In the matter of DSHE Holdings Limited

[2021] NSWSC 608

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of DSHE Holdings Limited [2021] NSWSC 608

Hearing dates:

1 February 2021

Date of orders:

28/05/2021

Decision date:

28 May 2021

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

See orders at [118].

Catchwords:

CORPORATIONS — deed of company arrangement — scope of power under s 90-15 of the Insolvency Practice Schedule — application for orders to facilitate the deregistration of the company without any intervening winding up — orders refused

CORPORATIONS — deed of company arrangement — orders terminating the deed of company arrangement — orders under s 447A of the Corporations Act 2001 (Cth) modifying the operation of the winding up regime created by s 446AA in relation to reporting to creditors

CORPORATIONS — deed of company arrangement — remuneration of deed administrator – where the remuneration claimed exceeds the total creditors’ claims

Legislation Cited:

Corporations Act 2001 (Cth), ss 91, 436A, 444D, 444G, 445C, 445D, 446AA, 447A, 497, 499, 509, 533, 544, 601AA, 601AC, Pt 9.7
Insolvency Practice Schedule in Schedule 2 to the Corporations Act 2001 (Cth), ss 1-1, 5-15, 60-5, 60-10, 90-15, 90-20

Insolvency Practice Rules (Corporations) 2016 (Cth), ss 70-30, 70-40

Supreme Court (Corporations) Rules 1999 (NSW), rr 9.2, 9.8

Cases Cited:

Baskerville v Tow.com.au Pty Ltd (in liq) [2018] FCA 1069

Cherry v Boultbee (1839) 41 ER 171

Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) (2018) 129 ACSR 115

Eagle; In the matter of Techfront Australia Pty Ltd (administrators appointed) [2020] FCA 542

Glenfyne International Holdings Ltd v Glenfyne Farms International AU Pty Ltd (in liq) [2019] NSWCA 304

In the matter of ACN 159 605 188 Pty Limited (in liquidation) (formerly Securimax Pty Limited) [2018] NSWSC 356

In the matter of Fearndale Holdings Pty Ltd (admin apptd) (recs & mgrsapptd) [2020] NSWSC 901

Re Courtenay House Capital Trading Group Pty Limited (in liquidation) (2020) 147 ACSR 1

Re GDK Projects Pty Ltd [2018] FCA 541

Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355

Re Octavia Administration Pty Ltd (in liq) [2020] NSWSC 927

Re Octaviar Ltd (in liq) [2019] QSC 235

Re One.Tel Ltd; Walker and Sherman (as liqs) (2002) 43 CSR 305

Re Quinlan (in their capacity as joint and several liquidators of Halifax Investment Services Pty Ltd (in liq) (No. 4) [2019] FCA 604

Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459

SAS Trustee Corporation v Miles (2018) 265 CLR 137

Shafston Avenue Construction Pty Ltd v McCann (2019) 138 ACSR 299

Strawbridge; In the matter of Virgin Australia Holdings Ltd (administrators appointed) (2020) 144 ACSR 310

Category:

Principal judgment

Parties:

Jason Preston in his capacity as liquidator of DSHE Holdings Ltd (receivers & managers appointed) (in liquidation) ACN 166 237 841 (First Plaintiff)

Katherine Sozou in her capacity as deed administrator of Black Range Metals (Resources) Pty Ltd (subject to deed of company arrangement) ACN 076 987 329 (Fourth Plaintiff/First Applicant)

Representation:

Counsel:
Ms D Hogan-Doran SC (Applicant)
Solicitors:
Norton Rose Fullerton Bright (Fourth Plaintiff/First Applicant)

File Number(s):

2019/155343

Publication restriction:

N/A

Introduction

1. The fourth plaintiff in this proceeding, Ms Katherine Sozou, is a registered liquidator and partner of the firm McGrath Nichol and is the deed administrator of Black Range Metals (Resources) Pty Ltd (subject to Deed of Company Arrangement) (ACN 076 987 329) (Resources).

2. Ms Sozou proposes to pay a final distribution in accordance with the Deed of Company Arrangement in the near future. Ms Sozou seeks orders that would facilitate her taking steps to immediately deregister Resources after payment of that final distribution as contemplated by the Deed of Company Arrangement or, alternatively, orders terminating the deed and dispensing with certain requirements for reporting to creditors in the winding up of Resources that will follow termination of the deed. Ms Sozou also applies for orders determining the remuneration of the previous deed administrators and her remuneration.

Summary of relevant evidence

3. Resources was incorporated on 20 January 1997. It is a wholly owned subsidiary of Black Range Minerals Pty Ltd (Holdings), which is in turn a wholly owned subsidiary of a company incorporated in Canada, Western Uranium Corporation (Western Uranium). Resources, Holdings and Western Uranium are part of a group of companies known as the Black Range Group. Other companies in the Black Range Group include Clean Teq Sunrise Pty Ltd (referred to in the evidence by the abbreviation Syerston) and Syerston Scandium Pty Ltd (referred to in the evidence by the abbreviation Investments).

4. The primary business of the Black Range Group was the exploration for and exploitation of minerals in a number of tenements located in and around Tottenham in New South Wales (the Tottenham Tenements). These activities were financed by CIBC Australia Limited (CIBC) under the terms of a syndicated facility agreement entered into on 15 June 1999 between Holdings (as principal), Syerston, Resources and Investments (as guarantors) and CIBC (as agent and financier) (the Facility Agreement) and a deed of security between the same parties also entered into on 15 June 1999.

5. Mr Joseph Hayes and Mr Anthony McGrath of McGrath Nichol were appointed voluntary administrators of Resources pursuant to s 436A of the Corporations Act 2001 (Cth) on 23 September 2003 and deed administrators under a deed of company arrangement entered into by Resources on 16 December 2003 (the Resources Deed).

6. Ms Sozou was appointed as deed administrator on 3 June 2019 and has been the sole deed administrator under the Resources Deed since that date.

7. At the time that Resources entered into the Resources Deed, Messrs Hayes and McGrath were already deed administrators under a composite deed of company arrangement entered into by Holdings and Syerston on 23 May 2003. That composite deed was varied pursuant to resolutions of creditors, on 19 December 2003 and 15 January 2004, of Holdings and Syerston respectively, that a separate deed of company arrangement be entered into by each of Holdings and Syerston. It is convenient to refer to those separate deeds as the Holdings Deed and the Syerston Deed.

8. Clause 2.1 of the Resources Deed provides:

“The objective of this arrangement is to minimise the Claims of Resources’ only creditor, CIBC, by assisting in maximising its return from Holdings and Syerston by transferring their assets and liabilities under their respective deeds of company arrangement to Resources.”

9. Clause 3.6 of the Resources Deed records that Resources has no assets.

10. Clause 4.1 of the Resources Deed provides:

“Transfer of Claims, Available Property and Fund in respect of Holdings

In the event that the Holdings Deed terminates in accordance with clause 9.1 of the Holdings Deed, Resources, by the Administrators, will irrevocably:

4.1.1   open a bank account styled ‘Black Range Metals (Resources) Pty Ltd – creditors of Black Range Minerals Limited Account’;

4.1.2   accept the transfer or assignment to it of the Holdings Available Property and the Holdings Fund;

4.1.3   deposit the Holdings Fund into the bank account referred to in clause 4.1.1;

4.1.4   realise any remaining Holdings Available Property, and deposit the proceeds of such realisations into the bank account referred to in clause 4.1.1;

4.1.5   distribute the Holdings Transferred Fund in the same manner as specified in clause 6.3 of the Holdings Deed;

4.1.6   do all such other things as may be necessary to ensure that the Holdings Available Property is realised, and the Holdings Transferred Fund is distributed in the manner contemplated by clause 6.3 of the Holdings Deed.

The Administrators shall have the power to carry out any further acts that may be necessary to effect or complete the matters set out in this clause, including, if the circumstances set out in clause 6.7 of the Holdings Deed eventuate, transferring the relevant monies to the directors of Holdings.”   

