Macks v Maka

[2015] SASC 200

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

In the Matter of EASTWOOD INSULATION PTY LTD (IN LIQUIDATION)

MACKS & ANOR v MAKA & ANOR

[2015] SASC 200

Reasons of Judge Bochner a Master of the Supreme Court

22 December 2015

CORPORATIONS - WINDING UP - LIQUIDATORS - REMUNERATION

Application by liquidators for approval of their remuneration for work undertaken first as deed administrators and subsequently as liquidators pursuant to Section 449E and Section 504 respectively of the Corporations Act 2001 (Cth).

Corporations Act 2001 (Cth) s 449E and s 504, referred to.
Barbo Group Pty Ltd trading as Alice Roof Tiles v Investment & Construction Enterprise Pty Ltd [2012] VSC 71; ASIC v Groundhog Developments Pty Ltd [2011] QSC 263, applied.
Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96; Conlan v Adams [2008] WASCA 61; Re Traditional Values Management Limited (in liq) (No 2) [2015] VSC 126; Thackray v Gunns Plantations Ltd [2011] VSC 380; Re AAA Financial Intelligence Ltd (in liquidation) (No 2) [2014] NSWSC 1270; Warner, In the matter of GTL Tradeup Pty Ltd (in liq) [2015] FCA 323; Templeton v ASIC [2015] FCAFC 137, considered.

MACKS & ANOR v MAKA & ANOR
[2015] SASC 200

1. JUDGE BOCHNER.  This is an application by liquidators of a company for determination of their remuneration, firstly, as joint and several deed administrators of the company and, secondly, as joint and several liquidators of the company.  Throughout these reasons, I will refer to the plaintiffs jointly as “Macks Advisory”.  It is useful at the outset to set out a brief chronology of the facts in this matter.  These facts are taken largely from the affidavit of Ian Wayne Burford sworn on 2 March 2015 (the first Burford Affidavit).

2. Four companies made up the Eastwood Group, Eastwood Insulation Pty Ltd (In Liquidation) (the Company), East Insulation Pty Ltd (Subject to Deed of Company Arrangement) (East), and Portisle Pty Ltd (Portisle).  The company was the main trading entity of the group.  Mr Stanley Zbigniew Maka (Maka) was the sole director and shareholder of the company and Portisle, and a director and shareholder of East.  In addition, Maka was and remains the sole director and shareholder of the fourth company in the group, Thermal Clad Pty Ltd (Thermal Clad).  The following facts appear to be uncontested: 

   ·    On 4 July 2013, Maka placed the company, East and Portisle into voluntary administration, appointing Macks Advisory as joint and several administrators.

   ·    On 8 August 2013, at the second meeting of creditors, Maka proposed a Deed of Company Arrangement (DOCA) for each company.  The meeting was adjourned to allow the creditors an opportunity to consider the proposal. 

   ·    On 21 August 2013, at the resumed meeting, the creditors resolved to enter into the DOCAs in respect of each company, and to appoint a Committee of Inspection.

   ·    On 30 August 2013, the DOCAs were executed with Maka and Thermal Clad as proponents.  Macks Advisory were appointed deed administrators.

   ·    On 10 February 2014, Macks Advisory reported to creditors in relation to all 3 DOCAs, and in particular reported on suspected breaches by Maka and Thermal Clad of their obligations under them.  Macks Advisory recommended to creditors that the DOCAs be terminated and the companies be wound up.

   ·    On 6 March 2014, the creditors resolved to terminate the DOCA in relation to the company and place it into liquidation, but to continue with the DOCAs in relation to East and Portisle. 

   ·    Macks Advisory were appointed liquidators of the company.

   ·    On 20 January 2015 the Portisle DOCA was completed, with all unsecured creditors receiving 100 cents in the dollar.

   ·    As at the date of swearing his affidavit, Burford reports that the East DOCA is in the process of finalisation, with all unsecured creditors receiving 100 cents in the dollar.

   The progress of the DOCA period and the liquidation

3. Close reading of the extensive affidavit material provided by Burford demonstrates that, while this could not be described as a particularly complex matter, there were a number of significant difficulties which hampered Macks Advisory’s ongoing conduct of the DOCA administration and liquidation.  Again, it is useful to set out some of the salient features:

   ·       At some point during Macks Advisory’s investigation of the company’s books and records, email correspondence came to light which cast doubt on the reliability of those books and records.  The email from Maka to his then accountant, and dated 28 June 2012, reads as follows:

   I think I know why there seems to be so much profit which is causing the tax blow out.
   Our friend Vin Cobiiac was preparing a good looking set of figures to enhance the chance to sell Eastwood Insulation to a prospective buyer.
   Obviously you have these details and are using these figures instead of real numbers.  Somewhere in Vins office are real figures and not doctored numbers.
   Vin spent a hell of a lot of time to get those figures to look real which is why he could not put in a tax form also maybe Darren Ness fed you some inappropriate information.
   …

   ·    Burford deposes that this email along with other deficiencies in the company’s books and records, and the failure of Maka to provide books and records for the period 2008 to 2010 and the 2010 accounts until 2015 caused Macks Advisory to consider that the accounts otherwise provided by Maka could not be relied on.

   ·    On 7 August 2013, the day before the second meeting of creditors, Maka applied to this Court for an injunction to prevent the administrators from auctioning the company’s plant and equipment.  Maka’s application was dismissed.

   ·    Throughout August to October 2013, the staff of Macks Advisory were required to provide ongoing assistance to Maka, in relation to matters where they had already provided the requested information, or where Maka had already been advised of his responsibilities or tasks required from him.  This led to a significant repetition of work and advice which would not have otherwise been required.

   ·    At the same time, Maka did not comply with his own obligations, in relation to taking control of the company’s bank accounts, providing regular information on debtor recoveries, responding to requests from Macks Advisory, and otherwise carrying out his obligations under the DOCA.

   ·    It appears that Maka may have made payments to creditors outside of the terms of the DOCA.

   ·    There was an ongoing dispute at to whether Maka and Thermal Clad were debtors or creditors of the company. 

   ·    Proceedings were subsequently issued against Maka and Thermal Clad for recovery of debt, and finally settled on the first day of trial on 5 June 2015, with Maka and Thermal Clad agreeing to pay the liquidators on behalf of the company, the sum of $237,500.00 in full and final settlement of all claims, relating to the debt recovery action.

   ·    As at the date of the hearing of this matter, Macks Advisory was pursuing two further recovery actions, one against Maka for insolvent trading, and one preference claim against the ATO.

   The Remuneration Sought

4. Macks Advisory seeks remuneration for two periods, the first being for the period they acted as deed administrators, from 30 August 2013 to 6 March 2014, and the second for the period as liquidators, from 6 March 2014 to 31 January 2015.  The remuneration sought for each period is, respectively, $137,000.00 for the first (the DOCA period), and $311,000.00 for the second (the liquidation period). 

   The objections made

5. On 2 June 2015, Maka and Thermal Clad (the objectors) filed a document entitled “Response to Plaintiffs’ Claim for Remuneration” (FDN 8).  In this document, they set out their objections to the remuneration sought.  While the objectors identify a number of objections which relate to issues such as unnecessary work, excessive amounts claimed, duplication, and insufficient detail provided, in the main, it appears that the main objection made is that the amounts claimed are not proportional to the total amount recovered during each period, thus resulting in Macks Advisory being the principal beneficiary of the administration (see paragraphs 28 and 31 of FDN 8).  It should be noted that in their material, the objectors did not raise any issues with any of the factual material outlined in the first Burford affidavit. 

6. In addition to what I will call the proportionality argument, the objectors complain that Macks Advisory have done little more than provide a running sheet of the work done, but no justification or explanation of why work was done, what was hoped or expected to be achieved by that work, nor the value of that work to the administration.  They contend that the failure to provide, as it were, a roadmap for their management of the affairs of the company, is sufficient to lead to a conclusion that the remuneration claimed is not reasonable.   

   The principles to be applied

7. In regard to the DOCA period, the determination of remuneration is governed by section 449E of the Corporations Act 2001 (Cth) (the Act), which provides:

   449E Remuneration of administrator

   (1)  The administrator of a company under administration is entitled to receive such remuneration as is determined:

   (a)by agreement between the administrator and the committee of creditors (if any); or

   (b)by resolution of the company’s creditors; or

   (c)if there is no such agreement or resolution—by the Court.

