Strazdins v DNPW Pty Ltd [2013] FCA 1368 | Case summary

Re Carlovers Carwash Ltd and Others [2005] NSWSC 879; 54 ACSR 696 Re Currabubula Holdings Pty Ltd (in liq); Ex parte Lord (2004) 48 ACSR 734; (2004) 22 ACLC 858 Strazdins and Cooper (in their capacity as joint and several deed administrators of DNPW Pty Ltd (subject to DOCA)) (ACN 107 484 711) and Another v Birch Carroll and Coyle Ltd (ACN 990 659 643) [2009] FCA 731; 72 ACSR 563 Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; 66 ACSR 229

REASONS FOR JUDGMENT 1 Mr Andre Strazdins and Mr Nick Cooper are the plaintiffs in this proceeding and the defendant is DNPW Pty Ltd. On 24 April 2008, Mr Strazdins and Mr Cooper were appointed joint and several voluntary administrators of the defendant company pursuant to s 436A of the Corporations Act 2001 (Cth) ("the Act"). On 22 September 2008 they were appointed joint and several deed administrators upon the execution by the defendant company of a deed of company arrangement. Nearly three years later on 10 August 2011, they resigned as deed administrators of the company. The defendant company continued in administration under a deed of company arrangement until 22 April 2013 when control was handed back to the directors. For convenience, I will refer to Mr Strazdins and Mr Cooper as "the administrators". 2 At a reconvened second meeting of creditors of the defendant company held on 26 August 2008, the creditors resolved that the administrators be remunerated in the sum of $193,232.25 plus GST in respect of professional services rendered by them during the period from 24 April 2008 to 31 July 2008. A meeting of creditors of the defendant company was held on 16 February 2011 and at that meeting the creditors considered a resolution that the administrators' fees for professional services rendered for the period 1 August 2008 to 21 September 2008 in the amount of $106,960.50 plus GST be approved for payment and a resolution that the administrators' fees for professional services rendered for the period 22 September 2008 to 7 January 2011 in the amount of $902,898.80 plus GST be approved for payment. Neither resolution was carried as a number of creditors were against the resolution and a number abstained from voting. The minutes record that no creditor voted in favour of either resolution. 3 The administrators seek to recover fees for their professional services between 1 August 2008 and 21 September 2008 in the amount of $106,960.50 plus GST and for the period from 22 September 2008 to 23 June 2010 in the sum of $617,279.25 plus GST. During the first period, the administrators were administrators of the defendant company and during the second period, they were deed administrators of the defendant company. They do not seek to recover their fees after 23 June 2010. 4 The administrators have issued an application in this Court against the defendant company seeking the following orders, relevantly: 1. Pursuant to section 447A(1) of the Corporations Act 2001 (Cth) (the Act), an order that Part 5.3A of the Act be deemed to operate such that the plaintiffs, as former administrators of the defendant, may make an application under section 449E(1A)(c) of the Act for the determination of their remuneration by the Court; 2. The plaintiffs be granted leave to file an application for the determination of their remuneration pursuant to section 449E(1A)(c) of the Act; … 5 In their written submissions in support of their application, the administrators sought to expand the scope of the orders they seek as follows: a) Pursuant to section 447A(1) of the Corporations Act 2001 (Cth), an order that Part 5.3A of the Act be deemed to operate such that the plaintiffs, as former administrators and first deed administrators of the defendant, may make an application under sections 449E(1)(c) and 449E(1A)(c) of the Act for the determination of their remuneration by the Court; b) The plaintiffs be granted leave to file an application for the determination of their remuneration pursuant to section 449E(1)(c) and 449E(1A)(c) of the Act. (Emphasis in the original.) 6 A little later in submissions on this application they sought to expand the orders they seek even further in a way I will describe later in these reasons. 7 Section 449E of the Act deals with the remuneration of administrators, both administrators of a company under administration, and administrators of a company operating under a deed of company arrangement. It provides for the determination of the remuneration to which the administrators are entitled. Relevantly, it is in the following terms: 449E Remuneration of administrator (1) The administrator of a company under administration is entitled to receive such remuneration as is determined: (a) by agreement between the administrator and the committee of creditors (if any); or (b) by resolution of the company's creditors; or (c) if there is no such agreement or resolution - by the Court. (1A) The administrator of a company under a deed of company arrangement is entitled to receive such remuneration as is determined: (a) by agreement between the administrator