Australian Securities and Investments Commission v Edge
[2008] VSC 428
•20 October 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
CORPORATIONS LIST
No. 5120 of 2006
| AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION | Plaintiff |
| v | |
| ROBERT JOHN EDGE | Defendant |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 6 OCTOBER 2008 | |
DATE OF JUDGMENT: | 20 OCTOBER 2008 | |
CASE MAY BE CITED AS: | ASIC v EDGE | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 428 | |
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Corporations – Administrator and Liquidator – Application for remuneration- Whether entitlement to amount of remuneration established – Whether Court satisfied that applicant had not been paid already in relation to any remuneration – Applicant’s appeal from Master dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr E.W. Woodward | Australian Securities and Investment Commission |
| For the Defendant | Mr J.L. Evans | Madgwicks |
HIS HONOUR:
This is an appeal from an order of Master Efthim made on 23 June 2008 concerning the appellant’s entitlement to remuneration as the administrator and/or liquidator of a number of companies, including Tetherless Access Pty Ltd (in liquidation) (“Tetherless”).
Background
The Master’s order was made in a proceeding which was commenced by the plaintiff, the Australian Securities and Investments Commission (“ASIC”), on 10 March 2006. ASIC sought a range of different orders under the Corporations Act 2001 (“the Act”) in connection with the conduct by the defendant, Robert John Edge, of insolvency administrations in respect of 24 companies. The insolvency administrations comprised nine court liquidations, twelve voluntary liquidations (six of which followed a voluntary administration and two of which followed a voluntary administration and deeds of company arrangement) and three voluntary administrations (two of which were followed by deeds of company arrangement).
Following a hearing lasting five days, Dodds-Streeton J (as her Honour then was) handed down reasons for judgment on 25 May 2007[1] and made a final order on 3 July 2007. Pursuant to paragraph 5 of that order Mr Edge was required to pay into court the sum of $207,592.75, being the total of the amounts identified by her Honour as having been paid to, or at the direction of, Mr Edge without proper approval in respect of eight companies, including Tetherless. Further, pursuant to ss.447E(1) and 536(1) of the Act, her Honour prohibited Mr Edge from making application to creditors or to a court for, or otherwise seeking payment of, remuneration or other sums claimed to be owing to him arising from or in respect of his role as voluntary administrator, administrator under a deed of company arrangement or liquidator of any of the companies except by application to a Master in this proceeding. Her Honour also ordered that:
Unless the Defendant makes application to the Master in this proceeding within 60 days (or such time as the Master on application allows) of the date of this order seeking payment to him of all or part of each of the sums listed under paragraph 5 of these orders, each of those sums will be available to be disbursed to the creditors or members of the company concerned in accordance with the Act or as the Master shall otherwise direct.
[1][2007] VSC 170.
By an interlocutory process filed on 9 August 2007 Mr Edge sought orders that he was entitled to receive remuneration in relation to nine companies, including Tetherless, in such amount as was determined by the Court to be payable to him.
Following a hearing, the Master handed down reasons for judgment on 16 April and 20 June 2008 and made an order on 23 June 2008 that Mr Edge be paid $59,442.46 from the total sum paid into court by Mr Edge.
By a notice of appeal dated 25 June 2008, Mr Edge appealed against the Master’s orders in respect of three companies, including Tetherless. Mr Edge also appealed against the Master’s order that he pay the costs of the plaintiff and the costs of Mr Paul Pattison, the liquidator of two of the companies in question, of and incidental to his interlocutory process. However, at the commencement of the appeal before me, Mr Evans of counsel for Mr Edge indicated that the appeal, in respect of the two companies of which Mr Pattison was the liquidator, was not proceeding, and that the appeal on costs was only brought in the event that the appeal concerning Mr Edge’s application for remuneration in respect of Tetherless was successful. This meant that no issue arose as to whether leave to appeal was necessary pursuant to the provisions of r.16.5(1) of the Supreme Court (Corporations) Rules 2003 and r.77.05(2) of the Supreme Court(General Civil Procedure) Rules 2005.
However, I raised with counsel whether leave to appeal was required under r.16.5(2) of the Supreme Court (Corporations) Rules 2003 on the basis that this matter had been referred by Dodds-Streeton J to a Master. Both counsel submitted that the better view was that this matter was an application to the Master, not a referral by her Honour. All her Honour had done was to prohibit Mr Edge from receiving any payment other than by an application to a Master, which Mr Edge might or might not have decided to make. I accepted that this was the correct analysis of the situation. Thus, pursuant to r.77.05(7) of the Supreme Court Rules, Mr Edge’s appeal was a rehearing de novo.
