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Federal Court of Australia |
Last Updated: 7 January 2002
In the matter of Ansett Australia Limited and Mentha [2002] FCA 1
CORPORATIONS LAW - external administration - application for court to fix interim remuneration of administrators pursuant to ss 447A(1) and 449E(1)(b) of the Corporations Act 2001 (Cth) - application prior to meeting of creditors convened under s 439A of the Corporations Act 2001 (Cth) - application prior to resolution of creditors fixing administrators' remuneration - complex and extensive administration - work necessary and properly undertaken for purpose of administration.
Corporations Act 2001 (Cth): ss 447A, 449E
Re English, Scottish & Australian Chartered Bank [1893] 3 Ch 385 referred to
IN THE MATTER OF ANSETT AUSTRALIA LIMITED (ACN 004 209 410) & ORS (All Administrators Appointed) and MARK FRANCIS XAVIER MENTHA and MARK ANTHONY KORDA (As Administrators)
V 3065 of 2001
GOLDBERG J
4 JANUARY 2002
MELBOURNE
1. Pursuant to s 447A(1) of the Corporations Act 2001 (Cth) ("the Act"), Pt 5.3A of the Act is to operate in relation to each of the companies in the schedule to the reasons for judgment accompanying this order as if s 449E(1)(b) provided that the Court may fix the remuneration of the plaintiffs as administrators of the said companies:
(a) whether or not a resolution to fix the plaintiffs' remuneration has been proposed at a meeting of the creditors of the said companies; and
(b) on an interim basis.
2. The remuneration to which the plaintiffs are entitled as administrators of the said companies in respect of the period from 17 September 2001 to 15 October 2001 (both dates inclusive) is fixed pursuant to s 449E(1), as it operates in accordance with par 1 of this order, as follows:
Ansett Australia Limited $3,292,851
Ansett Australia Holdings Limited 30,196
Ansett International Limited 11,297
Aeropelican Air Services Pty Ltd 56,657
Kendell Airlines (Aust) Pty Ltd 90,204
Skywest Airlines Pty Ltd 129,374
South Centre Maintenance Pty Ltd 9,517
Show Group Pty Ltd 135,351
Traveland International (Aust) Pty Ltd, Traveland International Pty Ltd,
Traveland New Staff Pty Ltd and Traveland Pty Limited 187,931
Ansett Australia and Air New Zealand Engineering Services Limited and
the remaining companies in the said schedule 18,817
3. Pursuant to s 447A(1) of the Act, Pt 5.3A of the Act is to operate in relation to each of the said companies as if s 449E(1)(a) also provided that the plaintiffs are entitled to such remuneration as is fixed by a resolution of the company's Committee of Creditors passed after the members of that committee had received no less than seven days prior written notice of the amount of remuneration claimed, together with details of the manner in which the amount claimed is comprised and calculated.
4. The costs of the application be costs in the administration of each of the said companies.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
1 On 12 and 14 September 2001, Messrs Peter Hedge, Greg Hall and Allan Watson ("the first administrators") were appointed administrators of Ansett Australia Limited, the other companies set out in Schedule A to these reasons ("the Ansett group") and Hazelton Air Charter Pty Limited, Hazelton Airlines Limited, Hazelton Air Services Pty Limited ("the Hazelton companies"), in accordance with the provisions of Pt 5.3A of the Corporations Act 2001 (Cth) ("the Act").
2 On 17 September 2001, I ordered that the plaintiffs, Mark Francis Xavier Mentha and Mark Anthony Korda members of Andersen, Chartered Accountants, ("the administrators") be appointed joint and several administrators of the Ansett group other than the Hazelton companies, and that Michael James Humphris be appointed administrator of the Hazelton companies, with effect from the time that the first administrators gave notice in writing of their resignation as administrators of the Ansett group. On 17 September 2001, the first administrators resigned as administrators of the Ansett group and, thereupon, the administrators were appointed administrators of the companies in the Ansett group and Mr Humphris ("the Hazelton administrator") was appointed administrator of the Hazelton companies. On 4 October 2001, the administrators were appointed administrators of Ansett Australia and Air New Zealand Engineering Services Limited pursuant to the provisions of Pt 5.3A of the Act.
