Campbell & Diboll (No 3)

Case •

[2022] FedCFamC1F 47

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Campbell & Diboll (No 3) [2022] FedCFamC1F 47

File number(s): WOC 455 of 2013
Judgment of: GILL J
Date of judgment: 10 February 2022
Catchwords: FAMILY LAW – ENFORCEMENT – Family company winding up – Remuneration of liquidators based on court order for the equal split of costs between parties – Liquidators pursuing costs from one of the separated parties – Whether the calculations presented by the liquidators amounted to proper costs for the parties to pay – Onus upon liquidators to establish that costs are proper – Evidence incapable of establishing whole of costs sought are proper – Recalibration of proper costs.
Legislation:

Corporations Act 2001 (Cth) s 545

Family Law Act 1975 (Cth) s 117

Family Law Rules 2004 (Cth)

Cases cited:

Adsett v Berlouis (1992) 37 FCR 201

Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd (2002) 174 FLR 1

Kelly, in re Halifax Investment Services Pty Ltd (in liq) (No 9) [2020] FCA 925

Re Beddoe, Downes v Coltam [1893] 1 Ch D 547

Division: Division 1 First Instance
Date of hearing: 7–8 October 2021 & 27 January 2022
Place: Canberra
Counsel for the Applicant: Mr Lipp
Solicitor for the Applicant: Chamberlains
Counsel for the Respondent: Mr Moller
Solicitor for the Respondent: Farrar Gesini Dunn

ORDERS

WOC 455 of 2013

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MR X & MR Z
Applicants
AND:

MS DIBOLL

Respondent

ORDER MADE BY:

GILL J

DATE OF ORDER:

10 FEBRUARY 2022

THE COURT ORDERS THAT:

1.The Amended Application in a Case filed 25 June 2021 is dismissed (save for the issue of costs).

2.The Applicants, Mr X and Mr Z, are jointly and severally liable to pay to the Respondent the sum of $8,118.37 within 14 days of the delivery of this judgment to the account that she nominates in writing to them. 

3.The proceedings are adjourned to 10 am on 11 April 2022 for the hearing as to the outstanding costs applications and any costs application pursued as a result of the judgment.

4.Any party pursuing costs is to file and serve written submissions as to such limited to no more than five pages and any further evidence relied upon by 4 pm on 24 February 2022.

5.Any party resisting such is to file and serve submissions in reply of no more than five pages by 4 pm on 10 March 2022.

Note:   The form of the order is subject to the entry in the Court’s records.

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Campbell & Diboll is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

GILL J:

  1. These proceedings arise in the context of final property orders having been made between Ms Diboll and Mr Campbell by Faulks DCJ on 24 October 2016, being orders that dealt in part with the role and remuneration of the applicant liquidators (“the liquidators”).  They primarily concern an application by the liquidators to cause Ms Diboll to pay certain of their expenses relating to the winding up of Y Pty Ltd, a corporate trustee of the business pursued by the parties during their relationship.

  2. This was a matter addressed by Faulks DCJ in both interlocutory and final orders as set out below.

  3. On 24 October 2016, Faulks DCJ ordered that:

    13. In addition to any sums recovered by the liquidators in the proper execution of their duties, in furtherance of Order 3 made by me on 13 March 2015, each of the parties will pay one half of the proper costs to the liquidators in relation to Y Pty Ltd on the basis that each will be responsible for one half of the amount outstanding taking account of the fact that $7,500 had at the date of the last order already been paid by the respondent.

  4. The 13 March 2015 orders had provided that:

    3. Each of the applicant and the respondent will pay one half of the proper costs of the liquidators in relation to Y Pty Ltd, such costs to be borne equally taking account of the money already paid by the respondent wife in these proceedings amounting to some $7,500. 

