MARTIN BRUCE JONES joint and several administrators GD PORK HOLDINGS PTY LTD (ACN 126 978 676) (ADMINISTRATORS APPOINTED) AS TRUSTEE FOR THE GD PORK UNIT TRUST
[2021] WASC 428
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: MARTIN BRUCE JONES joint and several administrators GD PORK HOLDINGS PTY LTD (ACN 126 978 676) (ADMINISTRATORS APPOINTED) AS TRUSTEE FOR THE GD PORK UNIT TRUST [2021] WASC 428
CORAM: KENNETH MARTIN J
HEARD: 9-11 AUGUST 2021
DELIVERED : 1 DECEMBER 2021
FILE NO/S: COR 24 of 2019
BETWEEN: MARTIN BRUCE JONES joint and several administrators GD PORK HOLDINGS PTY LTD (ACN 126 978 676) (ADMINISTRATORS APPOINTED) AS TRUSTEE FOR THE GD PORK UNIT TRUST
First Named First Plaintiff
ANDREW MICHAEL SMITH as joint and several administrators of GD PORK HOLDINGS PTY LTD (ACN 126 978 676) (ADMINISTRATORS APPOINTED) AS TRUSTEE FOR THE GD PORK UNIT TRUST
Second Named First Plaintiff
MARTIN BRUCE JONES joint and several administrators GD PORK PTY LTD (ACN 126 978 685) (ADMINISTRATORS APPOINTED)
Third Named First Plaintiff
ANDREW MICHAEL SMITH as joint and several administrators of GD PORK HOLDINGS PTY LTD (ACN 126 978 685) (ADMINISTRATORS APPOINTED)
Fourth Named First Plaintiff
AND
THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
First Intervenor
Catchwords:
Plaintiffs' application to draw down remuneration subject to remuneration determination - Voluntary administrators - Defendant's cross-application seeking court review - Insolvency Practice Schedule - Reasonableness of remuneration - IPS s 60-12 considerations - No allegations of improper conduct or incorrect decision making - Attempted remuneration apportionment reduction exercise by ASIC is punitive, misconceived and inappropriate
Legislation:
Corporations Act 2001 (Cth)
Result:
Paragraphs 1, 2 and 3 of plaintiffs' interlocutory application allowed
Intervenor's application dismissedCategory: B
Representation:
Counsel:
First Named First Plaintiff : Mr P Crutchfield QC (by video link) & Mr P Edgar Second Named First Plaintiff : Mr P Crutchfield QC (by video link) & Mr P Edgar Third Named First Plaintiff : Mr P Crutchfield QC (by video link) & Mr P Edgar Fourth Named First Plaintiff : Mr P Crutchfield QC (by video link) & Mr P Edgar First Intervenor : Mr S Maiden QC (by video link), Mr P Walker and Ms L Coci Solicitors:
First Named First Plaintiff : Lavan Second Named First Plaintiff : Lavan Third Named First Plaintiff : Lavan Fourth Named First Plaintiff : Lavan First Intervenor : Ingrid McCormick Case(s) referred to in decision(s):
Advance Housing Pty Ltd (in liq) v Newcastle Classic Developments Pty Ltd (1994) 14 ACSR 230
ASIC v Franklin [2014] FCAFC 85; (2014) 223 FCR 204
ASIC v Franklin [2014] FCFCA 85; (2014) 223 FCR 204
Boardman v Phipps [1967] 2 AC 46
Bovis Lend Lease Pty Ltd v Willy [2003] 45 ACSR 612
Breen v Williams [1996] HCA 57; (1996) 186 CLR 71
Chan v Zacharia (1984) 154 CLR 178
City and Suburban Pty Ltd v Smith (1998) 28 ACSR 328
Commonwealth v Irving (1996) 65 FCR 291
Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337
Furs Ltd v Tomkies (1936) 54 CLR 583
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Imageview Management Ltd v Jack [2009] EWCA Civ 63
Keech v Sandford (1726) Sel Cas Ch 61
Liversey v New South Wales Bar Association [1983] HCA 17; (1983) 156 CLR 288
Patrick Stevedores No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1
Paul's Retail [2009] NSWSC 1222; (2009) 76 ACSR 26
Paul's Retail Pty Ltd v Morgan [2010] NSWCA 217
R v Byrnes [1995] HCA 1; (1995) 183 CLR 501
Re Anderson Group [2002] NSWSC 764
Re Barokes Pty Ltd (In Liq) [2020] VSC 555
Re Kal Assay (1992) 9 ACSR 245
Re Palmer; Ex parte Taylor (1988) 18 FCR 271
Re Recycling Holdings Pty Ltd [2015] NSWSC 1016
Re Recycling Holdings Pty Ltd [2015] NSWSC 1016; (2015) 107 ACSR 406
Re Vplus Superstores Pty Ltd (In liq) [2013] NSWSC 662
Re Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134
Ten Network Holdings Ltd Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 914
V.R. Dye & Co v Peninsula Hotels Pty Ltd (in liq) [1999] VSCA 60
Warman International Ltd v Dwyer [1995] HCA 18; 182 CLR 544
Introduction
Legal framework
The present interlocutory applications
First interlocutory application
Second interlocutory application