3 The administrators have made an application to the Court for an order pursuant to ss 447A(1) and 449E(1)(b) of the Act that the Court fix the remuneration to which they are entitled up to 15 October 2001. The administrators also seek an order pursuant to s 447A(1) that Pt 5.3A of the Act is to operate in relation to each of the companies of which they are administrators as if the reference in s 449E(1)(a) to "a resolution of the company's creditors" were a reference to a resolution of "the Committee of Creditors" of each of those companies.
4 The administration of the Ansett group is still continuing and, at the date of the hearing, it was expected that the administration would continue for a further two months or thereabouts. That position has not changed. The remuneration which the administrators seek to have fixed is, therefore, remuneration for their work as administrators during the first month or thereabouts of the administration.
5 In compliance with s 436E of the Act, a meeting of the creditors of each of the companies in the Ansett group was convened for 18 September 2001 and, on that date, creditors of each company resolved to appoint a Committee of Creditors of each of the companies and the members of each Committee were appointed. Creditors of the companies in the Ansett group number at least 16,000, without taking into account the holders of frequent flyer points and the members of the Golden Wing scheme.
6 In accordance with s 439A(1) of the Act, the administrators were obliged to convene a meeting of the creditors of each company in the Ansett group within the period of 21 days after 12 September 2001 and to hold such meetings within five business days after the end of that period of 21 days. That time for the convening and holding of the meetings of the creditors of those companies has now been extended to 29 January 2002. It is at those meetings that the creditors are entitled to resolve either that the companies execute a deed of company arrangement, or that the administration should end, or that the companies be wound-up: s 439C. Thus, at the present time, no meeting has been convened under s 439A and the administration is continuing.
7 The entitlement of the administrators to have their remuneration fixed by the creditors of the companies in the Ansett Group or by the Court is found in s 449E which provides:
"(1) The administrator of a company under administration, or of a deed of company arrangement, is entitled to:(a) such remuneration as is fixed by a resolution of the company's creditors passed at a meeting convened under section 439A, or under section 439A or 445F, as the case may be; or
(b) if no remuneration is so fixed - such remuneration as the Court fixes on the application of the administrator.
(2) Where remuneration is fixed under paragraph (1)(a), the Court may, on the application of the administrator or of an officer, member or creditor of the company:
(a) review the remuneration; and
(b) confirm, increase or reduce it.
(3) Subsection (2) has effect despite section 437C."
Subsections (2) and (3) are not relevant for present purposes.
8 The principal affidavit filed in support of the application made it clear that the application had been made by the administrators for the purpose of fixing the remuneration of the first administrators as well as the remuneration of the administrators. Notice of the application was given to the Australian Securities and Investments Commission and a solicitor for the Commission appeared at the hearing and informed the Court that the Commission did not oppose the application.
9 When the hearing of the application commenced, I raised with counsel for the administrators the issue whether the Court was entitled to fix the remuneration of the first administrators on an application, not made by them but, rather, made by their successors. Counsel submitted that s 449E of the Act did not preclude the Court fixing the remuneration of an administrator who had retired on the application of the existing administrator.
10 I reached the conclusion that, upon the proper construction of s 449E, the Court could only fix the remuneration of an administrator upon an application made by that administrator to the Court to fix his or her remuneration. Paragraph 449E(1)(b) provides that the remuneration is to be fixed by the Court "on the application of the administrator". It is clear from this provision that it is for the administrator who seeks to obtain remuneration to place material before the Court which justifies the fixing of the remuneration sought. In other words, it is for the administrator to come to Court and justify the claim for remuneration. Although it might be open to the Court, pursuant to s 447A, to order that s 449E(1) is to operate in relation to the companies in the Ansett group as if it provided that the remuneration of the first administrators could be fixed by the Court on the application of their successors (and no such submission was made), I do not consider it appropriate in the circumstances, to make such an order. Having regard to the fact that at the time application was made to the Court to appoint the administrators upon the resignation of the first administrators, I was not informed why the first administrators were proposing to resign, I considered it appropriate that if the first administrators wished to have their remuneration fixed for the period of their stewardship of the administration, they should make the application themselves, as the reason why they resigned might be a relevant matter to take into account in fixing the amount of the remuneration to which the first administrators are entitled.