  5. The liquidators commenced enforcement proceedings by filing an Application in a Case on 27 June 2019 seeking variously that Ms Diboll pay $21,087.25 that they asserted was owed by virtue of Order 13 of the Orders of Faulks DCJ of 24 October 2016; $50,247.56 being what they described as fixed remuneration from 1 December 2016 to 6 January 2019 along with $5,500 being interim remuneration from 7 January 2019 to the conclusion of the liquidation; $23,148 being the costs of the liquidators of and relating to enforcement of Order 13 incurred by then, along with a further $10,000 to the conclusion of the proceedings.

  6. By their Amended Application in a Case dated 25 June 2021, the liquidators sought a lump sum payment from Ms Diboll of $64,117.56 and indemnity costs.

  7. In their case outline document filed 5 October 2021, the liquidators pursued orders, again seeking the payment of $21,087.25 that they asserted would be in fulfilment of Ms Diboll’s obligations pursuant to Order 13 of orders made on 24 October 2016 by Faulks DCJ.  Secondly they sought a lesser sum than in their original application of $45,679.60 further remuneration of the liquidation of Y Pty Ltd for the period 1 December 2016 until 6 January 2019.  Thirdly they sought costs in relation to an application made by Ms Diboll in her Response to an Application in a Case filed by her on 31 October 2019 where she sought the appointment of a reviewing liquidator or a single expert in relation to the remuneration of the liquidators.  Ms Diboll’s application was dismissed.  Fourthly they sought the costs that were reserved in respect of Ms Diboll’s Application in a Case filed 31 August 2021 that sought both summary dismissal of the liquidator’s application, and also access to the liquidator’s file.  Ms Diboll was successful in relation to obtaining the file and unsuccessful in relation to the summary dismissal which occupied part of the first day of trial.  Fifthly they seek the costs in respect of this application.  The liquidators had previously sought orders that bar Ms Diboll from arguing that their costs as claimed are not proper.  This matter was not addressed orally or in their summary of argument.   

  8. In addition to seeking the dismissal of the liquidators’ claims, Ms Diboll seeks orders that the liquidators refund to her a sum of $15,780 of the $17,465.50 that she has paid in relation to their liquidation that she asserts exceeded the proper costs that she was required to pay them by the orders of Faulks DCJ.  Secondly Ms Diboll seeks her costs in relation to this application.  Thirdly Ms Diboll seeks costs in relation to her application of 31 August 2021. 

  9. Despite the terms of their Amended Application in a Case, and inconsistently with what was contained in their case outline document, and following a query as to how the two fixed sums were to be reckoned, the liquidators articulated in their final submissions that the quantum of their claim against Ms Diboll was to be reckoned as a global figure of $64,056.70 arrived at by accumulating the total costs charged by the liquidators and then halving them (presumably pursuant to the division set out in the order of Faulks DCJ).  It was conceded that any amount already paid by Ms Diboll should be deducted, but not conceded that there should be a deduction from what has been recouped by the liquidators in the administration of the estate.

  10. Following this process, the amount claimed was to be ascertained by adding all of the amounts approved at the four creditors’ meetings (without the interim pre-approved amounts) and adding to that the interim pre-approved amount from the last of the creditors’ meetings.  This amount was then to be divided in half to determine Ms Diboll’s share, and what she has already paid (submitted to be $7,500 by the liquidator but uncontroversially $17,465.50) was to be deducted.  As will be seen below, this did not equate (other than in a general sense) to the dollar amount sought in the case outline or the various applications.

  11. The liquidators continue to pursue their costs but, contrary to their case outline, only seek to do so on delivery of this judgment and in reliance upon s 117 of the Family Law Act 1975 (Cth).  Provision is made to allow argument as to costs in the orders associated with these reasons.

    PROCEDURAL HISTORY

  12. Proceedings to enforce Faulks DCJ’s 24 October 2016 orders were initially brought against Ms Diboll by the liquidators on 27 June 2019.

