Diploma Construction Pty Ltd v Windslow Corporation Pty Ltd
[2007] WASC 168
•3 AUGUST 2007
DIPLOMA CONSTRUCTION PTY LTD -v- WINDSLOW CORPORATION PTY LTD [2007] WASC 168
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 168 | |
| Case No: | COR:95/2005 | 18 JUNE & 27 JULY 2007 | |
| Coram: | NEWNES J | 3/08/07 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Remuneration allowed at reduced amount | ||
| B | |||
| PDF Version |
| Parties: | DIPLOMA CONSTRUCTION PTY LTD (ACN 008 939 179) WINDSLOW CORPORATION PTY LTD (ACN 096 537 549) GIOVANNI MAURIZIO CARRELLO OLYMPIC HOLDINGS PTY LTD (ACN 009 127 404), DECUN PTY LTD (ACN 009 187 008), ARCTIC COLD STORES PTY LTD (ACN 104 746 527) AND BARCIA PTY LTD (ACN 009 229 556) |
Catchwords: | Corporations Winding up Application for approval of liquidator's remuneration Relevant principles Whether objections made out Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 473 |
Case References: | Venetian Nominees Pty Ltd v Conlon (1998) 20 WAR 96 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
WINDSLOW CORPORATION PTY LTD (ACN 096 537 549)
Defendant
Catchwords:
Corporations - Winding up - Application for approval of liquidator's remuneration - Relevant principles - Whether objections made out - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 473
Result:
Remuneration allowed at reduced amount
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : No appearance
Defendant : No appearance
Liquidator : Mr G D Cobby
Objectors : Mr K A Dundo
Solicitors:
Plaintiff : No appearance
Defendant : No appearance
Liquidator : Christensen Vaughan
Objectors : Q Legal
Case(s) referred to in judgment(s):
Venetian Nominees Pty Ltd v Conlon (1998) 20 WAR 96
(Page 3)
1 NEWNES J: This is an application by the liquidator of the defendant, Mr Giovanni Carrello (the "applicant"), for approval of remuneration in the sum of $122,024.81, for the period 14 June 2005 to 18 December 2006.
The evidence of the liquidator
2 The applicant has been a chartered accountant since 1991. He was appointed a registered liquidator in 1994 and an official liquidator in 1996. The applicant was appointed provisional liquidator of the defendant by order of the Court on 3 May 2005, and as liquidator on 14 June 2005.
3 The present application is made under s 473 of the Corporations Act 2001 (Cth) for approval of the applicant's remuneration. Some creditors have objected to approval of remuneration in the amount claimed. I should say that the present dispute relates to the applicant's remuneration as liquidator, not as provisional liquidator.
4 The applicant has filed two substantive affidavits dealing with the work carried out by him or staff in his office in the relevant period. The objectors rely on an affidavit of Mr Peter Bacich ("Mr Bacich"), who is a director of the defendant and each of the objectors. The objectors are Olympic Holdings Pty Ltd ("Olympic"), Decun Pty Ltd, Arctic Cold Stores Pty Ltd and Barcia Pty Ltd, which are creditors of the defendant.
5 The applicant says that the defendant was established for the purposes of a property development known as "Arcadia Court" in Subiaco. The development involved the purchase of land and construction of 90 units on it. The applicant's preliminary investigations, following his appointment, identified the major assets of the defendant as a number of debts due to it, including a debt of approximately $2,000,000 from AMEC Corporation Pty Ltd ("AMEC") and a debt of $400,000 from Swanline Investments Pty Ltd ("Swanline").
6 AMEC was an entity associated with Mr Bacich. The debt due by AMEC involved transfers of property between AMEC, Swanline and the defendant. The transactions had settled after the defendant successfully had mareva orders in relation to the transactions set aside. The applicant says that the mareva orders were set aside on the basis of evidence of Mr Bacich as to the financial position of the defendant, which evidence turned out to be incorrect. The applicant says the transactions involved the transfer of properties at less than commercial value to related entities resulting in what appears to be a loss to the defendant in excess of
(Page 4)
- $650,000. The effect of the transactions was to replace the properties as assets of the defendant with two debts and cash.
7 The applicant says that the defendant had no funds with which to conduct further investigations and he applied for, and later received, litigation funding from the plaintiff, Diploma Construction Pty Ltd ("Diploma").
8 In the meantime, Olympic appointed a receiver over the property of the defendant. Olympic is a company associated with Mr Bacich. It had acquired a debt from a secured creditor of the defendant and claimed that the security it thus acquired also secured previously unsecured debts that Olympic claimed to be owing to it by the defendant.
9 The applicant challenged the extent to which Olympic's debts were secured. He says he also believed that Olympic had recovered approximately $700,000 from the defendant when in fact the secured debt was only approximately $304,000. The applicant therefore instructed solicitors to commence proceedings on behalf of the defendant to recover the excess funds. The applicant provided instructions and assistance to the solicitors in the conduct of the proceedings. The defendant was successful in the proceedings but the judgment is subject to appeal.