11 I was not then disposed to continue with the application by the administrators for the fixing of their remuneration until I knew whether the first administrators would apply themselves to have their remuneration fixed. I wanted to ensure that if such an application was made, both applications would be heard at the same time as issues of duplication of work might arise for consideration.
12 I therefore adjourned the hearing of the administrators' application to fix the remuneration to the following day. The first administrators filed an application seeking to have the Court fix their remuneration and that application was supported by an affidavit referring to the work carried out by the first administrators and the circumstances under which they came to resign as administrators. I was able to hear both applications on the same day, 13 November 2001.
13 The material placed before the Court by the first administrators and the administrators satisfies me that no significant issue has arisen relating to duplication of work which impinges upon the administrators' claim for remuneration. At the time the first administrators resigned and the administrators' appointment took effect, they entered into a transition agreement whereby the first administrators agreed to co-operate with the administrators to provide for an orderly hand-over of the Ansett group's affairs. The agreement provided that work done by the first administrators after their resignation would be the subject of a separate engagement pursuant to which the administrators agreed to pay the first administrators for the work they carried out at their hourly rates. The scope of the work was to provide access to all staff who had been involved in the administration and to provide, as requested, professional staff to assist the administrators' staff in the conduct of the administration.
14 The first administrators and their staff continued to work after their resignation to complete work already commenced, and to provide assistance and advice which would assist with an orderly transition of the administration to the administrators. The administrators said that one of the reasons the first administrators were retained as consultants after their resignation was to minimise the risk of duplication of work by the administrators.
15 The administrators agreed to reduce the hourly rates to be charged by them and their staff below Andersens' standard or usual hourly rates. Those rates are approximately 35% lower than the standard rates, partly in recognition of the fact that there could be duplication of work as a result of the change in administrators. It has not been possible for the administrators to estimate the extent to which there may have been duplication of work, but they believe that the combination of the transition agreement and the reduced hourly rates effectively eliminated any cost of duplication. The nature of the administration is such that a certain amount of duplication of work was inevitable, but the arrangements made between the first administrators and the administrators were designed to minimise the extent of any duplication.
16 The first administrators rendered an account for remuneration for the period 12 September 2001 to midnight on 17 September 2001, seeking remuneration of $1,084,180.30 plus GST and seeking the payment of expenses of $92,084.99 plus GST. They also rendered an account for consulting services provided to the administrators for the period from 18 September 2001 to 30 September 2001 in the sum of $260,579.30 plus GST.
17 The claim for remuneration by the first administrators must be made by them and is not properly the subject of an application by the administrators. However, the administrators are entitled to pay the consulting fees in respect of the period from 18 to 30 September 2001, as those fees have been incurred as an expense of the administration for services rendered. Those consulting fees are not, therefore, the subject of any application for approval or allowance by the Court and do not need to be the subject of any further consideration.
18 As I have noted earlier, the time has not yet arrived for the holding of the meeting to be convened under s 439A of the Act. Nevertheless, I consider it appropriate at the present time, to fix the remuneration of the administrators for the period of their administration up to 15 October 2001. It is apparent that the administration will continue for at least a further two months, having regard to the present proposal of the administrators to sell the Ansett mainline airline to a syndicate or consortium associated with Messrs Lindsay Fox and Solomon Lew. The completion date for the conditional agreement which has been entered into is 31 January 2002. The administrators said that, having regard to the proposed settlement date, it is likely that they would seek a further extension of the convening period, pursuant to s 439A to about 21 January 2002 with a view to holding a second meeting of creditors on or about 29 January 2002. Such further extension was subsequently granted by the Court on 5 December 2001.
