VA’s appointment wrong, but we will still pay you

At the end of last year, the Federal Court handed down a decision that, respectfully, I’m feeling conflicted about.

On the one hand, of course an Administrator (“VA”) should be paid for their reasonable remuneration.

Even if the appointment is invalid due to circumstances outside of the VA’s control.

But on the other hand, if the VA is invalid by reason of the VA’s error of law, I’m not so sure for at least two reasons:

(1) the Court shouldn’t send a weak signal to practitioners on issues of validity of appointment; and

(2) the appointment is arguably not just invalid, but void ab initio. Meaning the VA’s appointment/decisions never occurred, so there is no incontrovertible benefit.

In Kreab Gavin Anderson (“KGA”) [2017] FCA 1473:

– the VA’s were appointed by KGA’s directors

– KGA was a Foreign Registerable Body, meaning Part 5B.2, Division 2 (Corporations Act) applied

– not Part 5.3A (the VA provisions)

– the VA’s, upon realising their mistake, applied to be appointed provisional liquidators and for remuneration approval (c$111k)

The Court granted remuneration on the basis of ‘quantum meruit’ and ‘unconscionability’, as the services provided an “incontrovertible benefit” to KGA and its stakeholders.

Please let me know your thoughts in the comments.

#SVVoidables

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