Onefone Australia Pty Limited & Ors v One.Tel Limited

Judgment 1Mr Paul Weston, the Special Purpose Liquidator ("SPL") of One.Tel Limited (in liquidation) ("One.Tel") seeks an order that his "unfunded" remuneration for the period 1 October 2011 to 9 March 2012 be referred to a registrar for assessment and quantification and the registrar report to the Court constituted by a judge the total amount that would be the proper remuneration for the SPL for that period. The reference to "unfunded" work is to work which has not been funded by a litigation funder, by contrast with "funded" work which has been funded by that funder in respect of certain proceedings sought to be initiated by the SPL. 2The SPL also seeks an order that, pending the determination of his remuneration by that process, he be paid an interim payment quantified as two-thirds of his claim for unfunded remuneration for the relevant period. The SPL also seeks an order that that payment be paid out of the assets of One.Tel within seven days, although Mr Glasson, who appeared for the SPL, indicated that the SPL would not object to that order providing for payment within a period of 14 days. The SPL offers an undertaking that, if the amount of remuneration determined for his work is less than the amount of the interim payment, he will repay the difference to One.Tel. 3The SPL's application is supported by an affidavit of the SPL which refers to various steps which have been taken by the SPL. The SPL's affidavit also refers to the existence of proceedings commenced by Singtel Optus Pty Limited on 19 March 2010 ("removal proceedings") which seek relief including his removal as SPL of One.Tel and indicates the present status of those proceedings. The SPL gives evidence of the rates at which his remuneration claim has been calculated, which are the same as those which have previously been approved by the Committee of Inspection ("COI") of One.Tel for the period of his work from 1 August 2008 to 30 April 2009 and fixed by the Court for the period 1 May 2009 to 31 December 2010. The SPL's affidavit exhibited a copy of his remuneration report for the relevant period. 4I was advised that the SPL had given notice, albeit only the business day before this application was listed before me, to members of the COI of the application and that such members had been represented at such applications in the past. The matter was called and there was no appearance in respect of this application by members of the COI. Application for Committee of Inspection's approval of unfunded remuneration 5The SPL had previously sought approval of his claim for remuneration from the COI, initially seeking to convene a COI meeting on 30 March 2012 which was then adjourned to 10 April 2012 and reconvened by telephone on 19 April 2012. At the telephone meeting on 19 April 2012, the majority of COI members present voted in favour of a resolution concerning payment of the SPL's funded remuneration for the relevant period. All three COI members who attended that meeting voted against a resolution to approve the SPL's unfunded remuneration. Two of the COI members indicated that they would not pass a resolution approving the SPL's unfunded remuneration even if he reduced his claim by a specified percentage in order to avoid the costs of making an application to the Court and the resulting delay in payment. The SPL advised members of the COI that he would be making an application to the Court to determine his unfunded resolution; one of the COI members present indicated that he agreed with a two-thirds interim payment (or at least an application to the Court for approval of such a payment) if the SPL's application to approve his unfunded remuneration was referred to a registrar for a report; a second COI member indicated she had a neutral stance and it was a matter for the SPL whether he sought an interim payment; and a third COI member indicated that he opposed an interim payment. Referral to the registrar 6In Onefone Australia v One.Tel Ltd [2008] NSWSC 1335 at [31], Barrett J observed that a liquidator has a: "clear entitlement to remuneration and a clear entitlement to have his or her remuneration fixed. There is no expectation that a liquidator will act gratuitously. The right to remuneration is not subject to negotiation or to discretionary withdrawal. The only question that can ever be contentious is the amount of the remuneration." The Court may determine a liquidator's remuneration under s 511 of the Corporations Act 2001 (Cth) where the process for approval of that remuneration under s 499(3) of the Corporations Act has failed or become unworkable or where a committee of inspection has stated that it is unable to approve that remuneration: Re Walker & Anor (as liquidators of One.Tel Ltd) [2005] NSWSC 557; (2005) 221 ALR 320; 189 FLR 467; Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822; Re One.Tel Ltd (in liq) (Unreported, Supreme Court of New South Wales, 14 March 2011, Ward J). 