FEDERAL COURT OF AUSTRALIA

ACN 104 635 369 Pty Ltd (in liq) (formerly Total Plant Services Pty Ltd) v Hamilton [2015] FCA 643

THE COURT ORDERS THAT:

1.    The time to seek a review of the Registrar’s decision dated 13 February 2015 approving the remuneration of the seventh defendant is extended to 12 March 2015 to the extent that the tenth defendant seeks a review of the approved remuneration for charges for:

(1)    “prior remuneration approval preparation”; and

(2)    work done after 3 April 2014.

2.    Otherwise, the application for an extension of time to review the Registrar’s decision dated 13 February 2015 is refused.

3.    The costs of the application for an extension of time are reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The tenth defendant (“Azzopardi Industries”) is admitted as an unsecured creditor of the plaintiff for voting purposes. Its claim is by far the largest claim in the liquidation. By amended interlocutory application filed on 28 May 2015, Azzopardi Industries seeks orders including an extension of time for a review of the decision of a Registrar of this Court approving the remuneration of the seventh defendant (“Mr Hamilton”) in the sum of $46,009.10 excluding GST for the period 25 December 2013 to 3 June 2014 inclusive.

2    Mr Hamilton was the plaintiff’s liquidator from 9 October 2013 until 3 June 2014. In February 2014, a registrar of this Court approved Mr Hamilton’s remuneration for the period 9 October 2013 to 24 December 2013 in the sum of $92,095.23 including GST.

Background to the extension of time application

3    The background to the current application is set out in ACN 104 635 369 Pty Ltd (formerly known as Total Plant Services Pty Ltd) (in liquidation) v Combined Group Management Pty Ltd [2014] FCA 1402.

4    Briefly, in December 2014, pursuant to s 477(2A) of the Corporations Act 2001 (Cth) (“Act”), the Court approved a compromise of the proceeding against the first to sixth defendants.

5    As a result, the current liquidators of the plaintiff received an amount of $600,000.

6    In my reasons, at [40], I noted:

Complaints and criticisms have been made on behalf of Azzopardi Industries and Azbuild about each of the liquidators. In my view, having regard to the history of the relationship between Azzopardi Industries and Azbuild, which includes protracted and contentious correspondence between their solicitor, Ms Thurai Rajah, and the various liquidators, it is appropriate to conclude that the quantum of the liquidators’ remuneration is highly unlikely to be resolved between the relevant parties. No party suggested otherwise.

7    At [41], I noted the submission made on behalf of Azzopardi Industries that it expects to be substantially out of pocket as a result of the plaintiff’s winding up. At [66], I concluded that Azzopardi Industries would not agree to the remuneration that the liquidators including Mr Hamilton would claim, based on matters including a statement in Ms Thurai Rajah’s letter dated 19 November 2014 to Mr Lancaster that her clients “object to the remunerations claimed by Mr Bill Hamilton”.

8    For these reasons among others, I made an order pursuant to s 511(1)(a) of the Act referring the proceeding to a Registrar of the Court for determination of the remuneration of each of the liquidators of the plaintiff to the extent that such remuneration had not already been fixed.

9    Rule 16.1 of the Federal Court (Corporations) Rules 2000 (Cth) (“Rules”) provides relevantly:

(1) For the purposes of paragraph 35A (1) (h) of the Federal Court of Australia Act 1976, if the Court or a Judge so directs, a Registrar may exercise a power of the Court:

(a) under a provision of the Corporations Act mentioned in column 2, or a provision of these Rules mentioned in column 3, of an item in Part 1 of Schedule 2; or

…

(2) A decision, direction or act of a Registrar made, given or done under these Rules, may be reviewed by the Court or a Judge.

(3) An application for the review of a decision, direction or act of a Registrar made, given or done under these Rules, must be made within:

(a) 21 days after the decision, direction or act complained of; or

(b) any further time allowed by the Court.

10    Section 511(1)(a) is mentioned at item 81 in column 2 in Part 1 of Schedule 2.

11    Section 35A of the Federal Court of Australia Act 1976 (Cth) provides:

(1) Subject to subsection (2), the following powers of the Court may, if the Court or a Judge so directs, be exercised by a Registrar:

…

(g) the power to make an order exempting a party to proceedings in the Court from compliance with a provision of the Rules of Court;

(h) a power of the Court prescribed by Rules of Court.