10 In the meantime, AMEC was placed into voluntary liquidation. The applicant says that, in the course of his subsequent negotiations with AMEC, he had discussions with Mr Bacich regarding the possible settlement of claims involving the defendant and third parties in order to minimise the costs and maximise the return to creditors of the defendant, but no settlement was reached.
11 The applicant says he has also had to deal during the liquidation with the settlement of claims against the defendant made by a number of parties seeking to enforce sale agreements involving four units sold for heavily discounted prices. Ultimately, settlements of those claims were negotiated.
12 The applicant says that in the course of the liquidation he has been required to review and investigate a number of transactions involving friends and family members of Mr Bacich and barter arrangements with the defendant's creditors. He also considered a number of potentially voidable or uncommercial transactions, but the information available to him did not provide sufficient detail of the transactions to enable a decision to be reached in relation to them.
(Page 5)
13 The applicant says that his review of the books and records in his possession as liquidator indicated that significant parts of the books and records were missing, including copies of various tax returns, original sale agreements of units sold, and documents identified as "deeds of discount" and "put options", without which the precise terms upon which the defendant had agreed to sell units and its tax position could not be resolved. The books and records of the defendant had also noted certain transactions but not the reasons for them.
14 The applicant says that due to the unsatisfactory state of the books and records of the defendant he decided that the directors of the defendant, including Mr Bacich, should be examined to establish the true nature of the transactions the defendant had undertaken. In mid-2006, he received a distribution from AMEC which provided the funds to enable that to occur. The applicant says he assisted the solicitors for the defendant in connection with the examinations, including in the preparation of documents necessary for the examinations, reviewing the defendant's books and records in his possession in detail to ensure that relevant issues were covered during the course of the examinations, preparing the files of documents necessary for the conduct of the examinations, and attending and assisting during the course of the examinations.
15 The applicant says that as a result of the examinations, and the books and records produced at it, he has been able to review his earlier conclusions as to the existence of assets and the dates upon which the directors ought to have known that the defendant could not fulfil its obligations. He still does not have possession of all the books and records of the defendant.
16 The applicant has had several meetings with the Australian Taxation Office and Diploma in order to keep them apprised of progress in the matter and he has also convened several creditors' meetings to keep creditors informed of progress and to seek to have resolutions passed in relation to his fees.
17 According to the applicant, there were approximately six creditors of the defendant at the beginning of the liquidation, with total debts of approximately $3.6 million. That amount of the debts subsequently increased to a sum of approximately $8 million. At the outset, two of the creditors were related to Mr Bacich - Olympic and Barcia Pty Ltd. The other creditors were third parties. I should mention that Mr Bacich takes
(Page 6)
- issue with the figure of $8 million and says that the total debts of the defendant were $5.5 million.
18 The applicant says that during the course of the liquidation Olympic has assigned small portions of its alleged debt to other entities controlled by or related to Mr Bacich. This has created a group of creditors controlled either directly or indirectly by Mr Bacich.
19 The applicant says that, on 18 January 2007, a resolution was put to the creditors to approve the remuneration claimed in this application. Three independent creditors having debts totalling $5,562,162.17 voted in favour of the resolution. Three creditors having debts totalling $15,000 voted against it. All of the creditors who voted against it were companies controlled by Mr Bacich. The applicant says he has not received any requests for clarification nor any ground of objection to any amount claimed by him by way of remuneration except from companies controlled by Mr Bacich.
20 The applicant says it is clear that no resolution regarding his fees can be passed by the creditors in general meeting unless Mr Bacich approves the resolution, as a resolution of that nature requires a majority of creditors both by number and value.
21 In addition to the description of the work involved in the liquidation as set out in the applicant's affidavits, the applicant has provided the timesheets maintained by him and his staff containing details of the time recorded and a note of the work carried out in respect of each time entry. The applicant has also provided details of the rates charged in respect of each person who worked on the matter and the experience and qualifications of each of them.
The objections
22 In opposition to the application, the objectors relied upon the affidavit of Mr Bacich. In that affidavit, Mr Bacich says that the objectors do not object to the basis of charging or the rates charged by the applicant. They say, however, that the applicant has unnecessarily pursued inquiries into transactions that were in the best interests of the defendant, and that the applicant has failed adequately to show why particular tasks were undertaken and why they were in the interests of creditors.
23 It was more generally submitted that the applicant had failed adequately to particularise the nature of the work undertaken, the benefit
(Page 7)
- to the creditors of the work, the time spent and the costs in respect of the various matters making up the claim.
24 At the hearing of the application, the objections came down largely to two matters. The first related to an amount of some $22,000 in connection with the preparation for, and attendance at, the examinations of the directors, and the second related to a disbursement of $15,180, being the amount paid by the applicant to a firm of chartered accountants, Morgans, in respect of certain accounting work.
