In the matter of Ansett Australia Limited and Hall [2002] FCA 10

REASONS FOR JUDGMENT 1 On 12 and 14 September 2001, the plaintiffs, Messrs Peter Hedge, Gregory Hall and Allan Watson ("the first administrators"), members of the firm of chartered accountants PricewaterhouseCoopers ("PwC"), were appointed administrators of Ansett Australia Limited, the other companies set out in the Schedule to these reasons ("the Ansett group") and Hazelton Air Charter Pty Limited, Hazelton Airlines Limited, Hazelton Air Services Pty Limited ("the Hazelton companies"), in accordance with the provisions of Pt 5.3A of the Corporations Act 2001 (Cth) ("the Act"). 2 On 17 September 2001, the Court ordered that Mark Francis Xavier Mentha and Mark Anthony Korda, members of Andersen, Chartered Accountants, ("the second administrators") be appointed joint and several administrators of the Ansett group other than the Hazelton companies, and that Michael James Humphris be appointed administrator of the Hazelton companies, with effect from the time that the first administrators gave notice in writing of their resignation as administrators of the Ansett group. That notice was given on 17 September 2001 and, thereupon, the second administrators were appointed administrators of the companies in the Ansett group and Mr Humphris was appointed administrator of the Hazelton companies. 3 The first administrators have filed an application with the Court seeking an order pursuant to ss 447A(1) and 449E(1)(b) of the Act that the Court fix the remuneration to which they are entitled up to 17 September 2001. The first administrators also seek an order pursuant to s 447A(1) that Pt 5.3A of the Act is to operate in relation to each of the companies of which they were administrators as if the reference in s 449E(1)(a) to "a resolution of the company's creditors" were a reference to a resolution of "the Committee of Creditors" of each of those companies. 4 On 12 November 2001, the day prior to the first administrators filing their application for the Court to fix their remuneration, the second administrators filed an application seeking an order that the Court fix the remuneration of both the first administrators and the second administrators. I reached the conclusion that, upon the proper construction of s 449E, the Court could only fix the remuneration of an administrator upon an application made by that administrator to the Court to fix his or her remuneration: In the matter of Ansett Australia Limited and Mentha [2002] FCA 1. 5 I was not then disposed to continue with the application by the second administrators for the fixing of their remuneration until I knew whether the first administrators would apply themselves to have their remuneration fixed. I wanted to ensure that if such an application was made, both applications would be heard at the same time as issues of duplication of work might arise for consideration. 6 I therefore adjourned the hearing of the second administrators' application to fix their remuneration to the following day. The first administrators then filed the application in this proceeding and an affidavit referring to the work carried out by the first administrators and the circumstances under which they came to resign as administrators. I was able to hear both applications at the same time. 7 According to Mr Hall, one of the first administrators, the first administrators met with Mr Greg Combet, the secretary of the Australian Council of Trade Unions ("the ACTU") on two occasions on 16 September 2001. They discussed the rates PwC would charge for undertaking the administration. I will return to this issue. They also discussed PwC's involvement with Air New Zealand Limited and Ansett. Mr Combet told Mr Hall that the unions wanted to change administrators because of a lack of response to some of the requests the unions had made to the first administrators and because of a perception that PwC had a relationship with Air New Zealand Limited which gave rise to a perception of conflict. 8 Mr Hall investigated the issue of a conflict as a result of the relationship between PwC New Zealand and Air New Zealand Limited. PwC New Zealand is a separate firm from PwC Australia. Mr Hall ascertained that PwC had provided some advice to Air New Zealand Limited in relation to Ansett. The advice was independent of PwC Australia which had no access to the advice provided. The first administrators formed the opinion that there was no conflict with PwC Australia acting in the administration of the Ansett group. 9 However, it was apparent to the first administrators from what Mr Combet had said that the unions would not vote in favour of the appointment of the first administrators on 18 September 2001 at the meeting convened pursuant to s 436E of the Act, but would rather move to appoint new administrators. Mr Hall had been told that the unions had approached the firm Andersen, who had agreed to act as administrators. The first administrators formed the opinion that any dispute over their role would cause uncertainty and delay and would not be in the interests of creditors and that they could not run an effective administration without the support of the unions. 10 Accordingly, the first administrators decided to resign in the interests of creditors and in order to ensure a smooth transition in the administrations from the first administrators to the second administrators. Notices of resignation were served on the various companies in the Ansett group between 7.49pm and 8.02pm on 17 September 2001. 11 The administration of the Ansett group is still continuing and, at the date of the hearing, it was expected that the administration would continue for a further two months or thereabouts. That position has not changed. 