7In my view, that process for approval of the SPL's remuneration has failed in respect of the relevant period, given the views expressed by the COI at the meeting held on 19 April 2012. I consider that an order should therefore be made referring the SPL's application for remuneration to the registrar to deal with the details of assessment and quantification on the basis that he or she will report back to the Court constituted by a judge, who make then make an order under s 511 of the Corporations Act, consistent with the course previously taken in Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 at [80]. Approval of interim payment 8The Court may authorise an interim payment of remuneration under s 511 of the Corporations Act: Georges (liquidator); Re Sonray Capital Markets Pty Ltd (in liq) [2010] FCA 1371; Onefone Australia Pty Ltd v One.Tel Ltd (Unreported, Supreme Court of New South Wales, 22 February 2011, Barrett J) at [7]ff. Such an order is not made for payment "on account" of future remuneration and is instead an award of remuneration on the basis of an undertaking made by a liquidator to the Court that he or she will repay the excess if the overall assessment results in a total smaller than the interim amount. The SPL's evidence is that interest does not accrue on his remuneration while the determination of the amounts payable are pending, because no invoice is drawn for that remuneration until it is approved, and there is a cost to his firm in funding the costs of his administration involving payment of interest on the firm's facilities with its bankers. This factor strongly supports an order for interim payment pending the determination of the SPL's remuneration. 9However, a particular issues arises as to whether the removal proceedings generally, or the specific orders sought in them, have relevance to the application for an interim payment. Mr Glasson properly drew to my attention the fact that an order is sought in those proceedings that the SPL's costs of the removal proceedings not be paid by One.Tel and approximately 34% of the SPL's remuneration claim for this period is identified as relating to remuneration attributable to those proceedings. Other amounts relate to other strategy and legal matters which are not identified as relating to the removal proceedings. 10I do not consider that the existence of the removal proceedings is itself an impediment to making an interim order for payment of an appropriate proportion of the SPL's remuneration. The SPL contends that an order for his removal made in the removal proceedings would not impact on his entitlement to remuneration: City & Suburban Pty Ltd v Smith (1998) 28 ACSR 328 at 339. In Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120 at [23], Barrett J did not accept a submission made by members of the COI that the Court should not approve a remuneration application by the SPL because the removal proceedings were then pending, although I note that the remuneration then in issue related to periods prior to commencement of the removal proceedings. His Honour observed at [23] that: "There was, at an earlier stage, a submission that the remuneration questions should await the trial of pending proceedings in which an order for the removal of the special purpose liquidator is sought ... I do not regard that as an appropriate course. There is no clear connection between the two matters. The special purpose liquidator is entitled to have the assistance of the court in the matter of the quantification of his proper remuneration for past services regardless of the pendency of the other proceedings". His Honour later made an interim payment order in respect of two-thirds of that remuneration claim: Onefone Australia Pty Ltd v One.Tel Ltd (Unreported, Supreme Court of New South Wales, 22 February 2011, Barrett J). Three further orders for interim payments pending the Court's assessment by a registrar of the SPL's claims for remuneration were made by Ward J on 14 March 2011, by Hammerschlag J on 14 June 2011 and by Barrett J on 19 December 2011 in respect of periods which were in whole or in part after the commencement of the removal proceedings. 11However, I consider that the question whether the liquidator should be paid an interim payment of remuneration attributable to the removal proceedings raises a different question from whether he should be paid an interim payment generally. The liquidator's receipt of an interim payment of remuneration attributable to the removal proceedings is potentially inconsistent with the orders sought in those proceedings that he not be indemnified for the costs of them. I do not consider that the plaintiffs in the removal proceedings should be placed in a worse position by reason of that interim payment than they would have been had it not been made, if they are ultimately successful in obtaining an order that the SPL should not be entitled to remuneration in respect of the removal proceedings. In particular, such an interim payment should not be made in a way which leaves those persons to establish, in contested proceedings, a right to repayment of an amount of remuneration referable to the removal proceedings, if the Court holds (in the removal proceedings) that the SPL is not entitled to that payment in respect of that remuneration. 12Mr Glasson acknowledged, in submissions, the possibility that an interim payment could be conditional on the SPL offering an undertaking that he repay the amount of that interim payment attributable to his remuneration in the removal proceedings, if the Court were to find (in the removal proceedings) that he was not entitled to such remuneration, although Mr Glasson indicated he did not have instructions as to that matter. I consider that an order for interim payment should only be made in respect of the SPL's remuneration referable to the removal proceedings if the SPL is prepared to offer such an undertaking. If the SPL does not wish to offer that undertaking, I would propose to make an order for interim payment excluding his remuneration referable to the removal proceedings. Orders 13I will, subject to the SPL by his Counsel offering the undertakings noted below, make the orders set out below.