and the committee of inspection (if any); or (b) by resolution of the company's creditors; or (c) if there is no such agreement or resolution - by the Court. (1B) To be effective, a resolution under paragraph (1)(b) or (1A)(b) must deal exclusively with remuneration of the administrator. Note: This means that the resolution must not be bundled with any other resolution. (1C) The Court may determine remuneration under paragraph (1)(c) even if: (a) there has been no meeting of the committee of creditors; or (b) there has been no meeting of the company's creditors. (1D) The Court may determine remuneration under paragraph (1A)(c) even if: (a) there has been no meeting of the committee of inspection; or (b) there has been no meeting of the company's creditors. (2) Where remuneration is determined under paragraph (1)(a) or (b) or paragraph (1A)(a) or (b), the Court may, on the application of ASIC, 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) Subsection (2) has effect despite section 437C. (4) In exercising its powers under subsection (1), (1A) or (2), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters: (a) the extent to which the work performed by the administrator was reasonably necessary; (b) the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary; (c) the period during which the work was, or is likely to be, performed by the administrator; (d) the quality of the work performed, or likely to be performed, by the administrator; (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; (i) whether the administrator was, or is likely to be, required to deal with: (i) one or more receivers; or (ii) one or more receivers and managers; (j) the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company's creditors; (k) if the remuneration is ascertained, in whole or in part, on a time basis: (i) the time properly taken, or likely to be properly taken, by the administrator in performing the work; and (ii) whether the total remuneration payable to the administrator is capped; (l) any other relevant matters. … 8 In relation to a company under administration, s 443D of the Act provides that an administrator is entitled to be indemnified out of the company's property for his or her remuneration as fixed under s 449E. Section 443E provides that the right of indemnity has priority over certain specified liabilities of the company and s 443F provides that to secure the right of indemnity under s 443D, the administrator has a lien on the company's property. These sections deal with a company operating under administration and not a company operating under a deed of company arrangement. In the latter circumstance, the deed administrators are agents of the company and fiduciaries. They have a right of indemnity to recover fees and expenses supported by an equitable lien. The relevant deed of company arrangement may exclude, limit or modify the equitable right or lien (Wellnora Pty Ltd v Fiorentino [2008] NSWSC 483; 66 ACSR 229 at 234 - 236 [18] - [26]). For reasons I will give, it is not necessary for me to consider whether the deed of company arrangement dated 22 September 2008 excludes, limits or modifies the equitable right or lien. 9 The administrators' application for an order under s 447A of the Act is based on the assumption that as former administrators and former deed administrators they do not have standing to make an application under s 449E. Section 447A provides that a court may make such order as it thinks appropriate about how Part 5.3A is to operate in relation to a particular company. The section provides examples of the orders a court may make, none of which are relevant in this case. The section also provides that an order may be made subject to conditions and it identifies the classes of persons who may apply for an order. The section provides that in the case of a company under administration, the administrator of the company may make an application, and in the case of a company that has executed a deed of company arrangement, the deed's administrator may make an application. It also provides that "any other interested person" may make an application. The width of the power in s 447A was discussed by the New South Wales Court of Appeal in Australasian Memory Pty Ltd v Brien (1998) 45 NSWLR 111 at 150 - 151 per Sheppard A-JA (with whom Meagher JA agreed) and the High Court in the appeal from the New South Wales Court of Appeal [2000] HCA 30; 200 CLR 270 at 279 [17 et seq.]. For reasons I will give, it is not necessary for me to consider the width of the power in s 447A of the Act. 10 In summary, the administrators seek an order that s 449E of the Act is to operate in relation to the defendant so as to entitle them as former administrators and former deed administrators to make an application under s 449E. 11 In their originating application, the administrators stated that they intended to serve the application on eight other parties who had been creditors of the company. Four of the creditors appeared on the hearing of the administrators' application. They were NT Pubco Pty Ltd, Garrihy Pty Ltd, DMTL Management Pty Ltd and Australia and New Zealand Bank Group Limited (ANZ Bank). I will refer to the first three companies as the "NT Pubco objectors". The NT Pubco objectors were represented by one firm of solicitors who also represented the defendant company. The ANZ Bank was represented by another firm of solicitors. 