  13. On 31 October 2019 Ms Diboll filed a Response to an Application in a Case seeking the appointment of a reviewing liquidator or a single expert.  At that point the parties both asserted that the appointment was pursuant to the Corporations Act 2001 (Cth) (“Corporations Act”) and that Ms Diboll’s liability was to be ascertained by the Insolvency Practice Schedule (“IPS”).[1]  Judgment was delivered accordingly on 24 March 2020 refusing that application, and also refusing the appointment of a Single Expert under the then Family Law Rules 2004 (Cth). By the final hearing, however, it was accepted that the IPS does not have application to this case, the liability arising purely by virtue of the orders of Faulks DCJ.

    [1] Corporations Act 2001 (Cth) Sch 2.

  14. Directions for progressing the matter toward trial were made on 18 February 2021.  Those directions were not complied with.  The time for compliance with various filing directions was extended on 3 June 2021, 26 July 2021 and 5 August 2021.

  15. On 31 August 2021 Ms Diboll filed an application seeking access to the liquidators’ file.  Orders were made by consent on 10 September 2021 requiring the liquidators to disclose a copy of the file to Ms Diboll.  Those orders also provided for the liquidators’ response to Ms Diboll’s 31 August 2021 application filed 7 September 2021 (including a claim as to costs and pursuing a bar on Ms Diboll arguing that their costs were not proper) to be dealt with at the final hearing. 

  16. Ms Diboll sought and was granted leave to make an application for summary dismissal of the liquidators’ claim on the first day of the trial.  That application was refused on 8 October 2021. 

  17. On 8 October 2021 Ms Diboll was granted leave to adduce evidence from a professional liquidator, Mr E, who prepared an expert report after reviewing the file disclosed by the liquidators. 

  18. An adjournment application seeking leave to file further material in reply was filed by the applicants on 7 October 2021, the first day of trial.  This application was granted on 8 October 2021.  On 4 November 2021, the affidavit in reply of Mr Z was filed which was responsive to the report of Mr E.  At a directions hearing before a Judicial Registrar on 17 November 2021, it was noted that this affidavit in reply was filed out of time.  The liquidators foreshadowed that an affidavit of Mr DD in response to the report of Mr E would be filed, which was done on 8 December 2021.  At the directions hearing, it was foreshadowed that the wife would object to both affidavits.  However, Ms Diboll did not ultimately object to Mr Z’s affidavit and the liquidators were permitted to rely upon it.  The liquidators were not permitted to rely upon the affidavit of Mr DD.  

  19. At the recommencement of the hearing on 27 January 2022 both Mr E and Mr Z were cross-examined.

    Material relied upon

  20. The liquidators rely upon the following material:

    (a)Amended Application in a Case filed 25 June 2021;

    (b)Case outline document filed 5 October 2021;

    (c)Affidavit of Mr Z filed 25 June 2021; and

    (d)Affidavit of Mr Z filed 4 November 2021.

  21. The wife relies upon the following material:

    (a)Amended Response to an Application in a Proceeding filed 5 October 2021;

    (b)Affidavit of Ms Diboll filed 1 October 2021;

    (c)Affidavit of Mr E filed 1 October 2021; and

    (d)Case outline document filed 5 October 2021.

    The liquidator’s remuneration

  22. As noted above, it was ultimately common between the parties that the issue of the remuneration of the liquidators was to be determined by reference to the orders of Faulks DCJ and, accordingly, that they were not matters to be determined by reference to the Corporations Act or the IPS.  The orders of Faulks DCJ imposed an obligation of remuneration distinctly different to that created by the Corporations Act.

  23. Based on the orders of Faulks DCJ the key determinant of the liability of Ms Diboll to meet the costs of the liquidator pursuant to those orders is that the liquidators establish that their claimed costs are proper.  The burden lies upon the liquidators to establish this.

  24. The central plank relied upon by the liquidators is the approval of remuneration that they have received at the four creditors’ meetings that they have conducted.  A summary of those four meetings is set out below.

  25. There are two reasons why the creditors’ meetings are limited in their cogency to establish the liquidators’ claims as proper.

