Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia

Federal Court of Australia|2012-09-06|Before: Flick J

REASONS FOR JUDGMENT 1 The present proceeding was commenced on 23 December 2008 by the filing of an "Application Under Pt IVA of the Federal Court of Australia Act 1976". A Statement of Claim was also filed on that date. 2 On 25 March 2011 reasons for decision were given approving a settlement: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277. Orders were made on 14 April 2011 and entered on 11 May 2011. 3 A number of applications were thereafter made seeking approval for the payment of fees incurred in respect to the administration of the Scheme giving effect to the settlement. In April 2012 approval was given for the payment of $175,563.44: Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 13) [2012] FCA 370. The "potential importance" of that decision was there stated to be that it was then anticipated that it was to be the "last application". That hope was not fulfilled. Now before the Court is a further application seeking the further approval for the payment of $95,792.57. 4 Barring any further unforeseen event within the next four weeks, this will be the last application. The final distribution of monies, the Court is informed, will take place on Friday 7 September 2012. The liberty previously reserved to the administrator to approach the Court seeking the payment of further monies pursuant to cl 10.1.2 is to be revoked as from 5 October 2012. 5 The sum now claimed in the present Interlocutory Application of $95,792.57 is comprised of the following amounts: Fees Amount (incl GST) Additional MS Invoice (Moore Stephens) $5,589.10 Scheme termination fee (Moore Stephens) $22,324.50 Supplementary Invoice (McLachlan Thorpe) $22,483.30 July Invoice (McLachlan Thorpe) $14,779.92 Estimate of Further Administration Costs (McLachlan Thorpe) $21,045.75 Joseph Mazzeo $5,390.00 Counsel $4,180.00 Total $95,792.57

The sums now claimed thus seek approval (inter alia) for the further payment of $27,913.60 to Moore Stephens and approval for the further payment of $58,308.97 to McLachlan Thorpe Partners. Each of these amounts relate to the finalisation and distribution of settlement monies to Group Members in April 2012 and the costs associated with this Application. 6 Each of these individual amounts is the subject of evidence and each has been reviewed. 7 The claim for $5,589.10 payable to Moore Stephens was incurred in respect to additional work undertaken which was not the subject of an earlier approval for the payment of $6,957.50. Moore Stephens are the external accountants retained to give accounting and tax advice. The additional work undertaken was not anticipated as at the date of the earlier approval. The amount claimed is separately itemised in its fee account rendered on 30 June 2012, which may be summarised as follows: Preparation of income tax return $400.00 Additional costs in connection with the RRS distribution calculations 425.00 Attending to ATO review of BAS statement 1,655.00 Reviewing distribution advice 1,150.00 Reviewing distribution worksheets and analysis for a group member 1,190.00 Reviewing distribution statement 225.00 Disbursements 36.00 5,081.00 GST 508.10 $5,589.10

"RRS" refers to "Residual settlement scheme". 8 The claim for $22,324.50, also payable to Moore Stephens, represents fees to be incurred in respect to the termination of the scheme, comprising: Scheme termination fee $19,395.00 GST 1,939.50 Filing of BAS statement GST 900.00 90.00 $22,324.50

