The Dominion Insurance Company of Australia Limited (subject to Scheme of Arrangement) [2013] NSWSC 898

Supreme Court of NSW|2013-07-01|Before: Brereton J, Black J

Re Potters' Oils Ltd (No 2) [1986] 1 All ER 890, [1986] 1 WLR 201 Re RM Eastmond Pty Ltd (1972) 4 ACLR 801 Re SDR Apparel Pty Ltd & the Companies Act (1977) 4 ACLR 162 Re Slade Constructions Pty Ltd [1970] SASR 561 Re Telmak Teleproducts Supplies Pty Ltd (1983) 1 ACLC 1054 Re Wood and Martin (Bricklaying Contractors) Ltd [1971] 1 WLR 293 Shannon (in his capacity as receiver and manager of North East Wiradjuri Co Ltd) v North East Wiradjuri Co Ltd (No 4) [2012] FCA 836 Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 Sweet & Maxwell Ltd v Universal News Services Ltd [1964] 2 QB 699 Talbot v Talbot [1968] Ch 1 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Young v ACN 081 162 512 [2005] NSWSC 139, Category: Interlocutory applications Parties: The Dominion Insurance Company of Australia Limited ACN 000 980 923 (Subject to Scheme of Arrangement) - plaintiff Paul Gerard Weston - applicant Representation: Counsel: R Glasson (applicant) Solicitors: O'Neill Partners (applicant) File Number(s): 2013/ 143047

The scheme 2Prior to December 1979, The Dominion Insurance Company of Australia Limited carried on business as an insurer and re-insurer, particularly in the fields of professional indemnity, public liability and product liability. On 12 December 1979, the company was wound up voluntarily. However, various claims against the company under policies issued by it remained unresolved, which likewise meant that it had unresolved claims against its reinsurers. On 15 December 1986, the court approved a scheme of arrangement, and indefinitely stayed the winding up, for the purpose of permitting the outstanding claims against the company, and its outstanding reinsurance claims, to be resolved. 3The scheme contains the following relevant definitions, which have the effect of establishing two sub-classes of creditors - Class "B" creditors being Liability Claims (debts or claims arising out of contracts of insurance or reinsurance with or underwritten by the company in respect of professional indemnity, public liability and/or product liability) which had been partly reinsured by either the Overseas or Local Reinsurers (as defined) and had not been quantified as at the Commencement Date; and Class "A" creditors being all other creditors except the Liquidation Claims (being the costs, charges and expenses of the winding up, including the remuneration of the Liquidator, and of and incidental to propounding of the scheme and staying the winding up): "Creditor" - Any person, society, firm, partnership, corporation, company or legal entity whatsoever and wheresoever situate residing or domiciled and however established formed or incorporated (whether in Australia or elsewhere) having or claiming to have (whether in its own right or by way of assignment or subrogation or otherwise) any debt or claim against the Company arising out of or in respect of any contract of insurance with [sic] contract of reinsurance with or underwriting by the Company or arising out of or in respect of any contract or arrangement or other transaction whatsoever with the Company or to which the Company is a party or arising out of any act or acts of omission or commission (whether sounding in tort or contract) prior to the Fixed Date whether or not such debt or claim be presently known or reported to the Company or the Liquidator and whether or not such debt or claim be now enforceable or be of a contingent or prospective nature or be hereafter enforceable or liable to be enforced INCLUDING any such person, society, firm, partnership, corporation, company or legal entity who or which has or claims to have (whether in its own right or by way of assignment or subrogation or otherwise) any debt or claim against the Company arising out of or in respect of any contract of insurance or contract of reinsurance with the Company or which had been underwritten by the Company which contract or underwriting was current at the Fixed Date but which was subsequently cancelled terminated expired by effluxion of time or was disclaimed by the Liquidator BUT EXCLUDING the Overseas Reinsurer and the Local Reinsurers. "Class 'A' Creditors" - All Creditors EXCLUDING the Liquidation Claims AND EXCLUDING the Class "B" Creditors PROVIDED THAT the inclusion of a Creditor as a Class "A" Creditor in the books and records of the Company does not operate as an admission or acknowledgement by the Company that such Creditor is entitled or will be entitled to any distribution or payment under the Scheme or that such Creditor is a creditor of the Company in any amount or at all. "Class 'B' Creditors" - Those Creditors whose debts or claims are Liability Claims and have been partly reinsured by either of the Overseas Reinsurer or the Local Reinsurers alone and in some cases in conjunction with some other reinsurer and have NOT been quantified as at the Commencement Date (including those debts or claims that have been incurred but not reported to the Company) and for the purposes of the Scheme and the Overseas Reinsurer's Deed and the Local Reinsurers' Deed are or may be shown in the books and records of the Company as being the estimates of such debts or claims whether or not such estimates or some of them include or consist wholly or partly of the cost or estimated cost to the Company of administering or attending to such claims including inter alia fees or estimated fees of inter alia assessors, investigators, solicitors, barristers and others BUT EXCLUDING the Liquidation Claims PROVIDED THAT the inclusion of a Creditor as a Class "B" Creditor in the books and records of the Company does not operate as an admission or acknowledgement by the Company that such Creditor is entitled or will be entitled to any distribution or payment under the Scheme or that such Creditor is a creditor of the Company in any amount or at all. "Liability Claims" - Those debts or claims which arise out of contracts of insurance or reinsurance with or underwriting [sic] by the Company and which are in respect of professional indemnity and/or public liability and/or product liability. "The Liquidation Claims" - The costs, charges and expenses of the winding up of the Company including the remuneration of the Liquidator and the costs, charges and expenses of and incidental to the propounding of the Scheme and the staying or termination of the winding up of the Company. ... "The Overseas Reinsurer" - The Dominion Insurance Company Limited a company duly incorporated in Scotland and having its registered office at Orchard Brae House, 30 Queensferry Road, Edinburgh Scotland and its successors and assigns. "The Local Reinsurers" - Kolnische Rucksversicherungs-Gesellschaft Aktiengesellschaft a corporation incorporated in the Federal Republic of Germany and registered in the State of New South Wales as a foreign Company having its registered office in New South Wales at 32 Bridge Street, Sydney and trading in the said State under the registered business name Cologne Reinsurance Company; The Mercantile and General Reinsurance Company of Australia Limited a company duly incorporated in the State of New South Wales and having its registered office at Royal Exchange Building, 56 Pitt Street, Sydney; New Reinsurance Company a corporation duly incorporated in Switzerland registered in New South Wales as a foreign company and having its registered office in that State at 6th floor, Guardian Assurance Building, corner Pitt and Hunter Streets, Sydney; and Reinsurance Company of Australia Limited a company duly incorporated in the Australian Capital Territory and having its registered office in that Territory at 7th floor, CML Building, University Avenue, Canberra; their successors and assigns and the successors and assigns of each of them. ... "The Overseas Reinsurer's Proportion of the Combined Fund" - that part of the residue of the Combined Fund referred to on Clause 4(1)(b)(vii) which bears the same proportion to the whole of that fund as the Net Claims of Class "B" Creditors whose claims whose claims were or are reinsured by the Overseas Reinsurer bear to the total of the Net Claims of the Class "B" Creditors. "The Local Reinsurers' Proportion of the Combined Fund" - that part of the residue of the Combined Fund referred to on Clause 4(1)(b)(vii) which bears the same proportion to the whole of that fund as the Net Claims of Class "B" Creditors whose claims whose claims were or are reinsured by the Local Reinsurers bear to the total of the Net Claims of the Class "B" Creditors. "The Net Claim of a Class "B" Creditor" - the amount shown in the books and records of the Company as at the Commencement Date as being the estimate of the debt or claim of each of the Class "B" Creditors whether or not such estimate includes or consist wholly or partly of the cost or estimated cost to the Company of administering or attending to such a claim including inter alia fees or estimated fees of inter alia assessors, investigators, solicitors or barristers or others LESS each proportion of that claim as is reinsured by: (a) reinsurers under facultative reinsurance arrangements; or (b) either the Overseas Reinsurer of the Local Reinsurer as the case may be pursuant to the contracts and treaties of reinsurance referred to in Recital B to each of the Overseas Reinsurer's Deed and the Local Reinsurers' Deed (hereinafter called "The Treaties") and "The Net Claim of that Class "B" Creditor," has a corresponding meaning. ... "The Combined Fund" - the fund called "The Combined Fund" to be established under Clause 4". 