11. Clause 4.2 of the Resources Deed provides:

“Transfer of Claims, Available Property and Fund in respect of Syerston

In the event that the Syerston Deed terminates in the circumstances set out in clause 9.1 or 9.2 of the Syerston Deed, Resources will irrevocably:

4.2.1   open a bank account styled ‘Black Range Metals (Resources) Pty Limited – creditors of Black Range Metals (Syerston) Pty Limited Account’;

4.2.2   accept the transfer or assignment to it of the Syerston Available Property and the Syerston Fund;

4.2.3   deposit the Syerston Fund into the bank account referred to in clause 4.2.1;

4.2.4   realise any remaining Syerston Available Property and deposit the proceeds of such realisations into the bank account referred to in clause 4.2.1;

4.2.5   distribute the Syerston Transferred Fund in the same manner as specified in clause 6.3 of the Syerston Deed;

4.2.6   do all such other things as may be necessary to ensure that the Syerston Available Property is realised and the Syerston Transferred Fund is distributed in the manner contemplated by clause 6.3 of the Syerston Deed.

The Administrators shall have the power to carry out any further acts that may be necessary to effect or complete the matters set out in this clause, including, if the circumstances set out in clause 6.7 of the Syerston Deed eventuate, transferring the relevant monies to the directors of Holdings.”

12. Clause 1.1 of the Resources Deed defines Holdings Available Property and Syerston Available Property as the “Available Property” as defined in the Holdings Deed and Syerston Deed (respectively).

13. The Holdings Fund and Syerston Fund are defined in the Resources Deed as the bank accounts maintained under clause 6.2 of the composite deed of arrangement of Holdings and Syerston, as varied from time to time. As I have already noted above, that composite deed was varied in a manner that resulted in Holdings and Syerston each entering into a separate deed of company arrangement. Under clause 6.2 of the Holdings Deed, the administrators of Holdings were required to establish a bank account into which the proceeds of realisation of the “Available Property” would be paid. Under clause 6.2 of the Syerston Deed, the administrators of Syerston were required to establish a bank account into which the proceeds of realisation of the “Available Property” would be paid.

14. The Holdings Transferred Fund and the Syerston Transferred Fund are defined in clause 1.1 of the Resources Deed as the bank accounts maintained in accordance with clauses 4.1.1 and 4.1.2 (respectively) of the Resources Deed.

15. Clause 6.3 of each of the Holdings Deed and the Syerston Deed sets the out the order of priority in which the “Available Property” of each company is to be applied. The remuneration, fees, expenses and liabilities incurred by the Administrators as voluntary administrators and subsequently as deed administrators of Holdings, Syerston and Resources has first priority, followed by admitted priority claims within the meaning of s 556 of the Corporations Act (second priority), payment of a dividend in respect of other admitted claims on a pari passu basis excluding the debt owed to CIBC under the Facility Agreement (third priority), further reduction of the debt owed to CIBC (fourth priority) and the payment contemplated by clause 6.7, which provides for payment to the directors of Holdings if all creditors entitled to a distribution under clause 6.3 are paid in full and there remains money in the Holdings Fund (in the case of Holdings) and the Syerston Fund (in the case of Syerston).

16. In June 2004, Syerston and Holdings entered into an agreement with, inter alia, Ivanhoe Nickel & Platinum Ltd (INPL). It is not necessary to describe all of the provisions of that agreement. Relevantly, INPL acquired the shares owned by Holdings in Syerston and certain debts owed by Syerston to Holdings in consideration for 1.5 million shares in INPL. A sufficient number of those INPL shares were required to be issued to CIBC to satisfy the debt owed by Holdings to CIBC, and the balance of the shares were to be issued to Holdings or Resources (at the election of the deed administrators of the Holdings Deed).

17. INPL issued 105,560 shares to Resources on 19 July 2004 pursuant to the abovementioned agreement and a subscription agreement between Resources and INPL. The shares were subject to a resale restriction under clause 4(n) of the subscription agreement that precluded Resources from selling the shares until INPL became a listed entity in Canada.

18. On 20 and 22 September 2004, respectively, the Syerston Deed and Holdings Deed were terminated and those companies were returned to the control of their directors. The property of Syerston and Holdings was then transferred to Resources to be distributed in accordance with clauses 4.1 and 4.2 of the Resources Deed to which I have referred above.

19. The deed administrators under the Resources Deed made interim distributions in October 2005 and May 2010. Creditors received 75 cents in the dollar as a result of those interim distributions, following which the INPL shares were the primary remaining asset to be realised and distributed under the Resources Deed.

20. INPL became a listed entity trading on the Toronto Stock Exchange in October 2012. Under the terms of the prospectus for INPL’s initial public offering, the INPL shares held by Resources were converted to Class A common shares and were subject to restrictions preventing their sale. Those restrictions ceased to apply in January 2016 and the deed administrators of Resources then sold the INPL shares in May and July 2016, realising a total sum of $564,307.66 (after brokerage and other fees).

21. The deed administrators of Resources then investigated the tax implications of realising the INPL shares, the potential distribution of the proceeds of the INPL shares and whether Resources could utilise any pre-administration tax losses. Those investigations revealed some modest funds held on term deposit accounts in the name of Resources and Syerston. The deed administrators caused those term deposits to be paid into a new term deposit account together with the proceeds of sale of the INPL shares.

22. The deed administrators’ investigations also revealed the need to lodge some outstanding tax returns for Resources and Holdings. The outstanding returns lodged to date have not resulted in any claim by the Australian Taxation office and the returns yet to be lodged are not expected to result in any such claim.

23. Ms Sozou was appointed as deed administrator under the Resources Deed on 3 June 2019, towards the end of the process of preparation and lodgement of outstanding tax returns. References hereafter to the Deed Administrator are references to Ms Sozou in her capacity as deed administrator under the Resources Deed.

24. Unsecured creditors’ claims have been admitted in the total amount of $281,299.52 under the Resources Deed, of which a total amount of $68,824.88 remains unsatisfied after payment of the interim distributions in October 2005 and May 2010. As Resources has no creditors other than CIBC, and the debt owing to CIBC under the deed of security was discharged by the issue of INPL shares to CIBC, I assume that those interim distributions were paid to unsecured creditors of Holdings and Syerston from assets of those companies that had been transferred to Resources in accordance with clauses 4.1 and 4.2 of the Resources Deed.

25. Despite searches and inquiries undertaken in late 2019, the Deed Administrator has been unable to obtain sufficient information in respect of six of those creditors (representing approximately 1.7% of admitted claims) to pay a final distribution to them. These creditors are referred to in the evidence as the Missing Creditors. I will use that terminology, although I note that these creditors are not, strictly speaking, “missing”. The Deed Administrator has been able to contact all of them, with the exception of three creditors that have been deregistered: see [43] below. The Missing Creditors have not been responsive to requests for bank account details that would enable a final distribution to be paid to them.

26. The Deed Administrator holds funds of approximately $428,000 from which a final distribution to creditors and her remuneration is to be paid. The final distribution to creditors has not yet been made because the Deed Administrator is awaiting preparation and lodgement of the final outstanding tax returns.

27. Clause 10.1 of the Resources Deed provides:

“If the Administrators have completed their distribution of the Funds in the manner contemplated by this deed (and this deed has not been terminated prematurely), the Administrators must:

10.1.1   apply to ASIC on behalf of Resources for the deregistration of Resources, and use their best endeavours on behalf of Resources to bring about the deregistration of Resources;

10.1.2   certify to that effect in writing and must within 28 days lodge with the Australian Securities and Investments Commission a notice of termination of this deed in the following form:

‘We Joseph David Hayes and, Anthony Gregory McGrath of KPMW, Level 26, the KPMG Centre, 45 Clarence St, Sydney NSW 2000 as administrators of the deed of company arrangement pertaining to Black Range Metals (Resources) Pty Limited executed on [insert date], certify that this deed has been wholly effectuated’

and the execution of this notice terminates this deed.”

28. The Funds are defined as meaning the Holdings Fund, the Holdings Transferred Fund, the Syerston Fund and the Syerston Transferred Fund to which I have referred at [13]-[14] above.

29. The application was conducted on the basis that the distribution of the INPL share sale proceeds would complete the distribution of the “Funds” and that there would then be nothing further to be done by the Deed Administrator under the Resources Deed save for the steps required by clauses 10.1.1 and 10.1.2. The evidence did not explicitly address this, but I assume that this is because:

1. Resources had no assets at the time the Resources Deed was entered into, as recorded in clause 3.6;

2. the INPL shares issued to Resources represent the proceeds of assets of Holdings and have therefore been treated as part of the “Holdings Transferred Fund” and so form part of the “Funds”; and

3. all other property of Holdings and Syerston has been distributed by the interim distributions in October 2005 and May 2010.

30. In any event, I proceed on the same basis on which the Deed Administrator presented the application, namely that the distribution of the INPL share sale proceeds will complete the distribution of the “Funds” and that there will then be nothing further to be done by the Deed Administrator under the Resources Deed subject to clauses 10.1.1 and 10.1.2.