Of the amount of $207,592.75 which Dodds-Streeton J ordered that Mr Edge pay into Court, the sum of $59,857.14 was the amount of remuneration which her Honour found had been received by Mr Edge in respect of Tetherless without proper approval. That amount was calculated as follows:
(a)the sum of $27,500, which was the amount Mr Edge had said in evidence that he believed had quite likely been paid to him out of the $62,000 approximately received by him as liquidator of Tetherless;
(b) the sum of $32.357.14,[2] which was the total of:
(i)the sum of $18,401.61 paid from Tetherless’ funds to American Express on 30 April 2003;
(ii)the sum of $9,600.53 paid from Tetherless’ funds to Australian Liquor Marketers on 7 May 2003; and
(iii)the sum of $4,355.00 which, according to the relevant Form 524s lodged by Mr Edge had been paid to him in the twelve month period ended 16 July 2002. (In fact, the total amount stated in these Forms was $4,356.00. Further, according to the relevant documents, the amount of remuneration paid was actually $4,361.00 ($2,948.20 and $1,412.80) not $4,355.00 or $4,356.00).
[2][2007] VSC 170, [549]-[553].
Contrary to Mr Edge’s evidence before Dodds-Streeton J, the submission made on his behalf was that the documents now before the Court demonstrated that he had not been paid the sum of $27,500. However, it was accepted that these documents also showed that he had received virtually the same amount, namely, the sum of $25,233.30, by the following payments:
(a)the sum of $20,494.63, almost certainly consisting of a payment of $12,524.24 on 25 July 1997 and one of $7,970.39 on 13 August 1997;
(b) the sum of $4,681.87 on 24 April 1998; and
(c) the sum of $56.80 on 30 January 2003.
Therefore, no point was taken by Mr Edge that he had paid into court more than the remuneration which he had previously received as administrator and liquidator. In any event, no appeal had been brought against her Honour’s finding on that point.
The Proper Approach to Determining Remuneration
There was very little disagreement between counsel for Mr Edge and for ASIC concerning the proper approach to determining the remuneration of an administrator or liquidator. This was not surprising as, in my opinion, the relevant principles are now well established.
In ACN 004 323 184 Pty Ltd,[3] Dodds-Street J applied the approach set out by the Full Court of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd v Conlan[4] in respect of a remuneration claim by a provisional liquidator to such a claim by a liquidator. Her Honour said:
[3][2002] VSC 353.
[4][1998] 20 WAR 96.
The propositions enunciated in Venetian Nominees which I consider applicable to a liquidator’s claim pursuant to s.473(3) of the Act include the following:
(a)The procedure for the determination is a summary one for fixing costs of an officer of the court as part of its supervisory function, in which strict observance of the rules of evidence is not ordinarily required.
(b)The onus is on the liquidator to establish that the remuneration claimed is fair and reasonable.
(c)The function of the court is to make an independent determination, based on the material proffered, of whether the remuneration claimed is fair and reasonable.
(d)If the liquidator establishes a prima facie case on the basis of the proffered material, which may include evidence which would not be admissible pursuant to strict observance of the rules of evidence, the court should then consider the validity of any objections.
(e)The mere listing of the persons who performed the work, the hours worked and the amounts claimed may be insufficient for the court to reach a determination. Ordinarily, the liquidator will provide “a statement of account reflecting in the appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly”.[5]
(f) the statement of account should be verified by affidavit.[6]
[5][1998] 20 WAR 96, 103 (Kennedy and Ipp JJ, with whom Wallwork J agreed).
[6][2002] VSC 353, [31].
Dodds-Streeton J also agreed with what the Full Court had said about a passage from the judgment of Shepherdson J in Re Solfire Pty Ltd (in liq) (No 2):[7]
In our opinion, however, it is, with respect, unnecessary to lay down an absolute rule, in such detailed terms, concerning the statement of account to be provided by a provisional liquidator. It may well be that in a particular case information particularised as suggested by Shepherdson J would be appropriate. In other cases less detailed information may be required. Every case depends on its own circumstances. But the overriding principle remains: sufficient information must be provided to the court to enable it to perform its function under s.473(2).[8]
[7][1999] 2 Qd R 182.
[8](1998) 20 WAR 96, 103 (Kennedy and Ipp JJ, with whom Wallwork J agreed).
In Re Stockford Ltd,[9] Finkelstein J said:
[9](2004) 140 FCR 424, [47]-[48].
