Chen & Chen
[2024] FedCFamC1F 48
•27 February 2024
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 v Spark [2002] VSC 353
Re Addstone Pty Ltd; ex parte Macks (1998) 30 ASCR 177
Re Allston Homes (in liq) [2017] VSC 500
Re Anderson Group [2002] NSWSC 764
Re Angstrom Assets Pty Ltd (in liq) [2014] NSWSC 1770
Re Application of Sutherland (2004) 50 ACSR 297
Re Beddoe; Downes v Cottam [1893] 1 Ch 547
Re Berkeley Applegate (1989) 1 Ch 32
Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361
Re GB Nathan & Co (in liq) (1991) 24 NSWLR 674
Re Greater West Insurance Brokers Pty Ltd (2001) 39 ACSR 301
Re Kal Assay Southern Cross Pty Ltd (1992) 9 ASCR 245
Re Love; Hill v Spurgeon (1885) 29 Ch D 34
Re Mandeville Group Pty Ltd (in liq) v Wight [2020] VSC 293
Re Matthew Forkes Pty Ltd (in liq) [2018] VSC 331
Re MF Global Australia Ltd (in liq) (No 2) [2012] NSWSC 1426
Re MJM (WA) Enterprises Pty Ltd (in liq) [2018] NSWSC 944
Re North Food Catering Pty Ltd [2014] NSWSC 77
Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171
Re Wine National Pty Ltd: James Estate Wine Pty Ltd and Liquor National Pty Ltd [2016] NSWSC 4
Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (2001) 207 CLR 72
Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459
Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193
Toma & Doyle [2022] FedCFamC1F 215
Turner v Hancock (1822) 20 Ch D 303
Trio Capital (Admin App) v ACT Superannuation Management Pty Ltd (2010) 79 ACSR 425
Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96
Verdon v Verdon (2020) 62 Fam LR 573
Warin & Warin (No 2) [2021] FamCA 483
Yanner v Eaton (1999) 201 CLR 351
Yarmirr v Northern Territory (2001) 208 CLR 1
Division Division 1 First Instance Number of paragraphs 86 Date of last submission 1 December 2023 Date of hearing 16 November 2023 and 1 December 2023 Place Melbourne Counsel for the Applicant Did not participate Counsel for the First Respondent Litigant in person Counsel for the Second Respondent Did not participate Counsel for the Third Respondent Did not participate Solicitors for the Fourth, Fifth and Sixth Respondents – the Liquidators KHQ Lawyers Counsel for the Seventh Respondent Did not participate Counsel for the Eighth Respondent Did not participate Solicitors for the Receivers KHQ Lawyers Counsel for the Ninth and Tenth Respondents Ms A Yianoulatos on 6 February 2024, no appearance on 1 December 2023 and unrepresented by counsel on 16 November 2023 Solicitors for the Ninth and Tenth Respondents Level Playing Field ORDERS
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.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
WILSON J
INTRODUCTION
These reasons address a complicated remuneration application brought by the joint and several liquidators of various respondents and by the joint and several receivers of various trustees of other respondents. The amount of the remuneration sought is considerable. The first respondent resists the remuneration application. The legislative basis for the remuneration applications is said to be –
(a)rule 11.49 of Federal Circuit and Family Court of Australia (Family Law) Rules 2021;
(b)s 60-10 of the Insolvency Practice Schedule (Corporations) being Schedule 2 to the Corporations Act (‘IPS’); and
(c)the inherent jurisdiction of Division 1 of the Federal Circuit and Family Court of Australia.
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
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, 098.50
Total $897, 628
Mr OO deposed to his view that the remuneration sought was reasonable and proportionate having regard to the complexity of the tasks undertaken. He deposed to not having previously sought remuneration in respect of the companies or trusts involved in this litigation.
Mr OO deposed to having received certain approvals at various meetings of creditors since the appointment of the joint and several liquidators and since the receivership orders. He described the time costing method by which fees have been calculated for this remuneration claim, the applicable schedule of rates over various epochs of the administrations and the manner in which tasks were allocated to his firm’s staff members in such a way that the complexity matched staff seniority with tasks of lesser complexity being allocated to the more junior staff whereas tasks of greater complexity are allocated to more senior staff of his firm.
Mr OO described the major components of the activity undertaken when performing receivership activities in relation to the trusts and when performing winding up activities in relation to the companies. The following is not intended to be exhaustive yet it records in précis form the tasks that the receivers, the liquidators and their staff undertook in this litigation –
(a)in respect of the Quen Family Discretionary Trust, the work involved tasks associated with selling properties, removing caveats, dealing with mortgagees and creditors holding guarantees, addressing complicated tax issues and overseeing conveyancing aspects of the land transfers in respect of real property formerly owned by Quen Pty Ltd;
(b)in respect of the E Family Trust, the work undertaken by the receivers involved selling real estate, dealing with the relevant mortgagee, dealing with caveators and obtaining advice in respect of liability for capital gains tax, dealing with solicitors, securing the property following a break-in and effecting the sale of plant and equipment full particulars of which were recorded in a document entitled schedule of tasks over the period 25 August 2022 to 14 July 2023; and
(c)in respect of the F Family Trust, the work undertaken by the receivers included selling real estate, dealing with the relevant mortgagee, dealing with the second mortgagee, addressing issues associated with the assignment of mortgage in favour of the second mortgagee, assisting solicitors concerning caveators and secured creditors, corresponding with tenants and dealing with the cancellation of a bank guarantee the details of which were provided by the receiver including the hours spent, the relevant operator performing the activity, the applicable change of rate and a short recital of the work actually performed.