4Each of Swiss Reinsurance Company Limited, General Reinsurance Australia Limited, and Munchener Rucksversicherungs - Gesellschaft Aktiengesellschaft in Munchen, are successors or assigns of the Local Reinsurers. The Dominion Insurance Company Limited is the Overseas Reinsurer. 5The three scheme funds - the Combined Fund, Fund One and Fund Two - are established by clause 4 of the scheme document. Essentially, the Combined Fund comprises all of the assets of the company together with interest earned from its investment, including any moneys due and payable by the Overseas Reinsurer and Local Reinsurers on balance of account as at the Commencement Date but excluding moneys due and payable after the Commencement Date. Fund One comprises the Overseas Reinsurer's proportion of the Combined Fund, interest thereon, and moneys paid or payable by the Overseas Reinsurer in respect of claims reinsured by the Overseas Reinsurer. Fund Two comprises the Local Reinsurers' proportion of the Combined Fund, interest thereon, and moneys paid or payable by the Local Reinsurers in respect of claims reinsured by the Local Reinsurers. In each case, the Reinsurer's proportion of the Combined Fund is determined after certain payments have been made out of the Combined Fund: Scheme Funds There shall be established three (3) scheme funds as follows: - (1) The Combined Fund (a) There shall be a fund called "the Combined Fund" which shall consist of all of the assets of the Company quantified or unquantified actual contingent prospective or otherwise as at the Commencement Date together with interest (if any) earned from time to time on the investment of any monies standing to the credit of the combined Fund INCLUDING any monies due and payable by the Overseas Reinsurer and Local Reinsurers on balance of account as at the Commencement Date BUT EXCLUDING any monies due and payable after the commencement Date by any of the Overseas Reinsurer and the Local Reinsurers pursuant to The Treaties or pursuant to The Overseas Reinsurer's Deed or The Local Reinsurers' Deed AND EXCLUDING the contributions (if any) of facultative reinsurers referred to in sub-clauses (2)(ii) and (3)(ii) of this clause. (b) Out of the Combined Fund shall be paid the following: - (i) The Liquidation Claims. (ii) To the Class "A" Creditors an amount of seventy cents (70c) in the dollar ($) of their debts or claims being on account of The Percentage of those debts or claims. (iii) To the Class "A" Creditors the Class "A" Creditors' Percentage of the net amount if any recovered by the Company from or in consequence of the Court proceedings PROVIDED THAT the Class "A" Creditors shall not in any circumstances receive more than one hundred cents (100c) in the dollar of their debts or claims under or by virtue of the Scheme. (iv) The costs of and incidental to the Court Proceedings including any costs which may be awarded against the Company in those proceedings any provision for costs and any payments which may have to be made in respect of costs or security for costs. (v) The costs charges and expenses of and incidental to the propounding of the Scheme and the costs charges and expenses of the Scheme Administrator (including his remuneration) of administrating the Scheme BUT EXCLUDING the administration of Fund One and Fund Two and attending to the overseas Reinsurer's Reinsured Claims and the Local Reinsurers' Reinsured Claims respectively. (vi) To the class "A" Creditors the Percentage in the dollar ($) of their debts or claims less the said amount of seventy cents (70c) in the dollar ($) paid in accordance with sub-clause (1)(b)(ii) of this clause. (vii) The residue thereof as to the Overseas Reinsurer's Proportion of the Combined Fund to Fund One and as to the Local Reinsurers' Proportion of the Combined Fund to Fund Two. (c) The Scheme Administrator shall make the payment referred to in sub-clause (b)(ii) above prior to any other payment to Class "A" Creditors or any of them. (d) Notwithstanding the previous provisions of this clause should any cheques forwarded to the last known address of any of the Class "A" Creditors in payment of the amounts payable to them pursuant to sub-clause (b) be returned to the Scheme Administrator or for any reason be not presented for payment within three months of them being issued and dispatched by the Scheme Administrator then the Scheme Administrator may cause the bank or banks upon which they were drawn to stop payment on the same and the Class "A" Creditors to whom they were dispatched shall thereupon be deemed never to have been Creditors and the Class "A" Creditors' Percentage of the amount or amounts represented by such cheques shall be paid to the remaining Class "A' Creditors and the balance shall form part of the combined Fund PROVIDED THAT the Scheme Administrator may in his absolute discretion extend the said period of three months in respect of all some or one of the Class "A" Creditors and may at any time if he believes it proper or equitable to do so pay a person society firm partnership corporation company or legal entity such amount or amounts to which he she or it would have been entitled as a Class "A" Creditor but for the provisions of this sub-clause. (e) The Combined Fund shall continue to exist even if only notionally and even if no funds are from time to time standing to its credit until the Scheme Administrator in writing otherwise resolves. (f) In dealing with the claims of Class "A" Creditors the Scheme Administrator shall be entitled to create reserves and/or make provisions in respect of their claims which inter alia are disputed or which are being litigated and shall be entitled to make partial distributions from the Combined Fund to the Class "A" Creditors or some of them as he sees fit. (g) The residue referred to in sub-clause (b)(vii) above may, if the Scheme Administrator thinks fit, be ascertained on the basis of estimates made by the Scheme Administrator of any or all of the amounts described in the preceding sub-clauses of clause (b) which, at the time when the estimate is made, cannot be precisely ascertained, subject to adjustment and to any necessary payment from the Combined Fund to Fund One and/or Fund Two or from Fund One and/or Fund Two to the Combined Fund, as the case may be, as and when the amounts so estimated are ascertained. (2) Fund One Fund One shall (submission to the provisions of sub-clause 4(1)(g)) consist of the Overseas Reinsurer's Proportion of the combined Fund. Plus - (i) interest (if any) earned from time to time on the investment of any moneys standing to the credit of Fund One; (ii) the contributions (if any) from reinsurers in respect of facultative reinsurance relative to claims reinsured by the Overseas Reinsurer; (iii) such moneys as the Overseas Reinsurer is obliged to pay to the Company pursuant to The Treaties; and (iv) such moneys as the Overseas Reinsurer shall have covenanted to pay from time to time to the Scheme Administrator for payment into or for the purposes of Fund one pursuant to the Overseas Reinsurer's Deed. (3) Fund Two Fund Two shall (subject to the provisions of sub-clause 4(1)(g)) consist of the Local Reinsurers' proportion of the combined Fund. Plus (i) interest (if any) earned from time to time on the investment of any moneys standing to the credit of Fund Two; (ii) the contributions (if any) from reinsurers in respect of facultative reinsurance relative to claims reinsured by the Local