  26. Firstly, while the creditors’ approval is a factor that may be taken into account under the Corporations Act, even there it is not necessarily definitive.  Even if it was, it should be acknowledged that the circumstances being addressed under the Corporations Act are very different from those pursuant to the orders of Faulks DCJ. 

  27. In particular, where the liquidator is acting under the Corporations Act the liquidator takes remuneration from the estate (subject to an order pursuant to s 545 of the Corporations Act).  There is no further obligation cast upon persons to meet the liquidator’s expenses and, as the persons or entities interested in the estate, the creditors who approve remuneration do so under circumstances where it is taken from the estate that is available to fund their various claims.  Here, once the estate was exhausted the creditors were effectively voting an approval for a third party to pay the expenses.  Under those circumstances, where it was not Ms Diboll voting in favour of the remuneration, the mere approval of the other creditors carries little or no weight in determining propriety.

  28. Further, under the Corporations Act the liquidator is under no duty to engage in expenditure that cannot be met from the estate, and it is not in any event in the liquidator’s interest to do so, as there is no available source to recoup from.  Here the orders set up a distinctly different scheme.

  29. Where Ms Diboll has voted in favour of the remuneration (as she did on the first two meetings) this may be taken as an admission against interest on her part and as such carries significant weight to establish that the costs were proper.

  30. Secondly, the manner of conduct of the third and fourth meetings, which were not marked by Ms Diboll’s approval, were such as to cast further doubt upon their credibility to establish the costs as proper.

  31. Not only did Ms Diboll vote against the remuneration at the third meeting (by which stage the liquidators were claiming a cumulative total of $77,433.80 and an additional $5,000 to cover costs until the end of the liquidation, a sum far in excess of the original $11,000 that had been indicated to Ms Diboll when she sought their appointment), but the meeting was conducted in a manner suggestive of an attempt to shut Ms Diboll out of the determination of remuneration.

  32. While at the first two meetings Ms Diboll was admitted as a creditor for approximately $1,000,000 (hence making her the largest creditor by a substantial margin), after indicating prior to the third meeting that she would vote against approval of the remuneration she was promptly reassessed by the liquidators to be admitted for $1 only.

  33. The justification for so doing was somewhat contentious, and occurred in the context of vitriolic correspondence from the chair of the meeting to Ms Diboll’s lawyer in response to her indication that she would not support the remuneration.

  34. Discussions with Mr DD (the chair of the creditors’ meetings and the on the ground arm of the liquidators), although lacking any file notes, were reported by Mr Z to have resulted in the conclusion that as the debts owed by Y Pty Ltd to Ms Diboll were in the nature of beneficiary entitlements, they should be distinguished from other debts, and thereby written down.  This followed the lodging of a further proof of debt by Ms Diboll.  This did not take into account that the whole of Y Pty Ltd’s conduct was in relation to the trust, and that the business was conducted by Y Pty Ltd for the trust.  Mr Z seemed ultimately to accept this left little scope to distinguish against Ms Diboll in the manner that they had at that meeting.  Even if it were legitimate to so distinguish, Mr Campbell’s claims were not ultimately written down in a like manner.

  35. These matters lead to the conclusion that the change was a tactic to counteract Ms Diboll’s stated intention to vote against remuneration approval.

  36. Even if this complexion was not placed on the writing down of the debt that Ms Diboll was admitted for, the lack of approval by Ms Diboll undermined the credibility of the third and fourth creditors’ meetings to objectively establish the propriety of the conduct of the liquidators based on the remuneration that they approved.

  37. For the above reasons the creditors’ third and fourth meetings are neither definitive nor persuasive of the propriety of the expenses incurred by the liquidator.  The first two meetings are marked by the concession of Ms Diboll in voting in favour of the remuneration, lending them a more persuasive effect than the third and fourth.

  38. The liquidators also relied upon their reports to the Court as establishing the proper nature of the expenses they incurred.  Those reports of 9 December 2014 and 12 March 2015 identify the particular difficulties faced by the liquidators (which are consistent with the comments as to the opacity of the financial arrangements of Ms Diboll and Mr Campbell made by Faulks DCJ in his judgement).  They do not however speak to the extent of expenditure necessary, with the second of the reports indicating the matter was on the cusp of a “summary (and likely final) report to the Company’s creditors”.