Distilled issues upon the present interlocutory applications
Early observations
Three key factual matters
Disclosure omission by Mr Jones to creditors as regards payment to Ferrier Hodgson for pre-appointment work
Use of a 'backdoor approach' by ASIC
Affidavit evidence of Adrian Saggers relied upon by ASIC
Procedural history
The 22 points raised at 31 May 2021
Point 1: Lack of precedent
Point 2: ASIC as intervenor (not amicus curiae)
Point 3: In Ten Network, ASIC did not seek a review of a remuneration determination
Point 4: Court's discretion to conduct review of a remuneration determination
Point 5: The Court must have regard to '... whether the remuneration is reasonable, taking into account any or all of ...')
Point 6: IPS s 60-12 considerations
Point 7: Plaintiffs address the IPS s 60-12(a) - (l) matters in the first tranche of their written submissions
Point 8: ASIC had not then addressed IPS s 60-12 matter criteria other than subsection (m)
Point 9: What is there for a court to 'review' about reasonable remuneration once the plaintiffs' as invoked IPS s 60-12(a) - (l) matter criteria are undisputed?
Point 10: Mr Saggers' affidavit raised no issue as to the work done by the former administrators
Point 11: Discretion to convene a review
Point 12: Focus of ASIC's concerns over pre‑appointment work of Ferrier Hodgson on the basis the voluntary administrator appointments should not have been accepted
Point 13: Why should voluntary administrators not be fully remunerated for their administration work if the ASIC concern is over earlier events?
Point 14: No absolute bar against a prior, private appointment under Ten Network
Point 15: Ten Network: the relief granted speaks
Point 16: Relatively small quantum of the Ferrier Hodgson private fee and Weston Milling transaction amounts
Point 17: Decision making for voluntary administration compared to liquidation
Point 18: Ferrier Hodgson's private pre-appointment work payment was overt and obvious
Point 19: Work done in the pre-appointment period needed to be done at some point anyway
Point 20: Barokes: No de facto punishments by attacking remuneration
Point 21: ASIC's other mechanisms to sanction a voluntary administrator other than by undermining the remuneration determinations made by creditors
Point 22: Apprehended bias: Voluntary administrators are not akin to courts or tribunals as regards the making of business decisions for the corporations to which they are appointed
Repercussions post 31 May 2021
IPS s 60-12
The court's role in the present applications
Evidence relied upon
Preliminary observations towards ASIC's conflict and bias submissions
Legal principles as regards fiduciary duty, bias and conflict of interest
Fiduciary obligations
Bias
Conflict of interest
ASIC's expressed concerns as regards Messrs Jones and Smith
The law concerning prior private engagements
Commonwealth v Irving
Re Ten Network Holdings Ltd
Agreed facts relied upon to sustain contentions of alleged conflict and bias
The legal test concerning ostensible bias
Application of legal test by reference to the fair-minded observer
The business of GD Pork and GDPH
The overriding issue: voluntary administrators taking up a prior appointment
Vaughan J's distillation of five relevant issues to be addressed
Final evaluations
The $110,136.81 payment to Ferrier Hodgson for pre-appointment work
Remuneration determinations for work conducted as voluntary administrators
ASIC's suggested appointment reduction exercise
The administrators' so-called 'Substantial Involvement'
Further contentions as to 'sales process work'
No review by the Court of the remuneration determinations
Conclusions
Orders
Schedule 1
Schedule 2
KENNETH MARTIN J:
Introduction
1I am dealing with two interlocutory applications. The first was filed by the plaintiffs on 3 June 2020 (exhibit 1.1), seeking orders to draw remuneration pursuant to Schedule 2 to the Corporations Act 2001 (Cth) (Corporations Act). The second application was filed on 28 August 2020 by the Australian Securities and Investments Commission (ASIC) as intervenor (exhibit 1.2), seeking then a court review of earlier remuneration determinations that had been issued in respect of the joint and several administrators of GD Pork Holdings Pty Ltd.