Reinsurers; (iii) such moneys as the Local Reinsurers are obliged to pay to the Company pursuant to The Treaties; and (iv) such moneys as the Local Reinsurers shall have covenanted to pay from time to time to the Scheme Administrator for payment into or for the purposes of Fund Two pursuant to the Local Reinsurers' Deed. 6The rights of the creditors are defined by clauses 2, 3 and 3A of the scheme document, so that in essence the Class "A" creditors are paid out of the Combined Fund, whereas the Class "B" creditors are paid out of Fund One (where there is an Overseas Reinsurer) or Fund Two (where there is a Local Reinsurer): 2. Class "A" Creditors (a) Class "A" Creditors shall be entitled to receive payment from the Combined Fund as soon as is reasonably practicable after the Commencement Date of the sum of not less than seventy cents (70c) in the dollar ($) of their debts or claims being on account of the Percentage of those debts or claims. (b) Upon payment to each of the Class "A" Creditors who have proved their debts or claims in the Scheme of The Percentage in the dollar ($) of their debts or claims as aforesaid together with any other amount or amounts to which they may be entitled from the Combined Fund their debts and claims and the debts and claims of each of them against the Company for the balance then remaining (if any) of their debts or claims and the claims of those class "A" Creditors who have not proved in the Scheme shall by virtue of the Scheme be and be deemed to be extinguished forgiven and released and thenceforth they and each of them shall be barred from making any further claim against the Company or under the Scheme in respect of that debt or claim or those debts or claims. 3. Class "B" Creditors (a) Class "B" Creditors whose debts or claims have been accepted in accordance with Clause 10 of the Scheme shall be entitled to receive the full amount of their debts or claims from either:- (i) Fund One and/or the Overseas Reinsurer; or (ii) Fund Two and/or the Local Reinsurers as the case may be in accordance with the Scheme. (b) Class "B" Creditors shall not be obliged to prove in the Scheme but the quantum of their debts or claims shall be ascertained and accepted as hereinafter set forth in Clause 10 and not otherwise. (c) By virtue of the Scheme the rights of each Class "B" Creditor shall be limited to an interest in Fund One or Fund Two as the case may be proportionate to the extent to which his claim (as determined in accordance with Clause 10 hereof) bears to the whole of the claims of the Class "B" Creditors (as so determined) to the intent that on and after the commencement Date the Class "B" Creditors shall have no rights against the Company whatsoever and they and each of them shall be barred from making any further claim against the Company. 3A. Creditor who is a Class "A" Creditor and a Class "B" Creditor Where a Creditor is both a Class "A" Creditor and a Class "B" Creditor, the Scheme shall apply to him separately, as if he were two distinct Creditors, in relation respectively to the debts or claims for which he is a Class "A" Creditor and the debts or claims for which he is a Class "B" Creditor and where a Class "B" Creditor has debts or claims ("Fund One Claims") which have been partly reinsured by the Overseas Reinsurer and also debts or claims ("Fund Two claims") which have been partly reinsured by the Local Reinsurers, the Scheme shall apply to him separately, as if he were two distinct Creditors, in relation respectively to his Fund One Claims and his Fund Two Claims. 7Provision is made for the distribution of Fund One and Fund Two by clauses 5 and 6. The effect is that it is ultimately the reinsurers who are beneficially interested in the residue of the funds: 5. Distribution of Scheme Funds (a) Fund One From Fund One shall be paid: - (i) To each Class "B" Creditor whose claim is an Overseas Reinsurer's Reinsured Claim and which is accepted by the Scheme Administrator in accordance with Clause 10: (a) the amount or amounts which reinsurers are obliged to pay to the Company, under facultative reinsurance arrangements, in respect of that claim (and is or are actually paid); AND (b) the amount or amounts which the Overseas Reinsurer is obliged to pay to the Company pursuant to The Treaties in respect of that claim (and is or are actually paid); AND (c) THE LESSER OF the amount equivalent to the amount of The Percentage of the Net Claim of that Class "B" Creditor and The Percentage of the amount of the claim of that Class "B" Creditor accepted in accordance with Clause 10 but after first deducting from the amount of that claim so accepted the amount or amounts which the Overseas Reinsurer is obliged to pay to the Company pursuant to the Treaties (or if there are at the time of payment insufficient funds in Fund One to make such payment the whole of the then balance standing to the credit of Fund One, if any); AND (d) so much (if any) interest forming part of Fund One as is available for application towards meeting that claim; AND (e) the amount which the Overseas Reinsurer is obliged to pay to the Scheme Administrator in accordance with the Overseas Reinsurer's Deed in respect of that claim (and is actually paid). LESS any amount due and payable to the Company by him in respect of any premium and the excess under the relevant policy ("the Offset") to the intent that such Class "B" Creditor should be paid the full amount of has claim less the Offset. (ii) To the Scheme Administrator the costs charges and expenses (including the remuneration of the Scheme Administrator) of administering Fund One and attending to the Overseas Reinsurer's Reinsured Claims and where such costs charges and expenses cannot be fairly attributed to Fund One alone such proportionate part of the same as in the sole discretion of the Scheme Administrator (acting reasonably) he considers just and the costs (if any) payable pursuant to Sub-clause 8(j)(vii). (b) FUND TWO From Fund Two shall be paid: (i) To each Class "B" Creditor whose claim is a Local Reinsurers' Reinsured Claim and which is accepted by the Scheme Administrator in accordance with Clause 10: (a) the amount or amounts which reinsurers are obliged to pay to the Company, under facultative reinsurance arrangements, in respect of that claim (and is or are actually paid); AND (b) the amount or amounts which the Local Reinsurers are obliged to pay to the Company pursuant to The Treaties in respect of that claim (and is or are actually paid); AND (c) THE LESSER OF the amount equivalent to the amount of The Percentage of the Net Claim of that Class "B" Creditor and The Percentage of the amount of the claim of that Class "B" Creditor accepted in accordance with Clause 10 but after first deducting from the amount of that claim so accepted the amount or amounts which the Local Reinsurers are obliged to pay to the Company pursuant to the Treaties (or if there are insufficient funds in Fund Two to make such payment the whole of the then balance standing to the credit of Fund Two, if any); AND (d) so much (if any) interest forming part of Fund Two as is available for application towards meeting that claim; AND (e) the amount which the Local Reinsurers are obliged to pay to the Scheme Administrator in accordance with the Local Reinsurers' Deed in respect of that claim (and is actually paid). LESS any amount due and payable to the Company by him in respect of any premium and the excess under the relevant policy ("the Offset") to the intent that such Class "B" Creditor should be paid the full amount of has claim less the Offset. (ii) To the Scheme Administrator the costs charges and expenses (including the remuneration of the Scheme Administrator) of administering Fund Two and attending to the Local Reinsurers' Reinsured Claims and where such costs charges and expenses cannot be fairly attributed to Fund Two alone such proportionate part of the same as in the sole discretion of the Scheme Administrator (acting reasonably) he considers just and the costs (if any) payable pursuant to Sub-clause 8(j)(vii). 6. Balance in Funds One and Two (a) If at any time after the expiration of five (5) years from the Commencement Date the Scheme Administrator forms the opinion that it would be unlikely that any further claims would be made or any further proceedings commenced or any existing proceedings proceeded with by Creditors against either or both of Fund One or Fund Two then the Scheme Administrator may pay the balance (if any) standing to the credit of either or both of such funds - in the case of Fund One to the overseas Reinsurer and in the case of Fund Two to the Local Reinsurers. (b) Payment to the Overseas Reinsurer and the Local Reinsurers in accordance with paragraph (a) of this clause shall not (i) terminate the Scheme in whole or in part; (ii) affect the rights of Creditors (if any) under the Scheme or; (iii) affect the rights and obligations of the Overseas Reinsurer or the Local Reinsurers under the Scheme or under the Overseas Reinsurer's Deed or the Local Reinsurers' Deed respectively. 