  39. Directly undermining the liquidator’s claims for remuneration, Ms Diboll relied upon the expert evidence of Mr E who examined the file of the liquidators and disputed the propriety of the charges of the liquidator.  In particular he observed the gross disparity between the initial estimate (that he regarded as an under quote) provided by the liquidators of $10,000 (excl GST) and the Work in Progress (WIP) records that indicated time charges totalling in excess of $190,000, with almost $90,000 recorded as billed and paid, $36,000 written off as not recoverable, and $65,000 carried forward as unbilled as at 10 June 2021.[2]

    [2] Affidavit of Mr E filed 1 October 2021, Annexure A, paragraph 2.1.5.

  40. Mr E concluded that the various heads of the WIP, being dealing with and realising of the assets ($23,000), reporting ($46,000), investigating ($84,000) and general administration ($38,000) were excessive, save that approximately $33,000 in administration was justified.  He also accepted that the internal disbursement costs of the liquidators was proper.

  1. Importantly he observed that the liquidators’ file:

    materially lacks sufficient working papers, file notes and other documentation which clearly and meaningfully demonstrates the manner in which the liquidation was conducted [as required by the IPS]...[3]

    [3] Affidavit of Mr E filed 1 October 2021, Annexure A, paragraph 3.1.8.

  2. As noted above, the IPS does not have direct application.  That does not remove the obligation on the liquidators for the keeping of an adequate file to explain and document the work undertaken. 

  3. Two particular challenges to Mr E involved querying whether he had examined the whole file (he had) and the manner in which he used the WIP records.  As was conceded by Mr E, the liquidators charged amounts less than recorded in their WIP records, although more than what Mr E anticipated the liquidation could be completed for.

  4. At [9.1.3] Mr E noted:

    The time for the preparation of this report has not allowed me to make a line by line calculation of the Liquidators’ work in progress to provide a specific opinion as to the quantum of remuneration necessary to conduct the winding up.  However, based on my experience in conducting similar liquidations, I estimate that the cost to conduct the winding up would be between $50,000 (excl. GST) to $60,000 (excl. GST).[4]

    [4] Affidavit of Mr E filed 1 October 2021, Annexure A, paragraph 3.1.11.

  5. This opinion, which was not the subject of serious challenge under cross-examination, does not go so far as to establish that costs beyond $50,000 to $60,000 are improper as a positive matter.  Given its qualification, Mr E’s evidence does not establish a ceiling for what is proper.

  6. If that were the only reason by which it could be concluded that Ms Diboll has made an overpayment then her case would fall short in this respect.  However, for reasons that are set out further below, there are matters that lead to a conclusion of overpayment even though Mr E does not establish such a hard ceiling to proper expenses.

  7. Further, while the evidence of Mr E does not identify a hard ceiling to proper expenses, it raises doubt about charges beyond such, so as to require more careful scrutiny of those charges asserted to be proper by the liquidators.  In particular, in accepting the estimate of Mr E as reasonable, and accepting his adverse commentary as to the nature of the steps undertaken by the liquidators, it marks out the liquidators’ (discounted WIP) claim of more than $120,000 as excessive, unless otherwise demonstrably justified.

  8. The onus rests upon the liquidators to establish that the steps undertaken, and charges made are proper (or reasonable).  The issue that then arises is as to the justification otherwise put forward by the liquidators. 

  9. Counsel for Ms Diboll helpfully drew principle from Re Beddoe, Downes v Coltam,[5] Adsett v Berlouis,[6] and Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd,[7] concluding that the assessment of whether an expense was properly incurred relies upon the undertaking of reasonable steps, honestly, assessed against the duties imposed upon the person undertaking the work.

    [5] [1893] 1 Ch D 547, 562.

    [6] (1992) 37 FCR 201, 210–211.

