Chen & Chen

Case [2024] FedCFamC1F 48

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Chen & Chen [2024] FedCFamC1F 48

File number MLC 5805 of 2016
Judgment of WILSON J
Date of judgment 27 February 2024
Catchwords FAMILY LAW – MAJOR COMPLEX FINANCIAL PROCEEDINGS LIST – LIQUIDATORS AND RECEIVERS – COMPANY LAW – remuneration application by joint and several liquidators appointed to several respondents and joint and several receivers appointed to several trusts – large sums sought by way of remuneration – part of claim made for remuneration in respect of work not yet undertaken – whether claimable – whether remuneration maintainable according to the provisions of the Insolvency Practice Schedule (Corporations) of Schedule 2 to the Corporations Act, of rule 11.49 of the rules of court and of what the insolvency practitioners asserted was “the inherent jurisdiction of this Honourable Court” – remuneration ordered.
Legislation

Corporations Act 2001 ss 60, 473, 477, 556

Evidence Act 2008 s 138

Family Law Act 1975 ss 79, 117

Federal Circuit and Family Court of Australia Act 2021 s 272

Federal Court of Australia Act 1976

Federal Circuit and Family Court of Australia (Family Law) Rules 2021

Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021

Federal Court (Corporations) Rules 2000

Companies Act (UK) (25 & 26 Vict c 89) s 81
Cases cited

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27

Arkin & Blasberg [2019] FamCA 476

Batten v Wedgwood Coal and Iron Co (1884) 28 Ch D 317

Burns Philp Investments Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280

Carr v Western Australia (2007) 232 CLR 138

Carter Holt Harvey Wood Products Australia Pty Ltd vCommonwealth of Australia (2010) 268 CLR 524

Chen v Chen (No 3) (2020) 63 Fam LR 448

Computer Machinery Co Ltd v Drescher [1983] WLR 1379

Conlan (as liquidator of Rowena Nominees Pty Ltd (receivers and managers appointed) (in liq) v Adams [2008] WASCA 61

Deputy Commissioner of Taxation v Shi (2021) 273 CLR 235

Director of Public Prosecutions for Victoria v Le (2007) 232 CLR 562

Downes v Cottam [1893] 1 Ch 547

Fitzgerald v Fish and Anor (2005) 33 Fam LR 123

Hillam & Barret [2019] FamCA 193

Holder & Holder [2022] FamCA 347

In the Matter of Barokes Pty Ltd (in liq); Koutsoukos v Daiwa Can Company [2020] VSC 555

In the Matter of Great Southern Managers Australia Ltd (receivers and managers appointed) (in liq) v Thackray (2011) 85 ACSR 144

In the Matter of Houben Marine Pty Ltd (in liq) [2018] NSWSC 745

In the Matter of Idylic Solutions Pty Ltd [2016] NSWSC 1292

Jess & Jess (No 7) [2023] FedCFamC1F 291

Karjala & Gallard [2020] FamCA 110

Lin v Yew (2021) 62 Fam LR 244

Northern Territory v Collins (2008) 235 CLR 619

Paul’s Retail Pty Ltd v Morgan (2009) 76 ASCR 26

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Re ACN 004 323 184 Pty Ltd…

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Details
AGLC
Chen & Chen [2024] FedCFamC1F 48
Case
[2024] FedCFamC1F 48
Decision Date

CaseChat Overview and Summary

The case involves a remuneration application by joint and several liquidators and receivers in a complex family law matter. The applicants, Messrs OO and UU, sought approval for their remuneration in relation to several entities, including companies in liquidation and trusts under receivership. The amounts claimed were substantial, with part of the claim pertaining to work yet to be undertaken. The primary legal issues were whether the remuneration for future work was claimable and whether the amounts sought were reasonable and maintainable according to the Insolvency Practice Schedule (Corporations), rule 11.49 of the Federal Circuit and Family Court of Australia Rules 2021, and the court's inherent jurisdiction.

The court found that the primary consideration for approving the remuneration was the reasonableness of the sums claimed. While creditors' approval was relevant, it was not determinative. The court referenced the decision in Re MJM (WA) Enterprises Pty Ltd (in liq) to support the notion that the reasonableness of the claim was the key factor. Additionally, the court noted that when dealing with remuneration from trust assets, it exercised its inherent jurisdiction rather than a statutory one, as per the decision in In the Matter of Houben Marine Pty Ltd (in liq). After considering the evidence and submissions, the court approved the remuneration sought by the joint and several liquidators and receivers.

