Berjaya companies to which the letter was addressed account for 97% share ownership of the Carlovers companies and some 90% of the debts. An estoppel in their favour should be seen as favouring the shareholders and creditors as a whole, so that the unconscionability of departing from the representation is a matter affecting the general body of persons interested in the implementation of the deed of company arrangement. That being so, the remedial provisions of s 447A, designed to underwrite the integrity of Part 5.3A implementation, should be deployed to prevent any such departure.
89 The court accordingly makes a declaration and orders as follows:
1. Declare that Stuart Karim Ariff is estopped as against Berjaya Group (Cayman) Limited and Berjaya Group (Aust) Pty Ltd from claiming remuneration for work completed from 1 September 2004 to 1 November 2007 as administrator of the deeds of company arrangement of Carlovers Carwash Limited, Carlovers Carwash (Aust) Pty Limited, The Carwash Kings Pty Limited and Carlovers (Maroochydore) Pty Limited, other than from the bank account known as "The Deed Fund Number 1 Trust Account" held with the National Australia Bank and from having recourse to Carlovers Carwash Limited or Carlovers Carwash (Aust) Pty Limited for the payment of such remuneration.
2. Order pursuant to s 447A of the Corporations Act 2001 (Cth) that Pt 5.3A of that Act is to operate in relation to Carlovers Carwash Limited, Carlovers Carwash (Aust) Pty Limited, The Carwash Kings Pty Limited and Carlovers (Maroochydore) Pty Limited as if:
(a) any amount duly fixed as remuneration of Stuart Karim Ariff as administrator of the deeds of company arrangement of Carlovers Carwash Limited, Carlovers Carwash (Aust) Pty Limited, The Carwash Kings Pty Limited and Carlovers (Maroochydore) Pty Limited for the period 1 September 2004 to 1 November 2007 is to be paid from the bank account known as "The Deed Fund Number 1 Trust Account" held with the National Australia Bank; and
(b) to the extent that any amount duly fixed as remuneration of Stuart Karim Ariff as administrator of the deeds of company arrangement of Carlovers Carwash Limited, Carlovers Carwash (Aust) Pty Limited, The Carwash Kings Pty Limited and Carlovers (Maroochydore) Pty Limited for the period 1 September 2004 to 1 November 2007 exceeds the amount available in the bank account known as "The Deed Fund Number 1 Trust Account" held with the National Australia Bank, the said Stuart Karim Ariff is entitled to no recourse whatsoever to Carlovers Carwash Limited or Carlovers Carwash (Aust) Pty Limited for the payment of such remuneration.
3. Order that the defendant pay the plaintiffs' costs of the proceedings.
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