Mr OO addressed in his affidavit the work he anticipated being required to perform up to a cut‑off date in March 2024 even though his affidavit was made in late September 2023. Mr OO estimated that in the time between September 2023 and 31 March 2024, future work in the receivership of the entities to which the joint receivers were appointed was likely to include matters arising from taxation issues, dealing with solicitors concerning possible public examinations, attending directions hearings in this litigation and administrative tasks.
So far as the E Family Trust was concerned, Mr OO estimated work to 31 March 2024 included obtaining taxation advice, dealing with Ms Quen in relation to her claim, addressing the release of funds held in a controlled money account, attending ongoing directions hearings and attending to administrative matters.
As for the F Family Trust, Mr OO estimated that work to 31 March 2024 will involve issues associated with taxation matters, activities to realise real property in a suburb of Melbourne and to assign certain interests in that property as well as attending ongoing directions hearings in this litigation.
In respect of all work in connection with the various receiverships, Mr OO deposed to adopting a conservative approach in estimating the work to be done in futuro.
Mr OO addressed activities undertaken by the joint and several liquidators in relation to each liquidation. For Quen Pty Ltd (in liq) that activity principally concerned selling real properties, dealing with creditors, investigating voidable transactions and claims against entities including claims against Ms Quen and attending to the administration of the liquidation.
So far as work referable to E Pty Ltd (in liq) was concerned, Mr OO narrated the work done to date to include realising real property and dealing with secured creditors as well as caveators, investigating potential proceedings against various persons and attending to the administration of the liquidation.
As for F Pty Ltd (in liq), similar tasks were recorded as having been performed in reference to E Pty Ltd (in liq).
Mr OO deposed to future work in relation to all liquidations involving realising certain real property, dealing with creditors, conducting public examinations, litigating voidable preferences and conducting the administration of each liquidation.
Mr OO deposed to there having been no dividends paid to creditors.
THE NOVEMBER 2023 AFFIDAVIT
Mr OO, for himself and on behalf of Mr UU, made an affidavit affirmed 30 November 2023 in relation to this remuneration application. In that affidavit, Mr OO identified activities he, Mr UU and their staff had undertaken in relation to the companies in liquidation and in relation to the trusts under receivership. Of relevance as at 30 November 2023 was the following information –
(a)National Australia Bank Ltd had served on Ms Quen a default notice in respect of a sum guaranteed by her in relation to Quen Pty Ltd (in liq), the default said to be in a sum of more than $740,000;
(b)so far as E Pty Ltd (in liq) was concerned, Mr OO deposed to seeking instructions concerning publically examining Ms Quen;
(c)in respect of F Pty Ltd (in liq), Mr OO deposed to the intervention by a mortgagee to not enforce its mortgage because the first respondent’s daughter resided in the mortgaged property, negotiations with which mortgagee were continuing;
(d)various resolutions have been reached in respect of G Pty Ltd business entities;
(e)the liquidators have instructed one or more proceedings to be commenced against Ms Quen for the recovery of amounts in excess of $7,270,000;
(f)the liquidators do not presently have sufficient funds to undertake public examinations; and
(g)the liquidators are uncertain whether any surplus will be generated in the liquidations to flow to the matrimonial pool.
THE FIRST RESPONDENT’S 30 NOVEMBER 2023 AFFIDAVIT
The husband made an affidavit on 30 November 2023 in support of an application for an order –
(a)for the removal of Ms Quen as a director of the seventh respondent; and
(b)for leave to request assistance from AUSTRAC to trace and recover what he called “missing [business] funds transferred overseas in excess of $13 million”.
The 30 November 2023 affidavit was short, being 17 paragraphs in all, filed on 1 December 2023. When this proceeding was before me on 6 February 2024 as well as in December 2023, the husband asserted that he opposed the liquidators’ and receivers’ remuneration application in reliance upon matters in his 30 November 2023 affidavit.
Several things must be said of the contents of the husband’s 30 November 2023 affidavit. The first relates to his application for the removal of Ms Quen as a director of G Pty Ltd, being the seventh respondent in this litigation. Mr OO in his 30 November 2023 affidavit deposed in paragraph four that he and Mr UU had been appointed to the G Pty Ltd entities. Exhibit “[OO]8” to that affidavit included an email from Mr OO’s solicitors indicating that a variety of entities answering the description G Pty Ltd entities have been placed in liquidation, namely –
(a)G2 Pty Ltd (in liq);
(b)G3 Pty Ltd (in liq);
(c)G4 Pty Ltd (in liq); and
(d)G5 Pty Ltd (in liq).
That same letter (included in exhibit “[OO]8”) did not reveal whether G Pty Ltd had been placed in liquidation. In view of the fact that all or most other G Pty Ltd entities have been placed in liquidation, I am not presently willing to make any finding on this interlocutory application in relation to the status of the registration of G Pty Ltd. If the point remains important in the hereafter I will proceed only on the application of the husband once a current search from ASIC is exhibited to an affidavit verifying that G Pty Ltd is not in liquidation.
The importance of that evidence should not be understated. Once an order is made for the winding up of a company or the company is otherwise placed in liquidation, proceedings against that company stop and directors of the relevant company cease to retain their power to direct the company. The point was not debated before me so it is best I say no more about it now.