12 By interlocutory process dated 8 July 2013, the defendant company and the NT Pubco objectors made an application in which they seek the following orders, relevantly: (1) The Plaintiffs' Originating Application be dismissed. (2) Further and/or in the alternative, the applicants, NT Pubco Pty Ltd, Garrihy Pty Ltd and DMTL Management Pty Ltd be joined to these proceedings as the Second through Fourth Defendants; (3) The proceedings be thereafter transferred to the Supreme Court of the Northern Territory of Australia; … 13 This application came on for hearing at the same time as the administrators' application. 14 As I have said, by the time submissions on the administrators' application had been completed, they had expanded the orders they sought on their application and those orders included, not only an order under s 447A of the Act, but also an order that the Court dispense with any requirement that they issue a further or separate notice pursuant to r 9.2(2) of the Federal Court (Corporations) Rules 2000 (Cth) ("the Rules"), or a further or separate application for orders pursuant to s 449E(1)(c) and s 449E(1A)(c) of the Act. They also sought orders that their application pursuant to those paragraphs be adjourned to a Registrar of the Court for directions which, in broad terms, required the Registrar to determine a number of matters concerning the remuneration claimed by the administrators, and then to refer the matter back to a Judge. 15 The orders now sought by the administrators raise some procedural difficulties. One of those difficulties is that because of the view they have taken as to the operation of s 449E of the Act, they have not made an application under that section. Their originating application seeks not only an order under s 447A of the Act, but also an order that they have leave to file an application for the determination of their remuneration. The orders that they now seek include an order that any requirement that they file a further or separate application for orders under s 449E be dispensed with. 16 Rule 9.2 of the Rules sets out the procedure to be followed by an administrator or deed administrator when he or she is applying to the Court for a determination of fees under s 449E(1)(c) or (1A)(c). Rule 9.2(2) requires the administrator to serve a notice of the administrator's intention to apply for an order and a copy of any affidavit on which the administrator intends to rely on specified persons at least 21 days before filing an originating process or interlocutory process seeking the order. The addressees of the notice have 21 days within which to object. If the administrator receives a notice of objection within the 21 day period, then he or she must serve a copy of the originating process or interlocutory process seeking an order on each creditor or contributory who has given a notice of objection and an affidavit in support of the originating process or interlocutory process. Rule 9.2(6) identifies the matters which must be addressed in the affidavit in support and one of those matters are the considerations set out in s 449E(4) of the Act. 17 In this case, the administrators purported to comply with the provisions of r 9.2 of the Rules although, as I have said, their originating application does not in express terms seek an order for a determination of their remuneration. 18 On 14 December 2012 the administrators served a notice pursuant to r 9.2(2) of the Rules of their intention to make an application pursuant to s 449E of the Act. However, an affidavit did not accompany this notice as required by r 9.2(2). The administrators received objections from the NT Pubco objectors, the ANZ Bank, Hoggies Darwin Pty Ltd and Merit Partners Pty Ltd. 19 On 28 March 2013 the administrators served a second notice of intention to apply for remuneration in accordance with Form 16 and an affidavit of Mr Strazdins sworn on 28 March 2013 accompanied that notice. Objections were received from the NT Pubco objectors, the ANZ Bank, Jalouise Pty Ltd and Dunstruck Pty Ltd. Neither Jalouise Pty Ltd nor Dunstruck Pty Ltd have sought to play any part in this proceeding. 