Onefone Australia Pty Ltd v One.Tel Ltd

LEGISLATION CITED : Corporations Act 2001 (Cth) ss 499(3), 511(1)(a)

Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290 CASES CITED : Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822 Re Walker & Anor (as liquidators of One.Tel Ltd [2005] NSWSC 557; (2005) 54 ACSR 11

Onefone Australia Pty Limited - First Plaintiff DCA Resources Australia Pty Limited - Second Plaintiff Pacific Finance Group Pty Limited - Third Plaintiff PARTIES : Concept Systems (Australia) Pty Limited - Fourth Plaintiff One.Tel Limited (in liquidation) - First Defendant Steven Sherman - Second Defendant Peter Walker - Third Defendant Paul Gerard Weston - Applicant

SOLICITORS : O'Neill Partners Commercial Lawyers - Applicant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

5291/03 ONEFONE AUSTRALIA PTY LIMITED & 3 ORS v ONE.TEL LIMITED & 2 ORS; APPLICATION OF PAUL GERARD WESTON JUDGMENT 1 I am dealing with a renewed application of the special purpose liquidator of One.Tel Limited concerning his remuneration. 2 In this case of a creditors voluntary winding up that commenced before the advent of the Corporations Amendment (Insolvency) Act 2007 (Cth) on 31 December 2007, the fixing of a liquidator's remuneration is governed by s 499(3) of the Corporations Act 2001 (Cth) as it stood before that date: "The committee of inspection, or, if there is no such committee, the creditors, may fix the remuneration to be paid to the liquidator." 3 In the present case, there is a committee of inspection, so that it alone has the power conferred by s 499(3). 4 The special purpose liquidator made an application in August last in respect of his remuneration. The circumstances were described as follows in the judgment of 17 August 2009 (Onefone Australia Pty Ltd v One.Tel Ltd [2009] NSWSC 822 at [1] to [4]: "The special purpose liquidator of One.Tel Limited makes application under s 511 of the Corporations Act 2001 (Cth) in relation to a question which he considers to have arisen in the winding up of that company.

The question concerns the quantum of the special purpose liquidator's remuneration for the period 1 May to 30 June 2009.

Under s 499(3) of the Corporations Act , the function of fixing remuneration in this creditors' voluntary winding up is vested in the committee of inspection (the version of s 499(3) relevant for present purposes is that existing immediately before 31 December 2007: see Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290 at [32]). The court has no power to fix remuneration, but it has been held in earlier cases (see, for example, Re Walker & Anor (as liquidators of One.Tel Ltd [2005] NSWSC 557; (2005) 54 ACSR 11) that, if the machinery created by s 499(3) breaks down and proves unworkable, then a question within the meaning of s 511 arises and the court may answer that question.

It is the contention of the special purpose liquidator that the s 499(3) machinery has broken down and proved unworkable in respect of remuneration for the period to which I have referred." 5 That application was adjourned because the court was not satisfied that a question within s 511(1)(a) had at that stage arisen. I quote from paragraphs [7] to [10] of the judgment: "I am not satisfied that, in these circumstances, the statutory machinery can be seen to have broken down and proved unworkable in the way that is necessary for resort to s 511 to be appropriate. On the evidence, there was some discussion at a meeting, two issues of concern were raised, some oral explanation was given about one of them but, as I have said, it is not clear that any explanation was given about the other. That is not a sufficient foundation for the special purpose liquidator to approach the court under s 511.

There must be interaction and debate. If the committee of inspection requests further information or explanation, the special purpose liquidator ordinarily ought to provide that.

If the committee of inspection needs time to consider the explanation, that time should be granted.