The second matter of importance about the husband’s 30 November 2023 affidavit related to his request for assistance from AUSTRAC. In essence the husband asserted that –
(a)based on information he said he obtained from documentation produced in response to one or more subpoenae, the business entities in liquidation have accumulated unpaid tax liabilities in excess of $5,000,000;
(b)the business entities in liquidation have undeclared net profits of more than $7,500,000;
(c)total unaccounted business funds of more than $13,000,000 have been removed from the various entities prior to those entities having being placed in liquidation;
(d)in 2017 Ms Quen transferred $200,000 of funds owned by one or more business entities to accounts in City YY and Country U in breach of anti-money laundering regulations;
(e)several Country U operated private money transfer providers assist clients to engage in currency transfers despite those transfers being in breach of anti-money laundering rules; and
(f)only AUSTRAC can trace money transferred internationally through money laundering activities.
Those were the husband’s assertions in any event.
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]).
The solicitors for the liquidators and receivers submitted that evidence by which a court may be persuaded to approve the remuneration sought ordinarily addresses the fairness and reasonableness of the work done for which remuneration is sought.[13] Their written submissions helpfully traced the history of liquidators’ remuneration, although mostly in a statutory context. In this court, very little judicial attention has been directed to the learning on court approving remuneration for liquidators and receivers (in an insolvency) and trustees generally. That may be for the simple reason that with the advent of complicated insolvencies emerging in complicated commercial cases in the Major Complex Financial Proceedings List in Division 1 of this court, those issues arise with increasing frequency. It seemed to me to be utile to record certain observations based on judicial authority of great veneration as well as learning that has arisen in courts that routinely address corporations law issues. To that I now turn.
[13] Conlan as liquidators of Rowena Nominees Pty Ltd (receivers and managers appointed) (in liq) v Adams [2008] WASCA 61.
Courts of Chancery falling within the Lord Chancellor’s equitable jurisdiction historically administered the law relating to companies.[14] Certain principles relating to the law of trusts were regarded as being apposite including the trustee’s right to an indemnity our of the trust estate against all costs, changes and expenses properly incurred by the trustees.[15] As an extrapolation of that concept, a provisional liquidator was regarded as being an agent in whose favour the provisional liquidator possesses a right to reimbursement from the company of all of his expenses.[16]
[14] RP Meaghre, WMC Gummow and JRF Legane, Equity Doctrines & Remedies (Butterworths, third edition, 1992), paragraph [116] and Companies Act (UK) (25 & 26 Vict c 89) s 81.
[15] Turner v Hancock (1822) 20 Ch D 303, 305, Re Love; Hill v Spurgeon (1885) 29 Ch D 348, 350 and Re Beddoe; Downes v Cottam [1893] 1 Ch 547, 558.
[16] Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96, 101.
In more recent times, it has been held by Young J in Burns Philp Investments Pty Ltd v Dickens (No 2),[17] that when dealing with liquidators’ remuneration, the principles to be applied are to some extent obscure.
[17] (1993) 31 NSWLR 280.
Liquidators, being officers of the court, are amenable to their remuneration being scrutinised as part of the supervisory function of the court, as was observed by Sir Robert Megarry in Computer Machinery Co Ltd v Drescher.[18]
[18] [1983] WLR 1379, 1385.
It will be discernible that in Venetian Nominees Pty Ptd v Conlan[19] the court was concerned with the remuneration associated with a provisional liquidation as opposed to a voluntary liquidation with which this case is concerned. In Conlan (as liquidator of Rowena Nominees Pty Ltd (receivers and managers appointed) (in liq) v Adams[20] the Court of Appeal of the Supreme Court of Western Australia (McLure and Bass JJA, Newnes AJA) held that the remuneration application with which s 473(2) of the Corporations Act was concerned in respect of a provisional liquidator was in all material respects to be equated with a remuneration application with respect to a liquidator under s 473(3) of the Corporations Act.
[19] (1998) 20 WAR 96.
[20] [2008] WASCA 61 (at [28]).
So far as the remuneration of receivers was concerned, in In the Matter of Great Southern Managers Australia Ltd (receivers and managers appointed) (in liq) v Thackray[21] Davies J[22] addressed legal issues applicable to a receiver’s remuneration application. There, Davies J was concerned with a receiver appointed pursuant to a security instrument as opposed to the position inuring in this case where the receivers were appointed by order of the court. In Great Southern, Davies J applied the observations of Dixon J in Re Universal Distributing Co Ltd (in liq),[23] where Dixon J held that a creditor secured over the assets of the company, who chooses to have his rights decided in the winding up, is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realisation of such assets. Dixon J relied on older chancery authority including Batten v Wedgwood Coal and Iron Co.[24] The underlying principle was explained by Davis J to be that a person who works and incurs expenses to care for and preserve or realise property so as to create a fund is entitled to a charge against the fund of the property in priority to any other claimant, the principle being known as “salvage” in case law.[25]
[21] (2011) 85 ACSR 144.
[22] Then of the Supreme Court by later a member of the Federal Court of Australia.
[23] (1933) 48 CLR 171.
[24] (1884) 28 Ch D 317.
[25] Re Berkeley Applegate (1989) 1 Ch 32.
In this litigation, the solicitors for the joint liquidators and joint receivers argue that they rely on the inherent jurisdiction of this court for their entitlement to their remuneration. In Great Southern, Davies J examined in careful detail the contention that a liquidator’s remuneration may be ordered in pursuance of the court’s inherent jurisdiction. The point was not argued before me. It may be important because this court, being a court of limited statutory jurisdiction, possesses inherent jurisdiction in very circumscribed circumstances. I have addressed the issue previously in such cases as Holder & Holder,[26] Karjala & Gallard;[27] Toma & Doyle;[28] Hillam & Barret;[29] Arkin & Blasberg;[30] and Warin & Warin (No 2).[31]
[26] [2020] FamCA 347.