The court ordered that the liquidators and receivers were entitled to their respective remuneration for the specified periods, as detailed in the reasons for judgment. The court also dispensed with compliance with certain procedural requirements and directed that the costs of the application be recovered from the companies in liquidation and the trusts in receivership. Any interested party was granted liberty to apply to modify the orders, provided they gave at least 72 hours' notice.

Orders

Orders of the court

MLC 5805 of 2016

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN

MS CHEN

Applicant

AND

MR CHEN

First Respondent

MS QUEN

Second Respondent

ORDER MADE BY

WILSON J

DATE OF ORDER

27 FEBRUARY 2024

THE COURT ORDERS THAT –

1. Pursuant to section 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) (IPS), being Schedule 2 of the Corporations Act 2001 (Cth), the liquidators are entitled to remuneration for necessary work properly performed as liquidators of Quen Pty Ltd (in liquidation) of –

(a) $29,454.00 (plus GST) for the period of 1 January 2023 to 14 July 2023; and

(b) $75,000.00 (plus GST) for the period of 15 July 2023 to 31 March 2024.

2. Pursuant to section 60-10(1)(c) of the IPS, the liquidators are entitled to remuneration for necessary work properly performed as liquidators of E Pty Ltd (in liquidation) (ACN …) of –

(a) $33,670.50 (plus GST) for the period of 1 January 2023 to 14 July 2023; and

(b) $75,000.00 (plus GST) for the period of 15 July 2023 to 31 March 2024.

3. Pursuant to section 60-10(1)(c) of the IPS, the liquidators are entitled to remuneration for necessary work properly performed as liquidators of F Pty Ltd (in liquidation) of –

(a) $30,227.50 (plus GST) for the period of 1 January 2023 to 14 July 2023; and

(b) $75,000.00 (plus GST) for the period of 15 July 2023 to 31 March 2024.

4. Pursuant to rule 11.49 of the Federal Circuit and Family Court of Australia Rules 2021, the receivers are entitled to remuneration for work performed as receivers of the Quen Family Discretionary Trust of –

(a) $106,509.00 (plus GST) and $116.43 (plus GST) for internal disbursements for the period of 25 August 2022 to 14 July 2023; and

(b) $75,000.00 (plus GST) and $500.00 (plus GST) for internal disbursements for the period of 15 July 2023 to 31 March 2024.

5. Pursuant to rule 11.49 of the Federal Circuit and Family Court of Australia Rules 2021, the receivers are entitled to remuneration for work performed as receivers of the E Family Trust of –

(a) $132,668.50 (plus GST) and $424.68 (plus GST) for internal disbursements for the period of 25 August 2022 to 14 July 2023; and

(b) $75,000.00 (plus GST) and $500.00 (plus GST) for internal disbursements for the period of 15 July 2023 to 31 March 2024.

6. Pursuant to rule 11.49 of the Federal Circuit and Family Court of Australia Rules 2021, the receivers are entitled to remuneration for work performed as receivers of the F Family Trust of –

(a) $115,098.50 (plus GST) and $339.50 (plus GST) for internal disbursements for the period of 25 August 2022 to 14 July 2023; and

(b) $75,000.00 (plus GST) and $500.00 (plus GST) for internal disbursements for the period of 15 July 2023 to 31 March 2024.

7. Compliance with the requirements of rule 9.2(2) of the Federal Court (Corporations) Rules 2000 is dispensed with.

8. The applicants’ costs of and incidental to this application are costs in the liquidation of the companies in liquidation and in the receiverships of the trusts.

9. Any person who can demonstrate sufficient interest to modify these orders has liberty to apply on not less than 72 hours notice.

10. The costs of the joint liquidators and receivers of and incidental to this remuneration application are to be assessed by a registrar of this court and when assessed recovered from the companies in liquidation and the trusts in receivership as the case may.

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.