   (1A)   The administrator of a company under a deed of company arrangement is entitled to receive such remuneration as is determined:

   (a)by agreement between the administrator and the committee of inspection (if any); or

   (b)by resolution of the company’s creditors; or

   (c)if there is no such agreement or resolution—by the Court.

   (1B)   To be effective, a resolution under paragraph (1)(b) or (1A)(b) must deal exclusively with remuneration of the administrator.

   Note:  This means that the resolution must not be bundled with any other resolution.

   (1C)The Court may determine remuneration under paragraph (1)(c) even if:

   (a)there has been no meeting of the committee of creditors; or

   (b)there has been no meeting of the company’s creditors.

   (1D)  The Court may determine remuneration under paragraph (1A)(c) even if:

   (a)there has been no meeting of the committee of inspection; or

   (b)there has been no meeting of the company’s creditors.

   (2)     Where remuneration is determined under paragraph (1)(a) or (b) or paragraph (1A)(a) or (b), the Court may, on the application of ASIC, of the administrator or of an officer, member or creditor of the company:

   (a)review the remuneration; and

   (b)confirm, increase or reduce it.

   (3)     Subsection (2) has effect despite section 437C.

   (4)     In exercising its powers under subsection (1), (1A) or (2), 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 administrator was reasonably necessary;

   (b)the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary;

   (c)the period during which the work was, or is likely to be, performed by the administrator;

   (d)the quality of the work performed, or likely to be performed, by the administrator;

   (e)the complexity (or otherwise) of the work performed, or likely to be performed, by the administrator;

   (f)the extent (if any) to which the administrator was, or is likely to be, required to deal with extraordinary issues;

   (g)the extent (if any) to which the administrator 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 administrator;

   (i)whether the administrator 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 administrator in performing the work; and

   (ii)whether the total remuneration payable to the administrator is capped;

   (l)    any other relevant matters.

   (5)     Before remuneration is determined under paragraph (1)(a), the administrator must:

   (a)prepare a report setting out:

   (i)such matters as will enable the committee of creditors to make an informed assessment as to whether the proposed remuneration is reasonable; and

   (ii)a summary description of the major tasks performed, or likely to be performed, by the administrator; and

   (iii)the costs associated with each of those major tasks; and

   (b)give a copy of the report to each member of the committee of creditors at the same time as the member is notified of the relevant meeting of the committee.

   (6)     Before remuneration is determined under paragraph (1A)(a), the administrator must:

   (a)prepare a report setting out:

   (i)such matters as will enable the committee of inspection to make an informed assessment as to whether the proposed remuneration is reasonable; and

   (ii)a summary description of the major tasks performed, or likely to be performed, by the administrator; and

   (iii)the costs associated with each of those major tasks; and

   (b)give a copy of the report to each member of the committee of inspection at the same time as the member is notified of the relevant meeting of the committee.

   (7)     Before remuneration is determined under paragraph (1)(b) or (1A)(b), the administrator must:

   (a)prepare a report setting out:

   (i)such matters as will enable the company’s creditors to make an informed assessment as to whether the proposed remuneration is reasonable; and

   (ii)a summary description of the major tasks performed, or likely to be performed, by the administrator; and

   (iii)the costs associated with each of those major tasks; and

   (b)give a copy of the report to each of the company’s creditors at the same time as the creditor is notified of the relevant meeting of creditors.

8. In regard to the liquidation period, determination of remuneration is dealt with in section 504 of the Act as follows:

   504    Review of liquidator’s remuneration

   (1)     Any member or creditor, or the liquidator, may at any time before the deregistration of the company apply to the Court to review the amount of the remuneration of the liquidator, and the decision of the Court is final and conclusive.

   (2)     In exercising its powers under subsection (1), 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.

9. It can be seen that the factors to be taken into account by the Court in each case are the same.  While there is no express power for the Court to determine the remuneration of liquidators in a voluntary winding up, it is accepted that the Court has this power as a result of the combination of sections 511 and 473(3):

   511    Application to Court to have questions determined or powers exercised

   (1)     The liquidator, or any contributory or creditor, may apply to the Court:

   (a)to determine any question arising in the winding up of a company; or

   (b)to exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.

   (1A)  APRA may apply to the Court under subsection (1) in relation to a company that is a friendly society within the meaning of the Life Insurance Act 1995 and which may be wound up voluntarily under subsection 180(2) of that Act.

   (2)     The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.

   473    General provisions about liquidators

   …

   (3)     A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:

   (a)if there is a committee of inspection—by agreement between the liquidator and the committee of inspection; or

   (b)if there is no committee of inspection or the liquidator and the committee of inspection fail to agree:

   (i)by resolution of the creditors; or

   (ii)if no such resolution is passed—by the Court.

10. In examining the Court’s role in the determination of remuneration for a deed administrator/liquidator, the decision of Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 (Venetian Nominees) is a useful guide. In that matter, Kennedy and Ipp JJ, with whom Wallwork J agreed, said the following:

    As a starting point, in our view, the onus is on the provisional liquidator to establish that the remuneration claimed is fair and reasonable. It is the function of the court to determine the remuneration by considering the material proffered and bringing an independent mind to bear on the relevant issues. The initial task is to consider whether, prima facie, the provisional liquidator has made out a case for the determination of the amounts claimed. The fact that there may be no person who objects to the claim, or any part of the supporting testimony, or that objectors advance unsustainable arguments, or do not properly formulate their objections, cannot detract from the court’s duty in this respect. The judicial officer conducting an inquiry under s473(2) is required to make an independent determination of the remuneration claimed, even if there is an absence of objectors, or appropriately detailed objections, or objections advanced on arguable grounds. Of course, once the court is satisfied that the provisional liquidator has made out a prima facie case that the remuneration claimed should be allowed, the absence or inappropriateness of points taken by objectors becomes relevant.

    Should the provisional liquidator fall [sic] to provide adequate evidentiary material to enable the court to determine whether the amounts claimed are fair and reasonable, no order should be made: Re Solfire Pty Ltd (In liq) (No 2). Thus, for example, the mere listing of the persons who performed the work, the hours worked by each, and the amounts claimed, may well be insufficient material for the court to come to a proper decision: Re Reiter Bros Exploratory Drilling Pty Ltd.

    Ordinarily, to commence the proceedings, the provisional liquidator will provide the court with a statement of account reflecting in appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly. The statement of account should also reflect in appropriately itemised form the expenses incurred by the provisional liquidator, accompanied where necessary by voucher proof. Sufficient detail should be provided to enable the court to determine whether the disbursements were reasonably incurred and that the amounts claimed are reasonable.

    The statement of account should be verified by affidavit. When the remuneration claimed involves work carried out by the provisional liquidator and his staff, the verifying affidavit need state merely that the work described in the statement of account was done by the provisional liquidator or under his personal supervision, and that from personal knowledge or from the records kept by the provisional liquidator or his firm, or from some other appropriate source, he believes that the information contained in the statement of account is correct. When disbursements are claimed, the affidavit should verify that they were incurred and, if necessary, why they needed to be incurred.

1. This is the exercise that Macks Advisory has purported to undertake, by way of the first Burford affidavit, ie to establish that the remuneration claimed is fair and reasonable.  In this affidavit and its voluminous exhibits, they have provided their itemised statements of account, with detailed summaries of the work done, under various categories.  In addition, they have provided details of the time spent on each item, the person who carried out the work, and the charge out rate of that person.  They have also provided other material and commentary of the work done, to demonstrate the challenges of the administration.  They assert that the material provided is sufficient to establish a prima facie case for determination in the amount claimed.

2. In contrast, the objectors argue that by failing to depose to the purpose and reasoning behind the actions carried out and the decisions made, Macks Advisory has not overcome this threshold question.  Their position is that, in the absence of an explanation as to why tasks were done, what they were aimed to achieve, and an analysis of why the work was necessary, there can be no finding that Macks Advisory has made out a prima facie case for determination of remuneration as claimed. 