    [7] (2002) 174 FLR 1, [284]–[285].

  10. He further identified from Gleeson J’s judgment in Kelly, in re Halifax Investment Services Pty Ltd (in liq) (No 9) (“Kelly”),[8] that the Court will need to bring an independent mind to the assessment of fair and reasonable, that the liquidators must lead evidence in sufficient detail to allow that question to be determined, and that will usually involve an itemised account setting out the details of the work done, by whom, the time taken, the expenses incurred and the remuneration claimed.

    [8] [2020] FCA 925, [32].

  11. The key matter is that the liquidator, who holds the information as to the steps undertaken, lead sufficient information as to allow the court to conclude that the costs are proper.  Where, as here, there is a pall cast over the extent of the expenses by evidence such as given by Mr E, the burden cast upon the liquidator becomes, in a practical sense, heavier.

  12. At their best, the details provided by the liquidators are those provided in the reports to the creditors’ meetings, as produced with the report of Mr E at Annexures G, H, I and J.

  13. Annexure G, produced 19 May 2015, indicated that full details of the costs and work performed would be tabled at the creditors’ meeting.  A schedule of hourly rates was produced[9] and a description of work was provided.[10]  The description of work was provided at a high level of abstraction, breaking the costs of the liquidator into headline categories of Assets, Creditors, Investigation, and Administration with further identification of the tasks performed under each heading and the sub tasks underlying each of those.  Identification of the amount of work involved for each was limited to a gross amount of hours for each headline category. 

    [9] Affidavit of Mr E filed 1 October 2021, Annexure G, page 150.

    [10] Affidavit of Mr E filed 1 October 2021, Annexure G, page 153.

  14. Further gross hours were provided in respect of each of the liquidators and staff.  Disbursements paid were identified.[11]

    [11] Affidavit of Mr E filed 1 October 2021, Annexure G, page 159.

  15. The level of detail did not permit the work to be subject to scrutiny and resulted in a claim for the period of 2 October 2014 to 8 May 2015 at $41,074.50 plus GST.  At the same time the estimate to completion was of a further $15,390.

  16. As noted these amounts were approved by the creditors’ meeting and, in particular by Ms Diboll.

  17. Annexure H to the report of Mr E produced the liquidators’ report of 10 September 2015.  In general, the report detailed the realisations of assets that had been identified in the previous report, and indicated an intention not to take further steps in relation to the plant and equipment associated with Y Pty Ltd.[12]

    [12] Affidavit of Mr E filed 1 October 2021, Annexure H, page 169.

  18. The liquidator reported that subject to the then pending Family Court proceedings:

    given the quantum of my outstanding remuneration and my estimate of the costs to complete the winding up, I do not anticipate a dividend to creditors of any class.[13]

    [13] Affidavit of Mr E filed 1 October 2021, Annexure H, page 184.

  19. Tables in relation to the work were provided in the same high-level manner as at the previous meeting, and approval was sought for the period of 20 May 2015 to 31 August 2015 at $19,832 plus GST, along with approval on an interim basis for a further $15,000 plus GST.

  20. The liquidators identified receipts totalling $86,959.52 including that recouped from plant and equipment, a refund of GST and monies from the indemnity (presumably a reference to the orders made by the Family Court).[14]  Disbursements and liquidators’ fees totalling $65,613.60 were shown as drawn.

    [14] Affidavit of Mr E filed 1 October 2021, Annexure J, page 198.

  21. It should at this stage be observed that this was in strong contrast to the closing submissions of the liquidators that asserted that the orders of the Family Court meant that Ms Diboll and Mr Campbell were responsible for all costs of the liquidation and that no indemnity should be taken from the estate.  The orders should not be read in that manner.  In any event, even if this were so, by the time of those orders indemnity had, insofar as it was available, been taken from the estate and the liquidators’ costs could not be reckoned without reference to such.