20 Although the administrators' application does not in express terms seek a determination of their remuneration under s 449E of the Act, they submit that they have complied with r 9.2 of the Rules. They submit that the arguments on whether an order should be made under s 447A and whether an application under s 449E should be dismissed summarily are the same arguments and have been put to the Court. They submit that the only parties with a relevant interest in an application under s 449E are before the Court. In those circumstances, they submit that an order dispensing with the requirement for a further and separate application under s 449E should be made. 21 The defendant company and the NT Pubco objectors submit that the administrators need an order under s 447A and that such an order should not be made. The ANZ Bank submits that an order under s 447A is not necessary because the administrators have standing to apply for a determination of their remuneration under s 449E of the Act. However, it submits that there are powerful reasons the administrators should not be permitted to proceed with an application under s 449E and, if it be wrong as to the administrators' standing, these reasons are also the reasons why an order under s 447A should not be made, or leave to issue an application under s 449E should not be granted, or, should an application be made under s 449E, the application should be summarily dismissed. 22 The defendant company no longer has property which the administrators can pursue for the recovery of their remuneration. It has sold assets and the proceeds have been distributed. A first and final dividend of 50.44 cents in the dollar was paid on 16 January 2013. The administrators are not pursuing a claim against the defendant company's property. 23 What then are the reasons for the administrators' application? The answer lies in the fact that they are seeking to recover at least part of their fees by way of damages or other forms of relief at common law and in equity against various parties including NT Pubco, Mr Dowling and the ANZ Bank in civil actions in the Supreme Court of South Australia and the Supreme Court of the Northern Territory. 24 The first civil action was brought in 2011 in the Supreme Court of South Australia and was action no. 858 of 2011. When the proceeding was commenced, the plaintiffs were the defendant company to this application and the administrators. The defendants were Cowell Clarke (a firm of solicitors), Mr Dowling, NT Pubco Pty Ltd and the ANZ Bank. An order was made by a Judge of the Supreme Court of South Australia transferring that part of the proceeding which involved the claims of Cowell Clarke, Mr Dowling and NT Pubco Pty Ltd to the Supreme Court of the Northern Territory. The action continues in the Supreme Court of South Australia insofar as it involves the ANZ Bank. In broad terms, the administrators claim against the ANZ Bank an amount they describe as unpaid preservation remuneration being the amount of $973,086 plus GST. They claim that they preserved the assets of the defendant company which were eventually realised for the benefit of the ANZ Bank. They plead in that action that they will bring a proceeding in the Federal Court of Australia for the determination of their remuneration under s 449E of the Act. 25 The second civil action is the action transferred to the Supreme Court of the Northern Territory by order of the Judge of the Supreme Court of South Australia. It is action no. 35 of 2013 and is between the administrators as plaintiffs and Cowell Clarke, Mr Dowling and NT Pubco Pty Ltd as defendants. The administrators claim against Cowell Clarke their remuneration which they state is to be quantified by their fee determination application which is the application before this Court. They also claim certain amounts from Mr Dowling and NT Pubco Pty Ltd based on certain indemnities allegedly given by those parties to the administrators. In that proceeding the administrators refer to their application to this Court for a determination of their fees. 26 The third civil action which should be mentioned is action no. 95 of 2011 in the Supreme Court of the Northern Territory. The plaintiffs to that proceeding are NT Pubco Pty Ltd and Mr Dowling. Mr Dowling was and is a director of NT Pubco Pty Ltd. The defendants to that proceeding are the administrators, Cowell Clarke, and Mr Dart and Mr McNamara QC who were, at the relevant time, counsel. In that proceeding, the plaintiffs bring a claim under the then Trade Practices Act 1974 (Cth) against the administrators, a claim for breach of the deed of company arrangement, and a claim for breach by the administrators of their general and fiduciary duties. 27 It is said by the administrators that the determination of their remuneration is therefore relevant in the following ways. First, it is relevant to their claim against the ANZ Bank because that claim is quantified by reference to their entitlement to remuneration. Furthermore, it is said to be indirectly relevant to parties who provided guarantees to the ANZ Bank. Secondly, it is said to be relevant to the claim against Cowell Clarke because it is relevant to the quantification of their claim against that firm. 28 There are two other civil actions which are relevant. The first proceeding is an application in this Court made in 2008 by the administrators and the defendant company against Birch Carroll & Coyle Limited which was the landlord of property upon which the defendant company conducted a business. Certain orders were made by a Judge of this Court (Lander J) on the application (see Strazdins and Cooper (in their capacity as joint and several deed administrators of DNPW Pty Ltd (subject to DOCA)) (ACN 107 484 711) and Another