19 The Ansett group administration is a complex and extensive administration. The administrators believe that it is the largest in Australia's corporate history in terms of the scale of the enterprise, the number of employees involved and the size of the liabilities of the group.
20 Having regard to the extensive work undertaken by the administrators and their staff, I consider it appropriate that the administrators have their remuneration fixed on an interim basis in respect of the period of their administration up to 15 October 2001. The material placed before the Court demonstrated that there has been a substantial commitment of staff and resources by the administrators to the administration, and it is not appropriate that they be prevented from obtaining remuneration for the work carried out in the first month or thereabouts of the administration, having regard to the time that will elapse until the holding of the meeting convened under s 439A of the Act.
21 In the ordinary course, if the statutory scheme of Pt 5.3A of the Act was followed, the meeting convened under s 439A of the Act would occur no later than 28 days after the commencement of the administration. In those circumstances, it would not be unreasonable to expect the administrators to wait for that period of time before their remuneration was fixed. However, it is quite a different proposition if they are compelled to wait for a period of the order of no less then four months.
22 Although the matter was not fully argued, it is arguable that the Court is only entitled to fix the remuneration of the administrators pursuant to s 449E(1)(b) if there has been a meeting of creditors convened under s 439A and a resolution for the fixing of the administrators' remuneration has not been passed. I do not express a concluded view on this matter, as I have reached the conclusion that it is appropriate for the Court to fix the remuneration of the administrators prior to the convening and holding of a meeting of creditors under s 439A and to order pursuant to s 447A(1) of the Act that s 449E(1) so operate as to allow this to occur.
23 I am satisfied that the administrators should be allowed the remuneration they have claimed. They have claimed a total amount of $3,962,195 for the period from 17 September 2001 to 15 October 2001. (There is an inconsistency in respect of the amount claimed for the period of seven days ended 12 October 2001. Paragraph 15 of Mr Korda's affidavit referred to $981,905, whereas par 34 claimed $980,777. I have accepted the lower figure). This amount covers the work of a substantial number of persons. Since the administrators took up their appointment, approximately seventy Andersen staff have been working full-time and a further one hundred and seventeen staff have been working part-time assisting the administrators on the administration. Detailed spreadsheets were provided to the Court showing the staff involved and the hours worked in respect of all aspects of the administration. The work carried out and undertaken was identified by reference to numerous categories which it is not necessary to analyse. Suffice it to say that the work covered matters such as operational issues, business assessment, statutory and government issues, managing creditors' claims, identifying and valuing assets, managing the sale process of businesses, managing employee entitlements, managing finance functions and many other aspects of the Ansett undertaking. I am satisfied that the work carried out by the administrators and their staff has been necessary, and properly undertaken, for the purpose of the administration.
24 A meeting of the Committees of Creditors of the companies in the Ansett group was held on 31 October 2001 at which the members of the Committees were presented with details of the remuneration claimed by the administrators. All but seven members of the Committees were present at the meeting either in person or by their nominated representatives. Of the seven members not present, the Qantas representative was excluded, and two members were based in Canberra, but a least one of those members participated in the meeting by telephone hook-up.
25 The administrators proposed a resolution that the remuneration be approved for payment, subject to the obtaining of Court approval, and the administrators be authorised to apply to the Court for approval to enable the Committees of Creditors to approve further remuneration from time to time. None of the members of the Committees present objected to the resolution and it was passed without abstention.
26 In the ordinary course, I would place substantial weight on a resolution of a committee of creditors to approve of an administrator's remuneration. It is generally accepted that courts will attach importance to the views of creditors as to what is to their commercial advantage in an administration or insolvency situation: Re Codisco Pty Ltd (1974) CLC 40-126 at 27,909. But this proposition depends on their ability to be informed adequately and in sufficient time of relevant issues. In Re English, Scottish & Australian Chartered Bank [1893] 3 Ch 385, Lindley LJ observed at 409:
"If the creditors are acting on sufficient information and with time to consider what they are about, and are acting honestly, they are, I apprehend, much better judges of what is to their commercial advantage than the Court can be. I do not say it is conclusive, because there might be some blot in a scheme which had passed that had been unobserved and which was pointed out later."