8The original Scheme Administrator, Mr McMahon, died on or about 17 March 2010. Clause 8(b) of the scheme document provided that should the Scheme Administrator die or be unwilling or unable to act as such, then the Overseas Reinsurer and the Local Reinsurers (acting collectively) shall each nominate a chartered accountant who is also a registered liquidator who then customarily and currently carries on practice in New South Wales as an official liquidator, and if the Overseas Reinsurer and the Local Reinsurers nominate the same person he shall be the Scheme Administrator; but that if the Overseas Reinsurer and the Local Reinsurers each nominate different persons then those two persons shall be the Scheme Administrator jointly and severally. 9Prior to Mr McMahon's death, he was introduced by his solicitors to the applicant Mr Weston, an official liquidator, as a person who could be appointed Scheme Administrator in his place. On or about 14 December 2010, in accordance with the provisions of clause 8(b) of the scheme document, Mr Weston was appointed Scheme Administrator.

The status of the scheme 10Following his appointment, Mr Weston received, from the solicitors, documents that Mr McMahon had delivered to them, and also further documents directly from Mr McMahon's office. These documents are, as Mr Weston puts it, "limited in their number and scope". 11Mr Weston has established that Mr McMahon in his capacity as Scheme Administrator held an amount of $1.744 million in a Bankwest facility, and a further $9,500 in a Westpac account, which sums he has caused to be deposited into an interest-bearing account controlled by him. 12Mr Weston has undertaken further enquiries and investigations to ascertain the status of the scheme. Appropriate enquiries have been undertaken with ASIC, Mr McMahon's office, Mr McMahon's estate, and the reinsurers, as well as with repositories of records with which Mr McMahon is said to have stored scheme records. Many of the documents that he would expect to form part of the books and records maintained in respect of the scheme cannot be located. This poses considerable difficulties in ascertaining the status of the scheme, including as to the identity of admitted creditors; into which category such creditors fall; the extent to which dividend has been paid; the allocation of funds between the various funds established by the scheme; compliance with taxation obligations; and the nature of receipts and payments during the operation of the scheme to date. 13Due to the absence of any records of receipts and payments for the scheme in respect of the periods 13 December 1986 to 15 June 1990, and 16 December 2009 to 14 December 2010, Mr Weston has been unable to identify what if any individual transactions took place in respect of the scheme during those periods. This means that he is unable to be certain of the balance of creditor claims and amounts required to be paid to each class of creditor from any of the Combined Fund, Fund One or Fund Two; the balance held in any of those funds; and any funds that may be required to be paid by the reinsurers into Fund One or Fund Two. He is also presently unable to calculate with certainty any amounts of income tax payable in respect of the scheme. However, he has been able to form a view that certain schedules appear to contain a listing of all known and admitted creditors for the scheme as at 15 December 2009, and that all listed creditors have been paid a dividend at the rate of 70 cents in the dollar. He anticipates that there will be a number of Class B creditors who are deregistered, no longer at their last known address or otherwise cannot be found. He has not yet endeavoured to reconstruct accounts for the Combined Fund, Fund One and Fund Two, as he is of the view that this may involve substantial time and costs and may not be successful; and may prove unnecessary as the scheme funds may be sufficient to allow payment to be made in full of the remaining dividend of 30 cents in the dollar to all creditors. 14In his first report to the reinsurers, issued on 29 July 2011, Mr Weston gave notice of a preliminary view that, pending the location and review of further documents, he anticipated that he would need to approach the court for directions in respect of various matters, including the identification of creditors. On 24 August 2012, Mr Weston issued a further report to the reinsurers, in which he set his provisional conclusions as to the then current status of the scheme, identified the areas of uncertainty with respect to its status and operation, identified the basis and terms upon which he proposed to progress the administration of the scheme with a view to paying final dividends and winding up the scheme, set out the basis on which he would seek payment of his remuneration, and invited the reinsurers to confirm their position. Three of the four reinsurers have confirmed that they agree, or have no objection to his proposals. The fourth has not responded.

The relief sought 15Many of the issues raised by the application do not yet require the court's attention, though in due course they may well do so. Relevantly for present purposes, the relief sought at this stage of the proceedings is as follows: (2) A declaration that, notwithstanding the terms of clauses 4(1)(b)(v), 5(a)(ii) and 5(b)(ii) of the Scheme, the Applicant is justified in paying and/or recouping from the Scheme Funds all of the remuneration (including Pitcher Partners non-insolvency related professional services), costs and expenses incurred by him, without recovering, applying or allocating any such remuneration, costs and expenses from the funds referred to in and in accordance with the terms of clauses 4(1)(b)(v), 5(a)(ii) and 5(b)(ii) of the Scheme, being of and incidental to: (a) his position as the Scheme Administrator under the Scheme of Arrangement (Scheme) in respect of the Plaintiff approved by this Court on 15 December 1986; (b) identifying, and otherwise communicating with, those who might have a beneficial interest in the Scheme Funds; and (c) these proceedings. (3) A declaration that, notwithstanding the terms of clause 8(e) of the Scheme, the Applicant is justified in paying and/or recouping his remuneration (including Pitcher Partners non-insolvency related professional services) as Scheme Administrator: (a) at the rates charged by Pitcher Partners in insolvency related matters from time to time and/or taxation related matters (as applicable); (b) for the period between 14 December 2010 and 23 August 2012, in the sum of $62,297.50 plus GST in the sum of $6,229.75; (c) for the period between 24 August 2012 and 10 June 2013, in the sum of $53,741.50 plus GST in the sum of $5,374.15; (d) for the period on and from 11 June 2013, in the sum approved by a majority in number only of the Overseas Reinsurer and Local Reinsurers (as those parties are defined in the Scheme), or, if such approval is not given, then by the Court; and (e) out of the Scheme Funds. ... 5. Further or in the alternative to paragraphs 3 and 4 above: (a) an order that the requirement of service of a Notice of Intention to Apply for Remuneration and a copy of the affidavits upon which the Applicant intends to rely pursuant to regulation 9.1 of the Supreme Court (Corporations) Rules 1999 (NSW), alternatively, Section 80A.13A of the Supreme Court Rules 1970 (NSW) be dispensed with; (b) an order under section 425(1) of the Corporations Act 2001 (Cth) that the amount to be paid by way of remuneration to the Applicant (including Pitcher Partners non-insolvency related professional services) as Scheme Administrator be fixed: (i) for the period between 14 December 2010 and 23 August 2012, in the sum of $62,297.50 plus GST in the sum of $6,229.75; (ii) for the period between 24 August 2012 and 10 June 2013, in the sum of $53,741.50 plus GST in the sum of $5,374.15. 16The Interlocutory Process has been served on each of the reinsurers and on ASIC, and notice of the Amended Interlocutory Process has also been given to them. None appeared to oppose the relief sought.