31. As the Deed Administrator submitted, it is plain from clause 10 of the Resources Deed that it was not contemplated that Resources would be returned to the control of its directors on completion of the distribution of the Funds. Rather, it was contemplated that the administration would be brought to an end by the deregistration of Resources without any intervening winding up. Clause 11.12 of the Resources Deed is directed to facilitating this in the event that the Deed Administrator is unable to locate all creditors entitled to a Distribution from the Funds. That clause provides:

“If, at the time this deed is ready to terminate in accordance with clause 10.1 but for the Administrators’ inability to locate Transferred Creditors with Admitted Claims or where a cheque in payment of a distribution to a Transferred Creditor remains unpresented, then the Administrators may pay such money to ASIC to be dealt with under Part 9.7 of the Act and such subsections of section 544 of the Act will apply as necessary as if references to the ‘liquidator’ were references to the Administrators. Payment to ASIC in this manner will be taken to be distribution to the Transferred Creditor in full discharge of any of the Administrators’ obligations arising under this deed.”

32. Clause 1.1 of the Resources Deed defines Transferred Creditors as creditors with “Claims” as defined in the Holdings Deed and the Syerston Deed, which were effectively transferred to be dealt with in accordance with clauses 4.1 and 4.2 of the Resources Deed on the termination of the Holdings Deed and the Syerston Deed.

33. The Deed Administrator’s affidavit sworn on 28 October 2020 refers to the payment provided for in clause 11.12 of the Resources Deed as the ASIC Payment.

Orders sought

34. By interlocutory process filed on 22 December 2020, the Deed Administrator seeks orders that broadly fall into three categories.

35. First, in prayer 1 of the interlocutory process, the Deed Administrator seeks an order pursuant to s 90-15 of the Insolvency Practice Schedule in Schedule 2 to the Corporations Act (the IPS) that the Deed Administrator would be justified in making the ASIC Payment in respect of the Missing Creditors.

36. Second, the Deed Administrator seeks:

1. in prayers 2 and 3 of the interlocutory process, orders to facilitate the deregistration of Resources, without any intervening winding up, by the Deed Administrator lodging an application for deregistration with ASIC; or

2. alternatively, in prayer 4 of the interlocutory process, an order pursuant to s 445D(1)(e) or (g) of the Corporations Act terminating the Resources Deed, with the consequences that:

1. by reason of s 446AA of the Act, Resources will be taken to have passed a special resolution under s 491 of the Corporations Act that it be wound up voluntarily without having made declaration of solvency under s 494 of the Corporations Act; and

2. by reason of s 499(2D) of the Corporations Act, Resources will be taken to have appointed the Deed Administrator as liquidator (unless the Court appoints a liquidator immediately after making the order terminating the Deed).

37. In the alternative scenario referred to immediately above, further orders are sought in prayers 5 and 6 of the interlocutory process that would have the effect of removing the need for the Deed Administrator to comply with the information and reporting provisions of s 497 [1] of the Corporations Act and ss 70-30 and 70-40 of the Insolvency Practice Rules (Corporations) 2016 (Cth) (the IPR). Orders 4, 5 and 6 of the interlocutory process were described as orders for a “truncated liquidation” of Resources.

    1. An application for an order that the Deed Administrator would be justified in dispensing with the requirements of s 533 of the Act, or alternatively an order that the requirements of s 533 be dispensed with, was withdrawn after the conclusion of the hearing.

38. Both prayers 2 and 3 and the alternative prayers 4 to 6 of the interlocutory process (which I will refer to as the deregistration orders and the truncated liquidation orders respectively) seek to overcome the problem that clause 10 of the Resources Deed cannot be complied with because s 601AA(1) of the Corporations Act permits an application to ASIC for the deregistration of a company to be made by the company, a director or member of the company or a liquidator of the company, but not by an administrator under a deed of company arrangement.

39. Section 509(2) of the Corporations Act does not overcome this problem without orders of the kind sought by the Deed Administrator in prayer 2 of the interlocutory process. Section 509(2) confers power on the Court to make an order on the application of “the liquidator” or “any interested party” that ASIC deregister the company on a specified day. However, s 509 is within Division 4 of Part 5.5 of the Act, which concerns voluntary winding up. Section 509(2) requires that any order made under that section be made before the end of the deregistration period, being the period of three months after the filing of an end of administration return with ASIC on the basis that the affairs of the Company are fully wound up. In my opinion, it is plain from the language of s 509 and from its context within Division 4 of Part 5.5 that s 509 applies to companies that have been voluntarily wound up and the Deed Administrators’ submissions correctly acknowledged that it is not open to an administrator of a company under a deed of company arrangement to apply to the Court under s 509(2) for an order that ASIC deregister the company.

40. Third, in prayers 7 to 9 of the interlocutory process, the Deed Administrator seeks orders under s 60-10 and/or s 90-15 of the IPS specifying the remuneration that she and the former administrators under the Resources Deed are entitled to receive:

1. for the period from 22 March 2014 [2] to 18 September 2020;

2. for the period from 19 September 2020 until the termination or finalisation of the Resources Deed; and

3. in her anticipated future role as liquidator of Resources for the period from the termination of the Resources Deed to the finalisation of the winding up of Resources.

   2. Prayer 7 of the interlocutory process specifies the period from 13 May 2010 to 18 September 2020, but all of the evidence concerning remuneration relates to the period from 22 March 2014 and 18 September 2020.

41. In prayer 10 of the interlocutory process, the Deed Administrator seeks an order that her remuneration and the costs and expenses of making this application be paid out of the assets of Resources.

42. I note that:

1. the effect of clauses 4.1 and 4.2 of the Resources Deed to which I have referred above is that the work to be done by the deed administrators under the Resources Deed included the distribution of the Holdings Transferred Fund and the Syerston Transferred Fund in accordance with clause 6.3 of the Holdings and Syerston Deeds (respectively); and

2. clause 6.3 of the Holdings and Syerston Deeds permits the payment of the remuneration of the deed administrators of Resources, Holdings and Syerston out of the Holdings Transferred Fund and the Syerston Transferred Fund.

43. The affidavit of Gabriel Bowes-Whitton affirmed on 18 December 2020 establishes that the sole shareholder and all creditors have been served with a Form 16 notice, a copy of the interlocutory process seeking the remuneration determination and a copy of the Deed Administrator’s supporting affidavit sworn on 28 October 2020 as required by r 9.2 of the Supreme Court (Corporations) Rules 1999 (NSW) (Corporations Rules), with the exception of three creditors who have been deregistered. Service was effected by express post and additional copies were sent by email to the shareholder and those creditors for whom the Deed Administrator has a current email address. There was no committee of inspection whose members were required to be served with these materials. In her affidavit sworn on 18 December 2020, the Deed Administrator deposed that neither she nor her solicitors had received any response from creditors or the shareholder.

44. The affidavit of Gabriel Bowes-Whitton affirmed on 28 January 2021 establishes that the interlocutory process, all supporting affidavits and the Deed Administrator’s written submissions were served on the Australian Securities and Investments Commission (ASIC) as required by r 2.8 of the Corporations Rules.

Summary of decision

45. Having now considered all of the evidence and submissions, I have decided that it would not be appropriate to make the deregistration orders even assuming that the Court has power to do so under s 90-15 of the IPS. The Court does have power to make an order terminating the Resources Deed under s 445D(1)(g) of the Corporations Act and it is appropriate in the circumstances of this case to exercise that power. The Court has power to make orders under s 447A of the Corporations Act modifying the operation of some reporting requirements that would otherwise apply under ss 70-30 and 70-40 of the IPR in the winding up of Resources that will be triggered by the order under s 445D(1)(g) and it is appropriate to make those orders in this case. It is not necessary to make an order dispensing with the requirements of s 497 of the Corporations Act in the winding up of Resources, as those requirements will be taken to have been complied by reason of s 446AA(3).

46. In relation to remuneration, I have decided that the remuneration in respect of the period from 14 March 2014 to 18 September 2020 is to be fixed in the amount sought by the Deed Administrator but the amount fixed in respect of the period from 19 September 2020 until the termination of the Resources Deed is to be reduced from the amount sought having regard to the extensive work that has already been done and the comparatively little work that remains to be done. No remuneration will be determined in respect of the future liquidation of Resources in circumstances where the Deed Administrator did not adduce evidence estimating the amount of that remuneration taking into account the very limited steps that will need to be performed in that liquidation, and the Deed Administrator has served creditors and the shareholder of Resources with her affidavit stating that she will not seek remuneration in respect of the liquidation if the Court makes orders for a truncated liquidation.