(3) The provisions of this Act and the Rules of Court that relate to the exercise by the Court of a power that is, by virtue of subsection (1), exercisable by a Registrar apply in relation to an exercise of the power by a Registrar under this section as if references in those provisions to the Court were references to the Registrar.

…

(5) A party to proceedings in which a Registrar has exercised any of the powers of the Court under subsection (1) may, within the time prescribed by the Rules of Court, or within any further time allowed in accordance with the Rules of Court, apply to the Court to review that exercise of power.

(6) The Court may, on application under subsection (5) or of its own motion, review an exercise of power by a Registrar pursuant to this section and may make such order or orders as it thinks fit with respect to the matter with respect to which the power was exercised.

…

(8) In this section, Registrar means the Registrar, a Deputy Registrar, a District Registrar or a Deputy District Registrar of the Court.

12    The decision that Azzopardi Industries seeks to have reviewed was made on 13 February 2015. The Registrar’s precise order was:

The remuneration of the Seventh Defendant is approved in the sum of $46,009.10 excluding GST for the period 25 December 2013 to 3 June 2014, inclusive.

13    Accordingly, by s 35A(5) and rule 16.1(3), any application for review of the Registrar’s decision was required to be made by 6 March 2015.

14    By interlocutory application dated 12 March 2015, Azzopardi Industries sought the following interlocutory orders:

(1)    The order made by Registrar Tesoriero on 13 February 2015 be set aside;

(2)    The application for remuneration made by Mr Hamilton be joined with the substantive proceedings;

(3)    The application for remuneration be stood over to 31 March 2015 before Justice Gleeson for management within the substantive proceedings;

(4)    Costs of this interlocutory application to be met by Mr Hamilton;

(5)    Any further or other order that the Court deems fit.

15    The interlocutory application was not accompanied by a supporting affidavit, as required by rule 17.01 of the Federal Court Rules 2011 (Cth). An affidavit of Adam Azzopardi sworn 31 March 2015 was subsequently filed in Court on 31 March 2015.

Legal principles concerning applications for extension of time

16    The relevant considerations in deciding whether to grant an extension of time are:

(1)    the reasons for the delay. The Court must be satisfied that it is proper to grant an extension of time, noting that the prescribed period is not to be ignored;

(2)    any prejudice to Mr Hamilton, noting that the mere absence of prejudice is not enough to justify the grant of an extension;

(3)    the merits of the application: cf. Lemmen v Porcu [2013] FCA 1056 at [2]; Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176; (1984) 3 FCR 344 at 348-9; Lucic v Nolan (1982) 45 ALR 411 at 417.

17    In Diab v McDonald (No 2) [2007] FCA 616, an application for an extension of time was refused where the Court was not satisfied that the application was brought with reasonable diligence or that there was a sufficient explanation for the delay during a certain period.

Evidence

18    In support of the application for an extension of time, Azzopardi Industries relied on paragraphs 12, 13 and 14 of the 31 March 2015 affidavit of Mr Azzopardi. In those paragraphs, Mr Azzopardi deposes to the fact that he and his legal advisers did not learn of the Registrar’s decision until 27 February 2015, two weeks after the decision was made.

19    In response, Mr Hamilton relied upon his affidavits of 14 October and 11 November 2014 and 30 January and 18 March 2015. He also relied on a bundle of documents exhibited to the 14 October 2015 affidavit tendered as exhibit “WJH1”, and a document entitled “Assignment WIP History by Employee by Task 25/12/2013 to 3/06/2014” (“annotated WIP history”).

20    Mr Hamilton’s 14 October 2014 affidavit sets out the steps taken and work carried out by Mr Hamilton and his staff during the period from 24 December 2013 to 3 June 2014. Paragraph 22 of the affidavit states, relevantly, that by a decision of the Companies Auditors and Liquidators’ Disciplinary Board (“CALDB”) dated 3 April 2014, Mr Hamilton was required to vacate all matters in which he made use of his appointment as a registered liquidator by 2 June 2014.

21    At paragraph 29 of the affidavit, Mr Hamilton sought approval of remuneration in the sum of $62,640.33 exclusive of GST for that period.

