(2009) 71 ACSR 250
- Correa v Whittingham (No 3) [2012] NSWSC 526
(2012) 267 FLR 120
- Re Dominion Insurance Company of Australia Ltd (subject to Scheme of Arrangement) [2013] NSWSC 898
Source
Original judgment source is linked above.
Catchwords
(2009) 71 ACSR 250
- Correa v Whittingham (No 3) [2012] NSWSC 526(2012) 267 FLR 120
- Re Dominion Insurance Company of Australia Ltd (subject to Scheme of Arrangement) [2013] NSWSC 898
By judgment delivered on 16 July 2015 ([2015] NSWSC 937) ("Judgment"), I held that Mr Warwick Keneally had not been validly appointed as administrator of Australian Blue Mountain International Cultural & Tourist Group Pty Limited ("Company").
I referred in paragraph 125 of the Judgment to a submission of Mr Pritchard, who appears for Mr Keneally, as to the availability of a claim for remuneration by Mr Keneally on a quantum meruit basis and noted that Mr Pritchard had referred to relevant authorities, including 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) 71 ACSR 250; Correa v Whittingham (No 3) [2012] NSWSC 526; (2012) 267 FLR 120 at [224] (which was reversed on appeal, but without criticism of that paragraph, and where the matter was returned to the trial Judge for determination of a quantum meruit claim) and Re Lime Gourmet Pizza Bar (Charlestown) Pty Ltd (formerly under administration) [2015] NSWSC 244. Mr Pritchard also there noted that an administrator could establish a claim for remuneration on that basis where work was done of incontrovertible benefit to the relevant company: Re Dominion Insurance Company of Australia Ltd (subject to Scheme of Arrangement) [2013] NSWSC 898; (2013) 276 FLR 338 at [43] (dealing with an invalidly appointed liquidator). I put aside, for present purposes, a possible alternative basis for a claim for quantum meruit based on the concept of implied request, which was not put by Mr Keneally.
Directions were subsequently made to crystallise the issues in respect of Mr Keneally's quantum meruit claim, as between Mr Keneally, the Company (which is no longer represented in the proceedings) and Ms Lam, the Applicant for Mr Keneally's removal. There is evidence that the documents which were relied on by Mr Keneally in this application have been served on the Company, which was for a time represented by solicitors, who then ceased to act for it, and the matter was called today and the Company has not appeared.
Mr Keneally now seeks orders, to which Ms Lam consents, without admissions, that judgment be entered against the Company in favour of Mr Keneally in the amount of $108,374.15 in respect of his quantum meruit claim for remuneration, costs and disbursements. Mr Keneally accepts that the balance of his quantum meruit claim would then be dismissed. The Court is asked to note that Mr Keneally has received the benefit of $70,318.57 from the Company's funds, and would only be entitled to receive the further amount of $38,055.58 from the Company in respect of the orders that are sought. Mr Pritchard points out, and I understand it to be common ground, that the amount of $70,318.57 referred to relates to amounts which have been dispersed by Mr Keneally to third parties from the Company's funds, and not amounts paid to him by way of remuneration.
It should be noted that the orders now sought by Mr Keneally, and consented to by Ms Lam, involve a significant element of compromise, so far as Mr Keneally seeks orders for substantially less than he had originally claimed, by way of either his actual costs and disbursements, or the amount of his entitlement on a quantum meruit basis, and the Company would pay more than Ms Lam had originally acknowledged could properly be recovered by Mr Keneally. In order to make the relevant orders, where the Company does not consent to them and has not appeared, the Court must be satisfied that the amount claimed is properly recoverable by Mr Keneally, and cannot make those orders simply by consent as between Mr Keneally and Ms Lam as a shareholder in the Company.
The application is supported by a detailed affidavit of Mr Keneally dated 2 October 2015, which sets out the history of the administration and refers to work that would ordinarily have been done by administrators, including investigation of the Company's affairs and potential recoveries, reporting to creditors and seeking to preserve, control and ascertain the value of the Company's assets, including its property. I pause there to note that the fact that work would ordinarily be done in respect of an administration, where there is a finding that an administrator has not properly been appointed, is unlikely in itself to be sufficient to establish that work is of incontrovertible benefit to the relevant company. However, it is plain that there are some categories of work, which may be done by an administrator who is improperly appointed, which would be of incontrovertible benefit to the relevant company. The most obvious example, and one which occurs in this case, is where steps would prudently have been taken by that company or its officers or by third parties on its behalf to maintain the property of the company, and those steps are taken by an administrator, particularly if the company would likely have paid a third party to undertake that work if the administrator had not in fact undertaken it.
Mr Keneally's evidence is that, at the date of the determination he had not validly been appointed as administrator, he and his team had incurred total costs and disbursements in the amount of $362,368.65 in respect of the administration, as to which he initially claimed, by way of quantum meruit, the amount of $176,660.75. That amount was divided in two categories. The first category related to banking and processing receipts and payments, insurance, investigation of certain misappropriation allegations, which had been raised prior to the administration, reporting and maintenance and risk management as to the Company's property, and also to a valuation of the Company's property. These claims were of differing strengths, so far as the claim to, for example, banking and processing receipts would very likely have related to work which the Company would have had to do in the ordinary course of its business, and the maintenance of insurance and risk management as to its property, and potentially the valuation of its property, are matters that would have conferred benefits upon the Company. The question whether the investigation of the misappropriation allegations would have fallen within the same category was potentially more controversial, and may have depended upon the weight which should have been given to those allegations, although it might be noted that even in the ordinary course, one would expect that a company would not simply ignore such allegations if they were made against one of its officers.