2By way of background, Martin Bruce Jones and Andrew John Smith had been appointed as the joint voluntary administrators of two related corporations on 31 October 2018 pursuant to s 436A of the Corporations Act. These were the corporations GD Pork Pty Ltd (ACN 126 978 685) (GD Pork) and its parent corporation GD Pork Holdings Pty Ltd (ACN 126 978 676) (GDPH). In the course of these reasons, I refer to these corporations in aggregate as 'the two corporations'.
3Mr Jones and Mr Smith (then partners of the consultancy firm Ferrier Hodgson) discharged their positions of voluntary administrators of the two corporations (who had been involved in the West Australian pork producing industry) over roughly a seven (7) month period - from the time of their statutory appointments until conclusion, on the appointment of independent liquidators at 28 May 2019.
4The present action was commenced by the originating process of Messrs Jones and Smith whilst they were still discharging their roles as the joint voluntary administrators, at 1 February 2019. Later, on 28 May 2019, the creditors of both corporations resolved (at reconvened second meetings) that the respective companies should be wound up and that joint and several liquidators be appointed - being Ian Francis and Michael Ryan of FTI Consulting (see par 94 of the parties' statement of agreed facts (exhibit 1.9)).
5Also on 28 May 2019, relevantly to the present applications, the creditors of GD Pork approved payment of $807,486 plus GST to Messrs Jones and Smith - as remuneration for their work as voluntary administrators of GD Pork between 17 November 2018 and 28 May 2019 (agreed facts subpars 93(a) and (b)). Likewise, the creditors of GDPH approved payment of $28,895 plus GST, as remuneration to Messrs Jones and Smith for their work as voluntary administrators of GDPH in that same period (see agreed facts subpars 93(c) and (d)).
6Essentially, ASIC takes issue with the remuneration determinations as approved by the creditors of the two corporations (at the respective reconvened meetings on 28 May 2019) in respect of Messrs Jones and Smith's work as voluntary administrators in the period of 17 November 2018 to 28 May 2019. Further, ASIC also takes issue against what were earlier remuneration determinations reached by the same creditors, at 5 December 2018, in respect of the earlier period of billed work (31 October 2018 to 5 December 2018) for Messrs Jones and Smith in their role as voluntary administrators (agreed facts par 65).
7As will be elaborated upon by these reasons, ASIC's primary grievance is that Messrs Jones and Smith should not ever have taken up their appointments as voluntary administrators - given that their firm Ferrier Hodgson, had earlier provided advice to the two corporations in a private capacity. On this basis, ASIC contends that conflict of interest and bias concerns arose and hence that the administrators' approved remuneration determinations by the creditors should be a subject of a court conducted review and to a corresponding substantial reduction in approved remuneration.
8Before rendering some early observations and evaluations towards the present interlocutory applications, it is necessary first, to set out the relevant statutory framework underlying remuneration determinations for the voluntary administrators.
Legal framework
9The payment approval resolutions of the GD Pork and GDPH creditors of 28 May 2019 and 5 December 2018, hold the status of being 'remuneration determinations' made under the Insolvency Practice Schedule (IPS), which is found at Schedule 2 to the Corporations Act. The definition for 'remuneration determination' under s 5-5 of the IPS, reads:
Remuneration determination, for an external administrator of a company, means a determination made in accordance with section 60‑10 in relation to the external administrator.
