Lombe, in the matter of Bosnjak Holdings Pty Ltd (Administrators appointed) [2005] FCA 275

FEDERAL COURT OF AUSTRALIA

Lombe, in the matter of Bosnjak Holdings Pty Ltd (Administrators appointed)

[2005] FCA 275

CORPORATIONS – administration – fixing remuneration of administrators prior to a s 439A meeting – variation of operation of Act

Corporations Act 2001 (Cth),ss 436A, 439A, 436F(1), 447A(1), 447E, 449E(1), 449E(2)

Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270applied

Korda, In the matter of Stockford Limited (Subject to Deed of Company Arrangement) [2004] FCA 1682 cited

IN THE MATTER OF BOSNJAK HOLDINGS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 341 435; BOSNJAK BROS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 107 264; BOSNJAK ENTERPRISES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 648 260; BOSNJAK INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 911 446; BOSNJAK PROPERTY DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 040 960; BOSNJAK’S COACH LINES PTY LTD (ADMINISTRATORS APPOINTED) ACN 001 085 918; BOSNJAK’S INTERNATIONAL SALES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 648 242; BLUE RIBBON BUS COMPANY PTY LIMITED (ADMINISTRATORS APPOINTED) ACN 088 325 615; ENIWILL PTY LTD (ADMINISTRATORS APPOINTED) ACN 003 160 370; PARRAMATTA BUS CO PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 449 436; SMITHFIELD COACH IMPORTS PTY LTD (ADMINISTRATORS APPOINTED) ACN 001 224 415; ST. MARYS BUS SERVICES PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 532 534; and WESTBUS PTY LTD (ADMINISTRATORS APPOINTED) ACN 000 201 267 (collectively, the VA Companies)

DAVID JOHN FRANK LOMBE AND PETER GEORGE YATES

NSD 372 OF 2005

GYLES J

21 MARCH 2005

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 372 OF 2005

	DAVID JOHN FRANK LOMBE and PETER GEORGE YATES APPLICANTS
JUDGE:	GYLES J
DATE OF ORDER:	11 MARCH 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Leave to file application returnable before me instanter.

2. Pursuant to s 447(A(1) of the Corporations Act 2001 (Cth) (the Act) Pt 5.3A of the Act is to operate in relation to each of the VA Companies as if:

(a) Section 449E(1)(a) of the Act also provided that the Applicants in their capacity as administrators of the VA Companies, are entitled to such remuneration for work performed in relation to all the VA Companies as is fixed by a resolution of the committee of creditors appointed to Westbus Pty Ltd (Administrators Appointed) passed after the members of that committee have received no less than 7 days written notice of the amount of remuneration claimed by the Applicants, together with details of the manner in which the amount claimed is comprised and calculated.

(b) Section 436F(1) of the Act also provided that one of the functions of the committee of creditors of Westbus Pty Ltd (Administrators Appointed) is to fix, by resolution of that committee, the remuneration of the Applicants in their capacity as administrators of all the VA Companies, after the members of that committee have received no less than 7 days prior written notice of the amount of remuneration claimed by the Applicants together with details of the manner in which the amount claimed is comprised and calculated.

3. An order that the plaintiffs’ costs of this interlocutory application be costs in the administration of the VA Companies.

4. Stand over the matter to Friday, 29 April 2005 at 10.00 am.

5. Liberty to apply on 24 hours’ notice.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 372 OF 2005

DAVID JOHN FRANK LOMBE and PETER GEORGE YATES

APPLICANTS

JUDGE:	GYLES J
DATE:	21 MARCH 2005
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 On 11 March last I made orders pursuant to s 447A(1) of the Corporations Act 2001 (Cth) (the Act) relating to the remuneration of the administrators of the applicant companies (the Westbus group). I said I would provide reasons for those orders later. These are those reasons.

2 On 31 January 2005 Peter George Yates and David Lombe were appointed joint and several voluntary administrators of the Westbus group pursuant to s 436A of the Act.

3 A first meeting of creditors of all companies was held on 7 February 2005. The only committee of creditors elected was that of Westbus Pty Ltd (the Westbus committee).

4 On 17 February 2005 the Supreme Court of New South Wales extended the convening period of the second meeting of creditors by a period of 60 days expiring on 21 April 2005. The administrators are required to hold the second meeting within five business days after that.