25 In relation to the examination of the directors, it was contended that the applicant had devoted excessive time to the investigations relating to the examinations and had carried out work himself when it could appropriately have been delegated to a member of staff at a lower charge rate. It was also submitted that the applicant had failed to provide sufficient evidence to demonstrate the benefit to creditors of the time spent and the costs incurred in relation to the work carried out.
26 In relation to the disbursement of $15,180, it was submitted that the applicant had failed to establish the reasonableness of the fee paid to Morgans.
The relevant principles
27 It was common ground that the principles to be applied on an application of this sort were those set out by the Full Court in Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96. Although that case concerned the remuneration of a provisional liquidator, I do not consider that, at least for the purposes of this case, any different considerations apply. The relevant principles can be summarised as follows:
1. The procedure for the determination is a summary one, not unlike that applicable to the taxation of solicitors' costs.
2. Strict observance of the rules of evidence is not ordinarily required.
3. The onus is on the liquidator to establish that the remuneration claimed is fair and reasonable.
4. The function of the Court is to make an independent determination, based on the material proffered, of whether the remuneration claimed is fair and reasonable. The absence of any objector, or the lack of merit of any objections advanced, does not detract from the Court's duty in that regard.
(Page 8)
- 5. The Court must first determine whether the liquidator has provided adequate evidentiary material to determine whether the amounts claimed are fair and reasonable.
6. The mere listing of the persons who performed the work, the hours worked and the amounts claimed may be insufficient for the Court to reach a determination. Ordinarily, the liquidator should provide a statement of account, verified by affidavit, reflecting in appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for the work, and the remuneration claimed.
7. If the material provided by the liquidator is not adequate to enable the Court to determine whether the amounts claimed are fair and reasonable, no order should be made.
8. If the liquidator establishes a prima facie case that the remuneration should be allowed, the Court should then consider the validity of any objections.
9. The procedure for objections should follow that set out in O 45 as far as possible and notice of objections should be supported by affidavit. While the Court may allow cross-examination of the liquidator and the objecting party, care should be taken to avoid the application becoming in the nature of the trial of an action.
10. The Court is not empowered to determine, as part of the liquidator's remuneration, debts incurred by the liquidator by way of disbursements. Other procedures must be used to challenge such disbursements.
Is the remuneration claimed fair and reasonable?
28 I am satisfied that the applicant has provided sufficient material to enable me to determine that a prima facie case has been made out that the amount claimed is fair and reasonable. Having regard to the totality of the affidavit evidence provided by the applicant, I am also satisfied that, with one exception, the objections are not made out.
29 In relation to the work in connection with the examination of the directors, the applicant has provided a description of the work carried out in identifying the major areas of the defendant's business requiring investigation, identifying the documents to be put to the examinees (ultimately comprising more than 1300 pages), arranging for those documents to be copied and collated, meeting with the defendant's
(Page 9)
- solicitors regarding the areas for investigation and the documents to be put to the examinees, and attending on the examinations.
30 The applicant says that considerably more time was required to carry out those tasks than would otherwise have been the case because important sections of the defendant's records had either been destroyed or withheld from him. As a consequence, he was obliged to attempt to ascertain numerous matters regarding the financial position of the defendant by reference to secondary documents rather than primary source material.
31 I do not accept that the applicant should have delegated the work which he carried out in respect of the preparation for the examinations and the attendance at the examinations. Having regard to the difficulties encountered by the applicant in relation to the adequacy of the defendant's records, the substantial claims by creditors associated with Mr Bacich, the importance of the examinations in the winding up, and the nature of the examinations and the complexity of the matters with which they were concerned, it was, in my view, entirely appropriate that the tasks undertaken by the applicant were undertaken by him rather than delegated.
32 I also do not accept the general objections by the objectors that the applicant has failed to demonstrate the benefit to creditors of the time spent and the costs incurred in relation to the work carried out. In my view, those matters have been properly explained by the applicant.
33 There is, however, a sum of $1900 claimed in respect of what is described simply as "investigation". Although specific objection was taken to that claim, no explanation of it was offered by the applicant. In the circumstances, I do not consider that the claim for that amount has been made out.
34 I have also considered the claims in respect of which no objection was taken and I consider that the amounts sought in respect of those items are fair and reasonable.
35 The objection taken to the disbursement of $15,180, being the amount paid to Morgans, raises a different issue. In the end I did not understand it to be in contention that disbursements in the nature of debts incurred by a liquidator do not fall for consideration on an application of this nature and are a quite separate matter. The Court is not empowered to determine such disbursements as part of the applicant's remuneration:
(Page 10)
- Venetian Nominees Pty Ltd v Conlan (supra) at 100 - 101. The amount of that disbursement must therefore be deducted from the present claim.
36 The deduction of the sum of $1900 and the disbursement of $15,180 will require the overall figure to be adjusted, taking into account consequential adjustments to the amount of GST payable.
Conclusion
37 I am satisfied that, subject to those adjustments, the remuneration claimed by the applicant is fair and reasonable and the objections have not been made out.
38 I will hear the parties on the precise amount that should be allowed in accordance with my decision and on the costs of the application.
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