22    Subsequently, that claim was reduced by $16,631.23 to the amount of $46,009.10 exclusive of GST, as explained in Mr Hamilton’s 30 January 2015 affidavit. A spreadsheet entitled “remuneration statement”, included in exhibit “WJH1”, shows that the claim of $46,009.10 is based on work done by Mr Hamilton and three staff members described falling into the following categories:

(a)    Preparation and implementation for formal mediation;

(b)    Preparation and implementation of further examinations April 3, 4, 7, 11, May 19, 20, 21, 22 and 21-25 July 2014;

(c)    Prior remuneration approval remuneration;

(d)    Preparation of affidavit and originating process to be filed to avoid Limitations Act;

(e)    Record management.

23    The annotated WIP history is marked with handwritten notes which, the Court was told, identify the individual charges which make up the amounts included in each category in the remuneration statement. The WIP history identifies the date on which individual tasks were undertaken.

24    Mr Hamilton’s 11 November 2014 affidavit deposes to the service of notice, including on Azzopardi Industries, of Mr Hamilton’s intention to apply for approval of his remuneration. Annexed to the affidavit is a letter dated 5 November 2014 from Azzopardi Industries lawyer informing Mr Hamilton that her clients “strongly object to your application for remunerations on the basis that it is unreasonable and grossly excessive” and seeking a detailed itemisation for the remuneration sought.

25    As it turned out, no application for remuneration was made by Mr Hamilton because of the referral of the proceedings to the Registrar by the order made on 15 December 2014.

26    Mr Hamilton’s 18 March 2015 affidavit concerns the total amount which Mr Hamilton then claimed to be owing to him and certain evidence regarding out of pocket expenses and disbursement.

Submissions

27    Counsel for Mr Hamilton, Mr Leong, did not identify any particular prejudice resulting from the delay in making the application for review.

Reasons for delay

28    The principal reason given for the delay by Azzopardi Industries is that it was not informed of the Registrar’s decision until 27 February 2015, that is, two weeks after the decision was made.

Merits of the application

29    Counsel for Azzopardi Industries, Ms Hawkins, relied upon the following matters:

(a)    CALDB’s disciplinary decision on 3 April 2014. Ms Hawkins submitted “there is a broad objection to the reasonableness of work done by Mr Hamilton in the period where he was facing imminent suspension instead of promptly handing the matter over to another liquidator”. More specifically, Ms Hawkins submitted that Mr Hamilton should not have incurred costs in arranging a mediation to take place in July 2014, which he could not attend because of his imminent suspension and which the next liquidators were required to vacate. Nor should he have incurred costs in drafting statements of claim which were never filed and which he could never file because he was going to be suspended;

(b)    The remuneration statement did not provide sufficient information to satisfy the Registrar that the remuneration should be approved in that the categories of work appear to be overlapping and it is not clear precisely what work was done when the liquidator was “facing imminent suspension”;

(c)    It is not clear that Mr Hamilton is entitled to be remunerated for the costs of obtaining the February 2014 remuneration approval.

30    Concerning the annotated WIP history, by written submissions dated 3 June 2015, Ms Hawkins made the following additional submissions:

(d)    Mr Hamilton is not entitled to remuneration for approximately $19,740.78 comprising the following charges dated after 3 April 2014:

(i)    $2,945.50 for preparation and implementation for formal mediation;

(ii)    $6,781.94 for preparation and implementation of further examinations;

(iii)    $1,037 for preparation of affidavit and originating process to be filed to avoid Limitation Act;

(iv)    $638 for record management;

(v)    $8338.34 for items that do not appear to be allocated to items on the remuneration statement.

(e)    The following activities were partially completed by Mr Hamilton and did not add value to the liquidation as a whole:

•    Mr Hamilton’s work in connection with sending a draft originating process sent to Mr Svelha (counsel acting for Mr Hamilton on the liquidation) on 16 May 2014;

•    Mr Hamilton’s work in connection with public examinations scheduled for 21 to 25 July 2014;

•    Mr Hamilton’s work in connection with arranging a mediation for 17 July 2014, as though he were to be a participant.

(f)    In doing work between 3 April and 3 June 2014, Mr Hamilton was acting to his own benefit as opposed to that of the company in liquidation.