Background

Background to the litigation

As these reasons disclose, I am of the view that the remuneration sought by the joint and several liquidators of various respondents and by the joint and several receivers of various trustees of other respondents in this proceeding should be approved in accordance with the application in a proceeding, sealed 18 October 2023. I make the orders sought. RELEVANT BACKGROUND This proceeding has been on foot since 2016 and in 2019 it was transferred from the docket of Cronin J to my own. Attempts to bring it to resolution at mediation failed and attempts to bring it to trial in the timely manner expected of litigation in Division 1 of the court since 2021 have likewise been unsuccessful. In 2022, after an application was brought to examine the second respondent, a number of respondents were placed in liquidation, the joint and several liquidators being Mr OO and Mr UU. Messrs OO and UU were also jointly and severally appointed as receivers of the assets and undertaking of certain trusts of relevance in this litigation. By application in a proceeding filed 18 October 2023 but dated 27 September 2023, Messrs OO and UU identified the legislative basis for their application, the amounts sought, the relevant periods involved and the entities in respect of which their remuneration was sought. Expressed most basically, Mr OO and Mr UU sought orders for their remuneration in respect of six entities. Those were as follows –(a)Quen Pty Ltd (In liq),[1] pursuant to s 60-10 (1)(c) of the IPS, in respect of –[1] This company is the fourth respondent.(i)the sum of $29,454 for the period 1 January 2023 to 14 July 2023; and(ii)the sum of 75,000 for the period 15 July 2023 to 31 March 2024;[2][2] Part of the period claimed has not elapsed. (b)E Pty Ltd (in liq),[3] pursuant to s 60-10(1)(c) of the IPS, in respect of ­–[3] This company is the fifth respondent.(i)the sum of $33,670 for the period 1 January 2023 to 14 July 2023; and(ii)the sum of $75,000 for the period 15 July 2023 to 31 March 2024;[4] [4] Part of the period claimed has not yet elapsed.(c)F Pty Ltd (in liq),[5] pursuant to s 60-10 (1)(c) of the IPS, in respect of – [5] This company is the sixth respondent. (i)the sum of $30,227.50 for the period 1 January 2023 to 14 July 2023; and (ii)the sum of 75,000 for the period 15 July 2023 to 31 March 2024;[6][6] Part of the period claimed has not yet elapsed. (d)Quen Family Discretionary Trust, pursuant to rule 11.49 of the rules, in respect of – (i)the sum of $106,509 plus 116.43 for the period 25 August 2022 to 14 July 2023; and(ii)the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024;[7][7] Part of the period claimed has not yet elapsed.(e)E Family Trust, pursuant to rule 11.49 of the rules, in respect of – (i)the sum of $132,668.50 plus $424.68 for work for the period 25 August 2022 to 14 July 2023;(ii)the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024;[8] and(f)F Family Trust, pursuant to rule 11.49 of the rules, in respect of – (i)the sum of $115,098.50 plus $339.50 for the period 25 August 2022 to 14 July 2023; and (ii)the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024.[9][8] Part of the period claimed has not yet elapsed. [9] Part of the period claimed has not yet elapsed. EVIDENCE IN SUPPORT OF THIS REMUNERATION APPLICATION

Evidence

Evidence Before The Court

Expressed most basically, Mr OO and Mr UU sought orders for their remuneration in respect of six entities. Those were as follows –(a)Quen Pty Ltd (In liq),[1] pursuant to s 60-10 (1)(c) of the IPS, in respect of –[1] This company is the fourth respondent.(i)the sum of $29,454 for the period 1 January 2023 to 14 July 2023; and(ii)the sum of 75,000 for the period 15 July 2023 to 31 March 2024;[2][2] Part of the period claimed has not elapsed. (b)E Pty Ltd (in liq),[3] pursuant to s 60-10(1)(c) of the IPS, in respect of ­–[3] This company is the fifth respondent.(i)the sum of $33,670 for the period 1 January 2023 to 14 July 2023; and(ii)the sum of $75,000 for the period 15 July 2023 to 31 March 2024;[4] [4] Part of the period claimed has not yet elapsed.(c)F Pty Ltd (in liq),[5] pursuant to s 60-10 (1)(c) of the IPS, in respect of – [5] This company is the sixth respondent. (i)the sum of $30,227.50 for the period 1 January 2023 to 14 July 2023; and (ii)the sum of 75,000 for the period 15 July 2023 to 31 March 2024;[6][6] Part of the period claimed has not yet elapsed. (d)Quen Family Discretionary Trust, pursuant to rule 11.49 of the rules, in respect of – (i)the sum of $106,509 plus 116.43 for the period 25 August 2022 to 14 July 2023; and(ii)the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024;[7][7] Part of the period claimed has not yet elapsed.(e)E Family Trust, pursuant to rule 11.49 of the rules, in respect of – (i)the sum of $132,668.50 plus $424.68 for work for the period 25 August 2022 to 14 July 2023;(ii)the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024;[8] and(f)F Family Trust, pursuant to rule 11.49 of the rules, in respect of – (i)the sum of $115,098.50 plus $339.50 for the period 25 August 2022 to 14 July 2023; and (ii)the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024.[9][8] Part of the period claimed has not yet elapsed. [9] Part of the period claimed has not yet elapsed. EVIDENCE IN SUPPORT OF THIS REMUNERATION APPLICATION In support of the application for remuneration set out immediately above, Mr OO (by himself and for the jointly appointed liquidator Mr UU) made an affidavit on 25 September 2023. The following is a synthesis of the more salient matters that arose from Mr OO’s affidavit –(a)he described Quen Pty Ltd (in liq), E Pty Ltd (in liq) and F Pty Ltd (in liq) collectively as “the companies” to each of which Mr OO and Mr UU were appointed as joint and several liquidators; (b)Mr OO and Mr UU are joint and several receivers of Quen Pty Ltd (in liq) the trustee of the Quen Family Discretionary Trust, of E Pty Ltd (in liq) the trustee of the E Family Trust and of F Pty Ltd (in liq) the trustee of the F Family Trust which he collectively called “the trusts”;(c)pursuant to orders made on 25 August 2022 described by Mr OO as “the receivership orders” the receivers were appointed without security over the whole of the assets and undertaking of the relevant trust property and pursuant to paragraph five of the receivership orders[10] the receivers’ remuneration costs and disbursements, including legal costs, were to be treated as if they were costs in the liquidation of each of the trusts; and (d)expressed arithmetically, over a period commencing on 25 August 2023 and ending on 31 March 2024, Mr OO and Mr UU sought orders in respect of their remuneration as follows ­– [10] Those orders were made by consent. (i)concerning Quen Pty Ltd (in liq) $104, 454(ii)concerning E Pty Ltd (in liq) $108, 670.50(iii)concerning F Pty Ltd (in liq) $105, 227.50(iv)concerning the Quen Family Discretionary Trust $181, 509(v)concerning the E Family Trust $207, 668.50(vi)concerning F Pty Ltd Family Trust $190, 098.50Total $897, 628