  22. Again, the approval of creditors included the approval of Ms Diboll.

  23. Annexure I to the report of Mr E contained the report to the creditors of 7 December 2016, being the first meeting to post-date the final orders of Faulks DCJ.[15]

    [15] Affidavit of Mr E filed 1 October 2021, Annexure I, page 206.

  24. The report followed the same form as the previous reports, save that it lacked the narrative of the general steps taken that had been provided in the previous reports.  It sought the approval of a further $16,527.30 for the period 1 September 2015 to 30 November 2016, and the interim approval to conclusion of a further $5,000.

  25. It did not receive the approval of Ms Diboll.

  26. Finally, Annexure J to the report of Mr E contained the report to creditors of 14 January 2019.[16]

    [16] Affidavit of Mr E filed 1 October 2021, Annexure J, page 237.

  27. On this occasion narrative was provided summarising “significant time and effort” attempting to obtain the sum from Ms Diboll that she had been ordered to pay by Faulks DCJ.  It should be noted that there was no order for a specific sum.  Despite the liquidator demonstrating that correspondence had been sent to Ms Diboll, Ms Diboll established that she did not receive notice of this meeting or the report in which she was the subject of criticism.

  28. A table of receipts and payments was included showing that the liquidator had then received the payment of the amount they pursued from Mr Campbell of $21,087.25.[17]

    [17] Affidavit of Mr E filed 1 October 2021, Annexure J, page 244.

  29. Information about the work undertaken was given in much the same form as previously, with the liquidators claiming $45,679.60 in remuneration for the period 1 December 2016 to 6 January 2019 and a sum of $5,000 to cover the conclusion of the liquidation.

  30. Where there was no issue with the remuneration being claimed by the liquidators, it may be the case that the high level of abstraction of their setting out of their costs to the creditors’ meetings was sufficient.  Where the matter became controversial, where the propriety of the costs claimed was specifically challenged, where it was the subject of criticism given by an expert on examination of the file, and in particular where the liquidators sought to enforce a right of indemnity based upon the costs being proper as described in the judgment of Faulks DCJ, the reports given at the meetings were not sufficient to show that the work undertaken was proper.   

  31. In the end, the justifying details, in terms of explanation of the remuneration, rose no higher than generalisations, permitting no independent judgment to confirm their propriety.

  32. That left the evidence in an insufficient and inadequate state to establish propriety in the remuneration expenses beyond those already paid by Ms Diboll.  The lack of an itemised account of the nature described by Gleeson J left too great a burden for the other, more generalised material to bear.[18]  The liquidator has failed to discharge the burden of establishing propriety beyond that which Ms Diboll has already accepted by her agreement in creditors’ meetings.

    [18] Kelly, in re Halifax Investment Services Pty Ltd (in liq) (No 9) [2020] FCA 925 [32].

  33. Although in reply the liquidators introduced the file into evidence they, appropriately, accepted that I was not tasked with trawling through the file to make determinations as to the individual expenses.

  34. Ms Diboll pursued a refund on the basis that the costs claimed by the liquidators exceeded that which was proper.  Ms Diboll took as the figure of propriety the estimate at the upper range of Mr E’s report, being $60,000.[19]  Whilst, as identified above Mr E’s assessment of expected range was unable to bear the weight required, it also corresponded to those sums claimed at the first two meetings that received the assent of Ms Diboll, prior to the point at which Ms Diboll started to dispute the liquidators’ claims.  That is, examining what the liquidators have justified as proper (approximately $60,000) is generally consistent with the claim made by Ms Diboll as to both the allowable extent of their remuneration.

    [19] Affidavit of Mr E filed 1 October 2021, Annexure A, page 13.

  35. Ms Diboll’s affidavit identified at [107] that the liquidators had received the following amounts:

    (a)       I [Ms Diboll] have paid a total of $17,465.50 (as set out in paragraph 29 and 54)

    (b)       Mr Campbell also paid $17,465.50 (paragraph 54)

    (c)       Mr Campbell also paid the sum of $21,087.25 (paragraph 99)

    (d)       The proceeds of the sale of assets $44,573.63

    (e)       The GST reimbursement from the ATO of $6,187.