3. The Full Court of the Supreme Court of Western Australia, in the matter of Conlan v Adams [2008] WASCA 61, drew the following principles from Venetian Nominees:

   [28] The court in Venetian Nominees considered the remuneration provision in s 473(2) of the Corporations Law which, although it related to a provisional liquidator, is in materially the same terms as s 473(3) of the Corporations Act. The court identified the relevant principles and procedures as follows. A liquidator is entitled to remuneration that is fair and reasonable and the liquidator carries the onus of establishing that entitlement. The court also said that in determining the remuneration to which a liquidator is entitled:

   -a summary procedure is involved, not unlike that applicable to the taxation of solicitors’ costs, which is not necessarily subject to all the rules that would apply in an action;

   -it is the function of the court to determine the remuneration by considering the material proffered and bringing an independent mind to bear on the relevant issues, the initial task being to consider whether, prima facie, the liquidator has made out a case for the determination of the amounts claimed. The court must make an independent assessment even in the absence of objectors, appropriately detailed objections or arguable objections;

   -if the liquidator has made out a prima facie case for determination and there are objections, special directions should be given as to the mode in which the account is to be taken and the procedure set out in O 45 of the Rules of the Supreme Court 1971 (WA) (Rules) should as far as possible be adopted;

   -an objector should specify the grounds of objection well in advance of the hearing.

   -if cross-examination of the liquidator is allowed, notice should be given of the points on which the liquidator will be cross-examined.

   …

   [30] In taking an account, the claimant bears the onus of establishing that a claimed item was not wrongly charged (a falsification in the old terminology): Ide v Ide (2004) NSWSC 751; (2004) 184 FLR 44 [23]–[25]. By analogy, the liquidator bears the onus of establishing a prima facie case for determination.

   [31] The expression ‘prima facie’ is used in Venetian Nominees to mean that the claimant’s evidence is sufficient to enable the court to determine whether the claimed remuneration is fair and reasonable. So, for example, there must be evidence relating to the work done by particular persons, how long it took to do the work, their hourly rate and the reasonableness of the rate.

   [32] However, it cannot be intended that the reasonableness of each item of work undertaken should positively emerge solely from the description of the item in the schedule. If in doubt as to the reasonableness of an item, reference can and should be made to relevant documents in the liquidator’s possession relating to the work the subject of the claim: Re Solfire Pty Ltd (in liq) (No 2) [1999] 2 Qd R 182 at 191; Re Medforce Healthcare Services Ltd (in liq) [2001] 3 NZLR 145 [33]–[36]. That is consistent with the procedure for taking accounts which permits summarised accounts in accountants form with access to the relevant parties to all source documents (Atkin’s Court Forms 2nd ed Vol 1 (1992 issue) at 612). Moreover, if the evidence is sufficient and there are objectors to the claim, then as with taking an account, the outcome of the application will ordinarily depend on the decision-maker determining the issues in contention between the parties particularly if it is apparent that the issues identified by the parties reflect a proper understanding of the guiding principles.

   [33] I agree with Owen J’s observations in Conlan (as Liquidator of Oakleigh Acquisitions Pty Ltd) & Ors [2001] WASC 230 [25] that in determining whether the information supplied by the liquidators meets the requirements in Venetian Nominees regard should be had to the purpose of an account which is, among other things, to enable a person interested in the fund from which fees will be drawn to ascertain whether there are matters to which objection should be taken.

4. I note, too, the observations made Gardiner AsJ in Re Traditional Values Management Limited (in liq) (No 2) [2015] VSC 126:

   [18] ... A convenient summary of the approach to be taken is contained in the decision of Davies J in Thackray v Gunns Plantations.[1] It is a summary procedure and the initial task of the court is to consider whether the liquidator has made out a prima facie case on the evidence before the court that the remuneration claimed is fair and reasonable. There is no absolute rule regarding the amount of detail required to support such a claim but it should enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken. If a prima facie case is established, the application should provide for an objection procedure to enable objections to be made. If there are objectors, the court should then establish the validity of those objections.

   [19] The Remuneration Report[2] is a voluminous document, and occupies three lever-arch folders. It is in much the same form as the remuneration report exhibited to Mr Handberg’s fifth affidavit which was the subject of consideration in the earlier application.[3] The first several pages of the document provide details as to the category of work undertaken, details as to the major tasks undertaken by the liquidators, split up into 15 job codes which are in turn succinctly described, followed by a spread sheet which summarises the remuneration sought in respect of the various job codes. There then follows in respect of each job code a more detailed description of the work undertaken in respect of that job code, and a spread sheet which sets out the time and costs charged broken down by identification of the staff members concerned. Where the rate for a staff member has changed during the period of the time for which remuneration is sought, the table breaks up the respective amounts and periods. Tables 1 and 2 to the report identify each staff member engaged in the liquidation from Mr Handberg and Mr Morgan down to junior clerical staff. It identifies them by their rank in the hierarchy of the liquidator’s firm, the hourly rates charged by them, the total of the hours they were engaged and the amount for which remuneration is sought. The report contains spread sheets which make up the bulk of the exhibit. A typical entry includes the date the work was performed, the job code, the person who performed the task in question, the time occupied, the hourly rate charged, and, under the remarks column, a succinct narrative of what actual work was involved in the claim.

   [20] In my view, the material contained within the Remuneration Report satisfies the “prima facie” criterion in Venetian Nominees Pty Ltd v Conlan[4] and the other authorities referred to in my earlier decision. In Conlanas liquidator of Rowena Nominees Pty Ltd (receivers and managers appointed) in liq v Adams[5] McClure JA, as to the meaning of “prima facie” in this context stated:

   The expression “prima facie” is used in Venetian Nominees to mean that the claimants’ evidence is sufficient to enable the court to determine whether the claimed remuneration is fair and reasonable. So, for example, there must be evidence relating to the work done by particular persons, how long it took to do the work, their hourly rate and the reasonableness of the rate.

   [21] I consider that, as with the Remuneration Report the subject of the previous application, the report contains sufficient information to enable the job code and overall purpose behind the work associated with it to be contextualised, and does so by reference to tasks carried out in connection with particular transactions and issues with which the liquidation of TVM involved. The report also enables a determination to be made as to whether the liquidators have properly delegated work to the appropriate staff member. It does this by breaking down the hours spent by each of the liquidator’s staff members and their respective hourly rates. Like the material put forward in the previous application, I consider it difficult to perceive what further information could be provided, particularly when one has regard to the cost and utility of providing such material. Further, I consider that the Remuneration Report complies with the requirements of r 9.4(7) of the Supreme Court (Corporations) Rules 2003 and satisfies me that the Remuneration (and remuneration) is prima facie fair and reasonable.

   [1] (2011) 85 ACSR 144 [60].

   [2] Exhibit GNH-45 to Mr Handberg’s seventh affidavit.

   [3] Exhibit GNH-39.

   [4] (1998) 20 WAR 96 (“Venetian Nominees”).

   [5] (2008) 65 ACSR 521 [31].

5. The role of the Court, therefore, in the first instance, is to examine the material relied on by the administrator/liquidator, to determine whether a prima facie case for remuneration has been made out.  Only once it has been determined that this threshold question has been answered in the affirmative does the Court then look to the objections made in relation to the various claims made. 

   Has Macks Advisory made out a prima facie case for the determination of remuneration as claimed?

6. As noted above, the objectors claim that in the absence of any discussion or explanation of Macks Advisory’s objectives in relation to the tasks undertaken, there can be no finding that the threshold question should be answered in favour of Macks Advisory.  They say that, despite the voluminous material provided, the affidavit material does not disclose a cohesive plan or road map for the administration to show that the actions taken were assessed and considered as necessary and beneficial to the administration.  They appear simply as disjointed tasks and not part of a larger plan for the benefit of the company or its creditors.  While I accept in principle that the actions in the administration need to be part of a larger plan for the conduct of the administration as a whole, I do not accept that this has not been demonstrated in this case. 