It seems to me that the proper approach is first to establish what in the United States cases fixing the fees of trustees and attorneys under the Bankruptcy Code is called the "lodestar" amount. This amount is reached by the number of hours reasonably spent by the insolvency practitioner multiplied by a reasonable hourly rate: In reBoston and Maine Corporation v Moore 776 F 2d 2, 7 (1st Circ 1985); Copeland v Marshall 641 F 2d 880, 891 (DC Circ 1980). This step will require the tribunal to decide whether the work performed was necessary to the administration, whether it was performed within a reasonable time and whether the rate is reasonable having regard to what the practitioner, and other practitioners, usually charge their clients. The "lodestar" amount should then be adjusted (up or down) to reflect other factors including the quality of the work performed, the complexity in the administration over and above the normal complexity of such work, the novelty and difficulty of the issues that confronted the administrator as well as the ultimate result obtained by him.
To have his fees fixed it will be necessary for the administrator to do more than simply state the amount of time spent and the rate to be charged for that time, as happened in this case. The amount of detail to be provided in support of a claim must be proportionate to the size of the estate and the amount of time spent. A useful discussion of what is required appears in Re Medforce Healthcare Services Ltd (In Liquidation) [2001] 3 NZLR 145 at 155:
In our view the exercise which must be undertaken by the court in fixing the reasonable costs of the liquidator is similar to that which is undertaken when approving solicitor and client costs or costs for legal aid purposes. In each case what is required is enough information to enable an assessment to be made as to whether the total costs charged are reasonable.
As a minimum it seems to us that what is required is a statement of the work undertaken during the course of the liquidation, together with an expenditure account sufficiently itemised to enable the charges to be made related to the work done. The detail would have to be sufficient to enable the judicial officer to determine whether the personnel involved in the liquidation and their respective charge-out rates were appropriate to the nature of the work undertaken. This information may in some cases raise concerns as to whether there has been overservicing and overcharging. If there are suggestions of this in the information provided, the Court can request further information.
See also Mirror Group Newspapers plc v Maxwell (No 2) [sic] [1998] 1 BCLC 638 at 648:
[The office holder] must explain the nature of each main task undertaken, the considerations which led them to embark upon that task and, if the task proved more difficult or expensive to perform than at first expected, to persevere in it. The time spent needs to be linked to this explanation, so that it can be seen what time was devoted to each task.
(Re Solfire Pty Ltd (in liq) No. 2 [1999] 2 Qd R 182 at 191)
[W]hen a provisional liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in taxable form provided by a solicitor to his client ...
(Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 103)
It may well be that in a particular case information particularised as suggested by [the judge in Re Solfire Pty Ltd (in liq) No. 2] would be appropriate. In other cases less detailed information may be required. Every case depends on its own circumstances. But the overriding principle remains: sufficient information must be provided to the court to enable it to perform its function ...
In my opinion, three points deserve to be restated:
(a)the onus is on the applicant to demonstrate that the remuneration claimed is fair and reasonable;
(b)sufficient information must be provided to the Court to enable it to perform its function; and
(c) every case depends on its own circumstances.
Counsel were also agreed that in this particular case it was appropriate to take into account the following factors:
(a)the history and age of the Tetherless administrations for which the application for remuneration was made (including when the work the subject of the application was performed);
(b)the circumstances which led to the need for the application for remuneration in relation to the Tetherless administrations;
(c)the Court’s knowledge of the process of liquidation, and the statutory requirements imposed on a liquidator;
(d) the findings of Dodds-Streeton J in her reasons for judgment;
(e)the utility of the particular tasks deposed to by Mr Edge as having been performed as part of the Tetherless administrations.
Finally, counsel for both Mr Edge and ASIC submitted that the appeal raised two separate questions:
(a) Had Mr Edge established an entitlement to any remuneration?
(b)If so, had he satisfied the Court that he had not been paid already in relation to that entitlement?
I will deal with each of these questions in turn.
Entitlement to Remuneration
In his affidavit in support of his application to the Master, sworn on 20 September 2007, Mr Edge set out his professional history. This has been summarised by Dodds-Streeton J in her reasons for judgment[10] and it is unnecessary to repeat it here. Mr Edge said that at all times from 1996 he had been “principally assisted in the conduct of external administrations of corporations” by an employee, Bill Armistead, and later by Harrisons Insolvency (“Harrisons”).
[10][2007] VSC 170, [128]-[136].