47. In explaining my reasons for those decisions, it is convenient to address the Deed Administrator’s application for deregistration orders or truncated liquidation orders, followed by the application concerning the proposed ASIC Payment in respect of the Missing Creditors and the application concerning the remuneration of the Deed Administrator and her predecessors.

Deregistration or truncated liquidation

Application for deregistration orders

48. In prayers 2 and 3 of the interlocutory process, the Deed Administrator seeks:

1. an order pursuant to s 90-15 of the IPS that s 509(2) of the Corporations Act “is to operate such that on application by [the Deed Administrator] the Court may make an order that ASIC deregister [Resources] on a specified day”; or

2. alternatively, an order pursuant to s 90-15 of the IPS that s 601AA(1) of the Corporations Act is to operate such that an application to deregister Resources may be lodged with ASIC by the Deed Administrator.

49. As I have already referred to above, s 509 is within Division 4 of Part 5.5 of the Corporations Act, which applies in cases of voluntary winding up.

50. Section 509(2) provides:

“On application by the liquidator or any other interested party, the Court may make an order that ASIC deregister the company on a specified day. The Court must make the order before the end of the deregistration period.”

51. The “deregistration period” referred to in s 509(2) is defined in s 509(1) as the period of 3 months beginning on the date on which an end of administration return is lodged with ASIC on the basis that the affairs of the company are fully wound up.

52. The practical effect of the order sought in paragraph 2 of the interlocutory process is that the Deed Administrator, without having been appointed as liquidator and without having lodged an end of administration report with ASIC, would be entitled to apply to the Court for an order requiring ASIC to deregister Resources on a specified date, and the Court would have power to make such an order. The mechanism by which this outcome is sought to be achieved is by an order under s 90-15 of the IPS varying the manner in which s 509(2) of the Corporations Act operates.

53. The practical effect of the alternative order sought in paragraph 3 of the interlocutory process would be to give the Deed Administrator a right to lodge an application to deregister Resources with ASIC under s 601AA(1) of the Corporations Act in circumstances other than those prescribed in s 601AA(2). Again, the mechanism by which this outcome is sought to be achieved is by an order under s 90-15 of the IPS varying the manner in which s 601AA(1) of the Corporations Act operates.

54. The Deed Administrator described the objective of these orders as being to facilitate the finalisation of the administration and deregistration of Resources in an efficient and cost effective manner by avoiding the need for any steps to be taken to wind up Resources (and the costs of such steps), so as to enable the Deed Administrator to make a final distribution to creditors that will result in creditors achieving a return of 100 cents in the dollar.

55. Section 90-15 of the IPS relevantly provides:

“(1)   The Court may make such orders as it thinks fit in relation to the external administration of a company.

(2)   The Court may exercise the power under subsection (1):

(a)   on its own initiative, during proceedings before the Court; or

(b) on application under section 90-20.

(3)   Without limiting subsection (1), those orders may include any one or more of the following:

(a)   an order determining any question arising in the external    administration of the company;

…”

56. A company is under external administration within the meaning of s 90-15 of the IPS if it has entered into a deed of company arrangement: see IPS, s 5-15. I accept the Deed Administrator’s submission that, as an officer of Resources, she is entitled to make an application under s 90-15: see IPS, s 90-20(1)(d).

57. It was submitted on behalf of the Deed Administrator that the power conferred on the Court by s 90-15 of the IPS is “at least as broad” as the power in s 447A of the Corporations Act and that “the better view is that the power conferred by s 90-15 is wider and of greater application”. In support of that submission, the Deed Administrator relied on Re Hawden Property Group Pty Ltd (in liq) (2018) 125 ACSR 355; [2018] NSWSC 481 at [8], Re GDK Projects Pty Ltd [2018] FCA 541 at [33] and Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) (2018) 129 ACSR 115; [2018] FCA 983 at [36].

58. In Re Hawden Property Group Pty Ltd (in liq) (supra), Gleeson JA noted that the ambit of s 90-15 had not yet been fully considered by the authorities. His Honour considered that it encompassed the power to give directions to an external administrator (previously contained in ss 479(3) and 511 of the Corporations Act), but (at [8], citations omitted):

“… the power under s 90-15 to ‘make such orders as it thinks fit in relation to the external administration of a company’ (s 90-15(1)) including ‘an order determining any question arising in the external administration of a company’ (s 90-15(3)(a)), is wider and accommodates the determination of substantive rights. Of course, the Court would not do so without affording potentially affected parties an opportunity to be heard …”

59. Similar observations have been made in subsequent cases concerning the scope of s 90-15: see, for example, Re Octaviar Ltd (in liq) [2019] QSC 235 at [8]-[9]; Re Courtenay House Capital Trading Group Pty Limited (in liquidation) (2020) 147 ACSR 1; [2020] NSWSC 780 at [12]-[14].

60. In authorities relied on by the Deed Administrator, descriptions of the power under s 90-15 as “unconstrained” are tempered with references to the principles governing the exercise of the power under the former s 479(3) and s 511 of the Corporations Act providing guidance in the exercise of the power under s 90-15: Re GDK Projects Pty Ltd (supra) at [33]; Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (in liq) (supra)at [36].

61. None of the cases referred to above involved an application for an order under s 90-15 of the IPS modifying the operation of a provision of the Corporations Act in relation to a particular external administration.

62. In Re Hawden Property Group Pty Ltd (in liq) (supra) the liquidator sought orders under s 90-15 that raised two issues relating to distributions to be made by the liquidator. One issue concerned whether an insolvency set-off under s 553C of the Corporations Act applied to proofs of debt lodged by two creditors of the company. The second issue concerned the basis on which the surplus assets of the company were to be distributed to its two members and, in particular, whether the “rule” in Cherry v Boultbee [3] should be applied as between the company and one of its members who was bankrupt. The remarks of Gleeson JA to which I have referred at [58] above were made in the context of the potential impact of the advice sought on the rights of creditors and contributories in respect of those distributions.

    3. (1839) 41 ER 171.

63. Re Octaviar Ltd (in liq) (supra) involved an application under s 90-15 of the IPS for advice concerning certain proofs of debt.

64. Re Courtenay House Capital Trading Group Pty Limited (in liq) (supra) involved an application under s 90-15 of the IPS and s 63 of the Trustee Act 1925 (NSW) for advice concerning the distribution of the funds that remained from a Ponzi scheme amongst the investors who participated in the scheme.

65. In Re GDK Projects Pty Ltd (supra) and Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (supra), the Federal Court of Australia made orders under s 90-15 for the appointment of a special purpose liquidator.

66. More recently, the Court of Appeal has held that the Court’s power under s 90-15 to make such orders as it thinks fit in relation to the external administration of a company extends to making orders for the removal of a liquidator and the appointment of a replacement liquidator irrespective of whether the liquidator or administrator to be removed has failed in the execution of their duties: Glenfyne International Holdings Ltd v Glenfyne Farms International AU Pty Ltd (in liq) [2019] NSWCA 304 at [59]-[61]. The President of the Court Appeal (with the concurrence of Bathurst CJ and Macfarlan JA) said that the construction of s 90-15 as unconstrained by any requirement to demonstrate failure on the part of the liquidator or administrator was (at [61]):

“… consistent with what was said in Owners of the Ship ‘Shin Kobe Maru’ v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54, namely that ‘[i]t is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words’. See also FAI General Insurance Co Ltd v Southern Cross Exploration N.L. (1988) 165 CLR 268 at 283-284, 290; [1988] HCA 13; Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 185, 202-203, 205; [1992] HCA 28.”

67. The Deed Administrator’s submissions did not include any analysis of whether s 90-15 of the IPS, construed in accordance with the principles applicable to statutory interpretation, confers power on the Court to alter the operation of provisions of the Corporations Act in a particular external administration. In particular, no submissions were addressed to whether the construction of s 90-15 for which the Deed Administrator contends would be consistent with the legislative intention as disclosed by the express words of s 90-15, the context of that section within the IPS and in the Corporations Act, and the contrast between the express terms of the section and the terms of s 447A of the Corporations Act which confers power on the Court to make such order as it thinks appropriate about how Part 5.3A of the Corporations Act is to operate in relation to a particular company. The submissions made on behalf of the Deed Administrator simply asserted that s 90-15 conferred power on the Court to vary provisions of the Corporations Act in relation to the external administration of a company because the power has been described as “unconstrained” in Re GDK Projects Pty Ltd (supra) and Deputy Commissioner of Taxation v Italian Prestige Jewellery Pty Ltd (supra). The submissions seized on that particular word in specific paragraphs of those authorities, without acknowledging the whole of what was said about s 90-15 in those cases, in which the orders sought under s 90-15 were very different to the orders sought by the Deed Administrator in the present case.

