Thank God It’s Friday: Fixing an administrator’s remuneration

07 April 2006

---

In Gidley Re Aliance Motor Body Pty Ltd [2006] FCA 102, Justice Gyles of the Federal Court considered whether an administrator’s remuneration could be fixed, by reference to a scale of hourly rates subject to a monetary cap, in advance at a creditor’s meeting convened under s 439A of the Corporations Act.

Background

Administrators were appointed to Aliance Motor Body Pty Limited (Aliance).

The second meeting of creditors resolved that Aliance should execute a deed of company arrangement. Furthermore, resolutions were passed approving the remuneration of:

• the administrators, until the deed was executed, on a time basis at hourly rates outlined in the administrators’ guide (the Guide) and authorising the administrators to make periodic payments on account of accruing remuneration up to a certain limit; and
• the deed administrator, up to a certain limit on a time basis at the hourly rates outlined in the Guide.

Subsequently, the deed administrator applied to the Court for directions in relation to the "fixing" of his remuneration as administrator and deed administrator.

Issues

The issue for consideration by the Court was whether "the remuneration of an administrator is ‘fixed’, within the meaning of s 449E of the [Corporations] Act, by a resolution of creditors which:

(1) approves remuneration where the amount is calculated by application of specified hourly rates to whatever time may be spent on the administration by the administrator, and his or her partners and/or staff; or
(2) approves remuneration of any amount up to a certain limit or cap where the amount is calculated by application of specified hourly rates to whatever time may be spent on the administration by the administrator, and his or her partners and/or staff".
Remuneration of an administrator

Section 449E of the Corporations Act 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."

The Court’s advisory opinion

Justice Gyles decided that:

• Section 449E(1) contemplates the fixing of remuneration prospectively, at least in many cases. Where remuneration is fixed prospectively it may be fixed by reference to a formula based upon time, provided the formula is objective enough to satisfy the ordinary and natural meaning of the provision.
• Here the resolutions were capable of objective application. All of the necessary elements could be objectively identified. The sum could be ascertained definitely. If that produced an unreasonable result then the remedy was an application for review by the Court pursuant to s 449E(2).

The Court directed that the deed administrator was justified in acting on the basis that his remuneration as administrator and as deed administrator had been properly fixed by the resolutions of the creditors.

---

This article provides information about topical legal issues.
Information contained in this article is intended as an introduction only and should not be relied on in place of legal advice.