Kennards Hire Pty Ltd v RMGA Pty Ltd

[2010] NSWSC 1387

CITATION:	Kennards Hire Pty Ltd v RMGA Pty Ltd [2010] NSWSC 1387
HEARING DATE(S):	17/11/10
JUDGMENT DATE :	2 December 2010
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	1. Order that the remuneration determined by the first resolution set out at paragraph [22] of reasons for judgment published in these proceedings on 2 December 2010 be reviewed pursuant to s 473(6) of the Corporations Act 2001 (Cth). 2. Order that the remuneration determined by the second resolution set out at paragraph [22] of reasons for judgment published in these proceedings on 2 December 2010 be reviewed pursuant to s 473(6) of the Corporations Act 2001 (Cth). 3.Pursuant to Item 7 of the delegation under s 13 of the Civil Procedure Act 2005 made on 9 April 2009, order that there be and is hereby referred to a registrar the matter of conducting and determining each of the reviews so ordered. 4. Direct that the reviews be listed before the registrar on a day to be appointed by the registrar (on notice of at least 35 days to both Mignon Esther Gardener and David Lewis Clout) for the purpose of giving directions for the conduct of the reviews. 5. Direct that, at least 21 days before the day so appointed by the registrar, Mignon Esther Gardener serve a copy of her interlocutory process filed on 12 April 2010, a copy of each affidavit served in support of that application, a copy of the court’s reasons for judgment of 2 December 2010 and written notice of the date so appointed by the registrar on each person on whom service ought to have been effected pursuant to rule 9.4A of the Supreme Court (Corporations) Rules 1999. 6. Direct that evidence admitted upon the hearing of these proceedings on 17 November 2010 be evidence upon the reviews to be conducted and determined by the registrar, subject to any determination as to relevance of any part of it to the review. 7. Order that the application of Mignon Esther Gardener for an inquiry by the court under s 536 of the Corporations Act 2001 (Cth) be dismissed.
CATCHWORDS:	CORPORATIONS - winding up - winding up by the court - application by contributory for (a) review of liquidator's remuneration fixed by meeting of creditors and (b) inquiry into the liquidator's conduct - relationship betwen the two processes - potential queries about some aspects of remuneration warrant review - such review directed only to discovering proper quantum - various alleged bases for inquiry into liquidator's conduct assessed - none of any merit
LEGISLATION CITED:	Corporations Act 2001 (Cth), Chapters 2D, 5, ss 53,95A, 180(1)(a), 180(1)(b), 182(1)(b), 181(1)(a),181(1)(b), 286, 473(1)(k)(i), 473(2), 473(3)(b)(i), 473(5), 473(6), 473(10), 482, 531, 536, 542, 556(1), 1321 Supreme Court (Corporations) Rules 1999, ruile 9.4A
CATEGORY:	Principal judgment
CASES CITED:	Australian Securities and Investment Commission v Edge [2007] VSC 170; (2007) 211 FLR 137 Belvista Pty Ltd v Murphy & Triden Contractors Ltd (1993) 11 ACSR 628 Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178 GIS Electrical Pty Ltd v Melsom [2002] WASCA 302 ; (2002) 172 FLR 218 Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231 Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99 Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 Onefone Australia Pty Ltd v One Tel Ltd [2008] NSWSC 1335 ; (2008) 69 ACSR 290 Paul’s Retail Pty Ltd v Morgan [2009] NSWSC 1222; (2009) 76 ACSR 26 Paul’s Retail Pty Ltd v Morgan [2010] NSWCA 217; (2010) 79 ACSR 580 Re Bauhaus Pyrmont Pty Ltd [2006] NSWSC 742 Re Fox Home Loans Pty Ltd [2005] NSWSC 1050 Re Glowbind Pty Ltd; Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456 Re Timeshare Resort Club Ltd [2010] FCA 673 Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103
TEXTS CITED:	“Tolley’s Company Law” edited by S Barc and N Bowen, second edition (1988), pp.903-4
PARTIES:	Kennards Hire Pty Ltd - Plaintiff RMGA Pty Ltd - Defendant Mignon Esther Gardener - Applicant David Lewis Clout - Respondent
FILE NUMBER(S):	SC 2009/289068
COUNSEL:	Ms P M Clingan - Applicant Mr J T Johnson - Respondent
SOLICITORS:	Clamenz Corporate Lawyers - Applicant Owen Hodge Lawyers - Respondent

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

THURSDAY, 3 DECEMBER 2010

2009/289068 KENNARDS HIRE PTY LTD v RMGA PTY LTD;
MIGNON ESTHER GARDENER – APPLICANT; DAVID LEWIS CLOUT - RESPONDENT

JUDGMENT

Background

1 The applicant, Mrs Mignon Esther Gardener, is the sole director and one of two members of RMGA Pty Ltd (“RMGA”), a company which is subject to winding up by virtue of an order made by the court on 20 July 2009. Mr Clout was appointed liquidator when the winding up order was made and continues in office. On 8 February 2010, as will be seen, the court ordered that the winding up be stayed until further order.

2 By interlocutory process filed on 12 April 2010, Mrs Gardener advanced several claims of which two were pressed upon the hearing on 17 November 2010, being

(a) a claim for a review of remuneration of Mr Clout as liquidator of RMGA determined by resolutions of the creditors; and
(b) a claim that inquiry be made by the court into conduct of Mr Clout as liquidator of RMGA.

3 Ms P Clingan of counsel appeared for Mrs Gardener upon the hearing of the interlocutory process. Mr J T Johnson of counsel appeared for Mr Clout.

4 The first claim is made under s 473(6) of the Corporations Act 2001 (Cth), it being common ground, first, that remuneration of the liquidator was, on 19 November 2009, determined by resolutions of creditors (s 473(3)(b)(i)) and, second, that Mrs Gardener has standing under s 473(5) to make application for a review of the remuneration so determined. Section 473(6) is concerned with remuneration of a liquidator already determined by resolution of creditors. It says that, upon application made by a competent applicant, the court may:

“review the liquidator’s remuneration and may confirm, increase or reduce that remuneration.”

5 The second claim is made under s 536(1):

“Where:
(a) it appears to the Court or to ASIC that a liquidator has not faithfully performed or is not faithfully performing his or her duties or has not observed or is not observing:
(i) a requirement of the Court; or
(ii) a requirement of this Act, of the regulations or of the rules; or
(b) a complaint is made to the Court or to ASIC by any person with respect to the conduct of a liquidator in connection with the performance of his or her duties;
the Court or ASIC, as the case may be, may inquire into the matter and, where the Court or ASIC so inquires, the Court may take such action as it thinks fit.”

6 A statement of claim filed by the applicant makes it clear that the s 536(1) claim is based wholly on s 536(1)(b). I say this because the statement of claim sets out a claim for:

“An order pursuant to s 536(1)(b) of the Corporations Act 2001 (Cth) that the Court undertake an inquiry into the actions of the Respondent as liquidator of the Defendant.”

Chronology

7 Before turning to the issues, I should record the sequence of relevant events following the making of the winding up order on 20 July 2009 (the order was made on the basis of insolvency in consequence of failure to comply with a statutory demand).