    (f)       Bank Account of $6,363.93

    (g)       And some interest of $5.12

    Total of $113,147.93 *which is also set out in the 4th Report[20]

    (As per the original.)

    [20] Affidavit of Ms Diboll filed 1 October 2021, paragraph 107.

  36. In their fourth report the liquidators record that between the Estate and contributions from Ms Diboll and Mr Campbell they have been paid for the costs of the liquidation (inclusive of disbursements) to a total of $113,140.93.[21]

    [21] Affidavit of Mr E filed 1 October 2021, Annexure J, page 244.

  37. Page 244 of Mr E’s affidavit shows that the liquidators received and drew against the following funds drawn from the estate (excluding any indemnity amounts from Mr Campbell and Ms Diboll), totalling $57,129.68:

    (a)Cash at bank $6,363.93;

    (b)Refund of GST monies $6,187;

    (c)Interest income $5.12;

    (d)Other current assets $8,993.63; and

    (e)Plant and equipment $35,580.[22]

    [22] Affidavit of Mr E filed 1 October 2021, Annexure J, page 244.

  38. Of those remuneration costs that may be taken to be proper, as approved at the meetings at which Ms Diboll gave her assent to their costs, the remuneration amounts claimed at the May 2015 meeting for the period of 2 October 2014 to 8 May 2015 comprise $41,074.50 plus GST, and at the September 2015 meeting for the period of 20 May 2015 to 31 August 2015 of $19,832 plus GST amounts to $60,906.50, being a sum marginally greater than what was recouped from the estate without regard to the contributions of Ms Diboll and Mr Campbell.

  39. From the fourth report, the disbursement costs total $14,917.44 (being reckoned by deducting the claim for remuneration from the total amount claimed).  The disbursements did not feature in the submissions made by either party.

  40. Applying the orders of Faulks DCJ, the shortfall between the remuneration claim from the first two meetings of $60,906.50 and the disbursements of $14,917.44 from what the liquidators obtained from the estate of $57,129.68 is $18,694.26, being the amount to be equally borne by Ms Diboll and Mr Campbell.  Ms Diboll’s share is therefore $9,347.13, rather than the $17,465.50 that she has paid.

  41. Enforcement of Faulks DCJ’s orders of 13 March 2015 and 24 October 2016 is a task that rolls both ways.  As the liquidators claimed that Ms Diboll has not met her obligation so too is she entitled to claim relief from an impost beyond that required by the orders.

  42. Deducting from Ms Diboll’s payments, her half share of the residue owed to the liquidators as reckoned by deducting their receipts for remuneration and disbursements from the estate from their proven entitlement means that Ms Diboll should be refunded $8,118.37.

    COSTS

  43. Each of the parties seeks costs in relation to the substantive proceedings and various parts of the interlocutory proceedings.  The various aspects of the case in relation to which costs are sought are set out below.

  44. On 31 October 2019 Ms Diboll filed a Response to an Application in a Case seeking the appointment of a reviewing liquidator or a single expert.  That application was refused on 24 March 2020. 

  45. On 31 August 2021 Ms Diboll filed an Application in a Case seeking the summary dismissal of the liquidator’s substantive application and access to the liquidator’s file.  Ms Diboll was successful in obtaining access to the file.  The summary dismissal application was dismissed on the first day of the trial.

  46. As may be seen from this judgment, not only was the liquidator unsuccessful in the substantive proceedings, but Ms Diboll was successful in pursuing a refund of part of the monies provided by her to the liquidators.

  47. Although the liquidators initially sought costs on the basis of their right of indemnification, at the final hearing they limited their claim to one pursuant to s 117 of the Family Law Act 1975 (Cth) and sought that the costs issues be dealt with following delivery of this judgment.

  48. Orders will be made to allow the outstanding costs issues to be finalised.

I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill.

Associate:

Dated:       10 February 2022


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