[27] [2020] FamCA 110.
[28] [2022] FedCFamC1F 215.
[29] [2019] FamCA 193.
[30] [2019] FamCA 476.
[31] [2021] FamCA 483.
The Family Court of Australia (‘FamCA’), and now Division 1 of the Federal Circuit and Family Court of Australia (‘FCFCOA’) are creatures of statute in which the jurisdiction of each is conferred by statute. The FCFCOA is a court of limited jurisdiction, its jurisdiction being limited by the legislation pursuant to which the court was created and its powers and jurisdiction conferred, in a manner similar to the jurisdiction conferred upon the Federal Court of Australia (‘FCA’) by the Federal Court of Australia Act. As with other courts created by statute, Division 1 of the FCFCOA is possessed of limited inherent jurisdiction, mostly with a view to preventing abuse of its process.[32]
[32] See the cases in paragraph 38 above.
In Great Southern, Davies J reasoned that the principle espoused by Mr Edward Nugee QC sitting as a Deputy High Court judge in the Re Berkely Applegate[33] was correct where his Lordship held that the allowance of fair compensation to the liquidator was a proper application of the principle that he who seeks equity must do equity.
[33] [1989] 1 Ch 32, 50 – 51.
In the Supreme Court of New South Wales the rationale behind the rule of there being an equitable allowance out of the assets of the trust of which a company in administration was trustee was said to be reposed in the policy underpinning equity’s making allowance to insolvency practitioners. That was the holding of Palmer J in Trio Capital (Admin App) v ACT Superannuation Management Pty Ltd.[34] That observation did not address the issue of the inherent jurisdiction of the court to make provision for the remuneration of the solvency practitioners. Very little in the way of other observations emerged from Davies J in Great Southern on the issue of the inherent jurisdiction of this court to approve the remuneration of liquidators and receivers. Equally, the five member Court of Appeal[35] of the Supreme Court of New South Wales in Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr[36] did not pass upon the court’s inherent jurisdiction to make orders in respect of the remuneration of liquidators.
[34] (2010) 79 ACSR 425, 434 (at [32]).
[35] Bathurst CJ, Beazley P, Gleeson JA, Barret and Beach AJJA.
[36] (2017) 93 NSWLR 459.
In the Supreme Court of Victoria, various observations have been made in the authorities[37] about a liquidator’s entitlement to recover costs and expenses, although it has been held that s 556(1) of the Corporations Act is the usual statutory provision enabling such an order to be made. A detailed review of the relevant Australian authorities was provided by Gleeson JA of the Supreme Court of NSW in In the Matter of Houben Marine Pty Ltd (in liq)[38] although in In the Matter of Houben Marine Pty Ltd (in liq) Gleeson JA preferred s 473(3)(b)(ii) of the Corporations Act as the legislative source of power. There, Gleeson JA called in aid the observations of Black J in Re MF Global Australia Ltd (in liq) (No 2),[39] those of Brereton J in Re North Food Catering Pty Ltd,[40] in Re Application of Sutherland,[41] Re GB Nathan & Co (in liq),[42] Re Greater West Insurance Brokers Pty Ltd,[43] and Re French Caledonia Travel Service Pty Ltd (in liq).[44]
[37] Re Matthew Forkes Pty Ltd (in liq) [2018] VSC 331, Carter Holt Harvey Wood Products Australia Pty Ltd v Commonwealth of Australia (2010) 268 CLR 524 and ReMandeville Group Pty Ltd (in liq) v Wight [2020] VSC 293.
[38] [2018] NSWSC 745.
[39] [2012] NSWSC 1426.
[40] [2014] NSWSC 77.
[41] (2004) 50 ACSR 297.
[42] (1991) 24 NSWLR 674.
[43] (2001) 39 ACSR 301.
[44] (2003) 59 NSWLR 361.
Importantly for present purposes, Gleeson JA accepted as correct that whenever the court allows a liquidator to be remunerated out of assets in connection with the administration of a trust fund, the court is not exercising the statutory jurisdiction under the Corporations Act, but rather, the court is exercising its inherent equitable jurisdiction.
It is next relevant to address this court’s inherent equitable jurisdiction.
In several decisions over the last four years I have had occasion to express various observations about the inherent jurisdiction of the FamCA and of Division 1 of the FCFCOA.[45] Those observations do not bear upon the issue in this case in relation to this court’s so-called inherent jurisdiction in respect of the remuneration of liquidators or receivers. That said, there can be no doubt that having regard to s 9 of the Federal Circuit and Family Court of Australia Act, Division 1 of the FCFCOA is a court of equity as well as a court of law.
[45] For example, Karjala & Gallard [2020] FamCA 110, Lin v Yew (2021) 62 Fam LR 244 and Jess & Jess (No 7) [2023] FedCFamC1F 291.
Before me, the issue of this court’s inherent equitable jurisdiction was not debated. Instead, Mr Chen (an unrepresented lay litigant) relied on his contentions that large sums of money had been removed from one or more respondents by reason of money laundering activities allegedly committed by the second respondent. The liquidators of the three respondents in liquidation are best placed to examine all acts, facts, matters, omissions, circumstances and things connected to the alleged money laundering activities. At no stage did Mr Chen advance any argument about the jurisdiction of this court to entertain the liquidators’ application for remuneration. Nor did Mr Chen make any submissions concerning the so-called inherent equitable jurisdiction of Division 1 of this court as a jurisdictional basis for the making of an order concerning the liquidators’ remuneration. In those circumstances, I take the view that this case is not the appropriate vehicle for me to express any view on the issue. Put simply, the matter was not argued.