8 Mrs Gardener was the only director of RMGA when the winding up order was made. Her husband, Mr Russell Richard Godfrey Gardener, was the secretary. The liquidator immediately set about obtaining the company’s books and financial records. He wrote to Mrs Gardener on 23 July 2009 requiring that these be delivered to him. He also asked her for a report as to affairs. A follow-up letter was sent on 5 August 2009. On the same day, the liquidator wrote to Mr Gardener making the same request.

9 On 20 August 2009, Clamenz Corporate Lawyers, a firm of solicitors, wrote to the liquidator confirming that they acted for Mr Gardener and that he maintained that a residential property at Captains Flat registered in the name of RMGA and the only substantial asset that it appeared to own was in reality held in trust for him. The letter went on to say that Mr Gardener “intends to commence proceedings in the Supreme Court of NSW to seek a declaration from the court that the property is held by the Company as trustee beneficially on behalf of our client”, that is, Mr Gardener; then:

“At the Supreme Court proceedings, our client will adduce evidence showing that the property was purchased with funds contributed in full by our client [Mr Gardener] personally and that he was operating under a mistake by registering the legal title in the name of the company.”

10 The letter ended by asking for an indication of “your current position as to whether you currently hold the property on trust for Mr Gardener”, adding that if no reply was received within seven days, the liquidator should consider himself on notice that proceedings might be commenced “at any time thereafter”.

11 On 21 August 2009, the liquidator wrote again to Mrs Gardener asking for the company’s books and records and a report as to affairs. The liquidator asked for delivery by 28 August 2009. A like letter was sent on the same day to Mr Gardener.

12 On 27 August 2009, the liquidator received from the Australian Taxation Office a letter stating that there was currently no claim in respect of RMGA but that there might be a claim when outstanding business activity statements for 23 periods, outstanding PAYG annual reports for seven periods and outstanding income tax returns for ten periods were received. The liquidator was thus on notice, first, that RMGA had defaulted, over a period of some seven years, in taxation lodgments and, second, that there might be a claim by the Australian Taxation Office for unpaid taxes.

13 On 27 August 2009, Mr Gardener completed a report as to affairs and submitted it to the liquidator. The report referred to four creditors (with amounts, totalling roughly $4,500, shown for three of them) and one asset, being $139 cash at bank.

14 Mr Gardener’s report as to affairs did not list the Captains Flat property as an asset. This is consistent with his contention, advanced through his solicitors, that the property was held by RMGA upon trust for him.

15 On 7 September 2009, the Clamenz firm wrote to the liquidator repeating the claim that the Captains Flat property was held by RMGA upon trust for Mr Gardener. The letter said that “no formal trust deed exists”.

16 The letter of 7 September 2009 also dealt with the outstanding matter of the company’s books and records, saying:

“These are all in your custody, in that the company was not trading and did not have any books and records.”

17 The liquidator wrote to Clamenz on 9 September 2009 about a number of matters. He raised the question of absence of any report as to affairs from Mrs Gardener. In relation to the matter of books and records, he said:

“Your client has not provided me with any of the books and records of the company. With respect, I disagree with your assertion that the company was not trading. I note that the company was registered for goods and services tax during the period from 1 July 2000 to 1 July 2007 and PAYG withholdings during the same period. The company operated bank accounts with National Australia Bank Limited and St George Bank Limited. The company owned and leased property. The company engaged in services of solicitors and accountants. The company owned the business names The Miners Oneshop and Russells Building Project Management. In my opinion, the company was trading.”

18 On 30 September 2009, the liquidator wrote again to Clamenz noting that he had received no reply to the letter of 9 September 2009; nor had he received evidence that the Captains Flat property was held in trust for Mr Gardener. The letter said that if documentary evidence in that respect was not received within seven days, he would assume that Mr Gardener had abandoned his claim and proceed to sell the property.

19 On 13 October 2009, Clamenz wrote again to the liquidator. It is appropriate to quote most of the letter:

“We have informed our client that you have formed the view that the company was ‘trading’. We have sought instructions from our client and he maintains his position that the company was not ‘trading’. He concedes, however, that he contracted with Kennards with the contemplation of commencing trade.
Our client is most concerned as a result of your preliminary view concerning trading that the liquidation process will waste unnecessary time and money and will destroy the equity in the property.
Our client would like to consider a commercial arrangement that would consist of the following:
Our client will agree to settle the known debts in full;
Our client will pay you for any reasonable costs you have incurred in the liquidation process.
At this stage we are not completely aware of the costs of the above. To assist our client in understanding the impact of such a proposal, can you please provide us with the following information, as at 13 October 2009:
1. A summary of all known creditors including a description and the amounts owed.
2. A copy of your fees to date including a breakdown by task and employee.
We feel that you have now had sufficient time to advertise for and take steps to become aware of any outstanding creditors. As the company is clearly solvent, our view is that in making an offer similar to that described above, that your duties as liquidator would be relieved and you could hand the company back to our client.
We request that you respond with the above values by 5pm Friday, 16 October 2009. If the response is not satisfactory and if it appears that as a liquidator you continue to take a position and that you are wasting the company’s funds in investigating unnecessary facts and circumstances then, we will consider commencing Supreme Court proceedings pursuant to section 536 of the Corporations Act 2001 (Cth). Should we proceed down this route, this letter may be tendered in evidence, particular should a need arise to raise our concerns about unnecessary costs.”

20 In the following days, the liquidator wrote to the son of Mr Gardener and Mrs Gardener. He had formerly been a director of RMGA. The liquidator asked him to deliver up any books and records of the company in his possession.

21 On 17 November 2009, Clamenz wrote to persons it understood to be creditors of RMGA. It did so as solicitors for “the directors of RMGA Pty Limited” (there was in fact only one director, Mrs Gardener). One of these letters was to a Mrs Bevan. The letter was as follows:

“ WITHOUT PREJUDICE
Dear Sir/Madam,
RE: RMGA Pty Limited – Debt outstanding to Lorraine Bevan
We act for the directors of RMGA Pty Limited (‘RMGA’ or ‘the company’). RMGA is currently in liquidation and we are seeking an order from the court that it terminates the winding up of RMGA and that control of the company be given back to the directors.
We will be making the application in the Supreme Court of NSW for an order that the winding up be terminated. This will be filed next week and is expected to be heard 7 to 21 days thereafter. A key component of our proposal is that if we are successful in terminating the winding up that within 14 days we will pay to you 100% of the debt owing.
A requirement of this type of this type of order is that we satisfy the court that you have consented to the motion. Please advise us in writing if you do not consent to this course of action.
As per the proof of debt form that you lodged with the liquidator, at present RMGA owes you $455.40. In good faith, please find attached a photocopy of the bank cheque that our client intends to issue to you upon the Supreme Court granting RMGA’s order to terminate the winding up.
Do not hesitate to contact us if you wish to be provided with more information about this process.
Sincerely Yours
CLAMENZ CORPORATE LAWYERS ”

22 The meeting of creditors was held on 19 November 2009. The following resolutions were passed:

“That the Liquidator shall be entitled to remuneration for work completed during the period from 20 July 2009 to 25 September 2009 determined as the amount equivalent to the time costs for the time spent by the Liquidator and his staff, such time costs being calculated at the Woodgate & Co. standard rates for such work, plus goods and services tax, and that the Liquidator is hereby authorised to draw such remuneration out of monies held by him as Liquidator of the company, such remuneration to be limited to $21,439.50, plus G.S.T.”
“That the Liquidator shall be entitled to future remuneration for the period from 26 September 2009 to completion, subject to any further future resolutions, determined as an amount equivalent to the time costs for the time spent by the Liquidator and his staff in relation to the winding up of the company, such time costs being calculated at the Woodgate & Co. standard rates from time to time for such work and that the Liquidator is hereby authorised to draw out of monies held by him as Liquidator of the company remuneration up to a limit of $30,000.00, plus G.S.T.”