There cannot be, as it were, automatic resort to s 511 just because something is put up and not passed at a single meeting. That is insufficient. This is particularly so when the fact that three out of the four members of the committee abstained from voting may well be taken to indicate that they did not consider themselves to be in a position to make a properly informed decision." 6 The special purpose liquidator now presses the application advanced under s 511 by reference to the approach taken in Re Walker & Anor (as liquidators of One.Tel Ltd [2005] NSWSC 557; (2005) 54 ACSR 11. He has put further evidence before the court. That evidence shows that the necessary interaction and debate have been exhausted and the s 499(3) process has indeed broken down. 7 The committee of inspection says, in relation to certain matters, that it cannot judge whether work said to have been done by the special purpose liquidator has been reasonably undertaken, in the sense of being fairly incidental to the functions confided by the court to the special purpose liquidator. The relevant aspects concern correspondence and discussions between the special purpose liquidator and potential litigation funders. 8 A view apparently espoused by the committee of inspection is that if, as appears to be the case, the potential funders are unwilling to commit until they have been able to assess the judgment yet to be delivered in the ASIC v Rich case, the special purpose liquidator should have adopted a "pens down" approach to that aspect of his work pending delivery of that judgment. For that reason, coupled with the special purpose liquidator's unwillingness to make the committee privy to his correspondence and discussions with the potential funders, the committee says that it has no reliable basis for assessing the special purpose liquidator's remuneration for the period in question. 9 There is no reason why the special purpose liquidator should share with the committee of inspection the detailed information the committee seems to think that it needs. Nor is there any apparent need for the special purpose liquidator to adopt a "pens down" attitude to any part of his function if he sees that there is some part of that aspect that requires attention. 10 I had occasion in an earlier judgment to review the functions of a committee of inspection in a creditors voluntary winding up: see Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; (2008) 69 ACSR 290. Such a committee has a statutory role to play in the fixing of remuneration but it has no power to direct a liquidator; nor is the liquidator bound to have regard to any directions the committee gives. 11 In the present context, it is the special purpose liquidator's responsibility to perform the functions he has been given. This may well entail decisions that his administration is best conducted by not consulting with the committee on certain matters or delaying consultation until some appropriate time. The committee cannot complain about that. It is not some kind of supervisor whose consent must be obtained. But, of course, the committee may, in such circumstances, decide that its ability to make a proper assessment of remuneration is removed by absence of knowledge of relevant matters. 12 This is what has happened here. A confidential annexure to Mr O'Neill's affidavit of 2 November 2009 (being a letter of 23 October 2009 from O'Neill Partners Commercial Lawyers, solicitors for the special purpose liquidator, to Baker & McKenzie, solicitors for the committee) sets out the general nature of matters and issues discussed in the course of the communications with potential funders to which I have referred. There is no apparent reason why the special purpose liquidator should have thought it necessary or appropriate to consult with the committee of inspection about his communications with potential litigation funders on those matters. It is clear, nevertheless, that the subject matter of the discussions as there described was within the proper scope of the special purpose liquidator's functions. 13 Impasse on the remuneration question was complete when the committee, through its solicitors, said on 30 October 2009 that, without seeing the actual communications between the funder and the special purpose liquidator (and his solicitors), there was insufficient information to enable the committee to approve the outstanding remuneration or to agree to a proposition stated on behalf of the special purpose liquidator that his belief that he was confident of securing funding is based on reasonable grounds. 14 The committee sought, it seems, to investigate or question the special purpose liquidator's belief that he had reasonable grounds for being confident that litigation funding would be obtained. In addition, the committee seems to have thought that its inability to verify the existence of such grounds had something to do with its function of fixing the special purpose liquidator's remuneration. 15 Pursuit of litigation funding forms part of the function that has been given to the special purpose liquidator by the court. It in no way forms part of the function of a committee of inspection. Steps the liquidator takes in that direction are within the proper province of his administration; and this is so whether or not the committee of inspection thinks that the task should have been approached in some other way or should have been deferred or does not share the confidence that the special purpose liquidator may have that a favourable outcome will be achieved in relation to a particular funding proposal - a proposal, moreover, in which the committee cannot expect or be expected to have any direct involvement. 16 The remuneration relevant to the application before me is for the period 1 May 2009 to 30 June 2009. The amount claimed is $61,502.98 (inclusive of GST). I am satisfied that, in the circumstances I have related, a question has arisen in the winding up which it is appropriate for the court to determine under s 511, that is, whether, in the absence of any determination by the committee of inspection under s 499(3) and in the face of the expressed inability of the committee to make such a determination, that sum should be paid to the special purpose liquidator as remuneration for that period. 17 Having regard to the evidence presented by the special purpose liquidator in his affidavit of 14 August 2009 and the explanation in the letter of 23 October 2009 to which I have referred, I am satisfied: (a) that the tasks listed in the three pages of narration in the WIP report 1 May to 30 June 2009 annexed to Mr Weston's affidavit are tasks within and relevant to the due performance of functions of the special purpose liquidator; (b) that that conclusion is strengthened and confirmed by the letter of 23 October 2009 from O'Neill Partners Commercial Lawyers to Baker & McKenzie; and (c) that the charge-out rates applied to the several items are reasonable. 18 The question that has arisen in the winding up is therefore answered: "The remuneration of Paul Gerard Weston, as special purpose liquidator of One.Tel Limited, for the period 1 May 2009 to 30 June 2009 is fixed in the sum of $61,502.98 (including GST) and Steven John Sherman and Peter John Walker, as liquidators, are justified in paying that remuneration out of funds available in the winding up." 19 In addition, I order that the proper costs and expenses of Paul Gerard Weston, as special purpose liquidator, of and incidental to this application be paid out of funds available in the winding up. **********

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