7. The first Burford affidavit and the affidavit of Burford filed on 13 August 2015 (the fourth Burford affidavit) provide a commentary on the conduct of the administration generally.  They outline the various steps taken and tasks completed, with the challenges faced.  It is true to say that at no time does Burford in either the first or fourth Burford affidavit outline the purpose of a particular action, or the expected goal to be achieved by the completion of the task.  The affidavits, however, cannot be read in isolation of the material exhibited to them, and this material amply outlines the plan or roadmap for their actions.  I note, for example, the following documents:

   ·       Minutes of first meeting of creditors held 16 July 2013 (Exhibit IWB-3) – amongst other things:

   oMacks Advisory provided a background to the administration, and discussed the decision to continue commercial projects to facilitate debtor recoveries;

   oMacks Advisory outlined the assets of the company and the steps being taken to realise those assets;

   oThe position of the secured creditor (Westpac) and the employee priority claims were discussed.

   ·       Minutes of first meeting of committee of creditors held 25 July 2013 (Exhibit IWB-4) – amongst other things:

   oMacks Advisory provided a timetable with key dates for the administration;

   oThe progress of the realisation of assets was discussed;

   oDebtor issues were discussed;

   oA possible DOCA was discussed.

   ·       Minutes of second meeting of committee of creditors held 29 July 2013 (Exhibit IWB-4) – amongst other things:

   oMacks Advisory provided an update on the sale and recovery of assets;

   oThe deed proposal was discussed.

   ·       Section 438D Report (Exhibit IWB-5) – amongst other things:

   oThis report outlines the issues presented to the administrators on taking control of the company.  I do not provide detail of the matters raised in this report because of its confidential nature.

   ·       Section 439A Report (Exhibit IWB-6) – amongst other things:

   oThis report provides a detailed summary of the financial position of the company;

   oIt provides a summary of the administrators’ role and the purpose of the administration;

   oIt provides a summary of the activities of the administrators to the date of the report;

   oIt outlines the assets of the company and the tasks undertaken to realise those assets;

   oIt discusses the debtor and creditor position of the company;

   oIt provides the administrators’ recommendations and reasons for those recommendations;

   oIt outlines the DOCA proposal, summarises the goal of the DOCA, and provides some commentary on the DOCA proposal.

   ·       Minutes of second meeting of creditors held 8 August 2013 (Exhibit IWB-7) – amongst other things:

   oMacks Advisory outlined the position of the company and what would be in the best interests of creditors;

   oMacks Advisory outlined the key aspects of the DOCA and discussed concerns raised by the committee of creditors;

   oMacks Advisory discussed the advantages of the DOCA, and also concerns held by them;

   oThe DOCA proposal was approved by the meeting with Macks Advisory appointed as deed administrators.

   ·       Minutes of first meeting of committee of inspection held on 26 September 2013 (Exhibit IWB-9) – amongst other things:

   oMacks Advisory outlined the current debtor status, the receipts and payments made on behalf of the company, the position of the secured creditor, the ongoing management of employee claims, and the lodgement of ATO documents;

   oMacks Advisory advised the meeting in relation to DOCA breaches;

   oMacks Advisory outlined ongoing correspondence with Maka’s lawyer, Mr Steven McNamara (McNamara) in relation to various issues, including the performance of obligations under the DOCA;

   oMacks Advisory discussed relevant DOCA deadlines.

   ·       Minutes of second meeting of committee of inspection held 18 December 2013 (Exhibit IWB-9) – amongst other things:

   oMacks Advisory confirmed the goal of the DOCA was to pay all creditors 100 cents in the dollar;

   oMacks Advisory provided advice in relation to the payment of the secured creditor and priority creditors;

   oMacks Advisory advised in relation to the increased claim by unsecured creditors and the problems this caused for the DOCA;

   oMacks Advisory outlined the role of Ms Tanya Boddey in the administration, what her duties comprised and how she was paid.

   ·       Report to creditors dated 30 January 2014 (Exhibit IWB-10) – amongst other things:

   oThe report reiterated the purpose of the DOCA;

   oMacks Advisory reiterated the major obligations of Maka and Thermal Clad under the DOCA;

   oThey outlined breaches of the DOCA to date;

   oThey outlined the asset of position of the company;

   oThey detailed dividend distribution;

   oThey explained Maka’s proposal to amend the DOCA;

   oThey provided an estimated return to creditors should the company be put into liquidation; and

   oThey outlined their recommendations in relation to the proposal to amend.

   ·       Minutes of third meeting of creditors held 20 February 2014 (Exhibit IWB-12) – amongst other things:

   oThe meeting discussed the continuation of the DOCA and McNamara’s belief that, contrary to the view of Macks Advisory, there had been no breaches of the DOCA; and

   oMacks provided an explanation as to why he used his casting vote in favour of terminating the DOCA.

   ·       Minutes of first meeting of committee of inspection held on 19 June 2014 (Exhibit IWB-14) – amongst other things:

   oMacks Advisory explained the purpose of the meeting;

   oMacks Advisory explained the inclusion of an estimated completion date for the liquidation;

   oIn response to a question from one of the committee members, Macks Advisory explained the reason for the fees being high, and the commercial value to creditors in the work done; and

   oThe committee considered and rejected an offer by Maka and Thermal Clad to settle all outstanding claims against them and for their purchase of the company’s plant and equipment.

   ·       Circular to creditors dated 21 May 2015 (Exhibit IWB-36-5) – amongst other things, the circular:

   oProvided creditors with an outline of the matters to be dealt with at the annual creditors’ meeting to be held on 5 June 2015;

   oProvided creditors with a brief summary of the status of various activities such as trade debtor collection, the preference claim, and the realisation of plant and equipment.

   ·       Minutes of meeting of creditors held 5 June 2015 (Exhibit IWB-36-6) – amongst other things:

   oMacks Advisory set out their role as liquidators in the winding up of the company;

   oMacks Advisory provided information on the claims that they had identified on behalf of the company and the commerciality of pursing these claims;

   oMacks Advisory provided an update on the progress of the debt recovery proceedings against Maka and Thermal Clad, including their estimated costs for the trial; and

   oMacks Advisory provided advice in relation to their request for approval of fees.

8. In light of the issues raised above I cannot accept the statement, made at paragraphs 7 – 8 of the objectors’ submissions.  It is clear from the material set out above, as well as from the correspondence and other material exhibited to the first and fourth Burford affidavits, that there was always a clear goal for the administration.  The actions of Macks Advisory are outlined at length to creditors, with a rationale for those actions being taken.  Many of the actions are discussed at meetings, explanations are provided and it is clear why tasks are being carried out.  In addition, there is on a number of occasions separate correspondence to Maka and/or McNamara advising what actions are to be taken, providing deadlines, and seeking assistance (see, for example, the correspondence during September 2013 between Macks Advisory and Maka, McNamara and Maka’s staff, exhibited at IWB-23-27).

9. It is disingenuous to suggest that, simply because Burford has not provided a narrative in a particular form in his affidavit, that Macks Advisory was acting in a directionless and purposeless way, rendering the tasks they performed unreasonable.  A close reading of the material makes it very clear what they were attempting to achieve through their actions.

1. Do the remuneration reports provide sufficient detail to make out a prima facie case for remuneration?  In examining this question I will refer specifically to the reports exhibited at IWB-36-5, as they are the most recent reports, and all of the reports are in a similar form.

2. The report commences with a statement of the period of time for which remuneration is sought.  I note that the report deals with a request for remuneration for the period 30 August 2013 to 19 June 2015, a more extensive period than this application.  The report then provides a brief summary of the work undertaken in the liquidation and a summary of the remuneration already paid and approved.  The time periods to which this application relates are outlined in the information provided for resolution 1 (the DOCA period) and resolution 2 (the liquidation period).

3. In relation to each time period, the report sets out a summary of the tasks performed in relation to different task areas, being assets, creditors, employees, trade on, investigation, dividend, and administration for the DOCA period and the same areas, minus trade on and dividend for the liquidation period.  The report then provides a short description of the tasks undertaken in each area, and then a more detailed explanation of those tasks.  In addition, the hourly rates of each staff member are provided, with a break down, by staff member of the time each person has spent in individual task areas.  In addition, at Exhibit IWB-36-11 and Exhibit IWB-36-12 an itemised spreadsheet of the work carried out in each period is provided, with a notation of the date, the individual carrying out the task, the task area, a brief comment the amount charged, and the time spent.  These documents usefully provide the comments of the objectors, with an indication of where Macks Advisory has assessed their objections and reduced their claim. 