23 The minutes record each resolution as having been “passed unanimously”. There is reference to two creditors having participated in the meeting.

24 The liquidator had issued a report to creditors dated 2 November 2009 in advance of the meeting. Also sent to creditors were two remuneration reports, one for the period 20 July 2009 to 25 September 2009 and the other (styled “future remuneration report”) for the period 26 September 2009 to “completion”. Each report was thus related to one of the remuneration resolutions.

25 On 1 December 2009, Mrs Gardener filed an interlocutory process advancing a claim as follows:

“On the undertaking by the applicant to:
a. pay within 28 days of agreement or assessment by the court to Woodgate & Co an amount to satisfy their reasonable fees in acting as liquidator for the company; and,
b. pay all known creditors as of the date of these orders in full by way of bank cheque within 14 days of these orders being made; and,
c. within 60 days of these orders, ensure that the company is in compliance with all statutory compliance obligations
an order pursuant to section 482 of the Corporations Act 2001 (Cth) that the winding up of RMGA Pty Limited (in liq) [ACN 068 728 558] be permanently stayed.”

26 This interlocutory process was heard on 8 February 2010. The court made orders that included the following:

“Upon the undertakings of the applicant, Mignon Esther Gardener, given to the court in paras 1(a), (b) and (c) of the interlocutory process dated 1/12/09 order that the winding up of the defendant be stayed until further order.
Order that the property known as XXX Foxlow Street, Captains Flat be charged with the payment of such amount as may be payable to the liquidator, Mr David Lewis Clout, in response to [sic] the liquidator of the defendant either as agreed or assessed by the court.”

27 On the hearing of Mrs Gardener’s interlocutory process, the liquidator indicated that he neither consented to the making of the orders sought nor opposed the making of the orders. He had sworn an affidavit on 11 December 2009 in which he deposed, among other things, that he had received some books and records but after review of them was of the view that not all had been provided; that he had sent a number of letters to Mrs Gardener to obtain a report as to affairs and the outstanding books and records (copies of the letter were annexed); that he had sent a number of letters to Mr Gardener seeking the outstanding books and records (again, copies were annexed); that there were seven known creditors (who were listed in an annexure); and that, although insufficient information had been provided to enable him to come to an informed conclusion in relation to the financial position, he was of the view that the company was insolvent under s 95A of the Corporations Act. The liquidator then said:

“22. To enable the company to be placed into a position where it would be solvent and be in a position to operate within the parameters of the Corporations Act 2001, should a stay be granted, I recommend a number of steps be taken, including:
(a) The relevant documents be lodged with the ATO as soon as possible to ascertain if, and to what extent, there is any liability to the ATO.
(b) All the outstanding creditors be paid.
(c) The records held by ASIC regarding the correct registered office of the company and addresses of the office holders be updated.
(d) The issue that the sole asset of the company is held on trust for Mr Gardener, be clarified to my satisfaction and any relevant documents be provided within 14 days to enable me to consider the position of the creditors in relation to that property.
(e) The liquidator’s remuneration as approved at a reconvened meeting of creditors held on 19 November 2009 at [sic] be paid for the period 20 July 2009 to 25 September 2009, a copy of which is attached and marked ‘H’.
(f) The liquidator’s remuneration as approved at a reconvened meeting of creditors held on 19 November 2009 be paid for the period 26 September 2009 to the conclusion of his involvement in this matter.
(g) The liquidator be compensated for all out of pocket expenses including but not limited to any legal costs including counsel fees incurred in the course of these proceedings.
(h) All books and records of the company required to be kept in accordance with s 286 of the Corporations Act 2001 that have not been provided to date, be provided within 14 days.
23. Should the steps as set out in paragraph 22 be undertaken, I would not oppose the application for stay of the liquidation in relation to the defendant company.”

28 On 25 February 2010, Clamenz wrote to the liquidator’s solicitors complaining that no books and records had been delivered to Mrs Gardener following the stay of the winding up on 8 February 2010. The liquidator’s solicitors replied on 4 March 2010 that nothing had been received from Mrs Gardener or Mr Gardener except the latter’s report as to affairs and that “some books and records of the company” were “obtained elsewhere” (this is apparently a reference to some documents delivered to the liquidator by Ms Freeman, a former external accountant of RMGA). The liquidator’s solicitors added:

“However in an attempt to expedite resolution of the matter we enclose the following:
1. Copies of the relevant books and records of the company as provided by the company’s former solicitor and accountant.
2. Copies of statements from National Australia Bank and St George Bank Limited, along with information provided by the ATO pursuant to the Freedom of Information Act.”

29 In the letter of 4 March 2010, the liquidator’s solicitors addressed the matter of quantification of remuneration, that being relevant to the charge on the Captains Flat property ordered by the court on 8 February 2010. The solicitors noted that remuneration for the period from 20 July 2009 to 25 September 2009 had been fixed by resolution of creditors at $21,439.50 plus GST and that, for the period from 26 September 2009 to completion, the creditors had approved a limit of $30,000, of which $21,796.10 plus GST had been calculated up to 19 February. There was reference, in this connection, to an enclosed copy of the liquidator’s work-in-progress ledger.

30 Clamenz replied on 30 March 2010 complaining of “the complete lack of description” in the work-in-progress report making it impossible for their client (presumably Mrs Gardener) to determine what the liquidator’s reasonable costs had been. They added that, notwithstanding this, they would seek their client’s instructions as to what was regarded as “reasonable”. The letter then continued on a different tack:

“At this point in time, we are instructed to put you on notice that our client anticipates possibly making an application to the Court pursuant to section 536 of the Corporations Act 2001 (Cth) and/or for negligence and/or breach of fiduciary duty in respect of the unreasonableness of the Liquidator’s conduct during this winding up. Having put you on notice of this we note that fees incurred by the Liquidator in defending this allegation should not be indemnified by the assets of the Company.
In our view, the Liquidator has spent excessive amounts of time (and cost) doing things for which he has no obligation to do. While it is settled law that the liquidator has an obligation to ensure that potential creditors have sufficient notice of the liquidation, so as to submit their proof of debt, there is no positive duty to take steps to chase individual creditors for their claim nor to step into their shoes to effectively prosecute the directors for their non-compliance with various statutory obligations not associated with the Corporations Act 2001 and not in the interests of creditors who have submitted proofs of debt.
In circumstances where, from very early on, the liquidator was notified of an intention by the director and member to pay creditors 100 cents in the dollar, it seems highly unreasonable for the liquidator to oppose an application to terminate or permanently stay the winding up and incur further fees for his own benefit and to the detriment of the company.
If the matter needs to be ventilated before a Court, we will require the Liquidator for cross-examination and further remind you that any costs incurred by the Liquidator in defending such action will not be indemnified by the Company’s assets in circumstances where he is being investigated for a breach of his duties.”