68. As Gageler J said in SAS Trustee Corporation v Miles (2018) 265 CLR 137; [2018] HCA 55 at [41] (citations omitted): [4]

“Statutory construction is the process by which meaning is attributed to statutory text. In a doubtful case, it involves constructional choice. The statutory text must be considered from the outset in context and attribution of meaning to the text in context must be guided so far as possible by statutory purpose on the understanding that a legislature ordinarily intends to pursue its purposes by coherent means.”

4. See also [20] (Kiefel CJ, Bell and Nettle JJ) and [64] (Edelman J).

69. Considered in the context of the Corporations Act as whole, there is a clear contrast between the text of s 90-15(1) and the text of s 447A, which empowers the Court to make orders about how Part 5.3A is to operate in relation to a particular company. That contrast is one factor which suggests that the words of s 90-15(1) confer on the Court a broad power to make orders in relation to an external administration that is being conducted in accordance with the relevant provisions of Chapter 5, but not to modify the operation of those provisions.

70. In my opinion, the express objects of the IPS are a further factor which favours that construction of s 90-15. The objects are set out in s 1-1 of the IPS and include “to regulate the external administration of companies consistently, unless there is a clear reason to treat a matter that arises in relation to a particular kind of external administration differently”. It is difficult to see how that object would be achieved if s 90-15 were construed as conferring power on the Court to modify the operation of the provisions of Chapter 5 that apply to each kind of external administration in relation to a particular administration. It seems to me that this construction would open the way for inconsistent regulation of external administrations of the same kind.

71. I acknowledge that, in Re Quinlan (in their capacity as joint and several liquidators of Halifax Investment Services Pty Ltd (in liq) (No. 4) [2019] FCA 604, Gleeson J made orders pursuant to s 447A of the Corporations Act and s 90-15 of the IPS varying the operation of s 446A(2) of the Corporations Act in relation to the company that was the subject of those proceedings so that it imposed bespoke reporting and disclosure obligations to creditors in lieu of ss 497 and 506A of the Corporations Act that would otherwise have applied. Section 446A(2) provides that, in specified circumstances, a company under administration is taken to have passed a special resolution that it be wound up voluntarily.

72. Her Honour was satisfied (at [36]-[42]) that s 447A conferred power on the Court to vary those obligations because s 446A – a provision with Part 5.3A of the Corporations Act – was the ongoing source of the winding up regime for the company, following Re One.Tel Ltd; Walker and Sherman (as liqs) (2002) 43 ACSR 305; [2002] NSWSC 1081 at [41]-[56].

73. After referring to the terms of s 90-15 and the observations of Gleeson JA in Re Hawden Property Group Pty Ltd (in liq) (supra) that I have set out at [58] above, her Honour stated (at [45]):

“Noting the breadth of s 90-15(1) and the breadth of the considerations set out in s 90-15(4), I was satisfied that this provision provided an alternative source of power for the relief sought.”

74. In Re Quinlan, Gleeson J heard the liquidator’s application for orders varying the operation of s 446A(2) on an urgent basis. Her Honour’s reasons for judgment refer in detail to the liquidator’s submissions concerning s 447A as a source of power for the orders sought, but make no reference to any submissions concerning s 90-15 as a potential alternative source of power. I infer that her Honour did not have the benefit of detailed submissions addressing the question whether s 90-15, properly construed, extends to orders modifying the operation of provisions of the Corporations Act.

75. The Deed Administrator’s submissions also referred to Baskerville v Tow.com.au Pty Ltd (in liq) [2018] FCA 1069. In that case, the Federal Court of Australia made an order under s 490 of the Corporations Act granting leave nunc pro tunc to the respondent company to resolve that it be wound up voluntarily, in circumstances where the winding up resolution had been passed one day after a winding up application had been filed in the Supreme Court of Queensland and the petitioning creditor in those winding up proceedings consented to the grant of leave. The Court also made an order pursuant to s 90-15 of the IPS that, in relation to the external administration of the respondent company, s 91 of the Corporations Act operated such that the relation-back day was fixed at the date on which the winding up proceedings had been filed in the Supreme Court of Queensland. On the basis of the facts recorded in the reasons for judgment of Greenwood ACJ, it appears that the relation-back day would otherwise have been the date on which the resolution was passed: see ss 91 and 513B(e) of the Corporations Act. [5]

    5. Item 15 of the definition of “relation-back day”.

76. In circumstances where the application was made on urgent basis and all parties consented to the orders sought, Greenwood ACJ’s consideration of the scope of the power conferred on the Court by s 90-15 of the IPS was limited to noting that the submissions made by the applicant for the orders emphasised the object of the IPS, to which I have referred above.

77. Section 90-15 of the IPS has been referred to in some cases as a complementary or alternative source of power to s 447A of the Corporations Act to make orders varying the operation of the provisions of Pt 5.3A, the IPS or the IPR with respect to the convening and conduct of creditors meetings in an administration: see, for example, Strawbridge; In the matter of Virgin Australia Holdings Ltd (administrators appointed) (2020) 144 ACSR 310; [2020] FCA 571 at [33]-[39]; Eagle; In the matter of Techfront Australia Pty Ltd (administrators appointed) [2020] FCA 542 at [23]-[28]. Those cases did not require consideration of any difference between the scope of the power conferred on the Court by s 447A and the power conferred by s 90-15.

78. For the reasons explained at [68]-[70] above, notwithstanding the decisions referred to at [71]-[77] above, I respectfully incline to the view that the scope of the power conferred on the Court by s 90-15 does not extend to modifying the operation of provisions of the Corporations Act to the external administration of a particular company. Fortunately, it is not necessary for me to express a final view about the scope of s 90-15 because, even assuming that s 90-15 does permit orders modifying the operation of provisions of the Corporations Act, I would not have exercised the power to make orders in terms of prayers 2 and 3 of the interlocutory process for the reasons explained below. I describe this as fortunate because, as noted above, I have not had the benefit of appropriately detailed submissions concerning the proper construction of s 90-15.

79. The reasons why I would not make orders in terms of prayers 2 and 3 of the interlocutory process in this case (even assuming that the Court had power to do so) may be stated briefly.

80. First, prayer 2 of the interlocutory process goes beyond modifying the operation of a statutory provision that applies to Resources. An order in terms of prayer 2 of the interlocutory process would confer on the Court a power that it does not otherwise have to entertain an application for an order requiring ASIC to deregister a company that has not been in liquidation and has not been the subject of a report to ASIC demonstrating that it has been fully wound up.

81. Second, the deregistration of a company can have significant implications for third parties, including those who may have a cause of action against the company. The circumstances in which a company may be deregistered are limited to those in Chapter 5A of the Corporations Act (including s 509, as referred to in ss 601AC and 601AA). The Deed Administrator’s submissions did not identify any particular reason why it was impractical or why it would cause hardship if deregistration were deferred until the completion of a winding up of Resources after termination of the Resources Deed under s 445D of the Corporations Act. For reasons explained below, the alternative orders for a truncated liquidation facilitate the objectives underlying the Deed Administrator’s application without by-passing the steps required to be taken under Chapter 5A to deregister a company. The submissions essentially did not rise above highlighting the greater convenience and efficiency of proceeding directly to deregistration. In my opinion, convenience and efficiency from the point of view of an administrator and creditors and contributories of a company is not a sufficient reason to override the statutory constraints on the circumstances in which a company may be deregistered.

82. Third, the making of orders in terms of prayers 2 and 3 would leave the Deed Administrator without a means of fulfilling her objective of making the ASIC Payment in respect of the Missing Creditors. That is because an order in terms of prayer 1 of the interlocutory process would not confer power on ASIC to receive the ASIC Payment and to deal with it in accordance with Part 9.7 of the Corporations Act. Section 544 of the Corporations Act provides for a liquidator to pay unclaimed money to ASIC in certain circumstances. There is no equivalent provision concerning payment of unclaimed money by deed administrators or administrators. Even assuming that ASIC was willing to accept the proposed ASIC Payment, it would not be “unclaimed property” as defined in s 9 of the Corporations Act. It follows that, contrary to the express intention of clause 11.12 of the Resources Deed, the Missing Creditors would not have the rights provided for by Part 9.7 of the Corporations Act if they later sought to reclaim the money.