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

While I have not decided this issue it will readily be apparent that in respect of the entities in liquidation, the proper person to undertake all tasks involved in getting in assets relevant to the insolvent administrations is the liquidator and his staff, not the husband.SUBMISSIONS IN SUPPORT OF THE REMUNERATION APPLICATION By written submissions filed 15 November 2023, the solicitors for the joint liquidators and receivers addressed certain factual and legal bases in support of orders for the remuneration sought. In précis form, those solicitors wrote as follows – (a)approval of the liquidators’ remuneration relates to three companies; (b)approval of the receivers’ remuneration relates to three trusts; (c)the liquidators’ remuneration application relates to two separate periods, the first being 1 January 2023 to 14 July 2023 and the second being 15 July 2024 to 31 March 2024; (d)the receivers’ remuneration application relates to two separate periods, the first being 25 August 2022 to 14 July 2023 and the second being 15 July 2023 to 31 March 2024; (e)pursuant to rule 11.49(2) of the rules, the consent receivership orders made by me on 25 August 2022 provided for payment of the receivers’ costs in such manner that those costs were to be treated in the same way as if they were costs in the liquidation of the companies in liquidation to be paid in accordance with the priority set out in s 556(1) of the Corporations Act;(f)creditors of Quen Pty Ltd (in liq) have previously approved the remuneration of the liquidators for the period 20 May 2022 to 31 December 2022 at $148,948.15 of which the sum of $133,924.63 has been paid; (g)creditors of E Pty Ltd (in liq) have previously approved remuneration of the liquidators for the period of 23 May 2022 to 1 December 2022 at $135,287.77 of which the sum of $115,733.49 has been paid; and (h)creditors of F Pty Ltd (in liq) have previously approved the remuneration of the liquidators for the period 20 May 2022 to 31 December 2022 at $142,895.70 of which the sum of $110,998.59 has been paid. The liquidators’ and receivers’ solicitors submitted that on this remuneration application, no approval has yet been given for the amounts claimed in respect of which part of the period claimed relates to activities actually conducted and part relates to activities yet to be conducted up to and including 31 March 2024. They argued that the activities demonstrate that the primary consideration for the court invited to approve the remuneration is the reasonableness of the sum claimed and in that regard, creditors’ approval is relevant but not determinative, citing the decision of the Supreme Court of New South Wales in Re MJM (WA) Enterprises Pty Ltd (in liq).[11][11] [2018] NSWSC 944 (at [10]). In their written submissions the solicitors for the liquidators and the receivers contended that the court’s power to approve liquidators’ and receivers’ remuneration from trust assets, the court is not exercising a statutory jurisdiction but rather the court is exercising its inherent jurisdiction when dealing with remuneration from trust assets in connection with the administration of the trust fund. They relied on the decision of the Supreme Court of New South Wales in In the Matter of Houben Marine Pty Ltd (in liq).[12][12] [2018] NSWSC 745 (at [19]).