12 In compliance with s 436E of the Act, a meeting of the creditors of each of the companies in the Ansett group was convened for 18 September 2001 and, on that date, creditors of each company resolved to appoint a Committee of Creditors of each of the companies and the members of each Committee were appointed. Creditors of the companies in the Ansett group number at least 16,000, without taking into account the holders of frequent flyer points and the members of the Golden Wing scheme. 13 The time for the convening of the meetings of the creditors of the Ansett group pursuant to s 439A of the Act has been extended to 22 January 2002. It is at those meetings that the creditors are entitled to resolve either that the companies execute a deed of company arrangement, or that the administration should end, or that the companies be wound‑up: s 439C. The second administrators propose to convene those meetings so that they can be held on 29 January 2002. 14 The entitlement of the first administrators to have their remuneration fixed by the creditors of the companies in the Ansett Group or by the Court is found in s 449E which provides: "(1) The administrator of a company under administration, or of a deed of company arrangement, is entitled to: (a) such remuneration as is fixed by a resolution of the company's creditors passed at a meeting convened under section 439A, or under section 439A or 445F, as the case may be; or (b) if no remuneration is so fixed - such remuneration as the Court fixes on the application of the administrator. (2) Where remuneration is fixed under paragraph (1)(a), the Court may, on the application 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) Subsection (2) has effect despite section 437C." Subsections (2) and (3) are not relevant for present purposes. 15 For the reasons given in my reasons for judgment on the second administrators' application to have their remuneration fixed for the period from 17 September 2001 to 15 October 2001: In the matter of Ansett Australia Limited and Mentha [2002] FCA 1, I am satisfied that it is appropriate to fix the first administrators' remuneration prior to the holding of the meeting of creditors convened pursuant to s 439E of the Act. The first administrators and their staff undertook a substantial amount of work, and it is appropriate that the first administrators obtain their remuneration, having regard to the time that will elapse between the cessation of their period as administrators and the holding of the meeting convened under s 439A of the Act. 16 The material placed before the Court by the first administrators and the second administrators satisfies me that no significant issue has arisen relating to duplication of work which impinges upon the first administrators' claim for remuneration. At the time the first administrators resigned and the second administrators' appointment took effect, they entered into a transition agreement whereby the first administrators agreed to co‑operate with the second administrators to provide for an orderly hand‑over of the Ansett group's affairs. The agreement provided that work performed by the first administrators after their resignation would be the subject of a separate engagement pursuant to which the administrators agreed to pay the first administrators for the work they carried out at their hourly rates. The scope of the work was to provide access to all staff who had been involved in the administration and to provide, as requested, professional staff to assist the second administrators' staff in the conduct of the administration. 17 The first administrators and their staff continued to work after their resignation to complete work already commenced, and to provide assistance and advice which would assist with an orderly transition of the administration to the administrators. The second administrators said that one of the reasons the first administrators were retained as consultants after their resignation was to minimise the risk of duplication of work by the administrators. 18 The second administrators agreed to reduce the hourly rates to be charged by them and their staff below Andersen's standard or usual hourly rates. Those rates are approximately 35% lower than the standard rates, partly in recognition of the fact that there could be duplication of work as a result of the change in administrators. It has not been possible for the second administrators to estimate the extent to which there may have been duplication of work, but they believe that the combination of the transition agreement and the reduced hourly rates effectively eliminated any cost of duplication. The nature of the administration is such that a certain amount of duplication of work has been inevitable, but the arrangements made between the first administrators and the second administrators were designed to minimise the extent of any duplication. 19 The first administrators rendered an account to the second administrators for remuneration for the period 12 September 2001 to midnight on 17 September 2001, seeking remuneration of $1,084,180.30 plus GST of $108,418.03 and seeking the payment of expenses of $92,084.99 plus GST of $9,208.50. They also rendered an account for consulting services provided to the administrators for the period from 18 September 2001 to 30 September 2001 in the sum of $260,579.30 plus GST of $26,057.93. 20 The claim for remuneration by the first administrators to be considered on this application is the claim for $1,084,180.30. The expenses incurred of $92,084.19 do not need to be the subject of an application by the administrators as they are expenses incurred in the administration and are payable by the Ansett group in accordance with ss 443A(1) and 443D of the Act. The fees charged for consulting services rendered during the period from 18 to 30 September 2001 do not have to be fixed by the Court or the creditors as they are expenses incurred in the administration by the second administrators payable in accordance with ss 443A and 443D of the Act. Those consulting fees are not, therefore, the subject of any application for approval or fixing by the Court and do not have to be the subject of any further consideration. 