Mr Edge stated that Mr Armistead was “an experienced senior credit control manager and loans recovery officer who was familiar with the process of a large-scale liquidation”. However, Mr Armistead had no formal accountancy training and was not studying to become an accountant. Mr Edge said that he considered that although Mr Armistead did not fall obviously within any of the categories in the IPAA Guide to Hourly Rates, he determined that Mr Armistead should ordinarily be “charged out” in relation to any liquidation at $174 per hour, as a “Manager 2” under the Guide. He said that he considered this “blended” rate to be appropriate as some of Mr Armistead’s functions were of “Manager 1 level, as Mr Edge’s immediate delegate, while others were of a level of “Manager 2”.
With respect to Harrisons, Mr Edge said that in about late 2000 he engaged that firm to act as his delegate in relation to a number of incomplete insolvency administrations of which he was liquidator, including Tetherless. That delegation ceased in March or April 2003.[11] Mr Edge said that his arrangement with Harrisons was that it would charge him at the appropriate IPAA rates for the work performed by its staff, and that he would pay it 85% of the face value of any bill, whilst retaining the remaining 15%. He acknowledged that Dodds-Streeton J had determined that the 15% received by him could not be retained as remuneration.[12]
[11][2007] VSC 170, [198].
[12][2007] VSC 170, [205].
Mr Edge said that he was appointed the administrator of Tetherless on 3 July 1997, and that on 16 January 1998, at a meeting of creditors pursuant to s.439A of the Corporations Law, the creditors resolved that the company be wound up and he became its liquidator. The last Form 524 lodged by Mr Edge concerning Tetherless was dated 16 January 2003, in respect of the six months ending on that date. However, it appeared that no final accounts were ever lodged by Mr Edge in his capacity as liquidator.[13]
[13][2007] VSC 170, [555].
A real difficulty for Mr Edge in his application for remuneration in respect of work done as the administrator and/or liquidator of Tetherless was the lack of documentation. He said that he believed that most of the books and records of Tetherless in his possession and of the liquidation were destroyed in the second half of 2005. This destruction was done by him or on his instructions. Not surprisingly, Mr Edge said that he had been hampered in making his application by the destruction of the records.
Nevertheless, Dodds-Streeton J was extremely critical of Mr Edge’s conduct in this regard:
ASIC did not allege that Mr Edge was guilty of dishonesty, but of serious misconduct falling short of dishonesty. I am not persuaded that Mr Edge’s account of the destruction of the documents was full, frank and truthful. The evidence indicates that Mr Edge destroyed large numbers of documents in such a way as to render the destruction process itself untraceable and also to destroy evidence of his conduct of liquidations and administrations, whilst aware that the regulator was concerned about it and that its queries were, at that stage, neither comprehensively formulated nor satisfied.
Mr Edge’s destruction of documents was, on the most favourable view, the result of gross ignorance, neglect and incompetence. On a less favourable view, it was deliberately unlawful conduct, designed to obstruct the regulator’s investigation of his conduct.[14]
[14][2007] VSC 170, [259]-[260].
It therefore seems to me that Mr Edge has only himself to blame for his difficulty in producing supporting documentation.
In his affidavit, Mr Edge said that he sought $27,500 for his remuneration and expenses as administrator, and $32,357.14 for his remuneration and expenses as liquidator, of Tetherless. The Master found that Mr Edge was only entitled to be paid the sum of $4,330.72, which he had disbursed to Harrisons, after retaining his 15% commission from the sum of $5,094,97, which he had received from Tetherless. The amount remaining available for payment to Mr Edge in respect of Tetherless was therefore $55,526.42.
Apart from the payment to Harrisons, it seems to me that no question of expenses arises, even though Mr Edge referred in general terms in his affidavit to the cost of hiring meeting rooms for meetings of creditors and the costs of advertising such meetings and other matters. I say this because the documents now before the Court showed that advertising costs had been paid both during the administration and the liquidation as had other sundry expenses, including “hire of equipment” and “travelling”.
Although Mr Edge did not specify a total amount which he claimed he was entitled to for his remuneration as the administrator and liquidator of Tetherless, his counsel submitted that it was well in excess of the amount of $55,526.42 remaining in Court. It appeared that Tetherless had been “billed” fees totalling $65,306.50 for the months of July and August 1997 alone, and that the September 1997 summary of the timesheets showed a further $13,176.40 owing for fees. Although Mr Edge said that not all of the timesheets had been located, those that had been found were “accurate in every respect”. He summarised them in the following table:
Person
Position
Hourly rate
Number of hours
Amount
Robert Edge
Partner
$345
357
$123,165.00
Bill Armistead
Manager 2
$174
251.4
$43,743.60
Others
Secretary
$87
91.2
$7,934.40
Total
$174,843.00
Mr Edge gave some general evidence in support of his application for remuneration.