83. For those reasons, there will be an order dismissing paragraphs 2 and 3 of the interlocutory process.

Alternative application for order terminating the Deed and “truncated liquidation” orders

84. As an alternative to the orders sought in prayers 2 and 3 of the interlocutory process, prayer 4 seeks an order terminating the Deed pursuant to s 445D(1)(g) of the Corporations Act with effect from 45 days after the date of the order. In written submissions, the Deed Administrator relied on s 445D(1)(e) as an alternative ground for an order terminating the Deed.

85. Section 445D(1) of the Corporations Act relevantly provides:

“(1)   The Court may make an order terminating a deed of company arrangement if satisfied that:

…

(e)   effect cannot be given to the deed without injustice or undue delay; or

…

(g)   the deed should be terminated for some other reason.”

86. Section 445D(2) provides that an application for an order under s 445D(1) may be made by a creditor of the company, by the company, by ASIC or by “any other interested person”.

87. If an order is made under s 445D(1), termination of the Resources Deed will occur by force of s 445C(a) at the time of the making of the order. Resources will be taken to have passed a special resolution under s 491 that the company be wound up voluntarily, without making a declaration as to solvency under s 494: see ss 446AA(1)(a) and 446AA(2) of the Corporations Act. Unless the Court appoints a person as liquidator immediately after making an order under s 445D(1), Resources will be taken to have appointed the Deed Administrator as liquidator: s 499(2D). The requirements of s 497 will be taken to have been complied with in relation to the winding up: see s 446AA(3) of the Corporations Act. The winding up of Resources will facilitate the Deed Administrator making the ASIC Payment pursuant to s 544 and the deregistration of Resources pursuant to s 509.

88. Determination of an application under s 445D involves a two-stage process. In the first stage, one of the grounds for termination in s 445D(1) must be established. In the second stage, the Court must consider whether it should exercise the discretion conferred by s 445D to terminate the deed of company arrangement: Shafston Avenue Construction Pty Ltd v McCann (2019) 138 ACSR 299; [2019] FCA 1426 at [130].

89. I am satisfied that the ground for termination in s 445D(1)(g) of the Corporations Act is established in this case. The work required of the Deed Administrator under the Resources Deed will have been completed when the final distribution to creditors has been paid. For the reasons I have explained at [38]-[39] above, effect cannot be given to the provisions of clause 10 of the Resources Deed that will apply following that final distribution. It is not a question of injustice or undue delay. The Deed Administrator cannot give effect to clause 10 at all because the provisions of Chapter 5 of the Corporations Act do not facilitate the distribution of the whole of “the Funds” in circumstances where some creditors cannot be located, and do not facilitate the Deed Administrator taking steps to cause Resources to be deregistered in circumstances where it has not been wound up. Thus, the external administration cannot be brought to an end by the immediate deregistration of Resources as clause 10 contemplated. As I have explained above, an order terminating the Resources Deed will bring about a voluntary winding up that will then facilitate the Deed Administrator making the ASIC Payment pursuant to s 544 and taking steps for Resources to be deregistered in accordance with s 509. That is “some other reason” to terminate the Resources Deed. In my opinion, it is appropriate to exercise the discretion to make the order under s 445D(1)(g) as it will bring about an ultimate result that is consistent with the plain objective of the Resources Deed.

90. There will therefore be an order to the effect of prayer 4 of the interlocutory process. The Deed Administrator wishes the termination to take effect 45 days after the date of that order to permit time for the final distribution to be paid in accordance with the provisions of the Resources Deed before Resources goes into voluntary winding up. However, the Deed will terminate on the date on which the order under s 445D is made by reason of s 445C(a), and the special resolution for voluntary winding up will be deemed to have been passed on that date by reason of s 446AA(1)(a) and (2). Further orders will therefore be made under s 447A that, in relation to Resources, s 445C operates to defer termination until 45 days after the order under s 445D(1)(g), and s 446AA(2)(a) operates so that Resources is taken to have passed a special resolution under s 491 of the Corporations Act 45 days after that date. This maximises the Deed Administrator’s ability to comply with the Resources Deed whilst, at the same time, bringing about an orderly termination of the deed, and minimises the steps that the Deed Administrator will be required to take as liquidator. Creditors will not be prejudiced by this, as the funds that would otherwise have been available for distribution in the winding up will have been distributed to them in accordance with clause 4 of the Resources Deed prior to the commencement of the winding up.

91. As referred to at [37] above, the Deed Administrator seeks additional orders dispensing with the requirements of s 497 of the Corporations Act and ss 70‑30 and 70-40 of the IPR.

92. The Deed Administrator (as liquidator) will not be required to do anything under s 497 of the Corporations Act. That section will be taken to have been complied with in relation to the winding up of Resources by reason of s 446AA(3). An order dispensing with the requirements of s 497 is not necessary and will not be made.

93. Sections 70-30 and 70-40 of the IPR require a liquidator to provide to creditors of the company in liquidation information about creditors’ rights and a report containing information about the company’s assets and liabilities and, inter alia, the likelihood of creditors receiving a dividend. It is doubtful that these sections will apply to the liquidator of Resources because, as I understand the evidence, there are no creditors of Resources. Its only creditor, CIBC, has been paid the amount owing to it by Holdings under the Facility Agreement by the issue of shares in INPL and this payment of the principal debt means that nothing is owing by Resources as guarantor: see [4], [8] and [16]-[18] above. The “creditors” to whom distributions have been paid under the Resources Deed, and to whom the Deed Administrator proposes to pay the final distribution, are creditors of Holdings and Syerston to whom Resources, its officers and members and the Deed Administrator are bound by clause 4 of the Resources Deed to pay distributions from the Holdings Transferred Fund and the Syerston Transferred Fund: see [10]-[15] above and Corporations Act, s 444G.

94. However, there is evidence that the Deed Administrator and her predecessors have been reporting to these “creditors” throughout the external administration as if there were creditors of Resources. For the avoidance of doubt, it is appropriate to make orders that will have the effect of removing the need for the Deed Administrator as liquidator to provide information and reports to “creditors” under ss 70-30 and 70-40 of the IPR. I accept the Deed Administrator’s submission that such information and reports, if required, would be of no utility in circumstances where the final distribution will have been paid prior to Resources entering into winding up on termination of the Resources Deed.

95. For the reasons explained at [68]-[70] above, I will not make the order in the terms proposed by the Deed Administrator dispensing, pursuant to s 90-15 of the IPS, with the requirement to comply with ss 70-30 and 70-40 of the IPR. As s 446AA of the Corporations Act is the source of the winding up regime that will apply to Resources, I will adopt the approach of Gleeson J in Re Quinlan (supra), following Re One.Tel Ltd; Walker and Sherman (as liqs) (supra), and make the order pursuant to s 447A varying the operation of s 446AA(2).

Payment to ASIC in respect of Missing Creditors

96. Given that Resources will be wound up voluntarily following the order terminating the Resources Deed under s 445D of the Corporations Act, s 544 will oblige the Deed Administrator (as liquidator) to make the ASIC Payment in respect of the Missing Creditors after the final distribution has been paid. It is not necessary to make an order under s 90-15 that the Deed Administrator would be justified in making that payment. Prayer 1 of the interlocutory process will therefore be dismissed.

Remuneration

Applicable legal principles

97. Pursuant to s 60-5 of the IPS, the Deed Administrator and her predecessors are entitled to receive remuneration for necessary work properly performed in the external administration of Resources in accordance with remuneration determinations made under s 60-10 of the IPS made by the Court.

98. As Rees J said in Re Octavia Administration Pty Ltd (in liq) [2020] NSWSC 927 at [49]:

“The principles which govern determination of a liquidator’s remuneration are well summarised In the matter of Prime Space Property Investment Limited (in liquidation) [2016] NSWSC 1821 at [29]-[33] per Black J; In the matter of Sakr Nominees Pty Ltd (2017) 93 NSWLR 459; (2017) 118 ACSR 333; [2017] NSWCA 38 per Bathurst CJ at [54]-[60] (with whom Beazley P, Gleeson JA and Beach AJA agreed) and Barrett JA at [71]; and In the matter of Plutus Payroll Australia Pty Ltd (in liquidation) [2018] NSWSC 1092 at [14]-[15] per Black J. In short:

(a)    A liquidator is entitled to reasonable remuneration for their services and bears the onus of establishing that the remuneration sought is fair and reasonable. 