Administrator's entitlement to remuneration 17Clause 8(e) of the scheme document entitles the administrator to remuneration at the rate or rates from time to time recommended by the Insolvency Practitioners Association of Australia or its successor (IPAA): (e) The Scheme Administrator shall be entitled to remuneration at the rate or rates from time to time recommended by the Insolvency Practitioners Association of Australia (or its successors) ("IPAA") for work of a like nature which shall be paid to the Scheme Administrator out of the various Funds constituted by the Scheme and/or by the Overseas Reinsurer and/or the Local Reinsurers in accordance with the Overseas Reinsurer's Deed and the Local Reinsurers' Deed as the case may be. A copy of the rates currently recommended by the IPAA forms the Fourth Schedule hereto. 18However, the IPAA, which was subsequently renamed the IPA, ceased to publish recommended rates from 1 July 2000, and instead recommended that insolvency practitioners should charge hourly rates in accordance with their own internal cost structures. In his first report, Mr Weston advised the reinsurers of this, and that he proposed to be remunerated on the basis of the schedule of hourly rates charged by his firm Pitcher Partners from time to time in respect of insolvency matters. In his second report, he provided a remuneration report which set out details of remuneration incurred for the period 14 December 2010 to 23 August 2012, totalling $62,297.50, and advised of his intention to approach the court to have his remuneration determined on the basis of the Pitcher Partners insolvency rates, seek approval for his remuneration and seek a regime by which future remuneration could be approved by a majority of the reinsurers. He also provided an estimate of further remuneration costs to complete the administration of the Scheme, amounting $175,865.00 (plus GST). He has since become aware of a potential taxation issue associated with the Scheme, in respect of which members of his firm's specialist tax team has been engaged, and considers that their likely costs may amount to $100,000.00. 19By the present application, Mr Weston seeks, on various bases, the protection of a court's approval of his proposed remuneration. 20It is well established that a scheme, once approved by the court, cannot be amended by the Court, except pursuant to a meeting of creditors approving an amended scheme [BTS Bearings Pty Limited v Transmission Supplies Pty Ltd (1983) 1 ACLC 923 (Needham J); Re Telmak Teleproducts Pty Ltd (1983) 1 ACLC 1054 (Needham J)]. Moreover, the court does not have jurisdiction, when making an order confirming a scheme, to authorise applications to the court to resolve questions relating to or out of the discharge of the Scheme Administrator's duties and powers, and a judgment approving a scheme which purports to confer such jurisdiction is legally ineffective to do so [Commonwealth Minister for Health v Trustees of the Ancient Order of Foresters Friendly Society in Queensland (1985) 10 FCR 27; Re Slade Constructions Pty Ltd [1970] SASR 561; Re Forklift Sales (SA) Pty Ltd (1972) 3 SASR 21, 24; Re RM Eastmond Pty Ltd (1972) 4 ACLR 801; Re SDR Apparel Pty Ltd & The Companies Act (1977) 3 ACLR 162]. 21However, the legislation confers on the Court jurisdiction to fix a Scheme Administrator's remuneration, in certain circumstances. Companies Code, s 315(11) relevantly provides: Where a person is or persons are appointed, whether by the terms of a compromise or arrangement or pursuant to a power given by the terms of a compromise or arrangement, to administer the compromise or arrangement: (a) section 325, sub-sections 326(1A) and (2) and sections 327, 330 and 332 apply in relation to that person or those persons as if: (i) the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a receiver and manager, or as receivers and managers, of the property of the Company; and (ii) a reference in any of those sections or sub-sections to a receiver, or to a receiver of the property, of a company were a reference to that person or to those persons; ... 22Section 325 provides as follows: (1) The Court may, on application by the liquidator or the official manager of a company, or by the Commission, by order fix the amount to be paid by way of remuneration to any person who, under the powers contained in any instrument, has been appointed as receiver of the property or part of the property of the Company. (2) The power of the Court to make an order under this section: (a) extends to fixing the remuneration for any period before the making of the order or the application for the order; (b) is exercisable notwithstanding that the receiver has died or ceased to act before the making of the order or the application for the order; and (c) where the receiver has been paid or has retained for his remuneration for any period before the making of the order any amount in excess of that fixed for that period - extends to requiring him or his personal representatives to account for the excess or such part of the excess as is specified in the order. (3) The power conferred by paragraph (2)(c) shall not be exercised in respect of any period before the making of the application for the order unless, in the opinion of the Court, there are special circumstances making it proper for the power to be so exercised. (4) The Court may from time to time, on an application made by the liquidator, the official manager, the receiver or the commission, vary or amend an order made under this section. 23Corporations Act, s 411(9), relevantly provides: (9) Where a person is or persons are appointed by, or under a power given by, the terms of a compromise or arrangement, to administer the compromise or arrangement: (a) section 425, subsections 427(2) and (4) and sections 428, 432 and 434 apply in relation to that person or those persons as if: (i) the appointment of the person or persons to administer the compromise or arrangement were an appointment of the person or persons as a receiver and manager, or as receivers and managers, of property of the body; and (ii) a reference in any of those sections or subsections to a receiver, or to a receiver of property, of a corporation were a reference to that person or to those persons; ... 24Section 425 relevantly provides as follows: Court's power to fix receiver's remuneration (1) The Court may by order fix the amount to be paid by way of remuneration to any person who, under a power contained in an instrument, has been appointed as receiver of property of a corporation. (2) The power of the Court to make an order under this section: (a) extends to fixing the remuneration for any period before the making of the order or the application for the order; and (b) is exercisable even if the receiver has died, or ceased to act, before the making of the order or the application for the order; and (c) if the receiver has been paid or has retained for the receiver's remuneration for any period before the making of the order any amount in excess of that fixed for that period--extends to requiring the receiver or the receiver's personal representatives to account for the excess or such part of the excess as is specified in the order. (3) The power conferred by paragraph (2)(c) must not be exercised in respect of any period before the making of the application for the order unless, in the opinion of the Court, there are special circumstances making it proper for the power to be so exercised. (4) The Court may from time to time vary or amend an order under this section. (5) An order under this section may be made, varied or amended on the application of: (a) a liquidator of the corporation; or (b) an administrator of the corporation; or (c) an administrator of a deed of company arrangement executed by the corporation; or (d) ASIC. (6) An order under this section may be varied or amended on the application of the receiver concerned. (7) An order under this section may be made, varied or amended only as provided in subsections (5) and (6). (8) ... 