v Birch Carroll & Coyle Ltd (ACN 990 659 643) [2009] FCA 731; 72 ACSR 563. The second action was an action in the Northern Territory Supreme Court (action no. 107 of 2010) which was resolved as to all matters except the question of costs. The question of costs was argued before a Master of the Supreme Court of the Northern Territory and he delivered reasons for judgment in relation to certain orders which he made: NT Pubco Pty Ltd & Anor v DNPW Pty Ltd (Subject to a Deed of Company Arrangement) & Ors [2011] NTSC 51. The plaintiffs to that action were NT Pubco Pty Ltd and Garrihy Pty Ltd and the defendants were the defendant company, the administrators, Ducks Nuts Pty Ltd and Jalouise Pty Ltd. The Master made findings which were critical of the administrators' conduct in relation to the defendant company. 29 The ANZ Bank described those findings in its written submissions. It claimed that the Master had found that the administrators, while acting as deed administrators, had acted, and continued to act, in a position of a conflict of interest from a date no later than 19 March 2009. More particularly, the finding of a conflict of interest was based on the following matters: (a) The plaintiffs had purported to threaten refusal of certain extensions of time limits for the completion of conditions of the DOCA, unless there was agreement from the DOCA proponent to the grant of certain indemnities and a bank guarantee to protect against adverse costs. That conflict was found to have arisen on 19 March 2009. (b) The plaintiffs had attempted to deflect $150,000 from funds available for distribution to unsecured creditors pursuant to the terms of the DOCA, towards payment of their fees, without seeking the approval of creditors. That conflict was found to have arisen on 17 April 2009. (c) The plaintiffs continued to act, and did not convene a further meeting of creditors, in circumstances where Mr Strazdins had, whilst giving evidence in the Federal Court proceedings before Lander J, conceded that he had made material errors in his report to creditors pursuant to section 439A of the Act, and where Lander J had observed that those errors put in doubt whether the DOCA was in fact in the interests of creditors. Lander J's judgment was delivered on 9 July 2009. 30 In their written submissions the defendant company and the NT Pubco objectors described the Master's findings against the administrators as follows: (a) seeking indemnities and bank guarantees as a precondition of the DOCA's continuation; (b) seeking assurances from the proposer that funds set aside for unsecured creditors could be used for payment of their fees; (c) failing to call a creditors' meeting following findings by Lander J in this Honourable Court in Strazdins & Cooper (in their capacity as joint and several deed administrators of DNPW Pty Ltd (subject to DOCA)) & Anor v Birch Carroll & Coyle Ltd (2009) 178 FCR 300, that the DOCA was not in the best interests of the creditors; and (d) making payment of their fees a precondition to the completion of the DOCA. 31 I have read the Master's reasons carefully. He did find that the administrators had a conflict of interest during at least part of the period in relation to which they now claim a determination of their remuneration. For present purposes, I do not need to be more precise than that and, in particular, I do not need to decide if the ANZ Bank and the defendant company and the NT Pubco objectors have accurately described all of the Master's findings. 32 The significance of the Master's findings is that both the ANZ Bank and the defendant company and the NT Pubco objectors submit that those findings are a reason the administrators should not be permitted to bring an application under s 449E of the Act or such an application should be summarily dismissed. In the alternative, they are a reason this application should be transferred to the Supreme Court of the Northern Territory or I should decline jurisdiction leaving the administrators to bring an application in the Supreme Court of the Northern Territory, if so advised. 33 I turn now to consider the first issue on these applications which is whether the administrators need an order under s 447A of the Act before making an application for a determination of their remuneration under s 449E of the Act. The precise issue is whether a former administrator or deed administrator may make an application for a determination of his or her remuneration under s 449E of the Act. 34 Section 449E was substantially amended by the Corporations Amendment (Insolvency) Act 2007 (Cth). Prior to those amendments, s 449E was in the following terms: (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) Subsection (2) has effect despite section 437C. 35 The defendant company and the NT Pubco objectors submit that prior to the amendments in 2007, a former administrator did not have standing to apply for a determination of his or her remuneration and that there was nothing in the extrinsic material relating to the amendments in 2007 suggesting an intention to expand the rules as to standing. 