Plaintiffs v Defendant

1 The plaintiffs, Messrs Carrafa, Cauchi and van Der Velde who were formerly the joint and several administrators of CVResort Pty Ltd ("the company") make application for the determination of their remuneration under section 449E(1)(c) of the Corporations Act 2001 ("the Act") and order 9.2 of the Supreme Court (Corporations) Rules 2003.

2 The originating process sought orders that the application be dealt with in the absence of the public and without requiring attendance by or on behalf of the plaintiffs. The plaintiffs seek an order that their remuneration for the period in which they acted as joint and several administrators of the company be approved and fixed in the sum of $21,746.50 excluding GST.

3 I am satisfied that all the relevant persons who are entitled to be notified of the application and who might be minded to oppose or contradict it have been given the requisite notice under the rules and that there has been no response by them. In the circumstances I am prepared to consider the matter without requiring further attendance by or on behalf of the plaintiffs.[1]

4 The plaintiffs rely on an affidavit of the first plaintiff, Michael Carrafa, sworn 21 December 2012 and of the second plaintiff Richard John Cauchi, sworn 30 November 2012.

5 On 15 March 2012 the directors of the company resolved to place the company into administration pursuant to Part 5.3A of the Act. The plaintiffs were appointed joint and several administrators as part of the same resolutions. The company conducted a motel business at Charlton in Victoria known as the Charlton Valley Resort. It was operated from leased premises.

6 The company was incorporated on 7 December 2007. Its directors were Ng Chin Heng, Hans Peter Krug and Dionne Maree Krug. Those persons each had shares in the company with the fourth shareholder being Ng Choon Heoh.

7 The affidavits filed in support of the application describe the tasks performed by the plaintiffs and their staff during the period of the administration. Mr Carrafa wrote to the creditors of the company on 19 March 2012 advising them of the appointment of the administrators and enclosing what might be described as the usual documentation to be provided to creditors at that point in an administration. That included a notice of the first meeting of creditors and, significantly in the purpose of the present context, a statement of proposed remuneration and work to be completed. That document informed the creditors of the current scale of fees which would be charged for conducting the administration and included the identification of the various persons who would carry out the work during the administration, detailing their experience and classification within the hierarchy of the plaintiffs' firm. The statement estimated that the remuneration of the plaintiffs for the period of the administration should not exceed $40,000.

8 On 27 March 2012 Mr Carrafa chaired the first meeting of creditors. The creditors did not appoint a committee of creditors. No other nominations were received to be appointed as administrators. The creditors resolved that a committee of creditors need not be formed.

9 In paragraph 15 of Mr Carrafa's affidavit he details certain tasks which were carried out by the plaintiffs. They included meeting with the directors of the company to discuss the company's business, property affairs and financial circumstances, reviewing the operations of the business to ascertain whether it was appropriate to trade on during the period of the administration, entry into a licensed agreement with one of the directors, Hans Krug to operate the business during the interim period with a view of selling the business as a going concern, conducting discussions with a potential purchaser of the free holding business and preliminary investigations into the company's affairs including ascertaining whether there had been any voidable transactions or insolvent trading.

10 On 10 April 2012 the plaintiffs received a proposal for a deed of company arrangement signed by Mr Krug which was to be put before the creditors and voted upon at the second meeting of creditors scheduled for 1 May 2012.

11 The evidence indicates that the plaintiffs received the sum of $29,699.65 into the administration and made payments of $14,644.40. The balance, $14,530.07 is currently being held as cash at bank. There was exhibited to Mr Carrafa's affidavit a copy of a document described as "summary of remuneration" claimed for the period 15 March 2012 to 11 April 2012 which outlines the work undertaken by the plaintiffs and their staff for that period and the time and fees incurred for such work. The document indicates that, on a time recording basis, the plaintiffs are presently owed $21,746.50 as remuneration for the work undertaken during the administration.

12 After the company was placed into administration, a winding up application, which had been issued by D J and T C Berry Refrigeration Pty Ltd, was returnable in the Supreme Court of Victoria on 11 April 2012. The plaintiffs apparently sought an adjournment of the application, as the terms of s 440A(2) required, to allow the preparation of the report to creditors and the convening of the second meeting of creditors at which a proposed resolution for the company to enter into a deed of company arrangement or be placed into liquidation would be tabled. Efthim AsJ refused the application for adjournment, terminated the administration pursuant to s 447A of the act and ordered that the company be wound up in insolvency. Mr Brent Morgan was appointed as liquidator.

13 On 18 April 2012, Mr Carrafa informed the creditors of the fact of the company being placed into liquidation. Because the administration ended on 11 April 2012 prior to the convening of the second meeting of creditors, no remuneration report and proposed resolutions seeking the approval of the joint and several administrators fees was put to the creditors, hence this application, which is made pursuant to s 449E(1)(c). Mr Carrafa wrote to the liquidator, Mr Morgan on 5 June 2012 seeking confirmation as to whether he would convene a meeting of creditors in the near future. Mr Carrafa indicated that he proposed to make application to the court for approval of remuneration of the administrators. I note that the affidavit of Tiarne Bennett relating to service of the requisite material under the Corporations Rules opposes that Mr Morgan was provided with such documentation in early October 2012.