Mr Rosenstrauss, a tax advisor employed as an associate in the Taxation Advisory Group of Moore Stephens, has filed an affidavit explaining the reason why the Scheme Termination Fee is higher than the amounts that were previously estimated in March 2012. The explanation provided included the following summary: As a result of the work previously undertaken by Moore Stephens and the understanding of the issues that are likely to arise, the following work, which had previously not been anticipated, needed to be undertaken or allowed for: i) Registration of the Scheme for PAYG instalments to allow for the remittance to the ATO of withholding tax deducted from the interest component of distributions made to Members that were non-residents of Australia; ii) The requirement for statements for Scheme members receiving distributions was clarified; iii) Allowance being made for direct liaising with representatives of IMF and group Members in relation to the distribution calculations and statements; iv) Attending to various formalities in relation to the termination of the Scheme including ATO registrations and preparations of Court Affidavits etc.; and v) The potential for unanticipated matters (such as the ATO review of the December 2011 BAS) had to be allowed for. It is noted that Moore Stephens has made written and verbal submission to the ATO to have interest charges for the late payment of the 2011 income tax liability of the Scheme fully remitted. That is an example of an "unexpected" or "ad hoc" matter. The manner of calculation of the sum of $19,395.00 is not addressed in any greater detail in either the affidavit of Ms Mtango or in the affidavit of Mr Rosenstrauss. But that gap is supplemented by the tender of a letter from Moore Stephens dated 19 July 2012. That letter details and itemises the work to be undertaken. In such circumstances it is considered appropriate to grant approval for the payment of fees incurred in respect to this additional work. 9 The claim for $22,483.30 is an amount claimed by McLachlan Thorpe Partners for professional fees for work undertaken between 22 March 2012 and 30 April 2012. The amount which had last been approved included an amount in respect to the estimated additional costs to be incurred in carrying out the April 2012 distribution. The amount which had been approved was in the sum of $33,795.30 whereas the total chargeable fees as at 30 April 2012 was $56,278.60 leaving the shortfall of $22,483.30, namely: Fees incurred $56,278.60 Fees approved 33,795.30 $22,483.30

Mr Mazzeo, the costs consultant, has reviewed this amount and has filed an affidavit deposing to his belief that the "supplementary account" is "fair and reasonable". 10 The claim for $14,779.92 is again an amount claimed by McLachlan Thorpe Partners for work done up to 17 July 2012 and comprises the following components: Professional fees $12,568.50 Disbursements 869.16 GST 1,342.26 $14,779.92

Mr Mazzeo has also reviewed this claim and has formed the view that "McLachlan Thorpe has properly charged its professional fees". This view is expressed based in part upon Mr Mazzeo's review of "the solicitors' files which showed the administration of the Settlement Distribution Scheme and the communications between the solicitors, the accountants and the group members as a whole". Mr Mazzeo has also formed the view that the "amounts charged for disbursements are appropriate, fair and reasonable in the circumstances". 11 The claim for $21,045.75 is an estimate as to the costs to be incurred in respect to the final distribution up to termination of the Scheme. A more precise break down of that sum is set forth in the affidavit of Ms Mtango. 12 Mr Mazzeo has also reviewed the other amounts claimed by McLachlan Thorpe Partners and has satisfied himself that each of the amounts claimed "are in accordance with Annexure A of the Settlement Distribution Scheme, as amended by the orders … made 1 July 2011 and 29 September 2011…". 13 The claim for $5,390 is in respect to an amount claimed by Mr Mazzeo, the costs consultant. There is no reason to pursue the reasonableness of this claim. 14 The final amount claimed in the sum of $4,180 is an amount payable to Counsel. Given the fact that the present Interlocutory Application was stood over for a second day, it is considered appropriate to grant approval for both the payment of the sum as claimed and for a further $4,180 in respect to the costs incurred in respect to the second day. 15 Ms Mtango, a solicitor employed by McLachlan Thorpe Partners, has filed an affidavit deposing to her belief that "these additional sums are fair and reasonable". Her affidavit does not address the further payment of Counsel's fees in respect to the second day of the hearing. 16 Each of the amounts claimed has been separately reviewed. 17 It is considered that each of the amounts claimed should be approved.

Conclusion 18 Approval should be given for the payment of $99,972.57, being the sum as claimed in the Interlocutory Application of $95,792.57, together with the further payment of $4,180. The payment of fees and costs represented by this amount arises in respect to amounts which were not foreseen or anticipated when the last approval was given in April 2012. 19 Given the assurance of Counsel that there is nothing now foreseen which will warrant any further application being made to the Court in respect to Administration Costs, the liberty previously reserved to the Administrator to apply to the Court in this respect should be revoked.

The Court: 1. Approves the payment of $99,972.57 as forming part of the "Administration Costs" for the purposes of clause 10.1.2 of the Settlement Distribution Scheme. 2. As from 5 October 2012 revokes order 3 as made on 14 April 2011 insofar as it reserves liberty to the administrator to apply to the Court for approval for payment in respect to costs incurred in respect to the administration and distribution of the settlement monies the subject of the Distribution Scheme. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (8 paragraphs)

Parties

Cases Cited (2)