36 In support of the first part of the above proposition, the defendant company and the NT Pubco objectors relied on the decision in Re Ansett Australia Ltd and Others (all admin apptd) and Mentha and Another (as admin) [2002] FCA 1; 40 ACSR 409 ("Re Ansett Australia"). That case does not support the submission. 37 Under the terms of s 449E before its amendment, the Court could only act on the application of the administrator. Goldberg J decided that second administrators could not apply for the fixing of the remuneration of the first and former administrators as well as their own remuneration. The first and former administrators would have to make their own application. If anything, the case supports the proposition that a former administrator had standing to apply under the earlier version of s 449E. The Explanatory Memorandum for the Corporations Amendment (Insolvency) Bill 2007 (Cth) does not advance the matter. It does not address the question of standing. 38 In addition to Re Ansett Australia, there are other cases which have considered the question of standing before the amendments in 2007. In Purchas, in the matter of RSP Group Pty Limited (in liq) [2006] FCA 1329, Gyles J said that the proposition that an administrator could apply as such, notwithstanding that the administration had ended, was a proposition of some novelty. However, he went on to say that counsel was correct in submitting that there was some support for the proposition to be derived from the decisions of Young CJ in Eq in Deputy Commissioner of Taxation v ACN 080 122 587 Pty Ltd [2005] NSWSC 1247 and Austin J in Re Currabubula Holdings Pty Ltd (in liq); Ex parte Lord (2004) 48 ACSR 734; (2004) 22 ACLC 858, "at least so far as standing is concerned". 39 In Re Currabubula Holdings Pty Ltd (in liq); Ex parte Lord Austin J said (at 735 - 736 [6] and [7]): It seems to me at least arguable that a person appointed as administrator has standing to apply to the court for approval of his or her remuneration under section 449E(1)(b) after the administration has come to an end. It is not easy to see any necessity for construing the section to mean that the administrator's opportunity to have his or her remuneration fixed comes to an end if the administration is terminated and there has been no opportunity to convene a meeting of creditors. I note that for the purposes of some other provisions of the Corporations Act (such as the definition of 'deferred expenses' in section 556(2)) a person may be appointed as an 'administrator' notwithstanding that the administration has come to an end. … I do not regard section 449E as preventing the former administrator of a company that has gone into liquidation from making a claim for fees properly and reasonably incurred during the administration, in circumstances where there has been no opportunity to have the fees fixed by the creditors or the court under the section. 40 In Deputy Commissioner of Taxation v ACN 080 122 587 Pty Ltd Young CJ in Eq reviewed and, in fact, increased an administrator's fees under the then subs 449E(2) after the administration had come to an end. 41 I am unable to see anything in the terms of s 449E which requires an applicant to be an existing administrator at the time of his or her application or at the time that the application is determined by the Court. The fact that the section uses the word, "administrator" and that that word is defined in the way it is in the Dictionary section, does not advance the matter. On the other hand, I think the fact that an administration might come to an end quite quickly (ss 435C, 439C) is a reason to construe the section broadly, not narrowly. In most cases there will be a practical limit to delayed applications by former administrators in the form of the continued existence of a company's property. In my opinion, a former administrator may bring an application for a determination of his or her remuneration under s 449E of the Act. The administrators do not need an order under s 447A. 42 The second order sought by the administrators is in the following terms: 2. The Court dispenses with any requirement on the plaintiffs to issue a further or separate notice pursuant to Rule 9.2(2) of the Federal Court (Corporations) Rules 2000 or a further or separate application for orders pursuant to s 449E(1)(c) and s 449E(1A)(c) of the Act. 43 Leaving aside other considerations, I would not be disposed to make an order precisely in these terms. There should at least be an amendment to the existing application to claim a determination under s 449E. Subject to that matter, the arguments against this order fall into two classes. First, various substantive arguments have been put against the order. Those matters have been fully argued and I propose to deal with them. Secondly, there are procedural questions of whether there is power to make the order and whether the order should be made in the circumstances. On the face of it, the relevant parties were given notice and are before the Court. However, the administrators advanced the order late in the proceeding and I will give the parties the opportunity to make further submissions on the procedural questions. 