10The term 'external administrator' is found defined in IPS s 5-20 IPS to include, inter alia, an 'administrator of the company'.
11Section 60-10, titled 'Remuneration Determinations', appears in pt 3, div 60, subdiv B of the IPS, under the general heading 'Remuneration of an external administrator - general rules'.
12It is apparent from IPS s 60-10 that a remuneration determination can be effected by a number of mechanisms, including by a resolution of the creditors of a corporation (see s 60-10(1)(a)), or in other circumstances by a court (see s 60-10(1)(c)). By the preface to s 60-10(1), a remuneration determination must be made in respect of 'necessary work properly performed by the external administrator in relation to the external administration ...'.
13By s 60-11, a person (including ASIC) may apply to the court for a 'review' of a remuneration determination made in respect of an external administrator of a corporation (see especially s 60-11(1)(a)). I note that the right to apply for a review does not apply where the remuneration determination itself is made by the court (see s 60-11(5)).
14Nevertheless, a court is given a discretion in relation to a decision to conduct a review of a remuneration determination or otherwise - concerning an external administrator. This is evident from IPS s 60-11(3), which says:
On application under subsection (1), the Court may, if it considers it appropriate to do so, review the remuneration determination. (my emphasis in bold)
15If a court does affirmatively resolve to conduct a review of a remuneration determination, then some mandatory obligations follow, in terms of the conducting of the review. This emerges via s 60-11(4), which reads:
After reviewing the remuneration determination, the Court must:
(a)affirm the remuneration determination; or
(b)vary the remuneration determination; or
(c)set aside the remuneration determination and substitute another remuneration determination. (my emphasis in bold)
16Moreover, I note that by IPS s 60-12, the Court 'must have regard to whether the remuneration is reasonable' and if undertaking the review task, the Court takes into account any or all of the following matters. There follow some thirteen (13) subparagraphs numbered (a) through (m), setting out (comprehensively) the relevant matters. But the basal aim of a review task for a Court has been clearly stated in mandatory terms - namely, to ascertain 'whether the remuneration is reasonable'.
17Since it is central to the present applications, I will return later in these reasons to set out the entirety of IPA s 60-12 by reference to the 13 different categories of matter considerations seen to follow, found comprehensively assembled under subpars (a) through (m).
The present interlocutory applications
18At this early stage, I turn to discuss in greater depth the two interlocutory applications filed in the proceedings.
First interlocutory application
19The interlocutory application of the plaintiffs Messrs Jones and Smith was filed on 3 June 2020, seeking at then, orders to draw their approved remuneration. By that time, as mentioned, they had ceased to occupy the roles of joint and several administrators of the two corporations (the two corporations having been placed into liquidation 12 months earlier, on 28 May 2019).
20The interlocutory application of Messrs Jones and Smith is made pursuant to s 90-20 of the IPS, alternatively under s 447A of the Corporations Act.
21IPS s 90-20(1) permits persons with a 'financial interest' in the external administration of a company to bring application for orders from a court - under s 90-15. That provision (see especially s 90-15(1) and s 90-15(3)) permits a court, as it thinks fit, either of its own initiative or upon application, to issue orders in relation to the external administration of a company.
22By s 90-15(3)(a), a court may issue an order 'determining any question arising in the external administration of a company'. As mentioned, the plaintiffs seek, in effect, permissive orders from this court that as former administrators of the two corporations, they be entitled to draw down on the remuneration which had been the subject of remuneration determinations approved by the creditors of the two corporations by resolutions dated 28 May 2019 - and set aside to that end.
