Re Ansett Australia Ltd v Mentha 40 ACSR 419 cited

REASONS FOR JUDGMENT 1 Part 5.3A of the Corporations Act 2001 (Cth) ('the Act') is concerned with the administration of a company's affairs with a view to executing a deed of company arrangement ('DOCA'). One of the matters to be attended to at the first meeting of creditors is to decide whether to appoint a committee of creditors (s 436E(1)) which, if appointed, has the functions specified in s 436F(1). The administration of a company ends upon the execution of a DOCA (s 435C), and the role of any committee of creditors appointed pursuant to s 436E(1) necessarily comes to an end at that point. 2 Subsections 449E(1) and (2) of the Act provide: '(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 There have been a number of cases in which orders have been made pursuant to s 447A of the Act investing the committee of creditors with power to determine the administrator's remuneration whilst the company remains under administration. Examples include Re Ansett Australia Ltd v Mentha 40 ACSR 419 (Goldberg J), Re AFG Insurances Ltd [2002] NSWSC 845 (Barrett J), Re Regis Towers Real Estate Pty Ltd 51 ACSR 628 (Campbell J) and my own decision in Re Henry Walker Eltin Group Ltd [2005] FCA 994. 4 In the present case a second meeting of creditors was held pursuant to s 439A of the Act on 12 August 2005. At that meeting it was resolved that the company execute a DOCA, that a committee of inspection be formed consisting of three named persons and that the committee of inspection be charged with the power to fix the remuneration of the Deed Administrators subject to the approval of the Supreme Court of NSW. Clause 14.2 of the proposed DOCA provides for the Administrators' Deed Costs to be fixed by resolution of the committee of inspection. The approval for which cl 14.2 provides is necessarily retrospective as details of the costs claimed, the manner in which the amount is calculated and the staff members involved, including a description of the tasks completed by each staff member, must be disclosed. 5 One effect of a resolution that the company execute a DOCA is that the instrument setting out the terms of the deed is taken to include the prescribed provisions, except so far as it provides otherwise: s 444A(5). The prescribed provisions are those set out in Schedule 8A to the Corporations Regulations (2001) (Cth): reg 5.3A.06. Clause 11 of Schedule 8A provides for there to be a committee of inspection to advise and assist the administrator of the deed. The committee of inspection appears to have a similar role in relation to a deed administrator as a committee of creditors (if appointed) has in relation to an administrator whilst the company remains under administration. 6 Absent a specific conferral of power, a committee of inspection under a DOCA does not have power to fix the remuneration of the deed administrators. The creditors do not have power to delegate their powers under s 449E to a committee: Re Korda; in the matter of Stockford Ltd (2004) 140 FCR 424 ('Re Stockford') at [23]. 7 The interlocutory process which is before me seeks an order pursuant to s 447A of the Act altering the operation of s 449E of the Act in relation to the second applicant ('MGA'). The purpose of the application is to enable the Administrators' remuneration under the proposed DOCA to be fixed by the committee of inspection, in the same manner as a Court appointed liquidator's remuneration can be fixed under s 473 of the Act. 8 I have the power under s 447A of the Act to make the orders sought. That follows from the decision referred to above. The question is whether that power should be exercised in the circumstances of the present case. 9 One of the joint voluntary administrators, Mr P W Marsden, has sworn that in his opinion, for reasons which he gives, it is prudent and commercially beneficial to the administration and to the creditors of MGA that the committee of inspection be empowered to fix the remuneration of the Deed Administrators. Those reasons relate principally to the costs involved in convening and holding a meeting where notice of the meeting is to be given to 1910 creditors, as opposed to the administrative efficiencies associated with a meeting of a committee of three which under the Corporations Regulations (2001) (Cth) can be convened on seven days' notice and conducted by telephone. 10 Re Stockford suggests that it was not open to the creditors at the meeting on 15 August 2005 to 'fix' the remuneration of the Deed Administrators prospectively by the establishment of a scale for work yet to be performed. One or more meetings will thus be required to approve the remuneration for work done under the deed. The proposed orders afford to creditors equivalent rights of review of remuneration fixed by the committee of inspection as are enjoyed in relation to a liquidator's remuneration when fixed by a committee of inspection. 11 No creditor has voiced any opposition to the proposal which was discussed and endorsed at the meeting of creditors held on 12 August 2005. Notice of the application has been given to the Australian Securities and Investments Commission ('ASIC'). In response, ASIC has said that they neither consent nor oppose the application. This is a proper case in which to make the orders which the applicants seek, and I do so: 1. Pursuant to s 447A of the Corporations Act 2001 (Cth) ('the Act') Part 5.3A of the Act is to operate in relation to the second applicant, Motor Group Australia Pty Limited, as if s 449E of the Act read: '(1) For the purposes of advising and assisting the administrator of a company under a deed of company arrangement, there must be a committee of inspection ("the committee") to which the rules set forth in the Corporations Regulations Schedule 8A, paragraph 11, sub-paragraphs (a) to (g) inclusive shall apply, and are incorporated by reference as if fully set out herein, but with sub-paragraph (b) amended to include the words "or a meeting held pursuant to s 439A of the Act" and sub-paragraph (d) amended by deleting the words "under this deed". (2) Subsection 548(3) and sections 549, 550 and 551 of the Act apply, with such modifications as are necessary, to a committee established under subsection (1) as if the references to the liquidator were references to the administrator of a company under a deed of company arrangement and the references to contributories were deleted. (3) Subsections 473(3), (4), (5) and (6) of the Act shall apply, with such modifications as are necessary, to a company under administration or under a deed of company arrangement and to a committee of inspection established under subsection (1), as if references to a liquidator were references to an administrator of a company or an administrator under a deed of company arrangement.' 2. Pursuant to section 447A of the Act, liberty be granted to any person who can demonstrate sufficient interest to modify or discharge these orders upon appropriate notice being given to the applicants. 3. The costs of the application be a cost in the administration of the second applicant. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.