4. In addition, Macks Advisory has provided a copy of the third edition of the ARITA Code of Professional Practice.  Burford deposes in paragraph 34.5 of his fourth affidavit that the remuneration reports and the reports at Exhibit IWB-36-11 and Exhibit IWB-36-12 have been prepared in accordance with the requirements in clauses 15.1 and 15.3.2 of that Code. 

5. On the basis of the material provided, I am of the view that Macks Advisory has established a prima facie case for determination of remuneration, in line with the requirements set out in the authorities referred to at paragraphs [13] and [14] hereof.  There is a detailed breakdown of the work performed, it is possible to see what work has been delegated to junior members of staff and when read in context with the other material referred to above, the purpose and intent behind the work is plain.

6. I now turn to the objections raised by the objectors.

7. The objections raised by the objectors can be summarised as follows:

   ·    Duplication of work performed during administration period;

   ·    Remuneration capped by DOCA;

   ·    Proportionality;

   ·    Claims excessive given the complexity of the matter;

   ·    Claims of remuneration taken as a whole over the periods of administration, deed administration, and liquidation are excessive.

8. There is some overlap between each of these objections.  I will deal with them in turn.

   Duplication of work performed during the administration period:

9. The objectors note that Macks Advisory were the administrators of the company prior to the DOCA period, and were also the administrators, and then the deed administrators of East and Portisle.  They say that they put Macks Advisory to proof that there was no duplication of work previously performed for the company, East or Portisle, for which they have received remuneration.  This is not helpful.  Having found that Macks Advisory has established a prima facie case for remuneration as claimed, it is of little assistance for the objectors to state, as they do at paragraph 22 of their Response to Plaintiffs’ Claim for Remuneration (FDN 8), that they “put the Plaintiffs to proof on the issue of the work the subject of the Application not being duplication of work previously performed and for which they have already been remunerated or otherwise sought approval”.  They do not identify any task areas, time periods, or individual items where they consider that duplication of work has occurred.  The failure to provide any substance or particularity to this objection precludes Macks Advisory from addressing the objection by calling evidence, providing further affidavit material, or indeed, reducing its claims made.  Even in the spreadsheets attached to FDN 8, where “duplication” is cited as the ground for objection, it is not specified where the duplication has occurred, what time period it relates to, or the extent of the duplication.  Indeed, where “duplication” is cited as the grounds for objection it appears that those items can be related back to other items in the same period; for example, on page 1 of appendix 1, the following entry is shown:

Timesheet End Date 2/09/2013 Emp Name Sheik Muhideen Task Asset Realisation and Security Comment review correspondence from Bolivar
reg debt status Response Insufficient detail provided, duplication Charge 105.00 Hours 0.30

This appears to relate to the entry two lines above:

Timesheet End Date 2/09/2013 Emp Name Ian Burford Task Asset Realisation and Security Comment review corresp re
Bolivar contract issues Response Insufficient detail provided, excessive Charge 294.00 Hours 0.60

1. The other entries which allege duplication are similar in that they appear to relate back to previous items within the same time period

2. As a general category, I reject this as a valid objection, without further particularisation.

   Remuneration capped by the DOCA:

3. In FDN 8, the objectors assert that remuneration for the deed period was, by the DOCA itself, capped at $50,000.00.  It is the position of Macks Advisory that this did not amount to a determination of their remuneration in this amount, but was merely a pre-approval cap, and formal approval for remuneration was required once the remuneration amount exceeded this figure.  This matter was not addressed in the objectors’ written submissions, nor was it pursued in their oral submissions; thus I accept the construction of Macks Advisory of this clause as a pre-approval cap.

   Claims excessive given the complexity of the matter:

4. In this regard, the objectors assert that the work required for the deed period and liquidation period was not particularly complex, given the small number of secured creditors (one), only one preference claim, and the relatively small number of other issues to be dealt with (ie the debt recovery litigation, the claim relating to the plant and equipment and the insolvent trading claim).  They refute the suggestion that the administration was made more complex by the attitude and conduct of Maka and McNamara.  They say that the issues with the books and records were no different to problems faced by many administrators, and should not justify a finding that the administration in this matter was more than run-of-the-mill.

5. I disagree.  The extensive material exhibited to the first and the fourth Burford affidavits makes it clear that the attitude of Maka and McNamara was obstructive and at best unhelpful.  The material demonstrates that the staff of Macks Advisory were required to convey the same information or advice on multiple occasions to Maka and to others on his behalf.  The material is included in the exhibited material on multiple occasions, because it was provided to Maka or others on his behalf on multiple occasions.  The failure of Maka to provide the report as to affairs in a timely manner compounded the difficulties faced.  While it is not surprising to confront books and records in a state of disarray, in this matter Macks Advisory were dealing with financial documents which they discovered to be deliberately falsified, a very different matter to simply poorly kept records.  Maka’s continued dealings with creditors outside the terms of the DOCA and inability to report to Macks Advisory as to either his dealings with creditors or debtors clearly made this administration much more difficult and time consuming than it needed to be.  Perhaps the most telling example of the objectors’ conduct in this regard is their application for an injunction to prevent the sale of plant and equipment during the administration of the company.  I am of the view that it is inappropriate for the objectors now to object to the costs incurred by the administrators on the basis that they are excessive, in circumstances where the conduct of the objectors themselves led to a substantial increase in costs.

6. I note, too, the submissions made at paragraph 18 of the objectors’ submissions:

   18.Mr Burford also places emphasis on the conduct and involvement of the director’s former solicitor, Mr Stephen McNamara of Commercial and General Law, including by deposing to the need to “[attend] upon Mr Maka and his solicitor Mr McNamara … and/or his accounting advisors, including numerous internal reviews and discussions regarding issues raised actions undertaken”.[6]In addition to the matters at 17 above:

   18.1. these comments must be viewed in the context of Mr McNamara’s involvement in the subject matter of the dispute in Viscariello v Macks [2014] SASC 189 and his role as the solicitor for Mr Viscariello in that litigation;

   18.2. Mr Macks has been an active participant in the administration, DOCA period and liquidation of the Company, charging 58.80 hours during the period 4 July 2013 – 29 July 2013: IWB6 p 167; 42.10 hours of time during the DOCA Period, 82.40 hours during the Liquidation Period, and 24.80 hours in the period from 1 February 2015 to 31 May 2015;[7] and    

   18.3. There is nothing in the material filed by the Plaintiffs which indicates that account has been taken of the nature of the relationship to ensure that work was not unnecessarily done or time unreasonably spent by the Plaintiffs and their employees reviewing, discussing or responding to the involvement of Mr McNamara, or that Mr Macks was less active in dealing with those matters than he ordinarily would have been.

   [6] First Burford Affidavit at [57.10] and [80.10]; see also [57.11], [74], [80.11], and [90]

   [7] IWB36 tab 5 p90-94

7. I do not know what conclusion the objectors suggest should be drawn from this submission, and whether the inference sought to be made is that the conduct of this administration was somehow influenced by other matters being dealt with by Macks at the time.  If this is the contention that the objectors seek to make, then to do so obliquely, without any evidence that this is the case, is in my view, inappropriate.

   Claims of remuneration taken as a whole over the periods of administration, deed administration, and liquidation are excessive:

8. It is the position of the objectors that, when viewed as a whole, the remuneration of Macks Advisory for the administration period, the deed period and the liquidation period is excessive.  They note that in total, Macks Advisory has been paid, or has sought approval of, remuneration in the following amounts:

   ·    From appointment to the commencement of the DOCA –  $244,621.00;

   ·    For the DOCA period – $137,503.00;

   ·    For the liquidation period –

   o6  March 2014 to 31 January 2015 –  $311,138.25

   o1 February 2015 – 19 May 2015 – $123,177.60

   o20 May 2015 to 19 June 2015 – $70,000.00;

   o1 July 2015 to completion of liquidation – $50,000.00 to $100,000.00.

9. Thus the total remuneration paid to Macks Advisory, if approved as sought, would be $986,439.00 (see objectors’ written submissions paragraph 13).

10. I will deal with this objection, when dealing with the proportionality objection, as I consider this is effectively a component of that matter; that is, the real objection is that the amount claimed is excessive when taken as a whole, and in light of the overall value to creditors.