31 The liquidator’s solicitors replied on 1 April 2010. The relevant parts of the letter are:

“1. We advise that the court made no orders for the delivery of documents from the liquidator and therefore we strongly oppose any allegations of lack of co-operation by either our client or our office. Rather we submit that our client has been more than accommodating in providing the requested documentation. Further, it should be noted that the documents provided to you were documents obtained by our client as a result of freedom of information requests and were not merely returning books and records provided by your client.

…

3. In response to the alleged reasonable costs identified in your without prejudice correspondence we submit that at the very least, the creditors have approved the amount of remuneration up to 25 September 2009 at the meeting held on 19 November 2009 in the amount of $21,439.50 plus GST. With a further resolution for an amount up to $30,000.00 plus GST for future remuneration in accordance with section 473(3)(b)(i) of the Corporations Act. We note that no application has been made seeking to review those resolutions or the remuneration so approved.

4. We deny any circumstances that would justify an enquiry under section 536 of the Corporations Act and request that full and complete particulars of any complaints be articulated.

5. We deny any negligence as asserted in your letter.

6. We deny any breach of fiduciary duty as asserted in the letter.”

32 On 12 April 2010, Mrs Gardener filed the interlocutory process with which I am now dealing. It sought, in addition to orders described at paragraph [2] above, an order that the liquidator deliver up to Mrs Gardener all books and records of RMGA in his possession. That aspect was dealt with by an order made on 12 April 2010 by consent as follows:

“By consent I order that the respondent liquidator deliver up to the applicant care of her lawyers, Clamenz Corporate Lawyers, all books and records of the company in the respondent liquidator’s possession within seven days.”

33 On 15 April 2010, the liquidator wrote to Mrs Gardener as follows:

“I refer to Order 4 of Justice Barrett of the Supreme Court of New South Wales on 12 April 2010. I attach a blue folder of documents delivered up to me by Ms Gail Freeman and a copy of Ms Freeman’s letter of 11 September 2009. The records were misfiled following the relocation of Woodgate & Co., from 25 Blight Street, Sydney to 6 – 10 O’Connell Street, Sydney.
Those books and records comprise of the following:
(a) one page of handwritten numbers relating to transactions in 2006;
(b) seven tax file number declaration forms created in 2006 and 2007;
(c) a business activity statement for the March 2007 quarter; and,
(d) four Pay As You Go payment summaries for 2006.
Contrary to Ms Freeman’s affidavit of 9 April 2010, I did not receive any bank statements, wages books or other records. I only received one hand written note from Ms Freeman. Had I received the books and records that Ms Freeman had deposed that she forwarded to me, this may have assisted my enquiries.
I have no other records of the company in my possession or control.
If you have any queries in this matter, please telephone Mr Richard Rowley, of my office.”

34 According to the liquidator, therefore, he sent to Mrs Gardener everything, by way of books and records, he had received from the company’s accountant. This related, of course, to documents pre-dating the winding up.

Approach to Mrs Gardener’s claims

35 Proceedings under s 536 involve three stages. At the first stage, the court, upon application made, decides whether an inquiry into the liquidator’s conduct is warranted. In Hall v Poolman [2009] NSWCA 64; (2009) 75 NSWLR 99, the Court of Appeal pointed out that there need not be a prima facie evidentiary case of lack of faithful performance or observance of requirements. But the applicant must point to something about the liquidator’s conduct that is a sufficient basis for making an order for inquiry; and it is desirable that this be articulated in pleaded form: Re Fox Home Loans Pty Ltd [2005] NSWSC 1050.

36 A sufficient basis is probably best summed up as in the nature of a well-based suspicion indicating a need for further investigation, with suspicion connoting a positive feeling of actual apprehension or mistrust, as distinct from mere wondering. Once such a basis has been shown, the court has a discretion whether or not to order an inquiry and thereby to progress the matter to the second stage which involves examination of the liquidator’s conduct and performance in the form of an adversarial proceeding, with particular allegations being advanced against the liquidator on the basis of evidence regularly adduced and the liquidator having full opportunity to mount a defence in the usual way.

37 The question whether a sufficient basis for ordering an inquiry into a liquidator’s conduct exists must be approached by reference to the purpose such an inquiry is intended to serve. As numerous judicial statements about s 536 make clear (including those of the Court of Appeal in Hall v Poolman (above)), that purpose is related to regulation, supervision, discipline and correction of liquidators in the interests of honest and efficient administration of the estates of companies subject to winding up. The interest to be served is a public interest. The section is not concerned in any direct way with vindication of private rights. Rather and as Steytler J said in GIS Electrical Pty Ltd v Melsom [2002] WASCA 302 ; (2002) 172 FLR 218 at [49] echoing an observation of McLelland CJ in Eq in Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434 at 438, it “is concerned with aspects of the conduct of liquidators which are liable to attract sanctions or control for what might be broadly described as disciplinary reasons”. The pre-occupation is, as I put it in Re Bauhaus Pyrmont Pty Ltd [2006] NSWSC 742 at [4], with “the broader question of due administration of the winding up in the public interest”.

38 The present application concerns this first stage only. The claim under s 536(1)(b) is pleaded in a statement of claim filed by Mrs Gardener. The salient allegations there set out should be summarised.

The duties pleaded

39 The statement of claim begins, after formal parts, by alleging duties of Mr Clout. These are set out together in paragraph 6. The duties are pleaded as follows:

1. Mr Clout, as liquidator, owed the duties imposed by ss 180(1)(a), 180(1)(b), 182(1)(b), 181(1)(a) and 181(1)(b) of the Corporations Act .
2. Mr Clout also owed “the duties imposed upon the Liquidator by virtue of him being an Officer of the Court”.
3. Mr Clout owed “the duty of the Liquidator as a fiduciary of the Company”.
4. Mr Clout owed “the duties imposed generally upon him by Chapter 2D and Chapter 5 of the Corporations Act 2001 (Cth)”.
5. Mr Clout owed “the duty to keep written financial records that correctly record and explain the company’s transaction and financial position and performance as would enable true and fair financial statements to be prepared and audited in accordance with s 286 of the Corporations Act 2001 (Cth)”.
6. Mr Clout owed “the duty of a liquidator to keep proper books in which he or she must cause to be made entries or minutes of proceedings at meetings and of such other matters as are prescribed in accordance with s 53 of the Corporations Act 2001 (Cth)”.
7. Mr Clout owed “the duty at common law to conduct an impartial investigation into the company’s affairs”.
8. Mr Clout owed “the duty at common law to expend the minimum amount possible on the winding up to comply with the liquidators [sic] statutory obligations and only incur proper fees and disbursements”.
9. Mr Clout owed “all other duties imposed upon the Liquidator at common law including a duty to take into account the interests of creditors and members at all times”.