STATUTORY GROUNDS FOR MAKING ORDERS FOR THE LIQUIDATORS’ REMUNERATION
The liquidators put their claim to an entitlement to remuneration on several bases. They were –
(a)rule 11.49 Federal Circuit and Family Court Rules;[46]
(b)s 60-10 of the Insolvency Practice Schedule (Corporations);
(c)Schedule 2 of the CorporationsAct, s 60-10(1)(c); and
(d)the inherent jurisdiction of the court.
[46] This was their error, as is explained below.
Before addressing those sections, it is necessary to address the relevant legal principles to be applied.
Prior to September 2017, the authorities in relation to liquidators’ remuneration involved a consideration of s 473(10) of the Corporations Act. That provision was repealed with effect from 1 September 2017 when s 60-12 of the IPS came into operation. In Re Allston Homes (in liq)[47] the court considered the impact of that legislative amendment. Relevantly, in its current iteration, the court may consider the extent to which the work done was “necessary and properly performed” as compared to earlier authority which spoke of the work being “reasonably necessary”.
[47] [2017] VSC 500.
In this remuneration application the first respondent has asserted that the conduct of one or more of the directors of the insolvent entities detrimentally impacted upon the commercial operations of the companies in liquidation and such conduct should be examined with steps put in place to recover the funds allegedly laundered before the liquidators’ remuneration is approved. No authority was brought to my attention enabling such a course to be ordered. Whether or not any such authority exists, it would be directed towards the conduct of the directors of the company as opposed to the conduct of the liquidators after their appointment. There is authority to the effect that a finding of unsatisfactory conduct of liquidators, conduct involving breach of duty or serious failures or misconduct on their part, may affect their entitlement to remuneration.[48] There is also authority from Barrett J in Re Anderson Group to the effect that allegations of misfeasance or breach of duty on the part of the liquidators should not be determined on a remuneration application. A very helpful recent review of relevant authorities on point was provided by Hetyey AJ of the Supreme Court of Victoria in In the Matter of Barokes Pty Ltd (in liq); Koutsoukos v Daiwa Can Company.[49] Whatever may be the proper resolution of any perceived conflict of authorities on point, several things emerge –
(a)no allegation of any form of misconduct is alleged against the liquidators in this case;
(b)the point was not argued before me; and
(c)the procedures for the determination of liquidator’s remuneration is a summary one,[50] invoking this court’s jurisdiction to supervise its officers.
[48] Re Kal Assay Southern Cross Pty Ltd (1992) 9 ASCR 245, Re Addstone Pty Ltd; ex parte Macks (1998) 30 ASCR 177, Re Anderson Group [2002] NSWSC 764 and Paul’s Retail Pty Ltd v Morgan (2009) 76 ASCR 26.
[49] [2020] VSC 555.
[50] Re ACN 004 323 184 Pty Ltd v Spark [2002] VSC 353 (at [31]) (Dodds-Streeton J).
Consistent with authority, I take the view that my principle role on this remuneration application is to consider, in a summary manner, whether based on the material proffered, the remuneration claimed is fair and reasonable.
A debate emerged in this application about the liquidators’ application for remuneration in respect of activities yet to be performed. In Re Wine National Pty Ltd: James Estate Wine Pty Ltd and Liquor National Pty Ltd[51] the court approved prospective remuneration, that is to say, remuneration for work likely to be performed in finalising the winding up. On the facts of that case, the court made such an order because the identified tasks were appropriate, the sums claimed were modest and unlikely to fully indemnify the liquidators in respect of the prospective work and doing so would avoid the costs of a further application in respect of the relevant schemes. In that case the court followed the approach in Re Angstrom Assets Pty Ltd (in liq)[52] in which the court said that the approval in relation to the prospective work will not authorise payment of remuneration unless that remuneration is earned by work that is actually required to be done.[53]
[51] [2016] NSWSC 4 (at [56]).
[52] [2014] NSWSC 1770.
[53] Observations to the like effect were made by Black J in In the Matter of Idylic Solutions Pty Ltd [2016] NSWSC 1292.
CONSIDERATION
The liquidators and receivers have engaged in very considerable activities since their appointments to the entities in liquidation and receivership. Each is an officer of the court. Each has spent a very considerable amount of time endeavouring to untangle a collection of immensely complex transactions. The first respondent has asserted that acts in the nature of money laundering has been undertaken. To the extent that he may have been involved in any such activity, the first respondent expressly declined to seek a certificate under s 138 of the Evidence Act, even after I directed his attention to the observations of the High Court in Deputy Commissioner of Taxation v Shi.[54] It is readily apparent that considerable activity remains to be done, not the least of which is to investigate the money laundering allegations advanced by the first respondent. It is also apparent that creditors of all relevant entities have not approved all applications for remuneration. That is not determinative, however. The court exercises its own jurisdiction in approving the liquidators’ remuneration.
[54] (2021) 273 CLR 235.
Having considered the detail and content of the affidavits filed in support of the remuneration application, I am persuaded that the remuneration sought by the liquidators and by the receivers is fair and reasonable and relates to work properly performed. It relates to activities between specific dates, identifying the work actually done, by whom, at the relevant charge out rate and for which entity. The information provided by the liquidators enables me to make an independent determination of whether the remuneration claimed is fair and reasonable and that it relates to work properly performed. It seemed to me that in any assessment of the fairness and reasonableness of the remuneration claimed, a working knowledge of the tasks confronting the liquidators was necessary. This case is in the Major Complex Financial Proceedings List for the very reason that it is factually complex and the legal issues raised so far have been likewise complex. A reported decision has been generated so far[55] and the liquidators have indicated considerably more work remains to be done. Without remuneration approval, their important work in these insolvencies is likely to become problematic, such work possibly even stalling. It must not be overlooked that the liquidators are investigating the possibility of claims being brought against directors. It is probable that further investigation will enable the liquidators to more comprehensively address any alleged conduct in the nature of breaches of directors’ duties. Naturally, money-laundering will fall for consideration by the liquidators and receivers and they should have a reasonable opportunity to investigate the issue. They should also not be denied reasonable remuneration for so doing.