(a)In a standard administration, not involving large amounts of assets or complex issues, the following tasks would be performed by him or Mr Armistead (or Harrisons):
(i) holding meetings with directors;
(ii) obtaining and reviewing the company’s books and records;
(iii) securing company assets and making an inventory of company assets;
(iv) notifying ASIC of his appointment;
(v) compiling a list of creditors;
(vi) sending notice to the creditors of his appointment;
(vii) convening and chairing the first meeting of creditors;
(viii) liaising with any committee of creditors;
(ix) forming an opinion on the solvency of the company;
(x)identifying any possible voidable transactions and breaches of directors’ duties;
(xi) considering any proposed deed of company arrangement;
(xii)forming an opinion as to the future of the company with reference to his detailed analysis of the books and records of the company and any proposed deed of company arrangement;
(xiii)providing a report to creditors detailing the financial position of the company, any proposed deed of company arrangement and his recommendation for the future of the company;
(xiv) determining the rights of potential creditors to vote; and
(xv) holding a second meeting of creditors.
(b)The minimum amount of his remuneration and expenses and that of his staff (calculated on an hourly rate in accordance with the IPAA Guide to Hourly Rates) for a standard administration would be approximately $10,000 for approximately 30 to 40 hours of work.
(c)In a standard liquidation, not involving large amounts of assets or complex issues, the following tasks would be performed by him or Mr Armistead (or Harrisons):
(i)holding meetings with directors, and/or seeking to obtain a report as to affairs from the directors;
(ii) obtaining and reviewing the company’s books and records;
(iii)securing company assets and making an inventory of company assets;
(iv) reviewing the report as to affairs provided by the director;
(v)investigating the circumstances leading to the liquidation and considering whether examinations of various people under ss.596A and 596B of the Corporations Law were advisable;
(vi) arriving at valuations of company property;
(vii) considering a strategy for realisation of company property;
(viii)determining whether the company should trade on pending realisation of the company’s property;
(ix) notifying ASIC of his appointment;
(x) completing the requisite ASIC forms on an ongoing basis;
(xi) compiling a list of creditors;
(xii) sending notices to the creditors;
(xiii) investigating and where necessary pursuing potential recoveries;
(xiv) liaising with any committee of creditors;
(xv)identifying any voidable transactions and breaches of directors duties;
(xvi) holding meetings of creditors;
(xvii) determining whether to admit proofs of debt; and
(xviii) payment of dividends.
(d)The minimum amount of his remuneration and expenses and that of his staff (calculated on an hourly rate in accordance with the IPAA Guide to Hourly Rates) for a standard liquidation would be approximately $10,000 for approximately 30 to 40 hours of work.
Mr Edge also relied upon the affidavit of Brendan John Marchesi sworn on 2 October 1997. Mr Marchesi said that he was a chartered accountant and director of Bent & Cougle Pty Ltd and an official liquidator of this Court. Mr Marchesi had been practising as an insolvency practitioner for 21 years and, in his affidavit, he outlined the tasks which an administrator would be required to perform in a standard administration with less than 20 creditors. He considered that, in a standard administration, there would be approximately 30 to 40 hours of work, which would equate to approximately $8,000 to $16,000 in remuneration calculated on an hourly rate in accordance with the Bent & Cougle Pty Ltd hourly rates. He also outlined the tasks which a liquidator would be required to do in a standard liquidation with less than 20 creditors. He considered that there would be approximately 30 to 40 hours of work which would equate to approximately $9,000 to $12,000 in remuneration. Further, in the case of a matter where there were fewer than 20 creditors, the company had not traded on and there were not large amounts of assets or complex issues involved, in his inexperience, an administration which then became a liquidation after a vote of creditors would generate a right to remuneration of between $16,000 and $24,000 in total.
Mr Edge also gave the following evidence about the work done for Tetherless:
(a)The administration and liquidation were complex and difficult as the company’s assets were overseas.
(b) He performed many of the tasks himself, rather than delegating them.
(c)The major asset of Tetherless was intellectual property (including software source code) in a wireless technology.
(d)The business of the company and all of its manufacturing operations operated out of the United States of America through a related US company.
(e) There were approximately 50 staff of the company in the USA and Australia;
(f)He flew to California on two occasions and each trip was for over a week at a time.
(g)On his first trip to the USA he had to take possession of the factory, machinery and stock, interview management staff, talk to bankers and review the company’s documents and attempt to secure the commercially confidential source codes and intellectual property.
(h)His second trip involved closing the factory, negotiating with the landlord with regards to unpaid rent, supervising the sale of plant and equipment and other assets such as office furniture and dismissing employees, attempting to locate the source codes and investigating and trying to realise substantial debtors.