14 In his affidavit, Mr Cauchi describes the steps taken to inform the creditors who were present at the meeting of creditors of the company on 27 March 2012 of the intention to make the present application. As well as the creditors, each member of the company whose shareholding represented at least 10% of the issued capital of the company were provided with the documents required by the Supreme Court (Corporations) Rules 2003. These documents included a Form 16 and accompanying affidavit sworn by Mr Cauchi dated 21 September 2012. No notices of objection were received in response to the service of the Form 16.

15 A review of the affidavit material and exhibits results in my mind in the conclusion that the administration of the company was a relatively straightforward one; the one unusual event was the requirement to apply for an adjournment of the winding up application until after the second meeting of creditors, which was unsuccessful.

16 In my view, Exhibit MC6 to Mr Carrafa's affidavit, which is the summary of the remuneration claimed for the period of the administration, sets out to the required degree of detail the matters in respect of which I am required to be informed in order to exercise my discretion under section 449E. It identifies the personalities at the plaintiff's firm who carried out various tasks by reference to date and the time occupied, together with a sufficiently detailed narrative.

17 The tasks which were performed by the respective persons appearing in the summary would appear to have been conducted by persons of the appropriate positions in the hierarchy of the plaintiff's firm. This meets the standard in respect of such evidence as described by the Full Court of the Supreme Court of Western Australia in Venetian Nominees v Comlan.[2] In summary, the plaintiffs must provide adequate evidentiary material to enable the court to determine whether the amounts claimed are fair and reasonable. In Venetian Nominees the Full Court stated:

Ordinarily, to commence the proceedings, the provisional liquidator will provide the court with a statement of account reflecting in appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly ... The statement of account should be verified by affidavit. When the remuneration claimed involves work carried out by the provisional liquidator and his staff, the verifying affidavit need state merely that the work described in the statement of account was done by the provisional liquidator or under his personal supervision, and that from personal knowledge or from the records kept by the provisional liquidator or his firm, or from some other appropriate source, he believes that the information contained in the statement of account is correct.

18 The Full Court quoted from the decision of Shepherdson J in Re Solfire Pty Ltd (in liq) (No 2)[3] where His Honour stated:

In my view, when a provisional liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in taxable form provided by a solicitor to his client ... He should identify the person or persons and the grade or grades of the person or persons engaged in the particular task concerning the provisional liquidation, he should identify that task and dates on which time was spent on it, the amount of time spent on it and he should identify the relevant rate, according to the grade of the person or persons performing the work.

19 The hourly rates charged by the individuals in the hierarchy of the firm appear to be appropriate in regard to the prevailing rates charged by liquidators for their remuneration and that of their staff. The hourly rate of Mr Carrafa, $525.00, is within the range of hourly rates which are charged by insolvency practitioners in the numerous appendices that I sight in consents to act provided by liquidators in winding up applications which come before me. A similar position applies in my view, to the other members of Mr Carrafa's staff having regard to the position that those persons occupy in Mr Carrafa's firm.

20 My review of their remuneration summary does not reveal any obviously unnecessary tasks being performed. Despite being served with the requisite material, no contradictor has appeared to oppose the application.

21 Section 449E(4) of the Act requires the court to take into account the various matters mentioned in sub paragraphs (a) to (l). Paragraphs (a), (b) and (c) are in substance concerned with an assessment as to whether the work performed and described in the administrator's evidence was reasonable and necessary and whether the time taken for the task was reasonable. As I have said, in my view, the remuneration summary does not reveal the performance of any obvious tasks which were unnecessary to be performed or for which the time engaged appears to be unreasonable.

22 Sub paragraph (d) of 449E(4) deals with the quality of the work performed by the Administrators and there is no evidence to suggest that it did not meet the requisite standards. Sub paragraphs (e), (f), (g) and (h) provide as follows:

(e) The complexity (or otherwise) of the work performed, or likely to be performed, by the administrator;

(f) The extent (if any) to which the administrator was, or is likely to be, required to deal with extraordinary issues;

(g) The extent (if any) to which the administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

(h) The value and nature of any property dealt with, or likely to be dealt with, by the administrator.

23 As I have observed already this administration would seem to have been a relatively straightforward and uneventful one. It had no extraordinary features, the administrators were not involved in trading on the business (although consideration was given to doing so) and no heightened level of risk or responsibility was occasioned. It was not an administration which dealt with a high value of property. Aside from the application for adjournment, there did not appear to be any litigation involved or acrimonious exchanges with the company's creditors.

24 Because of the relatively straightforward and conventional nature of the application I would make some reduction to the amount claimed of $21,746.50 excluding GST. I consider in the circumstances a reduction of 15% is appropriate. In the circumstances I would order, pursuant to s 449E of the Act, that the remuneration of the plaintiffs as the joint and several administrators of the company from 15 March 2012 to 11 April 2012 be fixed at $18,484.52 excluding GST.

25 Further, the plaintiffs are entitled to the costs of their application by originating process and such costs should be part of their costs as joint and several administrators of the company.

[1] The plaintiffs rely on an affidavit of Tiarne Bennett sworn 30 November 2012 in respect of service of the requisite notices under the Supreme Court (Corporations) Rules 2003.

[2] [1998] 16 ACLC 1653 at 1657.

[3] [1999] 2 Qd R 182 at 191.