[55] Chih v Chih v Ors (No 3) (2020) 63 Fam LR 448.
The legislation and the authorities do not require me to engage in a taxation of the remuneration sought. The legislation and the authorities require me to form an assessment in a summary manner that the remuneration claimed is fair and reasonable. That assessment is made on a prima facie basis based on the proffered material which ordinarily is verified by affidavit.
The liquidators and receivers in this case are highly experienced, to my way of thinking. They are also officers of the court. I am entitled to receive their evidence in a manner that demonstrates a prima facie entitlement to the remuneration sought.
No substantive opposition to the remuneration application was adduced by the first respondent. He deposed to wanting AUSTRAC being engaged. That does not address the liquidators’ and receivers’ remuneration.
In those circumstances, the orders I make are as proposed by the liquidators and receivers in their application dated 27 September 2023.
So far as the precise terms of the remuneration application was concerned, it became necessary to address each paragraph separately.
In paragraph one the liquidators of Quen Pty Ltd (in liq) rely on s 60-10(1)(c) of the IPS as their basis for remuneration of $29454 between 1 January 2023 and 14 July 2023 as well as for $75,000 for the period 15 July 2023 to 31 March 2024. The affidavit material and the timesheets exhibited to that affidavit material demonstrates, at least prima facie, an entitlement to that remuneration. To the extent that some of the relevant period involved prospective remuneration, I am persuaded that according to relevant authority the remuneration as sought ought to be ordered.
The same observations follow in relation to the liquidators’ claim in paragraph 2 of their application in a proceeding filed 18 October 2023, although the relevant company in liquidation is E Pty Ltd (in liq).
In paragraph three of their remuneration application the liquidators of F Pty Ltd (in liq) rely on s 60-10(1)(c) of the IPS for their remuneration of $30,227.50 from 1 January 2023 to 14 July 2023 and for $75,000 in the period 15 July 2023 to 31 March 2024. Timesheets and the liquidators’ affidavit persuade me that the sums sought are fair and reasonable. I make an order for their remuneration in those amounts.
In paragraph four of their application, the receivers rely on what they call the “Federal Circuit and Family Court of Australia Rules 2021” to be remunerated as to $106,509 and $116.43 for the period 25 August 2022 to 14 July 2023 plus $75,000 and $500 for the period 15 July 2023 to 31 March 2024. The rules they mention were erroneous. The correct rules were the Federal Circuit and Family Court Rules of Australia (Family Law) Rules 2021. That was to be contrasted with the Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021. At all event, proceeding on the basis that the receivers were relying on the Federal Circuit and Family Court of Australia (Family Law) Rules, rule 11.49 contains subparagraphs of no present relevance. Rule 11.49(2)(a) of the rules requires that the court (in mandatory terms) when appointing a receiver, must make orders about the receivers’ remuneration.
The receivers in this litigation were appointed to the Quen Family Discretionary Trust, to the E Family Trust and to the F Family Trust pursuant to consent orders made by me on 25 August 2022. The consent orders record that the joint receivers were appointed pursuant to s 272 of the Federal Circuit and Family Court of Australia Act 2021 and pursuant to rule 11.48 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021. Pursuant to paragraph three of those consent orders, the receivers were granted the powers under s 477(2) of the Corporations Act as a liquidator has in respect of property of a company. The receivers also had the powers to apply the proceeds of sale in the realisation of assets in accordance with the priorities set out in s 556(1) of Corporations Act.
So far as remuneration of the receivers were concerned, paragraph five of the consent orders was as follows –
5. The receiver’s costs of the receiverships, along with the applicant’s remuneration, costs and disbursements (including legal costs) of this application, are treated in the same manner as if they were costs in the liquidation of each of the fourth to sixth respondents to the proceeding, respectively, to be paid in accordance with paragraph 3(c) above, as follows –
(a) in respect of the fourth respondent, from the assets of the [Quen Trust];
(b)in respect of the fifth respondent, from the assets of the [E Trust]; and
(c)in respect of the sixth respondent, from the assets of the [F Trust].
That enlivened application of paragraph 3(c) of the consent orders. That paragraph was in the following terms –
3. In managing and dealing with those assets and undertakings as receivers so appointed, the receivers are granted powers in respect of them –
(c)to apply the proceeds of their sale or realisation in accordance with the priorities set out in section 556(1) of the Corporations Act;
Accordingly, by agreement the parties accepted that the receivers’ remuneration was to be treated in two relevant ways. The first was as if the receivers’ remuneration, costs and disbursements were costs in the liquidation of the fourth, fifth and sixth respondents. The second was that the receivers’ remuneration was to be paid in accordance with the priorities set out in s 556(1) of the Corporations Act from the assets of the three trusts over the assets to which the receivers have been appointed.