44 I turn to address the substantive arguments. 45 The defendant company and the NT Pubco objectors submit that if the administrators have a right to make an application, it is an application under subs (2) of s 449E, not subss (1) and (1A). They submit that the administrators have received remuneration and other payments pursuant to various indemnities which they were given. I reject this submission. The remuneration which the administrators received was for a specified period i.e., 24 April 2008 to 31 July 2008 and no remuneration was determined for any period after 31 July 2008. Therefore, the case does not fall within subs 449E(2) because there is no remuneration to review and confirm, increase or reduce. 46 In the alternative, the defendant company and the NT Pubco objectors submit that the Court has a discretion under subss 449E(1) and (1A) to refuse to entertain an application for the determination of remuneration or to summarily dismiss such an application. The ANZ Bank made a similar submission. In other words, the Court could refuse to entertain an application where any application would be futile, or there had been excessive delay, or what was said to be the machinery under the section had not been properly employed, or where such an application would involve this Court going behind or contradicting (as it was put) the orders made by the Master of the Supreme Court of the Northern Territory. I think the Court has the power to terminate an application under s 449E of the Act at an early stage where such an application would be futile or doomed to fail and therefore an abuse of process. I need not examine the exact parameters of the power because none of the reasons advanced for refusing to entertain the application (or summarily dismissing it) are made out, or made out to the extent necessary to justify such an order. 47 An important point needs to be made at the outset. Although the defendant company and the NT Pubco objectors submit that the application is futile because there is no property of the company for the purposes of the recovery of the administrators' remuneration (as I said earlier, the administrators expressly disclaim any intention to do so), they do not submit (and the ANZ Bank does not submit) that the determination of the administrators' remuneration serves no purpose as far as the proceedings in the Supreme Court of South Australia or the Supreme Court of the Northern Territory are concerned. 48 The ANZ Bank submits that an application under s 449E should not be entertained because the administrators have not employed the machinery in the section. It referred to Barrett J's observation in Re Carlovers Carwash Ltd and Others [2005] NSWSC 879; 54 ACSR 696 at 703 [29] that the general expectation should be that creditors are asked to determine the administrator's remuneration in the first instance. The administrators took the question of their remuneration to the creditors of the defendant company twice. On the first occasion their fees were approved. On the second occasion the resolutions were not passed and the administrators were told that they would have to make an application to the Court. There was a two and a half year delay between the two approaches to creditors which is not explained in the evidence of the administrators. Nevertheless, the conduct is not so egregious as would warrant a conclusion that the administrators cannot proceed with an application to determine their remuneration. 49 Both the defendant company and the NT Pubco objectors and the ANZ Bank submit that the Court should not entertain this application because of the delay of the administrators in bringing it. As I have said, on 16 February 2011 the creditors of the defendant company declined to pass a resolution approving the administrators' fees and the administrators were advised by some creditors that those creditors believed that they should be forced to make an application to the Court for approval of their outstanding remuneration. The administrators brought this application over two years later on 9 May 2013 and the delay is not explained by the administrators. 50 There is no time limit for the making of an application under s 449E(1) or (1A) of the Act. In those circumstances, the prejudice caused by the delay is important. There is no prejudice to the defendant company as far as its property is concerned. Once that fact is appreciated, it is difficult to see how there has been any prejudice to the defendant company and the NT Pubco objectors and the ANZ Bank by reason of the delay. They have been aware since 2011 that the administrators intended to recover their remuneration. 