11. While I have had some difficulty in dealing with the objections made, given their lack of particularity, I note that I have a duty to make an independent assessment of the claim for remuneration, despite the absence of any cogent or valid objection (Venetian Nominees). Thus, I will assess the claims made in light of the provisions of s 449E and s 473(10) of the Act. I note that the matters to be taken into account by the Court in determining whether remuneration is reasonable are the same in each case. I will deal with each of these criterion in turn. In considering these criteria, I have had regard in particular to the spreadsheets provided at Exhibit IWB-36-10 and Exhibit IWB-36-11 of the fourth Burford affidavit.

    (a) the extent to which the work performed by the administrator was reasonably necessary

12. Having regard to the itemised schedule of work performed that has been provided, with the significant affidavit material explaining the progress of the administration, I do not consider that it can be seriously argued that the work undertaken was not reasonably necessary.  The objection made on many occasions on the spreadsheet by the objectors is that insufficient information has been provided as to the description of the work done to allow assessment of its necessity or reasonableness. In considering this criteria, I note particularly the comment of Gardiner AsJ in Barbo Group Pty Ltd trading as Alice Roof Tiles v Investment & Construction Enterprise Pty Ltd [2012] VSC 71, where it was said:

    [21] In coming to that conclusion, I consider that there is a balance to be struck in the level of the detail given in the narration describing the tasks and other details on the one hand and the cost and utility of providing such material on the other. The spreadsheets prepared include details as to the date the identified tasks were performed, the person who performed them, the hourly rate at which that person’s time was charged, and a description of the task. [Citation omitted.]

13. I consider that the entries as described provide sufficient information to allow a decision to be made as to their reasonableness and necessity.  They describe the sorts of activities that one would expect administrators to be carrying out, and taking into account the difficulties already outlined above with the relationship with Maka and McNamara, do not indicate an unacceptable level of duplication.  In reaching this view, I also take into account the material exhibited at IWB 36-5, the circular to creditors dated 21 May 2015, which includes the remuneration request approval report for the periods in question.  Particularly useful are the tables commencing on page 76 and 79, which provide a summary by task area of the work performed, and on pages 90 and 91, which provide a break down of the work done, by employee.  In this regard, it should be noted that just over one-third of work performed during the deed period was carried out by Ms Boddey while just under a quarter of the work was performed by employees below the level of director.  Of the work performed during this period, just over a third was performed by either Macks or Burford personally.  For the liquidation period, just over half of the work is performed by Ms Boddey, with only 22% of the work being carried out personally by Macks and Burford.  This indicates that work was being appropriately delegated to junior members of staff.  Thus I conclude that that work performed was reasonably necessary.

    (b) the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary

14. I do not address this criterion on the basis that I am not asked to determine future remuneration.  However, I will deal with the overall cost of the administration when I address the proportionality objection.   

    (c) the period during which the work was, or is likely to be, performed by the administrator

15. The two periods in question are approximately 5 months and 11 months respectively.  Consideration of the various periods does not assist in the determination of reasonableness.  The time spent was neither inordinately long, as in ASIC v Groundhog Developments Pty Ltd [2011] QSC 263, nor so short as to raise serious questions as to the amount of time claimed to have been spent in the time available.

    (d) the quality of the work performed, or likely to be performed, by the administrator

16. There is no suggestion that the work performed by Macks Advisory was not of sufficient quality or of a quality that should in any way result in a reduction in remuneration.  On the contrary, and based on their statutory requirements, Macks Advisory has reported in accordance with their obligations, realised assets, pursued legal action which has resulted in an increased return to creditors and has undertaken investigations which may lead to further returns to creditors.  There is no suggestion that assets have been squandered, that actions have not been pursued which should have been, or that legal action has been commenced where it was impractical, improvident or uncommercial to do so.

    (e) the complexity (or otherwise) of the work performed, or likely to be performed, by the administrator; and

    (f) the extent (if any) to which the administrator was, or is likely to be, required to deal with extraordinary issues

17. I deal with these two factors together.  I note that in the ordinary course, this administration would not be regarded as particularly complex or as presenting extraordinary issues, given the number of creditors, both secured and unsecured.  However, these factors cannot be dealt with in isolation to the actions of Maka and McNamara.  The documents relied on by Macks Advisory indicate a significant level of obstruction to the administrators in carrying out their tasks, from failing to comply with their statutory obligations, such as providing the report as to affairs in a timely manner, to the repeated requests for information and assistance in relation to debtors, the dealing with (and not accounting for) creditors outside of the terms of the DOCA, and seeking an injunction to prevent Macks Advisory from carrying out their role as administrators.  I accept that this last action occurred before the periods under consideration, but it constitutes a useful example of the difficulties faced by Macks Advisory throughout the entire period.  As a result, while I do not consider that the administration, in itself, was particularly complex, nor were Macks Advisory dealing with extraordinary issues, the conduct of Maka and McNamara rendered it so.

    (g) the extent (if any) to which the administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case

18. There is nothing to suggest that Macks Advisory was required to accept a higher level of risk or responsibility than would ordinarily be the case.

    (h) the value and nature of any property dealt with, or likely to be dealt with, by the administrator

19. It must be acknowledged that in this matter, the property and assets dealt with by Macks Advisory were not of a value or nature so as to make the administration one which, in the ordinary course, was more difficult than the standard administration.  Nonetheless, I am of the view that, again, this factor must be examined in the context of the circumstances as a whole.  The conduct of Maka and McNamara in not co-operating with Macks Advisory, as set out above, made the administration more difficult than it should have been, given the property involved.

    (i) whether the administrator was, or is likely to be, required to deal with:

    (i) one or more receivers; or
    (ii) one or more receivers and managers

20. This is not a relevant consideration in this matter.

    (j) the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors

21. Again, as with other considerations, this consideration can only be assessed in light of the conduct of McNamara and Maka.  As set out above, while the number of creditors was small, the conduct of McNamara and Maka resulted in far more work having to be performed by Macks Advisory than might otherwise have been the case.  

    (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 administrator in performing the work; and
    (ii)  whether the total remuneration payable to the administrator is capped

1. I have addressed these considerations at [40]-[41] and [31] respectively above.  

   (l) any other relevant matters

2. I do not consider that there are any other relevant matters to be taken into account.

   Proportionality

3. All of the considerations set out above need to be assessed in light of the proportionality of the remuneration claimed as against the benefit to creditors of the work carried out.  It is the position of the objectors that the amount claimed by Macks Advisory is unreasonable on the basis that it is disproportionate to the overall outcome of the administration, in that Macks Advisory is ultimately a greater beneficiary from the administration than the various creditors.  This is on the basis that, in total, they would have received remuneration of close to $1,000,000.00, while the return to creditors is estimated at being only between 41 and 61 cents in the dollar, or a total return of approximately $1.7m.  This return will only be available to creditors in the event that the insolvent trading claim and the preference claim are successful.  In the event that these actions are unsuccessful, then the return to creditors would be significantly less than the fees paid to Macks Advisory.  They submit that it is not enough to determine that the work done and hours spent were reasonable and then to multiply those hours spent by an approved hourly rate.  Even if the work and hours are reasonable, the amount claimed may be excessive depending on the ultimate return to creditors.  

4. The notion of proportionality was touched on briefly by Davies J in Thackray v Gunns Plantations Ltd [2011] VSC 380, where he said (at [64]):

   [64] … Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the “reasonableness” of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the Court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim. [Citations omitted.]

5. In this matter, Davies J found that given the significant nature of the receivership, and taking into account the large amount of debt, both secured and unsecured, and the geographical spread of assets, the remuneration claimed was proportionate to the value of the assets protected. 