23I would note that, strictly speaking, there is no legal requirement that the former administrators seek a court approval to draw down upon amounts the subject of the 28 May 2019 remuneration determinations
- given these determinations had already been formally made by the corporations' creditors. However, the plaintiff's interlocutory application was commenced under circumstances where the former administrators had previously been in dialogue with ASIC as regards ASIC's expressed opposition then to any drawing down of the approved sums, without a prior court approval. That course was agreed upon. Consequently, an interlocutory application seeking permissive orders to this effect was filed by the plaintiffs.24But ASIC did not merely communicate its opposition to the drawing down of those 28 May 2018 remuneration determination amounts. ASIC informed the administrators of its opposition as well to the earlier remuneration amounts earlier approved and then received by the administrators of the two corporations. This became the subject matter of ASIC's subsequent interlocutory application.
Second interlocutory application
25On 28 August 2020, ASIC as an intervenor, filed its own separate interlocutory application pursuant to IPS s 60-11(1) and 90-15(1) (exhibit 1.2). By this application, ASIC seeks that the court review the remuneration to Messrs Jones and Smith pursuant to the earlier remuneration determinations of the creditors of the two corporations made on 5 December 2018 in respect of earlier billed work owing to their roles as voluntary administrators. Specifically, the earlier amounts related to work carried out between 31 October 2018 and 5 December 2018 and were in aggregate amounts of $141,576.50 (excluding GST) paid by GD Pork and $49,466 (excluding GST) paid by GDPH.
26The statutory provision (IPS s 60-11(1)) has been mentioned as regards the genre of persons who may apply to seek a review of a remuneration determination concerning an external administrator of a company. ASIC is specifically identified as such a person by s 60‑11(1)(a).
27I have also mentioned an alternate IPS provision relied upon by ASIC upon its application as well, namely IPS s 90-15(1). By this provision, a court, either on it own initiative or upon application, can issue such orders 'as it thinks fit', in relation to the external administration of the company. In particular, by IPS s 90‑15(3) the court may, without limitation, determine any question arising in the external administration of the company.
Distilled issues upon the present interlocutory applications
28By reference to the two pending interlocutory applications, there respectively emerged two related controversies.
29The first is whether, as sought by the former administrators, they should be permitted by order of the court to draw down the amounts of the two remuneration determinations as resolved upon by the creditors of the two corporations on 28 May 2019 (which application for permission to draw down those funds is opposed by ASIC).
30The second controversy is whether, by ASIC's interlocutory cross‑application made as intervenor, there should be a review conducted by the court of what was the earlier remuneration determinations made by the creditors of the corporations at 5 December 2018 in respect of the earlier work of Messrs Jones and Smith. If such a review were to be conducted by the court, then a further question arises as to whether there should be significant reductions in the amounts of the 5 December 2018 remuneration determinations, as is presently advocated by ASIC.
31As matters have developed, it appears uncontroversially accepted that ASIC is actually seeking that the court conduct a review, not only of the 5 December 2018 remuneration determinations, but also of the creditors' 28 May 2019 determinations (the subject of the plaintiffs' interlocutory application for draw down permission). It emerges on the plaintiffs' interlocutory application that ASIC opposes any draw down of funds now set aside and held on trust to meet the currently unpaid remuneration determination payment obligations to the former administrators.
32As will be discussed further, a key component of ASIC's opposing intervention contends for a court apportioned reduction (roughly in the order of 90%) in the level of the creditor approved remuneration fees for Messrs Smith and Jones as the joint and several administrators in respect of both corporations. ASIC has attempted a suggested apportionment reduction exercise by way of suggested reductions to the fees as have been approved under all remuneration determinations of creditors over the two companies' period of voluntary administration.
33ASIC's mooted remuneration reduction and apportionment exercise was first a subject of an attachment to the affidavit filed and read for ASIC in these interlocutory applications - namely, in the affidavit of an ASIC employee, Mr Adrian James Saggers sworn 28 August 2020 (exhibit 1.21). An attachment to the Saggers affidavit (attachment AJS-46) saw an attempted apportionment of the fees conducted by reference to a so-called 'workbook' prepared by another ASIC employee, a Ms Peries. However, that first attempted apportionment exercise came to be abandoned by ASIC before the hearing. It was overtaken by another attempt of ASIC under what is found as Schedule A to ASIC's first tranche of written submissions dated 7 April 2021 (exhibit 1.12).
