In Jindal Transworld PVT Ltd v Scottsdale Homes No. 10 Pty Ltd (No 2) [2010] SASC 210 (13 July 2010), a liquidator sought an order that his remuneration be fixed under s473(3) of the Corporations Act 2001. It was opposed by the company's only creditor on the basis of entitlement and quantum, and that the application was not competent because s473(3)(a) was not satisfied. That section prescribes that a liquidator's remuneration can be determined, if there is a committee of inspection ("COI"), by agreement between the liquidator and the COI. The creditor argued s473(3)(a) was a condition precedent to any court application.
Formation of a Committee of Inspection
The COI was formed by a resolution of creditors. The issue was whether a resolution of creditors was sufficient to validly form a COI. Section 548 states that a liquidator must, if requested, "convene separate meetings of the creditors and contributories" to determine whether a COI should be formed. No meeting of contributories was held because no request to convene was received. The company had one contributory.
Judge Lunn, a Master of the Supreme Court of South Australia, held that a COI is not established under s548 until both a meeting of creditors and a meeting of contributories have been held. If their determinations differ, then a Court order is required under s548(2). The request to convene has to be made by a creditor or contributory. The liquidator cannot be faulted for not calling a meeting of contributories when there was no request.
His Honour held that the plaintiff (creditor) ought to have requested a meeting of contributories if the creditor now wished to argue the liquidator failed to convene a meeting of contributories.
We query how a creditor can request a meeting of contributories. We also query how a COI could be formed with one creditor when s550(7) states there has to be at least 2 members for the continuance of a COI after a vacancy. Whilst the legislation is silent on how many members are required to make up a COI in the first place, s550(7) suggests that the minimum is 2. Practically speaking, there is no need for a COI if there is only one creditor, as that is the same as holding a meeting of creditors.
As there was no validly formed COI, the competency argument failed. The application was properly brought under s473(3)(b), which deals with the requirements when there is no COI.
Comments
In practice, COIs are often formed by resolution of creditors only. Liquidators need to be aware that a strict reading of s548, according to this case, means both a meeting of creditors and a meeting of contributories are required to validly form a COI. If their determinations differ, then judicial determination is required.
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