5 The Westbus group operated bus services on a large scale. The administrators are of the opinion that each company in the group is insolvent due, amongst other things, to cross guarantees. Westbus Pty Limited is the principal operating company but there are others. The administration of the group has been and will be very complex and time consuming. At their usual charge out rates the fees recorded by the administrators and their staff totalled approximately $870,000 as at 26 February 2005.

6 As noted by Finkelstein J in Korda, In the matter of Stockford Limited (Subject to Deed of Company Arrangement) [2004] FCA 1682 (Stockford) at [6], one of the features about administration pursuant to s 436A is that the Act only provides for the fixing of fees of the administrators at the second meeting of creditors – which is virtually the end of the administration. Section 449E relevantly provides:

‘Remuneration of administrator

(1) [Entitlements of administrator] 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) [Court may review entitlements] 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.’

That means that almost all of the work of an administrator will be complete at the time fees are fixed and, in that sense, fees will be fixed retrospectively.

7 That may be practical in a small scale administration where what is at stake in substance is the time of the administrator or in an administration which is completed within tight time limits. It is not practical in an administration on this scale where, in effect, the resources of a large firm of chartered accountants are required to be employed and the expenditure of considerable sums of money is required to fund those resources. I need not discuss here the question as to the proper line between s 449E remuneration on the one hand and disbursements on the other in a case such as the present (Stockford at [50]; Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96, 100; (1998) 16 ACLC 1653).

8 I am satisfied that the scale and complexity of the affairs of the companies under administration and the length of the administration require that provision be made for the fixing of fees prior to the s 439A meeting. Does Pt 5.3A of the Act provide for that to be done? It is arguable that application could be made to the Court pursuant to s 449E(1)(b). That subsection may or may not have any force prior to the s 439A meeting. Even if it has, the Court is not a desirable first port of call in making a judgment of some complexity which has commercial overtones. That exercise would also be very expensive.

9 I was thus persuaded that this is a proper case to exercise the power granted by s 447A to make such order as the Court thinks appropriate about how Pt 5.3A is to operate in relation to these companies. The extent of that power is established by the decision in Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 and has been exercised in many circumstances. The potential use of the section on a comparable issue was adverted to by Finkelstein J in Stockford at [23] and [37].

10 It then became necessary to examine the appropriateness of the mechanism provided by the proposed orders that involved both the fixing of remuneration by a committee of creditors rather than the body of creditors and by a committee of creditors of Westbus rather than of each company separately.

11 The following factors support the conclusion that the proposal is appropriate:

(a) the Westbus committee represents approximately 97 per cent in value of the total claims against all companies.

(b) the companies are effectively members of a commercial group with cross-guarantees operating and in respect of which ASIC Class Order Instrument C0 98/1418 is in operation save for one company.

(c) National Bus Company Pty Limited is the largest single creditor of the group and is a member of the Westbus committee.

(d) Employee claims against the operating companies are a major proportion of the external claims. The Transport Workers’ Union represents the substantial majority of those employees on the Westbus committee.

(e) The work has effectively been done for the group although apportioned as appropriate.

(f) There is no committee of creditors appointed for other companies and thus no available representative body.

(g) To establish such body for each company would be time consuming and expensive.

(h) A representative group of creditors is likely to be better able to properly consider the issues than groups of creditors in general meetings.

12 Furthermore, s 449E(2) and s 447E, together with the power to make orders pursuant to s 447A, mean that the Court can effectively intervene retrospectively at the suit of any appropriate party if there has been any irregularity.

13 I should record that I considered whether the proceeding should have been served on any party or parties and whether any party or parties should be joined to act as a contradictor or contradictors. I share the concern expressed from time to time by judges exercising jurisdiction under this Act concerning the propensity of practitioners to bring too many ex parte applications. I concluded that no such step was necessary in the present case. The nature of the orders sought fix a process rather than affect substantive rights and, in a practical sense, those with an interest are represented on the Westbus committee. To the extent that they are not, the issue can be raised at the s 439A meeting and, as I have said, any creditor with a grievance can approach the Court.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:

Dated: 21 March 2005

Counsel for the Applicants:	BA Coles QC

Solicitor for the Applicants:	Blake Dawson Waldron

Date of Hearing:	11 March 2005

Date of Reasons:	21 March 2005

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