(b)    The liquidator must lead evidence in sufficient detail to enable the Court to determine that question including an itemised account setting out the details of work, the persons who did the work, the time taken to perform the work and the remuneration and expenses incurred.

(c)    The Court must bring an independent mind to bear on the question whether the remuneration is fair and reasonable. 

(d)    Relevant considerations include the complexity of the liquidation and the level of responsibility and risk taken on by the liquidator.  

(e)    The time-costing based approach to remuneration as well as the percentage-based approach – which compares the percentage that a liquidator’s remuneration bears to the level of asset realisations achieved – are commonly used, and no particular approach is to be preferred.

(f)    There is a need for proportionality between the cost of the work done and the value of the services provided. Some work by a liquidator may not generate a return to creditors but is nonetheless necessary.”

99. In applying these general principles to the Deed Administrator and her predecessors in this case, it is necessary to consider the work for which remuneration is claimed in the context of the work that was required under the Resources Deed and the Corporations Act: In the matter of ACN 159 605 188 Pty Limited (in liquidation) (formerly Securimax Pty Limited) [2018] NSWSC 356 at [19].

100. The work done must be proportionate to the difficulty and importance of the task in the context in which it needed to be performed. The percentage that the total remuneration constitutes of the value of the Funds, including the proceeds of sale of the INPL shares realised by the Deed Administrator’s predecessors, provides one means of objectively testing the reasonableness of the remuneration claimed. However, the Court does not focus on proportionality in this sense alone in determining the reasonableness or otherwise of the remuneration. It is still necessary to consider the work actually done and whether the amount charged for it was proportionate to the difficulty and complexity of the tasks performed: Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38 at [54]-[60] (Bathurst CJ, with the concurrence of the other members of the Court of Appeal); In the matter of Fearndale Holdings Pty Ltd (in liq) (recs & mgrs apptd) [2020] NSWSC 901 at [32]-[38]. As Black J said in the last mentioned case (at [38], citations omitted):

“It is not the Court’s role, as constituted by a judge in an application of this kind, to undertake a line by line review of the relevant narratives in an insolvency practitioner’s billing record, but the Court will generally review the relevant narratives in a broad way in order to satisfy itself that they support the other evidence led in respect of the claimed remuneration.”

101. It is not necessary to distinguish between work done in realising Holdings Available Property and distributing the Holdings Fund, on the one hand, and work done in realising Syerston Available Property and distributing the Syerston Fund, on the other hand, under clause 4 of the Resources Deed. That is because the Holdings and Syerston and their respective creditors are bound by the provisions of the Holdings Deed and Syerston Deed that permit payment of the remuneration of the deed administrators of Resources out of the Holdings Transferred Fund and the Syerston Transferred Fund: see [42] above and Corporations Act, ss 444D and 444G.

102. The applications for remuneration determinations must be considered bearing in mind that creditors [6] have already approved the former deed administrators’ remuneration in the amount of $182,736.02 for the period prior to 30 April 2010. Creditors also approved the former deed administrators’ remuneration for the period from 30 April 2010 onwards in the amount of $40,000 on the basis that the sale of the INPL shares was not going to eventuate. In circumstances where the work done as a result of that sale eventuating was materially different to the work envisaged when the sum of $40,000 was approved, the remuneration application now made relates to the periods from 22 March 2014 to 18 September 2020, the period from 19 September 2020 to termination of the Resources Deed and the Deed Administrator’s future remuneration as liquidator of Resources. The Deed Administrator has not taken the question of remuneration back to creditors due to her concern that, after such a long administration, there may not be a quorum of creditors in attendance at any such meeting However, the interlocutory process and supporting affidavit were served on creditors, as referred to at [43] above.

     6. Using that term in the broad sense in which it appears to have been used by the Deed Administrator as including creditors of Holdings and Syerston: see [93]-[94] above.

Remuneration of Deed Administrator and her predecessors: 22 March 2014 to 18 September 2020

103. I will refer to this as the claim for past remuneration. The amount claimed is $333,892.

104. In her affidavit sworn on 28 October 2020 and in the remuneration report dated 7 October 2020 exhibited to that affidavit, the Deed Administrator described the nature of the work completed during the period from 22 March 2014 to 18 September 2020. The work comprised:

1. 117.2 hours of work in the “Assets” category over the six year period, most of which was undertaken by an accountant and a manager, including:

1. work relating to the sale of the INPL shares, such monitoring the realisation of shares in tranches through a stock broker, reconciling the sales with receipts and addressing taxation implications of the sale within the consolidated group of companies of which Resources was a member and obtaining relevant taxation and legal advice;

2. work involved in identifying and recovering the term deposit accounts referred to at [21] above;

3. reviewing historical books and records to determine whether all available assets had been realised; and

4. preparing an estimated outcome statement following the realisation of the INPL shares;

2. 181.5 hours of work in the “Creditors” category over the six year period, most of which was undertaken by a manager and two accountants, including:

1. preparing circulars and reports to creditors, after updating historical contact details for creditors and liaising with creditors to ascertain their bank details for payment of distributions;

2. reviewing legal advice in relation to unsecured creditors’ claims;

3. preparing the interlocutory process and supporting affidavits in these proceedings;

3. 100 hours of work in the “Dividends” category over the six year period, most of which was undertaken by the Deed Administrator, an assistant manager and a senior accountant, including:

1. verifying outstanding creditor balances from books and records and investigating statutory interest on balances owing to creditors for unclaimed dividends; and

2. preparing draft dividend notices ahead of distribution;

4. 49.9 hours of work in the “Statutory” category over the six year period, most of which was undertaken by an accountant, including:

1. preparation of quarterly business activity statements; and

2. preparation and lodgement of ASIC forms and corresponding with ASIC;

5. 148.5 hours of work in the “Taxation” category over the six year period, most of which was undertaken by the Deed Administrator, a manager, assistant manager and senior accountant, including:

1. seeking and reviewing legal and tax advice concerning the tax treatment of the sale proceeds of the INPL shares;

2. engaging a tax adviser to lodge returns and to determine the impact of Resources, Holdings and Syerston being part of a tax consolidation group; and

3. work required to prepare and lodge overdue tax returns; and

6. 136.6 hours of work in the “Administration” category over the six year period, most of which was undertaken by a manager and senior client administration staff, including bank account administration, planning and review of the progress of the external administration and document and file maintenance.

105. The number of hours spent and the amount of remuneration claimed in respect of each of the above category, is significant. However, it is plain from the descriptions of the work in the remuneration report and the itemised time sheets exhibited to the Deed Administrator’s affidavit, which I have reviewed in a broad way, that this is attributable to the six year time period over which the work was conducted and the very long period of the administration under the Resources Deed. The very long period of the administration has meant that it has been necessary at times for historical records concerning creditors and their claims and other matters to be revisited and checked before moving forward. As I have explained earlier in these reasons, the length of time taken to realise all of the available assets was attributable to constraints on the sale of the INPL shares and was outside the Deed Administrator’s control.

106. In her affidavit sworn on 28 October 2020, the Deed Administrator described the process by which time is recorded in the computerised system from which the itemised record was generated and deposed that the itemised record is accurate to the best of her knowledge. For the purpose of the remuneration claim, the Deed Administrator has reviewed the itemised time record and removed all time associated with the change in appointees over the course of the external administration, such as time spent by staff reading into the file and being briefed in relation to background matters.

107. Based on my review of the itemised time sheets, I am satisfied that the narratives contained therein are broadly consistent with the Deed Administrator’s evidence as to the work performed for which remuneration is claimed and that the work was carried out by persons with the appropriate level of seniority with hourly rates proportionate to their level of experience. I have identified in a broad way at [104] above the different levels of seniority of the personnel who carried out different types of work.

108. The itemised time sheets record the charge for each item of work based on the time spent and the hourly charge out rate of the staff member who performed the work. I accept that time-based charging is an appropriate method of charging in the circumstances of this case. The hourly charge out rates ranged from $690 (in 2014) to $735 (in 2021) for a partner, with senior managers being charged out at between $515 to $580, senior accountants between $320 and $435 and administrative staff at up to $200 per hour during this period. The average hourly rate for the period was $455 per hour. This is one measure against which the reasonableness of the manner in which the work was performed may be considered. The Deed Administrator has deposed that she considers the rates to be reasonable. I consider the hourly rates and the $455 average to be at the higher end of the range of rates consistent with work having been performed in a reasonable manner. However, I do not consider those rates to be outside the reasonable range in a long administration complicated by the assets of two other companies being folded into the administration and the tax issues arising from the realisation of the INPL shares and the consolidation of Resources and other companies for taxation purposes.