40 Then follow allegations of breaches of these duties.

The first alleged breach - remuneration and disbursements

41 First, there is an allegation that “in breach of the duties contained within paragraph 6 above” – all of them, apparently – Mr Clout “has caused the Company to incur fees and disbursements, for his own benefit and the benefit of others, that are excessive in the circumstances and are not properly incurred”. Particulars follow. They say that “fees and disbursements claimed by the liquidator in excess of $45,000 (with the exact amount to be determined following discovery) is [sic] considered grossly excessive when” five circumstances existed, namely:

(a) the company had excess assets over liabilities in the amount of at least $250,000 (excluding an accrual for the liquidator’s fees);
(b) the director and members of the company had proposed to pay creditors 100 cents in the dollar;
(c) the creditors had generally consented to termination of the winding up;
(d) the company had only limited trading activity and relatively simple financial affairs; and
(e) a liquidation “of this kind” would “typically incur” fees and disbursements in the range of $10,000 to $18,000.

The second alleged breach - the stay application

42 Second, there is an allegation that “in breach of the duties contained within paragraph 6 above”, Mr Clout “incurred costs to the Company and delayed distribution to creditors” by “opposing the application to stay the winding up of the Company”. It is further pleaded that Mr Clout’s “proper position” was to “make a submitting appearance in the interests of reducing costs, and to assist the court to not oppose the steps being taken by the applicants [sic], particularly where a realistic outcome was for creditors to receive 100 cents in the dollar”.

The third alleged breach – books and records

43 Third, it is alleged that Mr Clout breached certain of the paragraph 6 duties (being those under ss 180(1)(a) and 180(1)(b) of the Corporations Act, those “imposed generally” by Chapter 2D and Chapter 5 and the duties under ss 286 and 531 to keep financial records and books) in that he “failed to keep or did not obtain proper records for the company”. The particulars refer to failure to keep or to obtain:

(a) “proper records of the legal advice to the company by Owen Hodge Lawyers provided since the liquidator’s appointment”;
(b) invoices and records relating to an insurance policy taken out by the company since the liquidator’s appointment;
(c) proper records of invoices and records related to advertising expenses of the company since the liquidator’s appointment;
(d) a proper record (including description of work done) for the time spent on the liquidation by the liquidator and his employees;
(e) records of the minutes of meeting (singular) held by the company.

The fourth alleged breach – the 12 April 2010 orders

44 Fourth, it is alleged, in the alternative to the third matter, that Mr Clout failed to comply with the court’s order of 12 April 2010 as to delivery of books and records. The particulars are as follows:

“The Liquidator was obliged by way of Court Orders dated 12 April 2010, to deliver to the Applicant all the books and records of the company. Based on the books and records provided by the Liquidator it is apparent that the Liquidator has failed to maintain books and records, or in the alternative, in contempt of the Court Orders has failed to deliver all of the books and records of the Company. Records of the company not kept or delivered include but are not limited to the following:
(i) Legal advice provided to the Company by Owen Hodge Lawyers;
(ii) Invoices and records relating to insurance & advertising expenses incurred by the Liquidator;
(iii) All records associated with the Liquidator’s time spent on the liquidation; and
(iv) Minutes of meetings held by the company.”

The liquidator’s defence

45 Mr Clout filed a defence. He did not admit the allegations of duty set out at paragraph [39] above “in the absence of a proper particularisation of those duties” but otherwise admitted the matters in paragraph 6. Mr Clout denied the balance of the allegations referred to above.

Summary of issues relevant to inquiry application

46 Much could be said about the pleading in the statement of claim. For present purposes, however, its deficiencies may be passed over and the following complaints said by Mrs Gardener to justify inquiry under s 536 (by reference to s 536(1)(b)) can be said to be identifiable:

(a) excessive remuneration claims and excessive disbursements;
(b) opposing Mrs Gardener’s application for a stay in the winding up, rather than to “make a submitting appearance”;
(c) failure to keep or obtain proper books or records;
(d) failure to comply with the order of 12 April 2010.

47 To these may be added an apparently unpleaded complaint raised in submissions that the liquidator retained the firm Owen Hodge Lawyers to provide legal advice in connection with the winding up and that this was improper because that firm had acted for the plaintiff in obtaining the winding up order.

48 I shall deal at this point with the complaints going to matters other than remuneration and disbursements.

Assessment of second allegation

49 The allegation of breach of duty in relation to Mrs Gardener’s application for a stay of the winding up is devoid of merit. In the first place, Mr Clout did not, as Mrs Gardener pleads, oppose the application. He neither consented to nor opposed the making of the order and, by his affidavit of 11 December 2009 referred to at paragraph [27] above, set out in an objective way facts relevant to be taken into account on the application.

50 Mrs Gardener and those advising her seem to think that, if a liquidator consents to a contributory’s application for an order staying or terminating a court-ordered winding up, the court will simply make the order without inquiry. This is simply not so. The power under s 482 to terminate or stay a winding up is discretionary. Speaking of termination, Austin J summarised the relevant principle as follows in Vero Workers Compensation (NSW) Ltd v Ferretti Pty Ltd [2006] NSWSC 292; (2006) 57 ACSR 103 at [17]:

“(i) the court has a discretion as to whether the winding up should be terminated;
(ii) in exercising its discretion, the court considers the interests of:
• creditors of the company (including future creditors);
• the liquidator, particularly with respect to costs;
• the contributories;
• the public, including the public interest in matters of commercial morality, and the public interest that insolvent companies should be wound up.”

51 The same approach is taken to an application for a stay, at least where the stay is to be permanent or until further order.

52 The attitude of the liquidator is an important consideration upon such an application. If the liquidator is opposed, the court will scrutinise the matter very closely. If the liquidator consents, the court will have the knowledge that the person most familiar with the up-to-date position perceives no obstacle to the re-launching of the company into the mainstream of commercial life. If the liquidator neither consents nor opposes, the court will know that the liquidator does not consider himself or herself justified in offering the court an opinion one way or the other as to the ultimate outcome.

53 The court will, however, expect to have before it some account by the liquidator of his or her administration. In the present case, the liquidator prepared an affidavit recording matters he considered relevant (see paragraph [27). That affidavit was placed before the court on the hearing of the stay application on 8 February 2010. The court would thus have seen that the liquidator had reservations about the completeness of the material given to and obtained by him and, importantly, on the question of solvency. It would have been irresponsible in the extreme for any liquidator entertaining those reservations to have consented to a stay of the winding up. The proper course was to record the reservations and leave the matter to the discretion of the court.

54 It is said on behalf of Mrs Gardener that it was, from the point of view of the proper conduct of the liquidator in relation to the stay application, significant that Mrs Gardener and Mr Gardener proposed to pay out the creditors. But there could have been no certainty at all that that would act positively upon the court’s discretion, given that payment of the company’s debts by others might have been regarded as replacing one set of creditors with another. And it is facile to say that an apparent excess of assets over liabilities ought to have caused the liquidator to consent when the asset (which Mr Gardener apparently no longer claimed to be beneficially owned by him) was real estate in a small country town and the ability to convert it into cash in the short term was not obvious.