6. The principles referred to are further addressed by Brereton J in Re AAA Financial Intelligence Ltd (in liquidation) (No 2) [2014] NSWSC 1270. Brereton J, in dealing with a situation where the liquidator’s claim for remuneration and expenses would have exhausted available funds for creditors, examined the question of whether time reasonably spent at a standard hourly rate provides the proper measure of reasonable remuneration. In examining this question, he said the following:

   [36] … But the profound concern that the liquidators appear to be the dominant beneficiaries of the administration remains. It must be born [sic] in mind that the fundamental rationale of a liquidation is to get in and realise the assets of the company, establish who are the creditors and contributories, and distribute the assets for the benefit of the creditors and, to the extent of any surplus, the contributories. Indeed, as Ferris J explained in Mirror Group v Maxwell (at 648), liquidators are under a fiduciary duty to protect, get in and realise assets and property belonging to creditors or beneficiaries and pass it on to them, and in so doing are expected to exercise proper commercial judgment in carrying out their duties and to account both for the way in which they exercised their powers and for the property dealt with. Where the sole or dominant beneficiary of a liquidation is not the creditors but the liquidator, that fundamental purpose has not been achieved. While there are undoubtedly cases in which the proper pursuit of debtors and/or officers, in the apparent interest of creditors and/or the public, will prove unsuccessful or generate a return that will not exceed the liquidator’s reasonable remuneration and disbursements, claims for remuneration in cases where the liquidator appears to be the main beneficiary of the liquidation call for close scrutiny.

   He reached the following conclusion:

   [59] Reasonable remuneration cannot be assessed solely by the application of the liquidator’s quoted standard hourly rates to the time reasonably spent. While it is a relevant consideration, it is only one of several, and neither the default position nor dominant factor. It is to be considered in the context of other factors, including the risk assumed, the value generated, and proportionality. A commission or percentage basis of remuneration remains an appropriate one.

7. Thus, his view is that, given that the fundamental role of the liquidator is to realise assets for the benefit of creditors, remuneration should be determined taking into account the ultimate value to creditors, rather than simply the cost of the work performed. 

8. The notion of proportionality is picked up by Farrell J in the Federal Court of Australia in Warner, In the matter of GTL Tradeup Pty Ltd (in liq) [2015] FCA 323. She says, after considering with approval the decision of Brereton J in Re AAA Financial Intelligence Ltd (in liquidation) the following:

   [70] There is no doubt that the court must consider critically a liquidator’s proposed remuneration and be reticent to approve it in whole or part where it is evident that the liquidator has undertaken work the commercial justification for which is obscure over and above the liquidator’s capacity to earn fees from his or her pursuit. In evaluating whether particular activities should be pursued, the liquidator must have a primary purpose of maximising return to creditors, not maximising the return to the liquidator. However, Mr Bennett’s point is well taken that the Corporations Act does not require the liquidator to perform his or her role without prospect of remuneration or indemnity: see ss 545 (assets insufficient to meet expenses of winding up) and 568 (disclaimer of onerous property). While it is true that it is distasteful to the community and a cause of chagrin to creditors to see that the cost of administering the winding up of a company or trust estate results in little return to the creditors or beneficiaries, there is nonetheless a benefit to creditors and beneficiaries in having their position resolved and to the community of not permitting assets to remain unproductively in the hands of a defunct company for long periods. Without the prospect of reasonable remuneration, it is difficult to see why a liquidator would be willing to take on work which produces those results.

   [71] Whether remuneration is reasonable cannot be assessed solely by reference to time costing based on reasonable market rates or because it represents a particular percentage of the return which creditors achieve; each claim to remuneration must be evaluated on its own merits. In determining the value returned from the liquidator’s work, it is relevant to consider not only the absolute return to creditors but also whether the work for which remuneration is claimed was necessary to be done: not all necessary work results in a return to creditors, but that does not mean that remuneration for it is not reasonable or justified even at the price of a more limited return to creditors.

   [72] In this case, there is no suggestion that Mr Warner has done anything more or less than that required of him for the purpose of getting in moneys from providers into the Accounts, determining entitlement to moneys in the Accounts and taking necessary steps to ascertain the prospects of greater recovery from DMCC and the professional indemnity insurer.

9. Farrell J’s point here is that “value” to creditors can be measured in a number of different ways, not just by reference the return to creditors, or by reference to the actual cost to the liquidators.  In application of these principles, she approved payment to the liquidator of $83,095.82, from a pool of $139,093.69.

10. The Full Court of the Federal Court considered the notion of proportionality in Templeton v ASIC [2015] FCAFC 137 (Templeton).  In this matter, the Full Court was dealing with an appeal from a primary judge, who in turn was dealing with an application for review of a registrar’s decision.  In an application to determine receivers’ remuneration, the Registrar reduced the amount sought by the receivers.  On review, the primary judge, dismissed the review application.  The Full Court provided a very useful discussion of the concept of proportionality, and how it should be applied.  In particular, it said the following:

    [30] … Indeed, the question of proportionality is an anterior question to consider in order to determine whether time was reasonably spent. If the relevant work plan underpinning the actual time spent and the allocation of personnel at the requisite level of seniority was disproportionate to the nature, importance and complexity of the task and the benefit to be achieved from the task, then it might be said that the time spent on the task was not time reasonably spent.

    [31] The question of proportionality is a well recognised factor in considering the question of reasonableness. As the analogue of s 425(8) and like provisions expressly state, in having “regard to whether the remuneration is reasonable”, the court can take into account, inter alia, the quality and complexity of the work and the value and nature of any property dealt with as well as the question of time reasonably spent. Generally, an amalgam of the factors in s 425(8)(d), (e), (g) and (h) have as their unifying theme the concept of proportionality.

    [32] The question of proportionality in terms of the work done as compared with the size of the property or activity the subject of the insolvency administration or the benefit or gain to be obtained from the work is an important consideration in determining overall reasonableness: see Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004 at [18] and [19] per Brereton J, Re AAA Financial Intelligence Ltd (in liq) (No 2) [2014] NSWSC 1270 at [35], [36], [43] and [45] per Brereton J, Mirror Group Newspapers plc v Maxwell [1998] 1 BCLC 638 at 645 651 and 652 per Ferris J (also reported at [1998] BCC 324), Re On Q Group Ltd (in liq) [2014] NSWSC 1428 at [20] per Brereton J, Bank of Nova Scotia v Diemer [2014] ONCA 851 at [33], [45], [55] and [56] per Pepall JA, Re Roslea Path Ltd (in liq) [2013] 1 NZLR 207 at [108], [115] and [121] per Heath and Venning JJ, Brook v Reed [2012] 1 WLR 419 at [51], [86] and [87] per Richards J, referring to the relevant 2004 UK Practice Statement [2004] BCC 912, Re Korda; Re Stockford Ltd (2004) 140 FCR 424 at [47] per Finkelstein J, although we do not endorse his Honour’s obiter observations on the “lodestar” methodology as being the required approach as distinct from merely one practical way to proceed in a particular case.

    [33] Generally, in looking at proportionality, the value of the services rendered must be considered. We would endorse the observations of McLure JA in Conlan as liquidator of Rowena Nominees Pty Ltd (in liq) v Adams (2008) 65 ACSR 521 at [47] where her Honour observed:

    As to the performance of a task reasonably embarked upon, the work done must be proportionate to the difficulty or importance of the task in the context in which it needs to be performed. This is what is encompassed in assessing the value of the services rendered. Using an example from the law, the time spent by an appropriately qualified and experienced practitioner in drafting a statement of claim should be proportionate to the amount in issue.

    [34] Finally, even if one was not to address proportionality as an express factor, nevertheless its absence may have forensic significance in determining reasonableness. Another way to look at proportionality can be to conclude from a lack of proportionality between the cost of the work done relative to the value of the services provided that there has been overcharging or excessive remuneration claimed (see Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144 at [64] per Davies J).

11. Thus, the Court clearly endorses the principle of “value for money” if I may express it thus.  I note, in particular, the words in [33]:

    As to the performance of a task reasonably embarked upon, the work done must be proportionate to the difficulty or importance of the task in the context in which it needs to be performed. …

12. This raises the concept of two separate considerations occurring, first, the examination of whether the work was reasonably embarked upon, and, second, the time taken to carry out the work, and seniority of the person carrying out the work given the difficulty or importance of the task, in the circumstances of the matter at hand.  Thus, what is required is a complex assessment, encompassing not just the necessity of the work for which the remuneration was claimed but an assessment of all of the circumstances in which that work was provided.  While the overall outcome to creditors is one factor to be taken into account, it is not the only, or indeed the overriding factor to be considered.  As set out above, it is in an “important consideration” but not the only consideration in determining “overall reasonableness”. 