This passage has been cited with approval in a number of Australian cases: Re Landmark Corporation Ltd [1968] 1 NSWR 759 at 766-767; Re Codisco Pty Ltd (supra) at 27,909; Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115; Re Caruana, Ex parte Deputy Commissioner of Taxation (1987) 17 FCR 223 at 233-234; Re Spedley Securities Ltd (1992) 9 ACSR 83 at 86.
27 In the present case, the Committees were only provided with an agenda for the meeting on the day of the meeting. The agenda referred to "Administrators' Remuneration". But no details of the remuneration claimed or documents relating to it were circulated to the members of the Committees before the meeting.
28 In my view, the Committees of Creditors were not given sufficient information within a suitable time before the meeting to consider the resolution which was passed. I therefore do not place as much weight on the resolution as I would in circumstances where adequate details of the remuneration claimed were provided to members of the Committees of Creditors a sufficient time before the meeting to enable them to consider and, if thought appropriate, obtain advice on the remuneration claimed by the administrators.
29 Nevertheless, I am disposed to fix the remuneration of the administrators in the amount claimed, having regard to the material in support of that claim placed before the Court. The administrators have informed the Court that where it is proposed in the future to put a resolution to the Committees of Creditors approving of the administrators' remuneration, the members will be provided with not less than 48 hours prior notice of the amounts of any remuneration claimed, including details of the way in which the amounts so claimed are comprised and calculated.
30 The plaintiffs have claimed a total remuneration of $3,962,195 for the period from 17 September 2001 to 15 October 2001 in respect of their administration of the Ansett group. That amount comprises remuneration in respect of the administration of various companies in the Ansett group. It has been calculated by the administrators on a weekly basis in relation to the particular companies in respect of which administration work has been undertaken. The administrators' assessment, which I accept, is that the remuneration has been calculated as follows:
Ansett Australia Limited $3,292,851
Ansett Australia Holdings Limited 30,196
Ansett International Limited 11,297
Aeropelican Air Services Pty Ltd 56,657
Kendell Airlines (Aust) Pty Ltd 90,204
Skywest Airlines Pty Ltd 129,374
South Centre Maintenance Pty Ltd 9,517
Show Group Pty Ltd 135,351
The four Traveland companies 187,931
Ansett Australia and Air New Zealand Engineering Services Limited and 18,817
the remaining companies in the said schedule
31 The administrators also seek an order authorising the fixing of their remuneration in respect of the period after 15 October 2001 by the Committees of Creditors of the companies in the Ansett group, subject to the possibility of judicial review. The administrators referred, by way of analogy, to s 499(3) of the Act which enables the committee of inspection in a creditors' winding-up to fix the remuneration to be paid to the liquidator. Section 504 of the Act enables any member or creditor or the liquidator to apply to the Court to review the remuneration of the liquidator so fixed. Similar provisions are found in relation to the remuneration of liquidators appointed by the Court. Section 473(3) of the Act enables a liquidator to have his or her remuneration fixed by agreement between a liquidator and the committee of inspection or, if there is no committee of inspection or the liquidator and the committee of inspection fail to agree, by resolution of the creditors or, if no such resolution is passed, by the Court.
32 In the present circumstances, I am satisfied that it is appropriate to commit the fixing of the administrators' remuneration for the period from 15 October 2001 up to the date of the holding of the meeting to be held pursuant to s 439A of the Act to the various Committees of Creditors of the companies in the Ansett group, subject to the following provisions:
* the Committees of Creditors be given adequate notice, of at least seven days, of the meeting of the Committee of Creditors at which the administrators propose to seek a resolution fixing their remuneration;
* the administrators supply the members of the Committees of Creditors with adequate information, justifying the work which they have undertaken and the amount of remuneration sought for such work;
* there be a right of review by the Court of any fixing of remuneration by the Committees of Creditors, or failure to do so, by any creditor or member of the companies or by the administrators or the Commission. This will be covered by s 449E(2)(a) of the Act.