25As I do not think that there are any material differences between the relevant provisions of the Companies Code and those of the Corporations Act, it is unnecessary to consider the effect of the transitional provisions so as to resolve which of those two regimes is applicable. It is prima facie arguable that the effect of Corporations Law 1990, s 85 - the effect of which is continued by Corporations Act 2001, s 1408(1) - is that the present application, being a matter arising directly or indirectly out of a matter that arose before the commencement of the 1990 legislative scheme, is one in respect of which the former co-operative scheme laws of 1980 would therefore continue to apply. However, as there is no material difference, I shall for convenience refer to the current legislation. 26It is conspicuous that s 425(7) provides that an order under the section may be made, varied or amended only as provided in sub-sections (5) and (6); that sub-section (5) specifies those with standing to make an application, and does not include the receiver (to whose position a Scheme Administrator is for relevant purposes by s 411(9) assimilated); whereas standing to apply for a variation or amendment of an order made under the section is conferred on the receiver by sub-section (6). Although the predecessor section did not contain an equivalent of sub-section (7), it was otherwise to the same effect. 27The reason for the section being structured this way is that a receiver's right to remuneration is contractual, arising under the instrument of appointment. The receiver is entitled to that remuneration as a matter of contractual right, unless the court interferes at the suit of a party with standing under s 425(5). There is no need for a receiver to have standing to make such an application. However, where the court does interfere, the receiver is then given standing, under s 425(6), to apply to vary or amend the order so made. The purpose of the section is to allow the court to fix the remuneration of a receiver appointed under an instrument, if the receiver's remuneration would otherwise be excessive [Re Potters' Oils Ltd (No 2) [1986] 1 All ER 890; [1986] 1 WLR 201; Cape v Redarb (1992) 8 ACSR 67]. I respectfully disagree with the view adopted in this respect by Jacobson J in Shannon v North East Wiradjuri Co Ltd (No 4) [2012] FCA 836; in expressing the view that the provisions of s 425(5), which made no reference to the standing of a receiver, did not effect the scope of the power under s 425(1) which specifically referred to the power of the court to fix the remuneration of a receiver, his Honour's attention does not appear to have been drawn to sub-section (7). Although the rules [Supreme Court (Corporations) Rules 1999, r 9.1(1)] assume that a receiver can make such an application, the rules cannot validly confer such standing in the face of the explicit limitation in Corporations Act, s 425(7). 28Accordingly, in my view, is it not open to the court to fix the Scheme Administrator's remuneration under Corporations Act, s 425. 29Other potential bases for jurisdiction referred to were Corporations Act s 413(1)(g), UCPR r 36.17 (formerly Supreme Court Rules, Pt 20 r 10) (the "slip rule"), and the court's inherent jurisdiction. In Re AGL Gas Networks Limited [2001] NSWSC 165; (2001) 160 FLR 269, the validity of a scheme was challenged six years after the event, having been treated by all as effectual in the meantime, on the basis that a document had been executed very shortly after midnight of the last day on which the condition permitted. Santow J, as he then was, made an order extending time for compliance with a precondition of a scheme, in reliance on Corporations Act s 413(1), SCR, Pt 2 r 3 or Pt 20 r 10, and the court's inherent jurisdiction. 30Corporations Act, s 413, provides that where on an application for the approval of an arrangement it is shown to the Court that the arrangement has been proposed for the purposes of or in connection with a scheme for the reconstruction of any corporation and that under the scheme, the whole or any part of the undertaking or of the property of any corporation concerned in the scheme is to be transferred to a company, the Court may, by the order approving the arrangement or by any subsequent order, provide for a range of associated matters to give effect to the arrangement, including "such incidental, consequential and supplemental matters as are necessarily to ensure that the reconstruction or amalgamation is fully and effectively carried out": Provisions for facilitating reconstruction and amalgamation of Part 5.1 bodies (1) Where an application is made to the Court under this Part for the approval of a compromise or arrangement and it is shown to the Court that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of a Part 5.1 body or Part 5.1 bodies or the amalgamation of 2 or more Part 5.1 bodies and that, under the scheme, the whole or any part of the undertaking or of the property of a body concerned in the scheme (in this section called the transferor body) is to be transferred to a company (in this section called the transferee company), the Court may, either by the order approving the compromise or arrangement or by a later order, provide for all or any of the following matters: (a) the transfer to the transferee company of the whole or a part of the undertaking and of the property or liabilities of the transferor body; (b) the allotting or appropriation by the transferee company of shares, debentures, policies or other interests in that company that, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (c) the continuation by or against the transferee company of any legal proceedings pending by or against the transferor body; (d) if the transferor body is a company--the deregistration by ASIC, without winding up, of the transferor body; (e) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; (f) the transfer or allotment of any interest in property to any person concerned in the compromise or arrangement; (g) such incidental, consequential and supplemental matters as are necessary to ensure that the reconstruction or amalgamation is fully and effectively carried out. (2) Where an order made under this section provides for the transfer of property or liabilities, then, by virtue of the order, that property is transferred to and vests in, and those liabilities are transferred to and become the liabilities of, the transferee company, free, in the case of any particular property if the order so directs, from any security interest that is, by virtue of the compromise or arrangement, to cease to have effect. ... 31Companies (New South Wales) Code, s 317(1), made substantially identical provision. 32The scheme in this case cannot be characterised as one for the purposes of, or in connection with, a scheme for the reconstruction of Dominion, or its amalgamation with another body. Moreover, it does not involve the transfer of the whole or any part of the undertaking or property of any corporation involved in the scheme to a company. Even if Santow J were correct in relying on this source of power in Re AGL Gas Networks, it is not available in the present case. 33SCR Pt 2 r 3 (see now UCPR r 1.112) authorised the Court by order to "extend ... any time fixed ... by any judgment or order". Santow J, commencing from the position that a scheme of this type derived its force from the court order, and not from the antecedent resolutions of members or creditors [Hill v Anderson Meat Industries Ltd [1971] 1 NSWLR 868, 877; Caratti v Hillman [1974] WAR 92, 94-5; 4 ACLR 170, 173; Bond Corporation Holdings v Western Australia (No 2) (1992) 7 WAR 61, 68], held that the effect of these cases was that, once approved, there was no scheme separate from the order of the court, and that the "scheme" was subsumed into and by the court order. In the words used in Caratti v Hillman, the order speaks in terms of the scheme. Accordingly, where the scheme fixed a time by which certain steps were to be taken, that time could be extended under the rule. I confess to some reservations at this approach - which in my view goes further than what Street J said in Hill v Anderson Meat Industries [and see also Kempe v Ambassador Insurance Co (in liq) [1998] 1 WLR 271 (PC)]. However, I should follow the prevailing Australian authority [Re Matine Ltd (1998) 28 ACSR 268, 286; Re AGL Gas Networks, [46]]. 