A second category of claims, relating to meetings and correspondence with the directors of the Company and their advisers and facilitating settlement discussions was open to greater dispute, given the issues which I had canvassed in my judgment as to whether such activities were likely to benefit the Company, or were exposed to a significant risk of failure, and where those activities had failed to give rise to a settlement in the result.
Mr Keneally's affidavit also contains detailed evidence as to the work which had been undertaken, by way of a work in progress ledger summarising the work done, the persons who had undertaken it, the time spent and the charge-out rate for that work.
In the event, matters have moved on, by the efforts of the parties and their advisers, since Mr Keneally's original claim by way of quantum meruit. By subsequent correspondence, Ms Lam initially accepted that Mr Keneally was entitled to a payment in the amount of $32,139.92 by way of quantum meruit. She subsequently revised that position, after further information had been provided to her, to accept that Mr Keneally was entitled to a claim by way of quantum meruit in the amount of $82,414.65. Mr Keneally's affidavit in turn breaks down the claims between the various categories of work undertaken, and Ms Lam has indicated that she accepts his claim in respect of particular categories of work as having given rise to an incontrovertible benefit to the Company, including banking, insurance, risk management and property maintenance, leaving a dispute, prior to the compromise which has now been reached, in respect of the investigation, valuation, meetings and correspondence and negotiations. I am satisfied, on the evidence of Mr Keneally and the other evidence to which I will refer below, that Ms Lam was correct to have said that those categories of work which she has accepted were properly recoverable by Mr Keneally on a quantum meruit basis. The result of that finding is that Mr Keneally is at least entitled to recover the amount of $82,414.65 which Ms Lam has accepted on that basis.
In respect of the balance of Mr Keneally's claim, it is sufficient to note that the remuneration, cost and disbursements which are now sought to be ordered, by the orders sought by Mr Keneally and consented to by Ms Lam, could properly be ordered so long as the Court is satisfied that an additional amount exceeding $29,959.50 is properly recoverable within the other categories claimed by Mr Keneally. It seems to me to be plain that, even wholly excluding time referable to Mr Keneally's unsuccessful attempt to promote a resolution between the shareholders, a part of the work done relating to investigation, valuation, meetings and correspondence would provide a benefit to the Company, in the sense noted above, by way of work that would have needed to be done by the Company or service providers to it, if it had not been done by Mr Keneally, and the value of that amount of work would exceed the additional amount of remuneration, costs and disbursements which are sought in the relevant orders.
I note that Mr Keneally's application is also supported by an affidavit of Mr Li, who also deals with the work which has been done in respect of the investigation. There is other evidence, which I need not summarise, which goes to establish service upon the Company.
Mr Pritchard identifies several matters which he submits support the orders sought. The matters to which Mr Pritchard refers include the fact that the amount of Mr Keneally's claim is now consented to by Ms Lam. Mr Pritchard points out that the claim is not opposed by the Company, notwithstanding service upon it, although I give less weight to that matter where I may properly infer that there are current difficulties with the Company's management, given the differences between its shareholders. Mr Pritchard points out, and I give weight to, the fact that the amount of the claim represents a significant compromise on the full amount of Mr Keneally's original claim, and I have referred above to the level at which the Court would need to be satisfied to make the orders sought. Mr Pritchard points out that the amount of the claim would be justified, in large part, by reference to disbursements alone. Mr Pritchard also points out, and I give considerable weight to the fact that, the evidence of Mr Keneally and Mr Li in respect of the work done is not contested.
There is a question, which I do not need to determine for the purposes of the present application, whether or not the Court has made findings against Mr Keneally in the judgment of the Court. That is a matter that is properly deferred, to the extent that it remains open, to be addressed in respect of the question of costs.
Mr Pritchard also points out, and I accept, that at least some of the work done is plainly for the incontrovertible benefit of the Company, in the context of the Company's particular assets, and I have referred above to the principles which are to be applied in determining that question. I would not necessarily accept Mr Pritchard's further proposition that the work done, and claimed in respect of shareholder negotiations, should also be treated as giving rise to an incontrovertible benefit to the Company, but it is not necessary to determine that matter, where it is not necessary for Mr Keneally to rely on those matters to support the amount for remuneration, costs and disbursements now sought.
I give weight to the detail of evidence led in support of the application, which is not contested, and to the fact that Ms Lam has an obvious economic interest which is aligned with the interests of the Company, and that her consent to the orders sought provides a basis for inferring that the Company's interests are also served by the compromise which is proposed. I also have regard to the fact that that compromise has benefit to the Company, so far as it avoids the risk that an order for a significantly larger amount could have been made against it, had Mr Keneally been successful in the entire claim which he had sought.
For these reasons, I am satisfied that I may properly make the orders sought by Mr Keneally, by consent as between Mr Keneally and Ms Lam, and without admissions. Accordingly I make orders in accordance with the short minutes of order initialled by me and placed in the file.
I also make a further order that the second day of the hearing presently allocated to the question of costs, on 16 December 2015, be vacated, by agreement of the parties. I make a further order that the exhibits be returned.
[3]
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Decision last updated: 01 March 2016