51 The ANZ Bank put forward a specific instance of prejudice. It received payment of its secured debt being an amount of approximately $500,000. It refrained, so it contends, from claiming a dividend in the administration because it had been paid and the administrators had not made an application for determination of their remuneration. The notice inviting a formal proof of debt or claim required the formal proof of debt or claim to be lodged by 10 September 2012. The action in the Supreme Court of South Australia was commenced on 17 June 2011 and stayed between 10 August 2011 and 23 January 2013. I do not think the Court should refuse to entertain an application under s 449E of the Act because of the prejudice that might be suffered by one person who might be affected by the application. I make no comment on whether this specific instance of prejudice might be relevant in the action in the Supreme Court of South Australia. 52 Both the defendant company and the NT Pubco objectors and the ANZ Bank submit that I should decline to deal with the administrators' application for reasons of comity and in this context they referred to the reasons of the Master of the Supreme Court of the Northern Territory. The considerations relevant to this submission are also relevant to the application by the defendant company and the NT Pubco objectors for an order transferring this proceeding to the Supreme Court of the Northern Territory. 53 I reject the submission. The Master of the Supreme Court of the Northern Territory was not considering an application by the administrations for a determination of their fees. He was considering an application for costs. Even on the case of the defendant company and the NT Pubco objectors and the ANZ Bank, nothing the Master found appears to affect the administrators' claim before March 2009. There is no question of a res judicata and if it is said that there is an issue estoppel (and it is not clear to me that that was or is submitted), then this Court can give effect to that doctrine in the same way as the Supreme Court of the Northern Territory. Nor is there any possibility of conflicting orders between this Court and the Supreme Court of the Northern Territory. This Court will not make any orders which will conflict with, or contradict, the orders made by the Master. Finally, the administrators have told this Court that for the purposes of their application they will not seek to challenge the Master's findings. 54 I turn to the orders sought by the administrators. I would not make the first order for the reasons I have given. I will hear the parties further if they seek to make further submissions in relation to the procedural questions involved in the second order. As far as the third order is concerned, it is said by the administrators to be based on the procedure adopted in cases such as Re Anderson Group Pty Ltd [2002] NSWSC 764 and In the matter of VPlus Superstores Pty Ltd (in liq) and Others [2013] NSWSC 662. The procedure will no doubt often be an appropriate one. However, in this case I do not think a decision as to the appropriate procedure should be made until the rival contentions of the parties are clearly identified. As to the remaining orders sought by the administrators I will hear the parties as to those orders. 55 I turn to the application of the defendant company and the NT Pubco objectors. The first order will have to await any application by the administrators to amend their application. As to the second and fourth orders, I will, as I have said, hear the parties on joinder and costs. 56 The defendant company and the NT Pubco objectors seek an order under s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) transferring this proceeding to the Supreme Court of the Northern Territory. As I understand it, this application is supported by the ANZ Bank. 57 The Master's findings might in theory engage subparagraph 5(4)(b)(iii) of the Jurisdiction of Courts (Cross-Vesting) Act (i.e., "otherwise in the interests of justice"), but, for the reasons given in paragraph 53 above, I would not transfer this proceeding on that ground. 58 The two actions pending in the Supreme Court of the Northern Territory and, in particular, the action brought by the administrators, might in theory engage subparagraphs 5(4)(b)(i) (i.e., "relevant proceeding … is related to, another proceeding pending in the Supreme Court of a … Territory") or (iii) or both, but I am not satisfied on the evidence or the submissions advanced to date that it is either more appropriate or in the interests of justice that the proceeding be determined by the Supreme Court of the Northern Territory. It must be remembered that there is also the related action in the Supreme Court of South Australia. In this case, the administrators' application for a determination of their fees seems to involve a complex exercise of a relatively free-standing nature and there is no reason to think that this Court cannot deal with it as expeditiously as the Supreme Court of the Northern Territory. I decline to transfer the proceeding. 59 I will adjourn the applications to a date to be fixed to hear the parties on the appropriate orders. I certify that the preceding fifty-nine (59) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Strazdins v DNPW Pty Ltd

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Judgment (18 paragraphs)

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Legislation Cited (5)

Cases Cited (12)

Cited By (3)