55 The submissions made on Mrs Gardener’s behalf lose sight of the fact that a decision to stay a winding up is a discretionary decision of the court and that the court will have regard to a number of factors in deciding whether to make an order. The position is by no means the same as that in inter partes litigation where, if the parties join in asking the court to make an order that puts an end to their dispute, the court will generally do so without question, assuming that the particular order is within its power. An application by a contributory or other competent applicant under s 482 does not occur in and does not constitute litigation between that applicant and the liquidator. It is an application for the exercise of the court’s discretion in which the attitude and any evidence of the liquidator are but one factor to be taken into account.

56 The complaint with respect to the liquidator’s conduct concerning Mrs Gardener’s application for a stay of the winding up is baseless. It represents no ground for the initiation of a s 536 inquiry.

Assessment of third allegation

57 I turn now to the complaint about failure to keep or obtain books and records. This was largely abandoned at the hearing. I quote from the written submissions prepared by Clamenz Commercial Lawyers and placed before the court by Ms Clingan:

“In the Applicants Statement of Claim, there is an alternative pleading that either the Respondent failed to keep books and records or was in breach of a Court order dated 12 April 2010. Since the filing of that pleading, it would seem that, apart from a question about legal advice and the costs agreement with the solicitors for the company, the Respondent has kept books and records, however it is still submitted that the Respondent did not comply with Court orders dated 12 April 2010.”

58 The complaint about failure to keep or obtain books and records, if maintained, thus appears to be confined to legal advice and “the costs agreement with the solicitors for the company”. All that need be said about that is that the source of the supposed duty to obtain such documents is not stated (as to advice, it is commonplace for advice to be given and received orally; as to a costs agreement, any duty would rather be on the solicitors) and that no factual basis for any finding of a breach of such duty is suggested.

Assessment of fourth allegation

59 This brings to the fore the complaint about alleged failure of the liquidator to comply with the order of 12 April 2010. I have referred to the liquidator’s letter of 15 April 2010 (see paragraph [33] above). Thereafter, a difference of opinion rose as to the meaning and scope of the order of 12 April 2010. I quote from a letter of 12 May 2010 from the liquidator’s solicitors to Mrs Gardener’s solicitors concerning the part of the statement of claim dealing with this:

“In paragraph 11 it is said that the Liquidator failed to deliver up ‘books and records of the company’. By this we assume that what is meant is the ‘books’ as defined in Section 9 of the Corporations Act 2001 of RMGA Pty Limited. There is, as you would be aware, a distinction between books and financial records which were brought into existence as part of the activities of RMGA Pty Limited and books and records brought [sic] into existence by the Liquidator as part of his internal procedures and otherwise. Prior to the Pleading of the matters particularised in paragraph 11 no indication has been given of the asserted failure by the Liquidator to deliver up those items referred to in paragraphs (i) – (iv) of the particulars to paragraph 11 of the ‘Pleading’ or other specific ‘books’ that are said to have been withheld. Legal advice given to the Liquidator by Owen Hodge Lawyers or for that matter any other Australian legal practitioner would not it is submitted be a ‘book’ of RMGA Pty Limited.”

60 The point made here – and validly made – is that there is a distinction between books of the company and books of the liquidator pertaining to his or her administration of the company. The distinction is expressly recognised in s 542 of the Corporations Act which imposes a duty on a liquidator in relation to “all books of the company and of the liquidator that are relevant to the officers of the company”.

61 The written submissions prepared by Clamenz and handed up by Ms Clingan take issue with what is said in the extract from the liquidator’s solicitors’ letter of 12 May 2010 quoted above. They say that the argument put forward by the solicitors, if accepted “would mean that any documents held by an officer (such as a director) of the corporation created [sic] his tenure as an officer and for the benefit of the company could be classed as ‘records’ of the director rather than records of the company”.

62 It is obvious that certain documents in the possession of a director concerning his or her company belong to the director and not to the company. The company’s letter enclosing a cheque for director’s fees is one example. Notes jotted down by way of preparation to speak at a board meeting or listing for future reference the salient points in a report to the board are another. In relation to receivers (whose position is in many ways analogous with that of liquidators), the following is said at pp.903-4 of the second edition (1988) of “Tolley’s Company Law” edited by S Barc and N Bowen:

”On the termination of the receivership the company is entitled to the return of only those documents in the receiver’s possession which belong to the company. Ownership depends on the capacity in which he acquired them. Documents generated or received by the receiver pursuant to duty to manage the company’s business or to dispose of the assets belong to the company. Documents containing advice and information about the receivership or about the company brought into existence to enable the receiver to advise the holder of the charge belong to the holder. Notes, calculations and memoranda prepared by the receiver, not pursuant to any duty to prepare them but to better enable him to discharge his duties, belong to the receiver. The fact that the documents were prepared at the company’s expense is not decisive (see Gomba Holdings UK Ltd v Minories Finance Ltd , Financial Times, 11 November 1987).”

63 The decision thus referred to as having been reported in the Financial Times of 11 November 1987 went on appeal to the Court of Appeal: Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231. The decision at first instance was affirmed, as were the principles reflected in the textbook extract.

64 An odd aspect of the pressing of the matter at paragraph [44] above as grounds for a s 536 inquiry is that Mrs Gardener acknowledgment that, of the four particular classes of documents identified, three were delivered on 21 July 2010 and that the only one which, it is said, should have been delivered but was not is “the legal advice to RMGA by Owen Hodge Lawyers”.

65 Even on the case Mrs Gardener ultimately pressed, therefore, the only shortcoming related to legal advice obtained by the liquidator. As to that, there is room for debate as to whether it is “owned” by the company or the liquidator. An inquiry under s 536 is not an appropriate forum for the resolution of that question. It follows that Mrs Gardener has not, in relation to the matter of alleged failure to deliver up documents identified any conduct of the liquidator that might warrant a s 536 inquiry.

Assessment of the unpleaded allegation

66 Before dealing with the matter of remuneration, I should address the unpleaded complaint that the liquidator retained and took advice from the firm of solicitors who acted for the plaintiff in the winding up proceedings.

67 No cogent basis is put forward for criticising the liquidator in that respect.

68 Once a winding up order has been made, the successful plaintiff has no continuing interest except that shared with other creditors in the due conduct of the administration. There is, in the abstract, no apparent basis on which it is improper for the plaintiff’s lawyers to act subsequently for the liquidator or the company in liquidation. Nor, in the abstract, is there any apparent basis on which it is improper for a liquidator to retain the lawyers who acted for the plaintiff. The proposition that a lawyer should, at the suit of a client or former client, be restrained from acting for another person in particular legal proceedings is generally supportable on any of three bases:

1. That to act for the other person is inconsistent with the duty of loyalty owed by the lawyer to the client as an incident of the fiduciary relationship — the “loyalty ground”.
2. That the lawyer possesses information to which an obligation of confidentiality in favour of the client attaches, which confidentiality will be actually or potentially compromised if the lawyer acts for the other person — the “confidentiality ground.”
3. That restraint is necessary for the protection of the integrity of the judicial process and the due administration of justice — the “administration of justice ground.”