34The current equivalent of SCR Pt 2 r 3 does not avail the plaintiff here, because the problem is not one that can be solved by an extension of time. However, this characterisation of the nature of an approved scheme as being an order of the court informs consideration of the slip rule and the inherent jurisdiction, in respect of which his Honour's approach relied on the same characterisation of an approved scheme, as authorising its variation upon the grounds on which a court order could be varied. Relevantly, his Honour held that the slip rule extended to giving effect to the intention that the court would have had but for the failure that caused the accidental slip or omission, and in the particular case that had the court known that the relevant step would not be completed until moments after midnight on the date fixed, it would have approved of the scheme but subject to an alteration extending the time for performance of the step accordingly. 35I am prepared to accept that where the defect can properly be brought within the scope of the "slip rule", an amendment to correct the error would be authorised, though I respectfully doubt whether failure to provide a longer period for satisfaction of a condition precedent could qualify as a "slip". I am not so inclined to accept that a scheme, being a creature of statute, could be amended under the inherent jurisdiction, where the statute prescribes the procedures for approval, and authority establishes that once approved a scheme cannot be amended except by following those same procedures. 36In any event, in the present case the difficulty is in accepting that the relevant "slip" was not only in failing to make provision for the possibility that IPAA might cease to publish recommended rates, but that such provision should be to the effect that the Scheme Administrator would be entitled to remuneration at the hourly rates charged in accordance with his own internal cost structures. The effect would be to substitute, for an objective external standard, one fixed by the Scheme Administrator himself. While it can well be said that there was a slip in failing to provide for the eventuality that IPAA might cease to publish recommended rates, it cannot be said that the intent was that, in that event, the Scheme Administrator be able to charge whatever rates his firm set. 37Accordingly, I am unable to find a basis in Corporations Act s 413(1)(g), the slip rule, or the court's inherent jurisdiction, for, in effect, approving Mr Weston's remuneration. 38Nor am I able to conclude that on the proper construction of clause 8(e) in the events which have happened, the Scheme Administrator's firm's schedule of rates is substituted for the IPAA published rates by the IPA recommendation that insolvency practitioners should charge hourly rates in accordance with their own internal cost structures. The purpose of clause 8(e) was to apply an objective industry standard, and not whatever rate of charges was applied by the particular Scheme Administrator; it would be inconsistent with that intent to substitute the subjective standard of the administrator's own internal cost structures. 39In my view, the true intent that informed clause 8(e) of the scheme document was that the Scheme Administrator should be entitled to reasonable remuneration for an insolvency practitioner doing like work, and the reference to the IPAA published rates was a proxy for that. The IPAA rates were the machinery that provided the means for determining what was reasonable remuneration, so long as there was such a scale. But it is inconceivable that it was intended that, should the IPAA cease to publish recommended rates, the Scheme Administrator would be obliged to act without remuneration, or cease to administer the scheme. 40Courts have not infrequently had to deal with similar situations in the context of uncertainty and incompleteness of contracts, where parties have left certain contractual provisions - often price - to be ascertained, typically in terms of what is "fair" or "reasonable". Where there is a formula, either to be inferred from the parties' arrangements and course of dealings, or expressly stated in the contract itself, the court can itself supply the machinery to work it out [Hillas & Co Ltd v Arcos Ltd (1932) 38 Com Cas 23; Sweet & Maxwell Limited v Universal News Services [1964] 2 QB 699, 735; Brown v Gould [1972] Ch 53, 58 (Megarry J); Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429, 437; Talbot v Talbot [1968] Ch 1; Attorney General v Barker Brothers Limited [1976] 2 NZLR 495, 499-500 (Richmond P); Andrews v Colonial Mutual Life Assurance Society Limited [1982] 2 NZLR 556, 565; Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444, 459]. 41In this case, the IPAA published rates provided the machinery for determining what was reasonable remuneration for an insolvency practitioner doing like work. The failure of the machinery results in the requirement to determine, without the assistance of that machinery, what is reasonable remuneration. That task can be undertaken by the court. Being a specialist court, which is frequently engaged in the determination of the remuneration of insolvency practitioners, it is equipped to undertake that task itself. 42An alternative approach, which leads to the same result, is founded on the notion of a quantum meruit. If the mechanism for determination of the Scheme Administrator's remuneration has failed, but where it is manifest that it was intended that he be remunerated, an obligation to pay on a quantum meruit would be imposed. That would result in the same test - reasonable remuneration for an insolvency practitioner for work of a like nature. 43My attention has very properly been drawn to authority for the proposition that, where the appointment of a liquidator is defective, so that the liquidator is not entitled to remuneration on the normal basis, there is no entitlement to a quantum meruit, since there can be no implied contract to pay for work performed as a result of an invalid request - although where the work of the invalidly appointed liquidator has been of incontrovertible benefit a restitutionary claim may be available [Re Allison, Johnson & Foster Ltd; ex parte Birkenshaw [1904] 2 KB 327 (CA); In re Wood and Martin (Bricklaying Contractors) Ltd [1971] 1 WLR 293, 297; Re Kyra Nominees Pty Ltd [1981] WAR 120; (1980) 5 ACLR 60; Monks v Poynice (1987) 8 NSWLR 662; Young v ACN 081 162 512 [2005] NSWSC 139, [9]-[10]; Dean-Willcocks v Nothintoohard Pty Ltd (in liq) [2006] NSWCA 311, [102]-[104], [107]]. There is no need to resort to a restitutionary claim here, because the appointment of the Scheme Administrator is not defective; to the contrary, it is valid and effective, and there is an implied if not express provision for reasonable remuneration. The only defect is in the machinery for quantification of the remuneration. 44In my view, therefore, this result is reached as a matter of construction of the scheme document, and upon the true construction of the scheme document and in the events which have happened, the Scheme Administrator is entitled to reasonable remuneration for an insolvency practitioner for work of a like nature. 45If it were not possible to reach this conclusion as a matter of construction, then the slip rule - as explained above - would provide a third route to the same end: the "slip" was in providing only the proxy or machinery, and omitting reference to the underlying formula, namely reasonable remuneration for work of a like nature. It cannot be doubted that, had attention been given to the possibility that IPAA might cease to publish recommended rates, the Court's approval of the scheme would have been subject to the alteration that clause 8(e) refer to "reasonable remuneration for an insolvency practitioner for work of a like nature". In this respect, the case is stronger than one involving failure to advert to the possibility that a time stipulation might not be satisfied, as in Re AGL Gas Networks.