13. In addition, the Full Court provides a useful example of how the question of proportionality should be applied:

    [47] … her Honour appears not to have made like with like comparisons.

    [48] First, her Honour considered the value of the “Investors / Distribution” work in relation to the amount distributed of $6.1m and the amount to be distributed of $4.8m, totalling $10.9m. There is no difficulty with this. But in doing so, the comparator ought to have been the remuneration for work done in that category. Her Honour compared the amounts distributed or to be distributed with the “present claim, for over $4 million”. But the true comparator was the amount claimed for this category of work, being $2,369,274.50, alternatively that amount together with the previous remuneration claimed and allowed for that category of work.

    [49] Second, her Honour referred to the Receivers also having received about $14.2m. But that amount was in large part for remuneration done in relation to the secured creditors. It was not comparing like with like in looking at the proportionality for the remuneration claim in respect of the “Investors / Distribution” category. Now one could have looked at the total remuneration claim for work done in all categories as compared with the value of the work in all categories, but then the true comparator to the $14.2m would not just have been the $10.9m amount concerning distributions to investors, but would also need to have taken into account the value achieved or ascribed to the work undertaken concerning the secured creditors, which realised $92m.

    [50] For completeness, we should say that there is one submission of the appellants that we reject. It was said that in looking at the proportionality of the claim concerning the “Investors / Distribution” category, that the benefit of $10.9m should be assessed only against the $2.369m then claimed, without looking at the previous remuneration claimed for work in that category (this appears to have been $3.6m (T 24.45)). We would reject that contention. In our view, an appropriate proportionality analysis with respect to that category of work could properly consider either:

    (a)the total value of that work with the total remuneration claimed for that work over the entire period; or

    (b)the value of work performed of that type over the Relevant Period with the remuneration claimed for that work over the Relevant Period.

    [51] In that light, it would have been quite appropriate to compare the $10.9m “value” for the “Investors / Distribution” category with the total remuneration claimed for that work, not just limited to the work for that category claimed in the Relevant Period. Her Honour did not undertake that calculation; if she had, the relevant ratio of cost/benefit would have been in the order of 6 ($2.4m + $3.6m) to about 10 ($10.9m).

    [52] More generally, in considering the question of proportionality one also has to bear in mind two other points that may be overlooked. First, in performing some work, it may not be entirely clear ex ante what the precise benefit might be. A situation where work was being performed to preserve property of known value is quite different to the situation where work was being performed to achieve a return to creditors that was unclear. In the latter case, it might be inappropriate to use a hindsight analysis of known returns after the event to assess whether the work performed was proportional to the task; in such a situation one would look at the expected realistic return at the time the work was performed rather than actual outcomes. Second, some work may be sufficiently complex and labour intensive such as to justify a cost/benefit ratio of 6/10. After all, if the duty of the Receivers is to maximise returns and it is necessary to spend $0.60 to achieve $1.00, then proportionality is satisfied even if the ratio might be high.

14. What does that mean in the context of the matter before me?  Firstly, the overall return, or at least the anticipated return to creditors needs to be taken into account, but not to the exclusion of other factors.  Secondly, when assessing remuneration, it should be in light of the value of work in each category, as against remuneration claimed for that category, so as to compare “like with like”; alternatively, the entire value of the work across the entire period of the administration can be compared with the entire amount of the remuneration claimed across the entire period.

15. The objectors’ position is that the remuneration claimed is disproportionate, on the basis that the total amount claimed is $986,439.00 from commencement of the administration to its expected conclusion (not just taking into account the periods for which remuneration is sought in this application) as against a return to creditors of between 34 and 66 cents in the dollar (see fourth Burford affidavit at Exhibit IWB-36-7).  In my view, the objectors have not been comparing “like with like”.  They have taken the total amount of the remuneration either paid or claimed ($986,439.00) but only compared it to the potential return to unsecured creditors of anything between 61 cents in the dollar, to 0.0064 cents in the dollar.  They do not take into account the return to secured creditors (100 cents in the dollar) and priority creditors (also 100 cents in the dollar).  In addition, they say at [21] of their written submissions:

    … No evidence is before the Court of the prospects of success of the claims or the likelihood of a recovery if successful, and there is no explanation given as to why those claims have not been pursued prior to the Plaintiffs accumulating a total for remuneration of almost $1million.

16. At the time of making this application, the accumulated total for remuneration was not almost $1million; that is the estimate for total remuneration to the conclusion of the administration.  Macks Advisory has provided an estimate of the likelihood of success by providing a range of the possible recovery.  The objectors, however, are comparing the maximum amount claimed for remuneration over the entire administration, with the worst case scenario in terms of recovery and without taking into account the returns to secured and priority creditors.  The appropriate comparisons are either:

    ·    

    The total amount paid/sought over the entire period of the administration as against a reasonable, pragmatic estimate of all returns to all creditors over the entire period of the administration; or

    
    
    

    ·    The total amount paid/sought in relation to a particular category or time period (or both, ie a category of task for a particular period, for example, the DOCA period) as against the value to creditors of that task category over the period in question.

1. The objectors have not made either of these comparisons to assess proportionality.

   A comparison of the remuneration sought and the value achieved

2. Macks Advisory estimates that the overall return to unsecured creditors will be between 34 and 66 cents in the dollar.  Thus, the overall return to all creditors, including secured creditors and priority creditors will be greater than this, given that the secured and priority creditors have been paid out in full.  In contrast, Macks Advisory seeks a total remuneration of $986,439.00 over the entire period of the administration.  This amounts to between approximately 52% and 41% of the total assets realised.  The speculation of the objectors set out in paragraph 22 of their written submissions is not more than speculation of a worst case scenario of no recovery in relation to the insolvent trading claim. 

3. I am mindful of the words of the Full Court in Templeton, as follows:

   [52]…it might be inappropriate to use a hindsight analysis of known returns after the event to assess whether the work performed was proportional to the task; in such a situation one would look at the expected realistic return at the time the work was performed rather than actual outcomes. Second, some work may be sufficiently complex and labour intensive such as to justify a cost/benefit ratio of 6/10. After all, if the duty of the Receivers is to maximise returns and it is necessary to spend $0.60 to achieve $1.00, then proportionality is satisfied even if the ratio might be high.

4. These words cause me to take into consideration the following:

   ·    While the meeting of creditors did not approve the remuneration resolutions put by Macks Advisory, no other creditors have sought to be heard in relation to this application;

   ·    The major cause of action to be pursued by Macks Advisory (the insolvent trading claim) is against one of the objectors, Maka;

   ·    The work required by Macks Advisory and the resultant cost to the administration was increased by the actions of one of the objectors (Maka) and his advisor (McNamara).

5. In relation to this last point, it is, in my view, unseemly for Maka to object to items of work on the basis that they are excessive, unnecessary, duplication or disproportionate where a not insubstantial proportion of this work was required by the unhelpful approach of Maka and McNamara.  A reading of the material set out at Exhibit IWB-25 to Exhibit IWB-29 to the first Burford affidavit makes it clear that significant repetition of advice, information, and other work was required because of their approach.  In my view, a director of a company should not be in a position to behave in such a way as to increase the costs of an administration, but then object to the payment of those costs on the basis of proportionality.  If this were allowed, a recalcitrant director would be able to ensure that an administrator or liquidator would receive no benefit to themselves on undertaking such an administration. 

6. In making these comments I do not intend to indicate that the objectors should be punished or censured for their conduct by way of a remuneration determination in favour of Macks Advisory.  I make these comments to indicate that the conduct of the objectors is a relevant consideration in determining what work is reasonable in the circumstances, and how the context of an administration may result in an assessment of proportionality being dealt with in a different way in different circumstances.  By this I mean that actions of an administrator in one matter may be regarded as unreasonable, excessive or disproportionate, but in a different context may be regarded as reasonable.  In the circumstances of this matter, I conclude that a return of between 34 and 66% to unsecured creditors is proportionate to the remuneration claimed. 

7. As a result, I determine that Macks and Burford are entitled to remuneration as follows:

   ·    As joint and several deed administrators for the period 30 August 2013 to 6 March 2014 – in the sum of $137,000.00 plus GST; and

   ·    As joint and several liquidators for the period 6 March 2014 to 31 January 2015 – in the sum of $311,000.00 plus GST