69 In neither her statement of claim nor submissions did Mrs Gardener state any basis on which the solicitors who acted for the plaintiff on the winding up application could, on any of these grounds, be restrained from acting for the liquidator or the company or the company in liquidation. She was content merely to refer to some unexplained and unarticulated “conflict of interest”.

Remuneration – the relationship between s 473(6) and s 536

70 In summarising the matters pleaded in the statement of claim, I have referred to excessive remuneration claims and excessive disbursements. There is, of course, a clear and well-recognised difference between remuneration and disbursements: see, for example, VenetianNominees Pty Ltd v Conlan (1998) 20 WAR 96; Onefone Australia Pty Ltd v One Tel Ltd [2008] NSWSC 1335 ; (2008) 69 ACSR 290 and, more recently, Re Timeshare Resort Club Ltd [2010] FCA 673. The liquidator’s remuneration is the reward he or she receives for performing the functions of liquidator. It is his or her fee or recompense. In a court-ordered winding up such as the present, the right to remuneration is conferred by s 473(2) of the Corporations Act. There is no expectation that the liquidator meet any expenses of the administration out of that remuneration. The liquidator’s right in respect of expenses properly incurred is a separately existing right to have those expenses paid out of the assets of the company. That right arises from s 556(1). It is a right quite distinct from the right to remuneration.

71 Although Mrs Gardener’s statement of claim refers to both remuneration and disbursements, no submissions were made regarding disbursements as such. I therefore proceed on the basis that the complaint concerns remuneration alone.

72 That complaint is relevant not only to Mrs Gardener’s claim for an order for an inquiry under s 536 but also to her claim for a review of remuneration under s 473(6). It is therefore important to bear in mind the relationship between the two kinds of claim.

73 In Hall v Poolman (above) at [69], the Court of Appeal noted that one of the considerations relevant to the exercise of the discretion under s 536 is whether or not there is another appropriate remedy. Accordingly, the Court of Appeal said, where an issue is raised as to whether a decision made by a liquidator should be reversed or modified, the appropriate procedure is under s 1321, not s 536. The court referred to Belvista Pty Ltd v Murphy & Triden Contractors Ltd (1993) 11 ACSR 628 (at 630), per McLelland CJ in Eq; Re Glowbind Pty Ltd; Takchi v Parbery [2003] NSWSC 1190; (2003) 48 ACSR 456 (at [21]), per Burchett AJ.

74 In Australian Securities and Investment Commission v Edge [2007] VSC 170; (2007) 211 FLR 137, Dodds-Streeton J observed at [625] that the court’s extensive powers under s 536 are not circumscribed by the provisions applicable to review where a resolution of creditors approving remuneration has been passed. This means that the fact that creditors have, by resolution, fixed remuneration does not mean that matters relevant to that remuneration and its fixing are beyond the proper scope of s 536. But different considerations will arise when the same determination of remuneration by creditors becomes the subject of a claim for s 536 inquiry and a claim for s 473(6) review.

75 Upon a claim of the latter kind, the threshold question is whether the court should carry out a review. Is there some demonstrated need to inquire into the originally determined quantum? That is the way in which the question was posed in Paul’s Retail Pty Ltd v Morgan [2009] NSWSC 1222; (2009) 76 ACSR 26 at [79] in a passage not challenged by either party on appeal (Paul’s Retail Pty Ltd v Morgan [2010] NSWCA 217; (2010) 79 ACSR 580 at [54] – [56]).

76 That threshold question will necessarily be approached with s 473(10) in mind:

“In exercising its powers under subsection (3), (5) or (6), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a) the extent to which the work performed by the liquidator was reasonably necessary;
(b) the extent to which the work likely to be performed by the liquidator is likely to be reasonably necessary;
(c) the period during which the work was, or is likely to be, performed by the liquidator;
(d) the quality of the work performed, or likely to be performed, by the liquidator;
(e) the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator;
(f) the extent (if any) to which the liquidator was, or is likely to be, required to deal with extraordinary issues;
(g) the extent (if any) to which the liquidator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h) the value and nature of any property dealt with, or likely to be dealt with, by the liquidator;
(i) whether the liquidator was, or is likely to be, required to deal with:
(i) one or more receivers; or
(ii) one or more receivers and managers;
(j) the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company's creditors;
(k) if the remuneration is ascertained, in whole or in part, on a time basis:
(i) the time properly taken, or likely to be properly taken, by the liquidator in performing the work; and
(ii) whether the total remuneration payable to the liquidator is capped;
(l) any other relevant matters.”

77 The criterion identified by s 473(10) – “whether the remuneration is reasonable, taking into account any or all of” the enumerated matters – is something to which the court “must have regard” not only in exercising its power to review but also in exercising its power to decide whether or not to review. In the latter connection, however, there will generally be no occasion to come to firm conclusions. The approach will be more impressionistic. Detailed assessment and findings will be necessary only if it is decided that the power to review should be exercised.

78 The onus upon a person seeking to persuade the court to undertake a review is not a particularly heavy one. As with s 536, it is sufficient if there is a well-based suspicion indicating need for further investigation.

79 The only question upon a s 473(6) review is whether the originally determined remuneration should be increased, decreased or left unchanged. The court does not concern itself with whether the liquidator sought too much, whether the creditors were unreasonably mean in their decision-making, whether the original decision was against the weight of the evidence placed before creditors or any other factor going to fault or blame. The sole aim is to ensure that a proper quantum is determined.

Rule 9.4A

80 A threshold question in relation to Mrs Gardener’s application for a review under s 473(6) arises in relation to rule 9.4A of the Supreme Court (Corporations) Rules 1999. That rule requires an applicant for review to take certain preliminary steps, including service of a notice in accordance with Form 16A and the applicant’s supporting affidavit on each creditor who was present at the meeting at which the challenged remuneration was fixed and each member of the company with a shareholding representing at least 10% of the issued capital.

81 Mrs Gardener accepts that she has not complied with this requirement. She says, however, that this does not really matter. As to shareholders, she says that they are herself and her husband and that he is fully aware of her application and its basis. Mr Clout does not accept that Mr Garderer is a member since he is, it is said, a former bankrupt whose property (including his interest in RMGA) did not re-vest upon his discharge from bankruptcy: Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178. On that basis, the liquidator says, notice should have been given to Mr Gardener’s trustee in bankruptcy and Mr Gardener’s familiarity with his wife’s application and intentions is beside the point.

82 As to the two creditors who were represented at the creditors meeting of 19 November 2009, Mrs Gardener says that because they have now been paid – presumably by Mrs Gardener herself – they are not really relevant. There is also the startling submission that since one of the creditors (the plaintiff who obtained the winding up order) used the firm of solicitors now acting for the liquidator, that creditor “is aware of the application”.

83 Ultimately, Mrs Gardener said that the court should dispense with the requirement under rule 9.4A.

84 I do not pause at this point to determine that aspect. It is preferable to go to the merits of the question whether there should be a review and then to return, if needed, to the rule 9.4A matter.