(i)There was also a New Zealand related company and he had many telephone calls to both the USA and New Zealand seeking to determine whether the source code and other assets were owned by Tetherless or by the US company or the New Zealand company.
(j)He caused Tetherless to continue to trade while he investigated the above issues, and this involved him in many meetings with staff and the landlord of the company’s premises.
(k)When he decided to cease the company trading, he had to deal with issues such as termination of the lease and employee entitlements and to sell company assets.
(l)He and Mr Armistead had to examine thousands of company documents, including agreements with the US company, insurance policies and leases.
(m)He had to negotiate with significant shareholders regarding whether they would provide funds for a Deed of Company Arrangement.
(n)He retained Lewis Hutchinson to advise with regards to various legal issues which arose throughout the administration and liquidation.
(o)He retained Deacons Graham & James to represent the company in Supreme Court litigation in relation to breaches of warranties and directors’ duties.
(p)Upon his appointment as administrator he opened an ANZ account for the company.
(q)He and his staff prepared a list of creditors of Tetherless and the amount for which each creditor had lodged a proof of debt.
(r)On 10 July 1997 he held a meeting of creditors of Tetherless pursuant to s.436E of the Corporations Law.
(s)He applied to the Supreme Court for extensions of time for the convening of the second meeting of creditors and wrote to creditors informing them of the adjourned dates.
(t)On 16 January 1998 he held a second meeting of creditors of Tetherless and subsequently lodged a Form 911 with ASIC attaching the minutes of that meeting and his administrator’s report.
(u)At a time when he had delegated the handling of the liquidation to Harrisons, he called a meeting of creditors for 29 March 2002.
(v) Throughout the liquidation he completed various Form 524s.
(w)He received total receipts during the administration of Tetherless of $304,790.72, from which he made various payments such that upon Tetherless going into liquidation, the only asset transferred across was the cash balance of $651.63.
(x)He received total receipts during the liquidation of Tetherless of $62,066.13, from which he made various payments.
ASIC submitted that the Court was in no position to assess whether or not the remuneration Mr Edge claimed was fair and reasonable or to undertake the kind of qualitative assessment of the value of the work that the authorities demanded.
In my opinion, there were significant problems with Mr Edge’s attempt to establish his entitlement to the claimed remuneration. As the Master observed in his reasons for judgment, the timesheets are “extremely difficult to read”, although this did not apply to a lesser number which were typed not handwritten. More importantly even when the entries could be read, I consider that they did not assist Mr Edge to discharge the onus on him. First, I could not reconcile his timesheets with his assertion that they demonstrated that he had performed 357 hours. After spending considerable time studying the timesheets I could only find a total of 218.9 hours recorded. And that figure was only reached by treating the timesheets for November and December 1997 as recording one unit as representing one hour rather than one unit representing six minutes, despite the fact that Mr Edge said in his affidavit in support that this change occurred at the beginning of 1998. I should say, however, that I was able to reconcile the hours recorded on Mr Edge’s timesheets for the months of July, August and September 1997 with the hours recorded for him on the monthly summaries which, at least in the case of July and August, formed the basis for the subsequent “billings” to Tetherless.
Given the difficulties encountered with Mr Edge’s own figures I did not attempt a similar task for Mr Armistead’s timesheets.
No attempt was made by Mr Edge, before me, to explain how the numbers of hours claimed for the timesheets were reached. This was a significant omission when the Master had stated in his reasons for judgment:
I have tried to calculate the hours looking at the timesheets but that task was impossible for me to complete. Even though a considerable amount of time was spent in trying to reconcile the amounts claimed, I am unable to accurately work out the figures … The timesheets relied upon are confusing.
Secondly, the timesheets were often abbreviated and provided little by way of explanation, beyond stating that Mr Edge had telephoned or met someone. It seems to me that Mr Edge should, at the very least, have explained who the various people were that he is recorded as meeting or telephoning, and what role they played in his work. Presumably, Mr Edge should have been able to give this information, even after a gap of approximately 10 years, if he could read their names in his timesheets.
A particular example of why I am left in doubt about all of these various meetings and conversations, concerns solicitors. As I have set out above, in his affidavit Mr Edge referred to two firms of solicitors which he retained to act for him in respect of Tetherless. Yet, by my reading, in his timesheet for 22 July 1997 he has noted various calls to and attendances at “Minters”, and in his timesheet for what I believe to be 22 August 1997 he has noted a meeting with a solicitor from Clayton Utz. There is no explanation from Mr Edge as to why these times have been attributed to Tetherless, when it would have appeared from his affidavit that other firms of solicitors had been retained.