Quantification of reasonable remuneration 46As I have observed, the Corporations Court is a specialist court. It deals on a regular basis with, and is required to fix and approve, the remuneration of insolvency practitioners. It routinely receives evidence of the rates that proposed appointees as liquidators or administrators will charge, and is familiar with the prevailing rates. To require the applicant to adduce expert evidence of prevailing rates, when the court is able to form its own view, would unnecessarily involve the incurring of additional costs, to the ultimate detriment of those beneficially interested in the scheme. 47It is important to recognise that in this case I am not concerned with ascertaining whether the applicant's rates are within a reasonable range, but rather with fixing reasonable remuneration. The subtle difference is that the Court may allow remuneration at a rate that falls within, albeit at the high end of, a range, particularly if the liquidator has indicated that those rates will be charged when consenting to appointment. But when quantifying "reasonable remuneration" on a quantum meruit, the Court will be guided by the average, rather than the upper end, of the range. I accept that the Court has previously accepted observations in a registrar's report that the applicant's rates were "generally comparable to the rates charged by other practitioners in the field" [see, for example, In the matter of One.Tel Limited (in liq), (NSWSC, unreported, Black J, 27 May 2013)]. 48However, my judgment is that the applicant's rates are at the upper end of the range. In the below table I set out (a) the status of the person engaged, (b) the applicant's rates, (c) my assessment of reasonable remuneration, and (d) the percentage that (c) represents of (b). (a) (b) (c) (d) Partner/Appointee 595 550 92 Client Director/Associate 495 450 90 Senior Manager (>7 years) 460 415 90 Manager (6-7 years) 420 375 89 Assistant Manager (5 years) 340 300 88 Senior Accountant 2 (3-5 years) 300 265 88 Senior Accountant (1-3 years) 260 225 87 Accountant 2 & 3 230 200 87 Accountant 195 170 87 Computer operator 165 145 88 Secretary 165 145 88

49It will be observed that the rates I have allowed, in round terms, are a little under 90% of the applicant's rates. I would be prepared to hold that reasonable remuneration would be 90% of the amounts he has claimed, which would be a total of $158,278.50 (plus GST), in place of the $175,865.00 (plus GST) claimed. However, as I indicated in the course of argument, as this amount is less than the amount claimed, I will afford the applicant an opportunity, if it is desired, to adduce evidence of commercial rates, and of other relevant considerations including those referred to in Corporations Act, s 425(8). It should be noted that in assessing reasonable remuneration, I have not taken into account any special characteristics of the appointment or the scheme. However, in a time-costing system, unusual difficulty or complexity on the one hand, and simplicity on the other, is normally reflected in the time expended and the level at which the work is done.

Allocation of remuneration to scheme funds 50Clause 4(1)(b)(v) provides that the costs charges and expenses of and incidental to the propounding of the scheme, and the costs charges and expenses of the Scheme Administrator (including his remuneration) of administrating the scheme, but excluding the administration of Fund One and Fund Two and attending to the Overseas Reinsurer's Reinsured Claims and the Local Reinsurers' Reinsured Claims respectively, shall be paid out of the Combined Fund. Clause 5(a)(ii) provides that there shall be paid from Fund One to the Scheme Administrator the costs charges and expenses (including the remuneration of the Scheme Administrator) of administering Fund One and attending to the Overseas Reinsurer's Reinsured Claims, and where such costs charges and expenses cannot be fairly attributed to Fund One alone such proportionate part of them as the Scheme Administrator considers just. Clause 5(b)(ii) provides that there shall be paid from Fund Two to the Scheme Administrator the costs charges and expenses (including the remuneration of the Scheme Administrator) of administering Fund Two and attending to the Local Reinsurers' Reinsured Claims, and where such costs charges and expenses cannot be fairly attributed to Fund Two alone such proportionate part of them as the Scheme Administrator considers just. 51The remaining issue whether the administrator is entitled to pay his remuneration out of the Scheme Funds without recourse or allocation to any one of the three specific funds. In my view he is, on two bases. 52First, the work done to date by Mr Weston as administrator involves "administrating the scheme" generally, as distinct from Fund One and Fund Two or attending to the Overseas or Local Reinsurers' Reinsured Claims. Accordingly, his remuneration to date is payable out of the Combined Fund, under clause 4(1)(b)(v) of the Scheme Deed. 53Secondly, it is not possible finally to ascertain Fund One and Fund Two until the amount of any residue of the Combined Fund (of which both of Fund One and Fund Two form part) is ascertained: see clause 4(1)(b)(vii). Ultimately, if it appears that any of the remuneration presently claimed is properly chargeable to Fund One or Fund Two, that can be adjusted when the accounts are settled. I do not read clauses 4 and 5 as requiring that payments be made in the first instance only from the fund ultimately chargeable; rather, they are notional funds that provide the means for calculating and determining the amounts ultimately payable to the Class "B" creditors and the reinsurers.

Orders 54For the foregoing reasons, I have reached the following conclusions. 55It is not open to the court to fix the Scheme Administrator's remuneration under Corporations Act, s 425. Nor is there a basis in Corporations Act s 413(1)(g), the slip rule, or the court's inherent jurisdiction, for, in effect, approving Mr Weston's remuneration as claimed. 56On the proper construction of clause 8(e) in the events which have happened, the Scheme Administrator's firm's schedule of rates is not substituted for the IPAA published rates by virtue of the IPA recommendation that insolvency practitioners should charge hourly rates in accordance with their own internal cost structures. Rather, the Scheme Administrator is entitled to reasonable remuneration having regard to the prevailing rates for work by insolvency practitioners of a like nature. 57Alternatively, I would be prepared to make an order pursuant to the slip rule, correcting the order approving the scheme to provide that the scheme be approved subject to the alteration that clause 8(e) refer to "reasonable remuneration for an insolvency practitioner for work of a like nature" in the event that the IPAA cease to publish recommended rates. 58Reasonable remuneration would be 90% of the amounts Mr Weston has claimed, which would be a total of $158,278.50 (plus GST), in place of the $175,865.00 (plus GST) claimed. As I indicated in the course of argument, as this amount is less than the amount claimed, I will afford the applicant an opportunity, if it is desired, to adduce evidence of commercial rates and of any other relevant considerations. 59The Scheme Administrator is entitled to pay or recoup his remuneration (including Pitcher Partners' non-insolvency related professional services), costs and expenses incurred by him from the Combined Fund in the first instance. 60Subject to any application by Mr Weston to adduce further evidence, I propose to make the following declarations: (1)Declare that upon the true construction of clause 8(e) of the scheme document and in the events which have happened, the Scheme Administrator is entitled to reasonable remuneration having regard to the prevailing rates for work by insolvency practitioners of a like nature. (2)Declare that the sums of $56,067.75 plus GST in the sum of $5,606.77 (for the period 14 December 2010 to 23 August 2012) and $48,367.35 plus GST in the sum of $4,836.74 (for the period 24 August 2012 to 10 June 2013) are reasonable remuneration. (3)Declare that upon the true construction of the scheme document and in the events which have happened, the Scheme Administrator is entitled to pay or recoup his remuneration (including Pitcher Partners' non-insolvency related professional services) costs and expenses incurred by him from the Combined Fund in the first instance.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 July 2013

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (11 paragraphs)

Legislation Cited (3)

Cases Cited (10)

Cited By (9)