33 I was initially concerned that as s 449E(1) committed the primary fixing of remuneration of the administrators to the creditors, it was inappropriate to exclude the total body of creditors from a consideration of any request by the administrators for the fixing of their remuneration. However, it would raise significant administrative difficulties if I refused the application to have the Committees of Creditors fix the further interim remuneration payable to the administrators and required that remuneration to be fixed by the Court. If I required the administrators to give notice of their application for remuneration and details of the material upon which that application was based to all the creditors, and then give the creditors the opportunity to come to Court to be heard on the application, it would involve a substantial expense and would require a substantial period of time before the application could be brought before the Court to ensure that all creditors had been properly notified.
34 In the circumstances of this complex and extensive administration, I consider it appropriate to commit the fixing of further interim remuneration to the Committees of Creditors which represent a significant proportion of the total creditors of the Ansett group.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. |
Associate:
Dated: 4 January 2002
Counsel for the plaintiffs: |
Mr S P Whelan QC with Ms J Dodds-Streeton |
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Solicitor for the plaintiffs: |
Arnold Bloch Leibler |
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Date of Hearing: |
12 & 13 November 2001 |
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Date of Judgment: |
4 January 2002 |
Ansett Australia Limited (ACN 004 209 410)
501 Swanston Street Pty Ltd (ACN 005 477 618)
Aeropelican Air Services Pty Ltd (ACN 000 653 083)
Airport Terminals Pty Ltd (ACN 053 976 444)
Aldong Services Pty Limited (ACN 000 258 113)
Ansett Aircraft Finance Limited (ACN 008 643 276)
Ansett Australia Holdings Limited (ACN 004 216 291)
Ansett Aviation Equipment Pty Ltd (ACN 008 559 733)
Ansett Carts Pty Limited (ACN 055 181 215)
Ansett Equipment Finance Limited (ACN 006 827 989)
Ansett Finance Limited (ACN 006 555 166)
Ansett Holdings Limited (ACN 065 117 535)
Ansett International Limited (ACN 060 622 460)
Ansett Australia and Air New Zealand Engineering Services Ltd (ACN 089 520 696)
Bodas Pty Ltd (ACN 002 158 741)
Brazson Pty Limited (ACN 055 259 008)
Eastwest Airlines (Operations) Ltd (ACN 000 259 469)
Eastwest Airlines Limited (ACN 000 063 972)
Kendell Airlines (Aust) Pty Ltd (ACN 000 579 680)
Morael Pty Ltd (ACN 003 286 440)
Northern Airlines Limited (ACN 009 607 069)
Northern Territory Aerial Work Pty Limited (ACN 009 611 321)
Rock-it-Cargo (Aust) Pty Ltd (ACN 003 004 126)
Show Group Pty Ltd (ACN 002 968 989)
Skywest Airlines Pty Ltd (ACN 008 997 662)
Skywest Aviation Limited (ACN 004 444 866)
Skywest Holdings Pty Ltd (ACN 008 905 646)
Skywest Jet Charter Pty Ltd (ACN 008 800 155)
South Centre Maintenance Pty Ltd (ACN 007 286 660)
Spaca Pty Ltd (ACN 006 773 593)
Traveland International (Aust) Pty Limited (ACN 000 275 936)
Traveland International Pty Limited (ACN 002 275 936)
Traveland New Staff Pty Ltd (ACN 080 739 037)
Traveland Pty Limited (ACN 000 240 746)
Walgali Pty Ltd (ACN 005 258 921)
Westintech Limited (ACN 009 084 039)
Westintech Nominees Pty Ltd (ACN 009 302 158)
Whitsunday Affairs Pty Ltd (ACN 009 694 553)
Whitsunday Harbour Pty Limited (ACN 010 375 470)
Wridgway Holdings Limited (ACN 004 449 085)
Wridgways (Vic) Pty Ltd (ACN 004 153 413)
(All Administrators Appointed)
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