An even worse problem with the timesheets was that, on occasions, they were incomplete. An example of this was Mr Edge’s timesheet for 30 July 1997 when he was in the USA. In respect of a claim for 10.3 hours’ work for Tetherless on that day the typed description of the work done was:
Meet R.R. of factory and
On the following morning, 4.5 hours were billed to Tetherless without any description at all of what was done during this time. Equally uninformative were Mr Edge’s typed timesheets for various weeks between 13 July and 29 November 1998 when the only entry was “Consulting”.
Thirdly, Mr Edge made no attempt to relate his general description of the work done for Tetherless to the hours claimed by him. In my opinion, without some attempt at indicating what time was spent by whom on the various tasks, it is simply impossible for the Court to assess whether the amount of time “devoted to each task”[15] was reasonable, and whether “the personnel involved … and their respective charge-out rates were appropriate to the nature of the work undertaken”.[16]
[15]Mirror Group Newspapers Plc v Maxwell [1998] 1 BCLC 638, 648 (Ferris J).
[16]Re Medforce Healthcare Services Ltd (In liq) [2001] 3 NZLR 145, [34] (Salmon and Paterson JJ).
Further, no attempt was made by Mr Edge to put before the Court an explanation of how an amount of $55,526.42 or more could be calculated. Given that Mr Edge asserted that the timesheets showed that work worth nearly $175,000 had been performed, he should have been able to prepare an explanation, with full details, of a bill justifying remuneration in excess of the figure of $55,526.42, despite the difficulties caused by the destruction of documents and the lapse of time. But this was not done. In my opinion, it is not for the Court to perform the task of attempting to construct such a bill.
One of the two trips which Mr Edge said that he made to the USA was one occasion where some attempt could be made at assessing the time claimed against the tasks performed. As I read the timesheets, Mr Edge has recorded 35 hours of work done in the USA for Tetherless on this trip (apart from some travelling time). But, in my opinion, neither the cryptic descriptions in the timesheets (where they appear) nor the description in the affidavit of that work enables the Court to conclude that remuneration of $12,075 (35 hours x $345) or any lesser sum is fair and reasonable.
I note in passing that I was unable to identify in the timesheets a second trip by Mr Edge to the USA even though he said that “each trip was for over a week at a time”.
In my opinion, therefore, Mr Edge has not provided to the Court sufficient information to enable it to determine what would be fair and reasonable remuneration for the work performed as the administrator and liquidator of Tetherless. I cannot even decide whether it would be appropriate to award Mr Edge the $55,526.42 remaining in Court on the basis that his remuneration should be at least that amount. As the authorities make clear, simply producing claims by multiplying an hourly rate by a number of hours allegedly worked is not satisfactory.
I have given serious consideration to the submission that at the very least I should award Mr Edge something like the amount of remuneration which it was said would be earned in a standard administration and liquidation. However, in the end, I have decided that even this limited award is not justified on the material before the Court. As Dodds-Streeton J found:
In the present case, Mr Edge’s persistent, chronic and wide-scale dereliction of duty in failing to prepare and lodge accounts, including six monthly and final accounts and statements, and in failing to hold final meetings for many companies over a period of years, was very serious. That dereliction is inextricably associated with his wholesale, long-term delegation of lodgement and other essential functions of the liquidations and administrations to Mr Armistead (who was, to Mr Edge’s knowledge, not professionally qualified), and his consistent failure adequately to instruct, supervise or monitor Mr Armistead over a lengthy period of time in relation to numerous companies.[17]
[17][2007] VSC 170, [186].
In the light of that finding, it is simply not possible to know what deductions should be made from the standard amounts for work not performed or not properly supervised. As I have previously said, the authorities make it clear that every case depends on its own circumstances. Generalised evidence about amounts usually earned in standard administrations or liquidations does not assist me to determine what amount of remuneration would be fair and reasonable in the case of Mr Edge’s administration and liquidation of Tetherless. The onus being on the applicant, in my opinion he has failed to demonstrate that he had an entitlement to an amount of remuneration.
No Payment Already For Remuneration
Even if one took a more favourable view of the proof of Mr Edge’s entitlement, it seems to me that his application cannot succeed because I cannot be certain that he has not already received adequate remuneration. This problem arose for Mr Edge as a result of him not being able to produce page 4 of Tetherless’ monthly bank statements from the ANZ. This meant that there was a gap in Tetherless’ financial records, which might have shown other payments to Mr Edge. On behalf of Mr Edge, Mr Evans correctly submitted that with the information provided by the available bank reconciliation reports the gap was reduced to only three days. He therefore submitted that I should draw the inference that no payments were made to Mr Edge in the short period between 2.13 pm on Monday, 10 November 1997 when the bank reconciliation report was printed and the start of page 5 of the bank statements on Friday, 14 November 1997.