31    Mr Hamilton also made written submissions concerning the annotated WIP history.

Consideration

Reasons for delay

32    In the absence of any evidence to the contrary, I accept that Azzopardi Industries was not informed of the Registrar’s decision until 27 February 2015.

33    It is not clear who should have informed Azzopardi Industries of the Registrar’s decision. On one view, Mr Hamilton should have informed Azzopardi Industries of the Registrar’s decision (or at least sought to ensure that it was communicated to Azzopardi Industries promptly by the current liquidators) because he knew or should have known of Azzopardi Industries’ right to seek a review of the Registrar’s decision within the time allowed by the Rules. However, there is no rule that required Mr Hamilton to take that step. Mr Hamilton may have believed that the Court or the current liquidators would inform Azzopardi Industries of the decision.

34    Whatever the reason, it is unsatisfactory that Azzopardi Industries was not notified of the decision until 27 February 2015. I will arrange for a copy of this decision to be provided to the NSW District Registrar so that he may consider whether there is any change that should be made to the rules or practices of the Registry to avoid a similar situation in the future. I accept that the delay in Azzopardi Industries’ notification of the decision provides a partial explanation for the lateness of the application, although I also note that the delay in filing evidence in support of the application was not explained.

Merits of the application

35    In relation to activities prior to 3 April 2014, the only issue specifically raised on behalf of Azzopardi Industries concerned the charges for “prior remuneration approval preparation”. It is not clear that a liquidator is entitled to be remunerated for this activity and I accept, in the absence of authority to the contrary, that it is arguable that a liquidator’s remuneration should not include such charges.

36    Otherwise, I am not satisfied that the application for review has any merit in relation to charges for activities undertaken prior to 3 April 2014.

37    As to the period from 3 April 2014 to 3 June 2014, I do not accept that the mere fact that Mr Hamilton was notified of his pending suspension leads to a conclusion that any work done after 3 April 2014 did not add value to the liquidation. It would require an examination of the particular work done to determine whether, in all the circumstances, including Mr Hamilton’s knowledge of his pending suspension, Mr Hamilton should not be remunerated for that work. For example, I would not accept that work done in connection with the document at pages 33 and following of exhibit “WJH1”, which is headed “Contentions of Liquidator made this 8th May 2014 following the serious of examination made in December 2013 and for the purpose of Mediation (Informal)”, did not add value to the liquidation simply because that work was done after 3 April 2014.

38    However, I accept that Azzopardi Industries has an arguable case that Mr Hamilton is not entitled to remuneration for all of his work done after 3 April 2014, to the extent that the work was wasted by reason of his suspension on 3 June 2014.

39    In relation to the particular items totalling approximately $19,740.78 identified in the 3 June 2015 written submissions, they appear to be mainly charges for work done after 3 April 2014.

40    It is not clear whether the items totalling $8336.34 are items for which Mr Hamilton seeks remuneration. Since they are not marked with handwritten markings cross-referencing them to the remuneration statement, I infer that they are probably not included in Mr Hamilton’s present claim. However, if I am wrong about that, then I accept that Azzopardi Industries has an arguable case that Mr Hamilton is not entitled to remuneration for them in the absence of any clear explanation for how they are included in the claim.

41    In his submissions concerning the annotated WIP history, Mr Hamilton said that the amount of $19,740.78 was overstated by $15,540.31 comprising work done in connection with the application for appointment of a replacement liquidator. I am not satisfied that this is correct: as I have set out above, the $19,740.78 is calculated by reference to work in several categories on the remuneration statement. However, it is not necessary for me to reach a final conclusion on this point.

Conclusion

42    Having regard to the relatively short delay in making the application, and having regard to the merits of the application set out above, I am satisfied that an extension of time should be granted to seek a review of the Registrar’s decision to the extent that it approved charges:

(1)    For “prior remuneration approval preparation” (in the amount of $3,863.64); and

(2)    For work done after 3 April 2014 (in the amount of not more than $11,402.44 or alternatively not more than $19,740.78).

43    No extension of time should be granted for a review of the Registrar’s decision to the extent that it approved other charges for the period from 23 December 2013 to 3 April 2014.

Associate:

Dated:    26 June 2015