In this remuneration application, pursuant to paragraph four the receivers identify specific periods in respect of which remuneration is sought. To my mind, the applicable criteria that would be relevant if this receivership were a liquidation have been enlivened. In other words, on a prima facie basis, it is demonstrably apparent from a reading of the receivers’ affidavit and supporting material that the relevant persons performing the relevant work are identified, past work has been identified, prospective work has been earmarked and the fairness and reasonableness of the remuneration sought is ascertainable. I take the view that it is appropriate to approve the receivers’ remuneration in the sums sought over the periods sought and I so order.
I address paragraph five below.
In paragraph six of the receivers’ remuneration application, the receivers have relied on rule 11.49 of the Federal Circuit and Family Court of Australia (Family Law) Rules for approval of their remuneration in relation to F Trust. The relevant sums were $115,098.50 and $339.50 for the period 25 August 2022 to 14 July 2023 and the sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024.
As with the other periods, trusts and liquidations, the receivers have prepared detailed affidavit material in relation to the person undertaking the work in respect of the F Trust, the relevant charge out rate, time sheets, and the work undertaken so far being work already done. As for future work, the need for and details of it are recorded in the receivers’ affidavit. To my mind, the legal basis for the receivers’ remuneration in respect of the F Trust has been demonstrated and so there is a prima facie entitlement to the remuneration sought. I make an order in terms of paragraph six of the receivers’ remuneration application.
Returning to paragraph five of the receivers’ remuneration application, the receivers’ application related to work undertaken or to be undertaken in respect of the E Trust. Paragraph 5(a) related to a claim for $132,668.50 plus $424.68 yet the relevant period was not identified. The sum of $75,000 plus $500 for the period 15 July 2023 to 31 March 2024 was identified, however. In the receivers’ affidavit filed 27 September 2023, the period of 25 August 2022 to 14 July 2023 is identified in relation to the claim for $132,668.50.
THE LIQUIDATORS’ AND RECEIVERS’ COSTS OF THE REMUNERATION APPLICATION
The solicitors for the liquidators and receivers sought an order that the costs of those solicitors be costs in the liquidation of the three companies in liquidation and that those costs be costs in the receiverships of those three trusts.
Several issues arose in relation to the costs application in paragraph eight of the remuneration application filed 27 September 2023. First, at the risk of stating the obvious, the application in paragraph eight related to the costs of the liquidators’ and receivers’ solicitors, as opposed to the remuneration of the liquidators and receivers themselves. The liquidators and receivers are parties to this proceeding and so the provisions of s 117 of the Family Law Act apply to them as much as those provisions apply to all other parties. In the absence of an order made under s 117(2), the provisions of s 117(1) of the Family Law Act apply requiring each party to bear his, her or its own costs of the proceedings.
The liquidators and receivers relied on written submissions in relation to costs. Those submissions were prepared by counsel. The mainstay of those submissions concerned an order being made for legal costs in respect of work yet to be performed. Counsel for the liquidators and receivers submitted that s 117(2A)(g) was the relevant provision enabling the order sought to be made. Recognising that only one of the subsections of s 117(2A) needs to be invoked in order to properly make an order under s 117(2),[56] s 117(2A)(g) of the Family Law Act empowers a judge in my shoes to make an order that deviates from an order under s 117(1) where the court considers such an order to be appropriate. In support of the proposition that the liquidators’ and receivers’ costs should be ordered under s 117(2), their counsel relied on the following –
[56] Fitzgerald v Fish and Anor (2005) 33 Fam LR 123.
(a)the costs application relates only to the liquidators’ and receivers’ costs;
(b)no costs order is sought from a party;
(c)any costs allowed to the liquidators or receivers will have the effect of reducing the amount of funds held by the liquidators and receivers thereby reducing the sum potentially available to other claimants;
(d)that may have the effect of causing the other parties to bear the economic burden of any such costs order;
(e)yet unless the court so ordered, so it was put, the claimants in this proceeding particularly those who are creditors of the companies in liquidation would be treated disproportionately to all other creditors interested in maximising the surplus and hence the amount available for distribution;
(f)all unsecured creditors should be treated by the court on the same footing;
(g)here, the first respondent makes no claim as a creditor in the various administrations in insolvency yet he wishes to preclude the liquidators and receivers from having their costs met out of the insolvent administrations;
(h)the first respondent (so it was argued) has no standing to be heard on the question of costs because costs, if ordered in accordance with the applications made by the liquidators and receivers, will be borne by creditors pari passu;
(i)insofar as prospective costs are concerned, they are likely to relate to costs associated with the preparation of half yearly reporting and the liquidators and receivers (so it was said) are strangers to this litigation in the sense that but for the matrimonial causes these questions would be determined by a court exercising federal jurisdiction without reference to s 117 at all;[57]
(j)the receivers and liquidators ought not be forced the bear their own costs under s 117(1) in circumstances where they are complying with a reporting regime ordered to benefit the other parties to this litigation;
(k)as a matter of public policy, so it was said, the court would create a disincentive for a liquidator to act in respect of a corporation in family law litigation;[58] and
(l)finally, some abstruse contention was advanced and which need not be considered having regard to its dubious but irrelevant application, about accrued jurisdiction.
[57] This submission ignored the fact that the receivers and liquidators have been appointed to entities embroiled in this litigation under the Family Law Act so it is erroneous to suggest that they are “strangers” to this litigation and that s 117 would not apply if they had been appointed by the Federal Court. They were not appointed by that court.
[58] The written submissions on behalf of the liquidators and the receivers at paragraph nine called this proceeding “family court proceedings”, an erroneous reference to the Federal Circuit and Family Court of Australia (Division 1), which court has been operative since September 2021, long enough for its proper name to be embedded in the submission.