On the other hand, Mr Woodward of counsel, who appeared for ASIC, submitted that there was simply no basis for drawing such an inference and that therefore the Court could not be satisfied that more than sufficient remuneration had not been received and retained by Mr Edge. Mr Woodward pointed out that, according to the documents relied on by Mr Edge, the following payments were received by him:
15 July 1997
$100,000.00
24 July 1997
$50,000.00
4 August 1997
$50,000.00
14 August 1997
$100,000.00
30 September 1997
$2,518.68
10 October 1997
$2272.04
24 February 1998
$36,116.50
28 May 1998
$10,000.00
4 August 1998
$14,000.00
1 October 1998
$1,000.00
That is, funds continued to be received after mid-November 1997. Mr Woodward submitted that there was no evidence proving or disproving the receipt of further amounts between 10 and 13 November 1997. Certainly, Mr Edge did not address this issue in his affidavit in support of his application. Nor did he seek to file further material on the appeal, despite the Master stating in his reasons for judgment:
On the material before me, I know that monies were paid to Mr Edge but I can not ascertain what is the entire amount that he may have received.
What is known is that the available funds at the bank were reduced by $622.00 from $16,669.20 to $16,047.20 in this short period. Further, I consider that two cheques were drawn in that period. Mr Woodward pointed out that cheque No. 1044 was not found in any of the bank statements or bank reconciliation reports. On my reading of the documents the same observation applies to cheque No. 1045. Presumably one or both were drawn and banked in the three day gap and thus it or they appeared as debits on the missing page of the bank statements. The cheque or cheques could have totalled that sum of $622 or some much larger figure if further funds had been received in that period. I am not able to say one way or the other.
Mr Woodward submitted that if funds had been received it would not be surprising if Mr Edge had paid himself his outstanding remuneration. After all, fees of nearly $58,000 were apparently unpaid by the end of September 1997 ($65,306.50 plus $13,176.40 less $20,494.63). Mr Woodward submitted that, if these fees had not been paid in mid-November 1997, the question arose as to why they were not partly paid when Mr Edge received his first funds as liquidator in February 1998. By then, of course, the administrator’s fees for the remainder of the administration (1 October 1997 to 14 January 1998) would also have been payable.
Secondly, Mr Woodward submitted that there was no reason to doubt that Mr Edge would have been prepared in November 1997 to pay himself his claimed remuneration without the required approval. After all, this was precisely what had occurred when Mr Edge paid himself the $20,494.63 in July and August 1997 before the creditors had been asked to pass a resolution approving his remuneration.
In my opinion, there is, therefore, no valid basis for drawing the inference that no payments were made to Mr Edge in this short period.
Even if no further funds were received in the three day gap, it is still possible that Mr Edge received some payment from the $622 referred to above and from the eight cheques totalling $9,203.22 debited to the account between 18 November and 5 December 1997, as the payees of these cheques are not known. I am prepared to assume that cheque No. 1048 for $130.00 was paid to City Side Self Storage as other cheques for that amount were also drawn around this time apparently on a monthly basis. Mr Woodward also conceded that it was probably unlikely that the five cheques for sums less than $513 were payment of the administrator’s fees. However, he did submit that the two largest cheques, for $4,562.00 and $3,012.00 respectively, could well have been for that purpose. In addition, I note that it is possible that any of these cheques could have been paid to a third party creditor of Mr Edge or Mr Armistead, just like the cheques to American Express and Australian Liquor Marketers in 2003.
On that basis, I do not know what happened to $8,196 ($4,562.00 plus $3,012.00 plus $622.00) or even $9,695.22 ($9,203.22 plus $622.00 less $130.00). I am not able to say one way or the other whether any of these amounts were received by Mr Edge. Again, Mr Edge did not address this issue in his affidavit.
In the circumstances, it seems to me that Mr Edge has not satisfied the Court that he has not been fully paid in relation to any entitlement to remuneration.
Costs
As Mr Edge’s appeal against the rejection of his application for remuneration as the administrator and/or liquidator of Tetherless has failed, the appeal in respect of the costs order is no longer pursued. It is therefore unnecessary for me to say anything about the submissions on costs, which were advanced on the assumed basis that the substantive appeal had been successful to some extent.
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