CMC Cairns Pty Ltd (in liquidation) [2011] QSC 240

1-1 SUPREME COURT OF QUEENSLAND CITATION: Re CMC Cairns Pty Ltd (in liquidation) [2011] QSC 240 PARTIES: TERRY VAN DER VELDE AND DAVID STIMPSON AS ADMINISTRATORS OF CMC CAIRNS PTY LTD (in administration) ACN 010 861 579 (applicant) FILE NO/S: SC No 6148 of 2009 DIVISION: Trial PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: Delivered ex tempore 12 July 2011 DELIVERED AT: Brisbane HEARING DATE: 12 July 2011 JUDGE: Atkinson J ORDER: Pursuant to s 447A and s 449E(2) of the Corporations Act 2001 (Cth), the applicants’ additional remuneration as administrators of CMC Cairns Pty Ltd (in liquidation) from 25 August 2009 to 15 September 2009 be increased by the sum of $49,018 plus GST. CATCHWORDS: CORPORATIONS – VOLUNTARY ADMINISTRATION – ADMINISTRATOR – REMUNERATION – where the liquidators of the company made an application pursuant to s 447A and s 449E of the Corporations Act 2001 (Cth) for approval of additional remuneration to them whilst they were acting as administrators – where the further remuneration was approved by the creditors at the general meeting – where the company was already in liquidation and was therefore not sufficient authority for the approval of the fees – whether the powers conferred by the Corporations Act were broad enough to make the orders sought Corporations Act 2001 (Cth), s 447A, s 449E Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270, cited Lombe, in the matter of Bosnjak Holdings Pty Ltd (Administrators appointed) [2005] FCA 275, cited COUNSEL: Lambros A J for the applicant SOLICITORS: Bennett & Philp Lawyers for the applicant -- 1 of 8 -- 1-2 ORDER HER HONOUR: This is an application made under section 447A and section 449E of the Corporations Act 2001 (Cth) for approval of additional remuneration to the administrators, who are now the liquidators, of the company in the sum of $49,018 plus GST whilst they were acting as administrators. It is necessary to set out some of the background facts which are taken from the submissions of the applicants. After CMC Cairns Pty Ltd (in administration) ACN 010 861 579 (the company) went into administration, a second meeting of creditors was held on 25 August 2009. The creditors resolved that the company execute a deed of company arrangement. It was, it is submitted, a complex proposal which also required a Creditors’ Trust to be incorporated and numerous security documents and guarantees to be provided. This proposal had been put forward by the directors themselves who had indicated they could sign the documents as soon as they were prepared. At that meeting, the applicants sought approval for remuneration for their fees of $40,000 for the time between the second meeting being held and the deed of company arrangement being executed. That remuneration was approved by the creditors at the second meeting. Such approval is provided for under section 449E(1)(b) of the Act. -- 2 of 8 -- 1-3 ORDER Unfortunately, matters did not go as planned or as predicted. The directors caused many problems and requested numerous meetings with the administrators to discuss the execution of the deed of company arrangement and the deed of company arrangement proposal. The applicants were also trading on a number of building projects and contracts for the company at the time which required substantial oversight and supervision. Ultimately, the directors did not execute the deed of company arrangement. As a consequence of that, the applicants were obliged to continue to trade on the projects for a significantly longer period than was expected and engaged in significantly more work in trying to obtain the directors' execution of the deed of company arrangement, despite the fact that the proposal had originally been submitted by and agreed to by those same directors. Because of the failure of the directors to execute the deed of company arrangement, the company went into liquidation. As a consequence of those matters, the actual time spent and the fees generated by the applicants between the second creditors' meeting and the company going into liquidation was, in fact, $89,018 plus GST of which, as I have noted, only -- 3 of 8 -- 1-4 ORDER $40,000 had been approved by a resolution of the creditors pursuant to section 449E(1)(b). On 12 April 2011 the applicants sent to the creditors a detailed report and a notice of annual general meeting to be held on 10 May 2011. The documents were sent to all creditors and included a full work-in-progress report of the applicants' fees as administrators during the time between the second meeting of creditors and the company going into liquidation. The report, specifically, told the creditors that they could vote against such remuneration and that a court application would still be required to approve the additional fees. The creditors voted at the annual general meeting held on 10 May 2011 to approve the further remuneration of the administrators in the additional sum of $49,018 plus GST for the time from the second meeting of creditors to the company going into liquidation. By then, of course, the company was, as I have mentioned, already in liquidation. It was not therefore strictly a resolution of the creditors of a company under administration and so was not effective under section 449E(1)(b) to be sufficient authority for the applicants to be paid the additional fees. -- 4 of 8 -- 1-5 ORDER The creditors had already, as I have mentioned, been informed that that was the situation. The approval of the creditors is nevertheless useful in showing that there was no objection by the creditors to the additional fees which were engendered because of the matters that I have already mentioned. That brings the applicants to the court to approve the additional remuneration generated in the way I have set out. As the applicants submit, section 447A of the Corporations Act gives very wide powers to the court to make such orders as it thinks appropriate with regard to a company under administration and how Part 5.3A is to operate in relation to a particular company. Some examples are given in that section. The width of the power was referred to by the High Court in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270. In Lombe, in the matter of Bosnjak Holdings Pty Ltd (Administrators appointed) [2005] FCA 275, it was held that, arguably, the powers in section 447A were wide enough to make an order altering the operation of section 449E. In that case, Gyles J was concerned with the question of whether or not the court could make orders with regard to the remuneration of the administrators prior to the second creditors' meeting. He was satisfied that “this is a proper -- 5 of 8 -- 1-6 ORDER case to exercise the power granted by section 447A to make such order as the Court thinks appropriate about how Part 5.3A is to operate in relation to these companies.” In that case, the administration was extremely complex. Perhaps in response to the form of restrictions on how the remuneration of the administrator was to be fixed, section 449E was amended in 2007 by Act 132 of 2007 with effect from 31 December 2007. Section 449E(1) now provides that 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. However, the court also has the explicit power under section 449E(2), where the remuneration is determined under paragraph 1(a) or 1(b) or paragraph 1A(a) or 1A(b) of section 449E, to review the remuneration and confirm, increase or reduce it. Such an application may be made by ASIC, the administrator or an officer, member or creditor of the company. The application here is made by the liquidator who was the administrator and as liquidator is, of course, an officer of the company. -- 6 of 8 -- 1-7 ORDER A potential difficulty in making an order under section 449E(1)(c) might be found in the fact that there has been a resolution by the creditors and the power of the court under section 449E(1)(c) only arises if there is no such resolution. In my view, therefore, it is more appropriate to exercise the power explicitly given to the court by section 449E(2) to review the remuneration which has been determined under section 449E(1)(b) and confirm, increase or reduce it depending on the evidence before me. The evidence before me clearly shows that the further work that was required led to the increase in fees and that the fees involved are legitimate. That view is, of course, supported, although it is not conclusive, by the resolution of the creditors of the company in liquidation supporting payment of the further remuneration. Accordingly, in reviewing the remuneration paid to the administrators, I am prepared to and do increase it by the sum requested of $49,018 plus GST. The order of the court will be that pursuant to section 447A and section 449E(2) of the Corporations Act, the applicants' additional remuneration as -- 7 of 8 -- 1-8 ORDER administrators for CMC Cairns Pty Ltd (in liquidation) ACN 010 861 579 from 25 August 2009 to 15 September 2009 be increased by the sum of $49,018 plus GST. ... ----- -- 8 of 8 --