21 I turn to the work undertaken in the administration by the first administrators. At one of the meetings with Mr Combet on 16 September 2001, the first administrators informed Mr Combet of the rates per hour they would charge for the work undertaken in the administration. Those rates were discounted from PwC's normal rates and were agreed to by the ACTU. Mr Hall said that the ACTU agreed to those rates. 22 From 12 to 17 September 2001, the first administrators carried out work in the administration with a team of in excess of 170 PwC staff. Each person involved in the administration prepared detailed timesheets recording the number of hours worked per day and a brief description of the work carried out. A summary of the individual staff hours worked was produced to the Court. Mr Hall said that the work undertaken was necessary and properly undertaken for the purpose of the administration. I accept that evidence. 23 A meeting of the Committees of Creditors of the companies in the Ansett group was held on 31 October 2001 at which the members of the Committees were presented with details of the remuneration claimed by the first administrators and the second administrators. All but seven members of the Committees were present at the meeting, either in person or by their nominated representatives. Of the seven members not present, the Qantas representative was excluded, and two members were based in Canberra, but a least one of those members participated in the meeting by telephone hook‑up. 24 The second administrators proposed a resolution that the remuneration claimed by the first administrators and the second administrators be approved for payment, subject to the obtaining of Court approval, and that the second administrators be authorised to apply to the Court for approval to enable the Committees of Creditors to approve further remuneration from time to time. None of the members of the Committees present objected to the resolution and it was passed without abstention. 25 The Committees of Creditors were only provided with an agenda for the meeting on the day of the meeting. The agenda referred to "Administrators' Remuneration". But no details of the remuneration claimed or documents relating to it were circulated to the members of the Committees before the meeting. 26 In my reasons for judgment on the second administrators' application to fix their remuneration: In the matter of Ansett Australia Limited and Mentha [2002] FCA 1, I concluded that the Committees of Creditors were not given sufficient information within a suitable time before the meeting to consider the resolution which was passed. I therefore did not place as much weight on the resolution as I would in circumstances where adequate details of the remuneration claimed were provided to members of the Committees of Creditors a sufficient time before the meeting to enable them to consider and, if thought appropriate, obtain advice on the remuneration claimed by the second administrators. 27 Nevertheless, the Committees of Creditors were given the opportunity to challenge or query the remuneration claimed. They did not do so and I am disposed to fix the remuneration of the first administrators in the amount claimed, having regard to the material in support of that claim placed before the Court. The Committees of Creditors were given a power point presentation of the claims for remuneration and were informed that the time charged by the first administrators after 17 September 2001 was to cover the transition of the administration from the first administrators to the second administrators. The second administrators informed the meeting of the hourly rates charged by the first administrators and the second administrators and a representative of the Transport Workers Union said that the Union had previously said it was satisfied with PwC's hourly rates. 28 The first administrators have claimed remuneration of $1,084,180.30 for the period from 12 September 2001 to 17 September 2001 in respect of their administration of the Ansett group. That amount comprises remuneration in respect of the administration of various companies in the Ansett group. It has been calculated by the first administrators on a daily basis in relation to the particular companies in respect of which administration work has been undertaken. The first administrators' assessment is that the remuneration has been calculated as follows: Ansett Holdings Limited $735,454.40 Ansett Australia Limited 111,807.10 Ansett Australia Holdings Limited 9,505.00 Ansett International Limited 6,143.50 Aeropelican Air Services Pty Ltd 1,516.40 Kendell Airlines (Aust) Pty Ltd 12,570.10 Skywest Airlines Pty Ltd 9,001.40 South Centre Maintenance Pty Ltd 5,028.60 Show Group Pty Ltd 23,789.40 Traveland International (Aust) Pty Ltd, Traveland International Pty Ltd, Traveland New Staff Pty Ltd and Traveland Pty Limited 114,099.80 Ansett Air Cargo 54,844.60 510 Swanston Street Pty Ltd 420.00 $1,084,180.30 29 I am disposed to accept this assessment, subject to clarification of the amount claimed in respect of Ansett Air Cargo as no company under that name appears in the schedule of companies in the Ansett group under administration attached to the application. Subject to that clarification, an order fixing the remuneration of the first administrators will be made in accordance with the first administrators' assessment. 30 As it is appropriate to fix the remuneration of the first administrators prior to the convening and holding of a meeting of creditors under s 439A, I propose to order pursuant to s 447A(1) of the Act that s 449E(1) so operates as to allow this to occur. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg.