Higgins v JSS Logistics Pty Ltd (in liq)

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FEDERAL COURT OF AUSTRALIA

Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320

File number: WAD 265 of 2021
Judgment of: JACKSON J
Date of judgment: 4 November 2022
Catchwords: CORPORATIONS - application for approval of provisional liquidators' remuneration - procedural requirements satisfied - remuneration sought reasonable - amount of remuneration approved
Legislation:

Corporations Act 2001 (Cth) ss 472, 473, Schedule 2 (Insolvency Practice Schedule (Corporations)) ss 60-10, 60‑12, 60-16

Federal Court (Corporations) Rules 2000 (Cth) r 9.3
Cases cited:

Conlan v Adams [2008] WASCA 61

Hundy (liquidator), re Renewable Energy Traders Pty Ltd (in liq) [2019] FCA 1795

Morgan, re Brighton Hall Securities Pty Ltd [2018] FCA 2029

Re Barokes Pty Ltd (in liq) [2020] VSC 555

Re Sakr Nominees Pty Limited [2017] NSWSC 668

Re Sirrah Pty Ltd [2021] NSWSC 1636

Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459

Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96
Division: General Division
Registry: Western Australia
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Number of paragraphs: 28
Date of hearing: Determined on the papers
Solicitor for the Interested Party: Trinix Lawyers

ORDERS

WAD 265 of 2021
BETWEEN:

SARAH JONINE HIGGINS
(ALSO KNOWN AS SARAH JONINE STEWART)

Plaintiff
AND:

JSS LOGISTICS PTY LTD (IN LIQ) (ACN 134 369 761)

First Defendant

JAMES LAURENCE STEWART

Second Defendant

GREGORY BRUCE DUDLEY AND JEROME HALL MOHEN AS JOINT AND SEVERAL LIQUIDATORS OF JSS LOGISTICS PTY LTD (IN LIQ) (ACN 134 369 761)

Interested Party

ORDER MADE BY:

JACKSON J

DATE OF ORDER:

4 NOVEMBER 2022

THE COURT ORDERS THAT:

1.Pursuant to r 9.3(5) of the Federal Court (Corporations) Rules 2000 (Cth), this application is dealt with in the absence of the public and without any attendance by, or on behalf of, the provisional liquidators.

2.Pursuant to s 60-16(1)(a) of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act 2001 (Cth)), the remuneration of Gregory Bruce Dudley and Jerome Hall Mohen as provisional liquidators of JSS Logistics Pty Ltd (in liq) (ACN 134 369 761) for the period 2 February 2022 to 12 April 2022 is approved in the sum of $120,650.00 (excluding GST).

3.The provisional liquidators' costs of this application are costs in the liquidation of JSS Logistics Pty Ltd (in liq).

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

JACKSON J:

  1. Gregory Dudley and Jerome Mohen seek approval of their remuneration in relation to acting as provisional liquidators of JSS Logistics Pty Ltd (in liq).  They acted in that capacity from 2 February 2022 until 12 April 2022.  At the end of that period, the Court ordered JSS Logistics to be wound up, and since then Mr Dudley and Mr Mohen have acted as its liquidators.  For clarity in relation to this application, I will refer to them as the provisional liquidators.

  2. The provisional liquidators seek…

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Details
Case
[2022] FCA 1320
Decision Date

CaseChat Overview and Summary

In Higgins v JSS Logistics Pty Ltd (in liq), the applicant provisional liquidators sought approval of their remuneration for the period of their appointment. The parties involved in the dispute were the provisional liquidators, Gregory Bruce Dudley and Jerome Hall Mohen, and JSS Logistics Pty Ltd, a transport and logistics company in liquidation. The Court was required to determine whether the procedural requirements for approval of provisional liquidators' remuneration had been satisfied and whether the amount of remuneration sought was reasonable. The legal issues included whether the provisional liquidators had provided sufficient evidence to support their claim for remuneration and whether the amount claimed was proportionate to the value of the subject matter and the complexity of the liquidation process.

The Court found that the provisional liquidators had satisfied the procedural requirements for approval of their remuneration, including providing a detailed report of the time spent on the matter and the hourly rates charged. The Court also found that the amount of remuneration sought was reasonable, considering the value of the subject matter and the complexity of the liquidation process. The provisional liquidators had spent a significant amount of time identifying and locating the company's assets, dealing with the claims by Simm Group in relation to the sale of the business, and addressing the WorkSafe claim. The Court was satisfied that the work was done by suitably qualified professionals in a timely and efficient manner and that the proportion of time spent by people of different seniority and charge-out rates was appropriate.

In conclusion, the Court approved the provisional liquidators' remuneration in the amount sought, which was $120,650.00 (excluding GST). The Court found that the provisional liquidators had satisfied the procedural requirements for approval of their remuneration and that the amount claimed was reasonable. The Court also noted that the provisional liquidators' costs of the application would be costs in the liquidation of JSS Logistics Pty Ltd (in liq).

Orders

Orders of the court

1. Pursuant to r 9.3(5) of the Federal Court (Corporations) Rules 2000 (Cth), this application is dealt with in the absence of the public and without any attendance by, or on behalf of, the provisional liquidators.

2. Pursuant to s 60-16(1)(a) of the Insolvency Practice Schedule (Corporations) (being Schedule 2 to the Corporations Act 2001 (Cth)), the remuneration of Gregory Bruce Dudley and Jerome Hall Mohen as provisional liquidators of JSS Logistics Pty Ltd (in liq) (ACN 134 369 761) for the period 2 February 2022 to 12 April 2022 is approved in the sum of $120,650.00 (excluding GST).

3. The provisional liquidators' costs of this application are costs in the liquidation of JSS Logistics Pty Ltd (in liq).

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The provisional liquidators seek approval of remuneration in the sum of $120,650.00 (excluding GST). For the following reasons, remuneration in that sum will be approved.Background JSS Logistics operated a transport and logistics business in WA from two depots, located in Perth and in Karratha. Its two directors and two shareholders in equal shares were a married couple: Sarah Higgins and James Stewart. In about August 2020, following the breakdown of their marriage, Ms Higgins and Mr Stewart agreed to sell JSS Logistics' business and assets with a view to ceasing trading. In November 2021 this culminated in an agreement for the sale of the company's business to Simm Group Assets Pty Ltd. Completion of the sale occurred on 15 December 2021. On 30 November 2021, Ms Higgins commenced proceedings in this Court seeking orders for the winding up of JSS Logistics. An interlocutory application was also filed on 30 November 2021 seeking the appointment of provisional liquidators until the making of a winding up order. On 2 February 2022, Mr Dudley and Mr Mohen were appointed as joint and several provisional liquidators pursuant to s 472(2) of the Corporations Act 2001 (Cth). According to a report that the provisional liquidators lodged with the Court at the beginning of March 2022, as at the date of their appointment there were several outstanding matters regarding the sale to Simm Group that needed to be resolved. These included the transfer of registration of the company's numerous vehicles to Simm Group and the assignment of the lease for the Perth depot and transfer of service contracts from the company to Simm Group. Net sale proceeds held in a solicitors' trust account pursuant to an order the Court made in December 2021 also needed to be distributed, and there was a potential claim by Simm Group for damages relating to non-delivery of assets and resulting loss of turnover. As has been said, orders for the winding up of JSS Logistics and the appointment of Mr Dudley and Mr Mohen as liquidators were made on 12 April 2022.The evidence The provisional liquidators have filed two affidavits of Mr Dudley in support of the relief sought, one dated 5 July 2022 and the other dated 17 August 2022, as well as a further affidavit of their solicitor, Alister Norwood dated 31 October 2022, which gives a summary of receipts and payments. The first of those affidavits contains the bulk of the evidence in support of the interlocutory application. It attaches a report that the provisional liquidators have prepared in support of the application for approval of remuneration. They are partners in the accounting firm RSM Australia Partners and had the assistance of various staff members in the performance of their functions as provisional liquidators. Their claim to remuneration in relation to their work and that of their staff is calculated on a time costing basis. The report provides a breakdown of the hourly rates and hours spent on the matter by the provisional liquidators and each member of their staff that worked on it. The $120,650 for which approval is sought is made up entirely of those time charges (exclusive of GST).

Evidence

Evidence Before The Court

As has been said, orders for the winding up of JSS Logistics and the appointment of Mr Dudley and Mr Mohen as liquidators were made on 12 April 2022.The evidence The provisional liquidators have filed two affidavits of Mr Dudley in support of the relief sought, one dated 5 July 2022 and the other dated 17 August 2022, as well as a further affidavit of their solicitor, Alister Norwood dated 31 October 2022, which gives a summary of receipts and payments. The first of those affidavits contains the bulk of the evidence in support of the interlocutory application. It attaches a report that the provisional liquidators have prepared in support of the application for approval of remuneration. They are partners in the accounting firm RSM Australia Partners and had the assistance of various staff members in the performance of their functions as provisional liquidators. Their claim to remuneration in relation to their work and that of their staff is calculated on a time costing basis. The report provides a breakdown of the hourly rates and hours spent on the matter by the provisional liquidators and each member of their staff that worked on it. The $120,650 for which approval is sought is made up entirely of those time charges (exclusive of GST). The report gives a summary of the work undertaken, broken down into six 'major task areas', namely assets, creditors, employees, trading (called 'Trade on/Treasury'), investigation and administration/statutory. The lion's share of the work appears to have involved assets and investigation. The first of these categories of work included the identification and location of the assets of JSS Logistics, principally its fleet of vehicles. It also included the sale of real property and matters concerning the sale of the business. There was also debt collection. In the investigation area there was the process of collecting and reviewing the company's books and records and preparing a report to the Court on the status of the company, including its solvency, and reviewing the status of the sale of business. A total of 307.6 hours is proposed to be charged for these and the other activities summarised in the report. Most of the work was done by a senior manager (about 80 hours), an assistant manager (about 105 hours), and an analyst (about 55 hours), with Mr Dudley performing most of the work that was done at partner level (about 30 hours). The remuneration report includes an itemised breakdown of all time charged. It is relevant that the provisional liquidators' report to the Court estimated the value of the assets of the company at between about $2.9 million and $4.2 million, and liabilities at between about $2.0 million and $6.0 million. Much of the uncertainty about the value of liabilities is attributable to the claims by Simm Group in respect of the sale of the business and a prosecution against the company by WorkSafe. Mr Dudley's first affidavit expresses the opinions that the length of time spent by the provisional liquidators and their staff was reasonably necessary for the work carried out, that all work was carried out by suitably qualified professionals in a timely and efficient manner, and that the remuneration claimed is appropriate. He says that he believes that the skill, care and responsibility attached to the work involved justifies the fees claimed.Principles

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Finally, the affidavit must also provide evidence of the matters mentioned in s 60-12 of the Insolvency Practice Schedule to the extent they may be relevant to a provisional liquidator: r 9.3(8). On its face, Mr Dudley's first affidavit does so.The remuneration sought is reasonable Having regard to the following matters, I am satisfied that the remuneration which the provisional liquidators seek is reasonable. The provisional liquidation lasted for just over two months. The amount claimed, about $120,000, is proportionate to the value of the subject matter, which was up to $4.2 million measured by the assets of JSS Logistics or up to $6.0 million measured by the company's liabilities. Aspects of JSS Logistics' affairs were likely to have been time consuming, or at least not straightforward, on both the assets and the liabilities sides. A substantial part of the company's assets, prior to the sale to Simm Group, was comprised of a large number of vehicles which needed to be identified, located and secured. One basis on which it was appropriate to appoint provisional liquidators was that there was reason to believe that Mr Stewart may have taken possession of or hidden some of the vehicles, and this was likely to impact on the sale of the business. On the liability side of things, the provisional liquidators were required to deal with the claims by Simm Group in relation to the sale of the business and the WorkSafe claim. The proportion of time spent by people of different seniority and charge out rates was appropriate. The work was evidently done by a mix of senior, mid-ranking and junior personnel, and Mr Dudley as the partner in charge of the appointment did not spend an excessive amount of time on the matter. I have reviewed the time charging line items in the broad way mandated by the authorities and am satisfied that they are reasonable. There is no reason to doubt the opinions expressed by Mr Dudley in his first affidavit that the work was done in a timely and efficient manner, and no reason to doubt the quality of the work done. Orders will be made approving the remuneration in the amount sought.