The remuneration complaints

85 The approach to be taken in deciding whether a s 473(6) review should be undertaken is referred to at paragraphs [75] to [79] above. Mrs Gardener approached that issue at three levels.

86 First, she referred to a number of circumstances and put them forward as indicating a need for review. These are noted at paragraph [41] above.

87 Second, Mrs Gardener looked at several areas of endeavour on the liquidator’s part as identified in his internal records and submitted in relation to each that the time spent was excessive, in particular:

(a) entries totalling 8 hours and 54 minutes in relation to remuneration report;
(b) entries totalling 15 hours for creditors report;
(c) entries totalling 5 hours and 24 minutes for minutes of the creditors meeting;
(d) entries totalling 1 hour and 18 minutes for reviewing a letter of one and a half pages and searches by a partner;
(e) half an hour spent by Mr Clout on a telephone call to Mr Woodgate where Mr Woodgate made no corresponding entry;
(f) entries totalling 2 hours and 42 minutes for one phone call to the bank, one call to a secretary, a search for a phone number and an email to an insurance company;
(g) entries for 1 hour and 24 minutes for “new letters”;
(h) entries for 42 minutes for performing a search;
(i) entries for 36 minutes for telephone calls to persons who were not creditors of or suppliers to the company;
(j) entries for 36 minutes for “investigation”;
(k) a total of 26 entries of time for arranging insurance of the company’s property; and
(l) entries of 2 hours and 12 minutes for reviewing and drafting a caveat.

88 I hasten to say that these are descriptions in the written submissions of Mrs Gardener’s lawyers and that I have not been through the source materials to check them. Counsel for Mr Clout did not, however, take issue with the descriptions.

89 Third, Mrs Gardener says that work was duplicated. The only instance she gives involves a letter to Mr Gardener that was reviewed by Mr Rowley on 8 October 2009 for 18 minutes and by Mr Woodgate on 9 October 2009 for a further 18 minutes.

Assessment of the remuneration complaints

90 The last allegation by Mrs Gardener (as to duplication of work) may be dealt with shortly. The fact that each of two persons spends 18 minutes reviewing a letter to be sent by the liquidator does not necessarily bespeak duplication. It is equally consistent with a system of checks and balances directed to quality control. That matter alone would not warrant a decision by the court to review the remuneration determined by resolution of creditors.

91 The first matter – or series of matters – raised by Mrs Gardener (those noted at paragraph [41] above) stands in the same light. None of the matters (a) to (d) at paragraph [41] can be regarded in any way as indicating what a liquidator’s proper remuneration should be. All the circumstances there mentioned might exist in a particular case in which time is nevertheless spent dealing with a claim by a third party that the company’s main asset is beneficially owned by the third party; where the liquidator, in seeking to get in the company’s books, is met by silence or lack of co-operation by officers; where the single report as to affairs actually received is uninformative and incomplete; where the sole director furnishes no report as to affairs; where it is necessary for the liquidator to obtain direct from the Australian Taxation Office information that ought to have been provided by the company’s officers; and where a s 482 application makes it necessary for the liquidator to prepare a detailed affidavit. As to matter (e) at paragraph [41], I simply say that the references to a winding up “of this kind” and the remuneration and disbursements it would “typically incur” are meaningless, at least in the absence of evidence seeking to establish some genus of winding up and the “typical” characteristics of it.

92 Remaining, therefore, is the second series of matters raised by Mrs Gardener (paragraph [87] above). As to that, certain particular observations may be made – for example, that absence of any record by Mr Woodgate of a conversation Mr Clout recorded as having had with him is as consistent with the innocent possibility that Mr Woodgate simply failed to make a record as it is with the alternative possibility that Mr Clout recorded a conversation that did not occur; and one would naturally incline much more strongly to the former.

93 Beyond that, however, it must be said that some of the items do raise possible issues going to the matter in s 473(1)(k)(i) in both its branches, that is, time “properly taken” and time “likely to be properly taken”. Thus, for example, there must be at least a potential query under that heading in relation to items (a), (b), (c) and (l) at paragraph [87] above. I classify the position as one of “potential query” only because one cannot know precisely what lies behind a label of just a few words.

94 On balance, I am persuaded that the potential queries form a proper basis for the court to undertake a review of the remuneration determined by the two resolutions passed at the meeting of creditors on 19 November 2009. A registrar will appropriately conduct the review.

The s 536 application

95 If, upon the s 473(6) review, it is decided that the liquidator’s remuneration should be reduced, such concern as Mrs Gardener had about the conduct of the liquidator regarding remuneration and the effect of that conduct on the estate of the company in liquidation will have been addressed and resolved. If it is decided that the remuneration should be increased or left unchanged, Mrs Gardener’s concern about the possibility of excessive remuneration will be shown to have been groundless.

96 This, coupled with the fact that Mrs Gardener has failed to show any other basis on which it might be appropriate to order a s 536 inquiry, means that no such inquiry will be ordered.

Disposition

97 Given that there is to be a review under s 473(6), it is necessary to return to the matter of non-compliance with rule 9.4A. It will be sufficient, in that connection if, at least 21 days before the day on which the matter comes before the registrar for directions, Mrs Gardener serves a copy of the originating process and supporting affidavits (plus a copy of these reasons) on the persons who ought to have been served in accordance with rule 9.4A(3).

98 The orders and directions of the court are as follows:

1. Order that the remuneration determined by the first resolution set out at paragraph [22] of reasons for judgment published in these proceedings on 2 December 2010 be reviewed pursuant to s 473(6) of the Corporations Act 2001 (Cth).
2. Order that the remuneration determined by the second resolution set out at paragraph [22] of reasons for judgment published in these proceedings on 2 December 2010 be reviewed pursuant to s 473(6) of the Corporations Act 2001 (Cth).
3. Pursuant to Item 7 of the delegation under s 13 of the Civil Procedure Act 2005 made on 9 April 2009, order that there be and is hereby referred to a registrar the matter of conducting and determining each of the reviews so ordered.
4. Direct that the reviews be listed before the registrar on a day to be appointed by the registrar (on notice of at least 35 days to both Mignon Esther Gardener and David Lewis Clout) for the purpose of giving directions for the conduct of the reviews.
5. Direct that, at least 21 days before the day so appointed by the registrar, Mignon Esther Gardener serve a copy of her interlocutory process filed on 12 April 2010, a copy of each affidavit served in support of that application, a copy of the court’s reasons for judgment of 2 December 2010 and written notice of the date so appointed by the registrar on each person on whom service ought to have been effected pursuant to rule 9.4A of the Supreme Court (Corporations) Rules 1999.
6. Direct that evidence admitted upon the hearing of these proceedings on 17 November 2010 be evidence upon the reviews to be conducted and determined by the registrar, subject to any determination as to relevance of any part of it to the review.
7. Order that the application of Mignon Esther Gardener for an inquiry by the court under s 536 of the Corporations Act 2001 (Cth) be dismissed.

99 It will be necessary to hear the parties on costs. My general inclination (it is no more) is to think that there should be a costs order in relation to the proceedings to date and that the matter of costs from this point forward should be separately dealt with in light of the outcome on the review. The question of costs is at this stage reserved.

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