No contrary submissions were put in opposition to the contentions of the liquidators’ and receivers’ counsel. Be that as it may, several things must be said of those contentions.
First, I accept that the liquidators and receivers have and continue to perform work that is in the nature of conventional insolvency work, namely, getting in assets, addressing creditors’ claims, pursuing choses in action and such like. The insolvencies in this case arise out of complicated company arrangements created, so it seems, by one or more of the respondents and in the context of litigation under the Family Law Act in respect of which the applicant is and has been largely unaware. The first respondent unashamedly described acts of money laundering. The liquidators and receivers have, of necessity, been required to immerse themselves in allegations of fraud and nefarious commercial activity.
They are officers of the court performing duties that benefit others. They should not be required to bear their own costs in undertaking that activity. Historically, in the exercise of the jurisdiction of the Court of Chancery, receivers were not required to act for the benefit of others without remuneration. So should they not be required to in the year 2024.
Second, the receivers and managers apply for orders for costs in this family law proceeding. Whether or not their counsel takes the view that if his clients were in another court s 117 would be irrelevant, the fact remains that this litigation has been and has continued under the Family Law Act, rendering s 117 applicable. It is true that certain provisions of the Corporations Act apply, for which Division 1 of this court possesses original jurisdiction. But it is erroneous to argue that matters of public policy are determinative, influential upon or even relevant in the costs application which I must determine. A statutory regime applies under s 117 of the Family Law Act. The liquidators and receivers are parties to this litigation. How it might be suggested that s 117 somehow does not apply was not explained. The contention is devoid of merit. As a matter of well established authority,[59] is it my task to construe s 117, s 117(2) and each subsection of s 117(2A). Public policy is beyond the scope of the considerations that I am required to entertain.
[59] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27, Yanner v Eaton (1999) 201 CLR 351 at [17], Yarmirr v Northern Territory (2001) 208 CLR 1, Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (2001) 207 CLR 72, Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193, Carr v Western Australia (2007) 232 CLR 138, Director of Public Prosecutions for Victoria v Le (2007) 232 CLR 562 and Northern Territory v Collins (2008) 235 CLR 619.
Next, it seems to me that there is merit in the contention that any costs order will or may have the effect of diminishing the assets available for distribution to the general body of unsecured creditors in the liquidations and in the receiverships. To the extent that the assets of the companies in liquidation and the trusts in receivership are reduced by the fees of the liquidators and receivers, it seems to me that the liquidations and receiverships are unlikely to have advanced to the point they have but for the pivotal roles performed by the liquidators and receivers.
Next, it is relevant to observe that in respect of costs yet to be incurred (that is to say “prospective costs”), the work self-evidently has not been done so the quantum of those costs has not yet been measured yet the solicitors for the liquidators and receivers want to be paid in priority to anyone else in the respective insolvencies. In the context of a so-called “dollar-for-dollar” costs order in a s 79 application under the Family Law Act, I observed in Verdon v Verdon[60] that an order the effect of which was to require a party to pay in advance a sum of money took effect as a costs order equivalent to a solicitor client costs order and it was on made in an amount that avoided costs being taxed. I held that such an approach was contrary to the statutory regime set out in s 117(1) of the Family Law Act.
[60] (2020) 62 Fam LR 573.
In this costs application, certain similarities exist to the logic underpinning the refusal to make a dollar-for-dollar costs order. I say that for several reasons. First, the liquidators and receivers seek their costs before any work is actually done. Next, it is only permissible to say in a very generalised sense that the work for which they presently wish to obtain payment in advance is necessary, appropriate or reasonable. Nevertheless, they want to be paid now in a sum that is no more than an estimate. Next, the sum sought has not and is not proposed to be taxed or assessed. Next, the approval of their costs now, ahead of the work being done to incur those costs, diminishes the sum of available assets for distribution among unsecured creditors.
All the matters in the immediately preceding paragraph would ordinarily tell against the order for costs, as sought, being made.
However, some of the more important matters that point in the opposite direction (that is to say, of approving the costs order sought by the solicitors for the liquidators and receivers) are that –
(a)very significant amounts of money laundering are alleged;
(b)the liquidators and receivers should be funded to pursue that; and
(c)the available assets that might diminish by ordering the costs sought will be relevant to creditors many of whom are parties to this litigation and persons allegedly involved in either breaches of duty or other nefarious conduct.
In those circumstances, I take the view that s 117(2A)(g) has in fact been engaged and that the solicitors for the liquidators and receivers should be funded for prospective work. If they are not so funded, it is highly likely that their valuable work performed in this litigation will come to a halt.
ORDERS
I make orders in accordance with paragraphs one to nine of the liquidators’ and receivers’ application in a proceeding filed 27 September 2023.
I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the reasons for judgment of the Honourable Justice Wilson. Associate:
Dated: 27 February 2024
SCHEDULE OF PARTIES
MLC 5805 of 2016 Respondents
Third Respondent
C PTY LTD
Fourth, Fifth and Sixth Respondents – the Liquidators
MR OO AND MR UU IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF QUEN PTY LTD (IN LIQUIDATION), E PTY LTD (IN LIQUIDATION) F PTY LTD (IN LIQUIDATION)
The Receivers
MR OO AND MR UU IN THEIR CAPACITY AS JOINT AND SEVERAL RECEIVERS OF THE ASSETS AND UNDERTAKING OF THE QUEN FAMILY DISCRETIONARY TRUST , E FAMILY TRUST AND F FAMILY TRUST
Seventh Respondent
G PTY LTD
Eighth Respondent
MR A CHEN
Ninth Respondent
MS K
Tenth Respondent
MS J
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