109. I am satisfied that the information provided by the Deed Administrator and referred to above is sufficient for the Court to properly assess the claim for past remuneration. Having considered the matters in s 60-12 of the IPS and applied the principles summarised above, I am satisfied that the work was performed properly in the course of the very long external administration of Resources, that it was reasonable to carry out that work, and that the remuneration claimed for the period 22 March 2014 to 18 September 2020 is a fair and reasonable reward for the work.

110. The remuneration claimed for the period 22 March 2014 to 18 September 2020, together with the remuneration already approved by creditors as referred to at [102] above amounts to $515,628. This significantly exceeds the total amount of $281,299.52 claimed by creditors (of which $212,474.64 was distributed to creditors prior to May 2010): see [24] above. However, for the reasons already explained above, I do not regard that as detracting from my conclusions that it was reasonable to perform the work, the work was properly performed and that the remuneration claimed is fair and reasonable in the unusual circumstances of this external administration.

111. For those reasons, there will be an order that the remuneration of the former deed administrators of the Resources and the Deed Administrator for the period from 22 March 2014 to 18 September 2020 be determined in the amount of $333,892 (excluding GST).

Remuneration as Deed Administrator: 19 September 2020 to termination of Resources Deed

112. I will adopt the Deed Administrator’s terminology and refer to this as the claim for future remuneration, notwithstanding that the Deed Administrator’s application was heard some months after the beginning of this period. The amount claimed is $20,000, comprising:

1. 8 hours work for preparing a final Deed Administrators report to creditors at a cost of $4,160;

2. 11 hours work in relation to dividend procedures at a cost of $5,672.50;

3. 11 hours work at a cost of $5,210 in relation to preparation of quarterly business activity statements, preparation and lodgement of ASIC forms and work referred to as “Review and consider DOCA mechanics with regard to ASIC lodgements”; and

4. 10.5 hours work at a cost of $4,935 for administration.

113. In relation to each of those categories of work:

1. it is plainly necessary for a final report to creditors to be prepared, but I consider that the cost of $4,160 (equivalent to about 8 hours’ of senior accountant/assistant manager/manager time) to be greater than what is fair and reasonable. The Deed Administrator did not identify the information that would need to be included in that report that has not already been the subject of earlier reports, the subject of evidence in support of the interlocutory process or the subject of preparatory calculations by her staff. In those circumstances, I would expect that the preparation of the report could either be attended to by more junior staff with the Deed Administrator reviewing a final draft, or by more senior staff taking less time. Doing the best I can, I would allow $2,500 for this category (being approximately four hours of a senior accountant’s time plus one hour of the Deed Administrator’s time at current hourly rates);

2. it will be necessary for the Deed Administrator to undertake the procedures necessary to make the final distribution to creditors, but the evidence does not demonstrate that this will require 11 hours’ work in circumstances where there are 18 creditors (of whom six are Missing Creditors), the Deed Administrator and her staff have already undertaken calculations for the final distribution on the basis of various scenarios and obtained the information required to pay the final distribution to twelve of the creditors, and there is no reason to expect that the ASIC Payment to made under s 544 of the Corporations Act would involve complex or protracted steps. I would reduce this category to $3,345 (allowing approximately six hours of a senior account’s time and one hour for the Deed Administrator to review and approve the steps and associated documentation);

3. I regard the estimate of $5,210 as excessive compared to the past work done in relation to business activity statements each quarter and lodgement of ASIC forms (as revealed by the itemised time records) and in the absence of any explanation of what is meant by “Review and consider DOCA mechanics with regard to ASIC lodgements”. Taking into account that the period between 19 September 2020 and the end of the administration will be relatively short and that Resources is not trading, I would reduce this category to $3,925 (allowing approximately six hours of a senior accountant’s time, one hour of a senior manager’s time to supervise the senior accountant one hour of the Deed Administrator’s time);

4. it is understandable that the administrative tasks required finalise the Deed Administrator’s records after such a lengthy administration are likely to be more involved than would usually be the case at the end of an administration and I am satisfied that the amount of $4,935 claimed for this work, together with final bank reconciliations and the preparation of the end of administration return for ASIC which are included in this category, is fair and reasonable remuneration.

114. For those reasons, there will be an order that the remuneration of the former the Deed Administrator for the period from 19 September 2020 until the termination of the Resources Deed be determined in the amount of $14,705 (excluding GST).

Remuneration as liquidator

115. The Deed Administrator asks the Court to make a determination concerning her future remuneration as liquidator, notwithstanding that she deposed in paragraph 136 of her affidavit sworn on 28 October 2020 that, if the Court makes the orders sought for a truncated liquidation “I will not seek remuneration for the subsequent liquidation on the basis that only limited steps will be required to be undertaken”. The amount of remuneration claimed in respect of the future liquidation is $18,000.

116. Creditors served with the remuneration application and supporting evidence have not raised any objection on basis of the affidavit informing them that the Deed Administrator will not seek remuneration in respect of her future role as liquidator if the truncated liquidation orders are made. Those orders (or orders with the same effect) are to be made. The Deed Administrator has not adduced any evidence estimating the time and cost of the work that will be required to be done in this scenario. The estimate of $18,000 assumes that all of the usual reporting to creditors would be required. Those are sufficient reasons for me to decline to make an order fixing that remuneration in the amount of $18,000 and it is not necessary to consider whether the Court has power under s 60-10 of the IPS to determine the remuneration of an external administrator in respect of an external administration that is imminent but has not commenced at the time that the order is sought. That question was not addressed in the submissions made on behalf of the Deed Administrator.

Costs of this application

117. There is no reason why the Deed Administrator’s costs should not be paid out of the assets of Resources (including the Holdings Fund and Syerston Fund transferred to Resources and administered under the Resources Deed) as proposed in prayer 10 of the interlocutory process.

Conclusions and orders

118. For the reasons above, I make the following orders:

1. Prayers 1, 2 and 3 of the interlocutory process filed on 22 December 2020 are dismissed.

2. Order pursuant to s 445D(1)(g) of the Corporations Act 2001 (Cth) that the deed of company arrangement dated 16 December 2003 between Black Range Metals (Resources) Pty Limited (administrators appointed) (ABN 46 076 987 329) (the Company and the Deed) and Joseph David Hayes and Anthony Gregory McGrath is terminated.

3. Order pursuant to s 447A of the Corporations Act 2001 (Cth) that, in relation to the Company, s 445C(a) of that Act operates as if it specified the date that is 45 days after the making of order 2 above.

4. Order pursuant to s 447A of the Corporations Act 2001 (Cth) that, in relation to the Company, s 446AA of that Act operates:

1. as if the time in s 446AA(2)(a) at which the Company is taken to have passed a special resolution under s 491 of the Corporations Act2001 (Cth) is the date that is 45 days after the making of order 2 above; and

2. as if the following new sub-paragraph (3A) were inserted in s 446AA as follows:

“The liquidator is not required to comply with ss 70-30 and 70-40 of the Insolvency Practice Rules (Corporations) 2016 (Cth).”

5. Order pursuant to s 60-10 of the Insolvency Practice Schedule in Schedule 2 to the Corporations Act 2001 (Cth) that the remuneration of the former deed administrators and deed administrator of the Company performing their roles under the Deed for the period from 22 March 2014 to 18 September 2020 be determined in the amount of $333,892 (excluding GST).

6. Order pursuant to s 60-10 and/or s 90-15 of the Insolvency Practice Schedule in Schedule 2 to the Corporations Act 2001 (Cth) that the remuneration of the deed administrator of the Company performing her role under the Deed for the period from 19 September 2020 to the date of termination of the Deed pursuant to orders 2, 3 and 4 above be determined in the amount of $14,705 (excluding GST).

5. Prayer 9 of the interlocutory process filed on 22 December 2020 is dismissed.

6. Order that the Deed Administrator’s remuneration referred to in orders 5 and 6 above and costs and expenses of the interlocutory process filed on 22 December 2020 be paid out of the assets of the Company (including all assets administered in accordance with clause 4 of the Deed).

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Endnotes

Decision last updated: 28 May 2021