34As is explained by the cover sheet to that schedule (at page 2), ASIC at the end seeks to ask this Court by way of a remuneration review, to disallow in aggregate some 93.5% of the approved fees the subject of creditor remuneration determinations in respect of GD Pork; and 30.2% of the approved remuneration in respect of GDPH. ASIC's expressed rationale for those proposed fee disallowances (were a review to be conducted by the court) was candidly explained by junior counsel for ASIC during the application hearing. I will elaborate upon that attempted apportionment exercise later in the reasons.
Early observations
35I pause to mention at an early point a key observation pivotal to the present dispute and the application hearing.
36But for the opposing intervention of ASIC, the interlocutory application by the plaintiffs (as former administrators) of 3 June 2020, would present as a relatively straightforward and routine interlocutory application made to the court - seeking approval to draw down the funds specifically set aside to abide the payment obligation to them arising by the remuneration determinations of the two corporations' creditors.
37As mentioned, the basis for ASIC's expressed opposition to the plaintiffs' application is grounded on suggested conflict of interest and ostensible bias arguments - as regards the administrators' alleged wrongful taking up of their statutory appointments. As will be elaborated upon shortly, there is no suggestion by ASIC that Mr Jones and Mr Smith did not perform valuable work to the benefit of both corporations whilst discharging their roles as joint and several administrators over a period of almost seven (7) months, between 31 October 2018 and 28 May 2019. Nor was there any suggestion that the professional work claimed for under all the remuneration determinations was not carried out timeously, diligently, or competently, or that there had been any level of overcharging such as by excessive hourly rates, or by charging for work not performed. Nothing like that was suggested by ASIC concerning the seven (7) months of the voluntary administration.
38Nor was there any suggestion by ASIC that any of the many business decisions as were taken by the administrators whilst performing their offices were wrong, biased for or against any person, improperly or negligently taken, or had brought about any degree of harm or damage to the corporations or to their creditors or to shareholders. Further, there was no contention that the remuneration determination amounts as were claimed (both under the December 2018 and May 2019 remuneration determinations) were otherwise than reasonable in their quantums - as fees levied for the work done in the period of voluntary administration (and later approved by the creditors of the two corporations).
39Nor was there any suggestion that the creditor resolved and approved remuneration determinations were in any way tainted or influenced by any level of misunderstanding, by misrepresentation, or by any element say, of misleading conduct - so as to possibly bear adversely against the resolution approval decisions as ultimately resolved upon and approved by those creditors.
40Instead, the rationale for ASIC's expressed administrator remuneration opposition and for ASIC's advocated court review of remuneration exercise - is grounded on its 'concern' that Messrs Jones and Smith ought not, at 31 October 2018, to have accepted and thereafter to have continued on in their respective appointments as the joint and several administrators of the two corporations.
41Hence, ASIC's expressed 'concern' is directed at events occurring before the appointments as voluntary administrators - and as to their suggested ramifications. ASIC argues that at the time of their appointments, Messrs Jones and Smith, by then, suffered under a conflict of interest or a potential conflict of interest. Further or alternatively, ASIC argues that they took up their appointments under circumstances where they were then open to challenge - on the basis of their suggested ostensible bias in their future decision‑making whilst discharging positions as voluntary administrators of the two corporations. How does ASIC support that view?
42The factual basis for ASIC's expressed negative stance is grounded on expressed 'concerns' that Ferrier Hodgson (and Mr Jones as a former partner therein) had earlier been professionally engaged by the same two corporations privately and had carried out advisory work for them in an earlier period. That was from 25 July 2018 to 31 October 2018 (before Messrs Jones and Smith of Ferrier Hodgson came then to be appointed as the voluntary administrators of the two corporations).
43So then, it is the earlier period of prior private engagement of Ferrier Hodgson and Mr Jones, spanning roughly three (3) months, that ASIC contends is problematic when viewed against their entitlements to remuneration for work done as voluntary administrators done in a later period of roughly seven (7) months. According to ASIC, the earlier period of private engagement generated either an actual or potential conflict of interest in Mr Jones and Mr Smith, and it also raised, says ASIC, an allied ostensible bias concern over the taking up of their statutory appointments at 31 October 2018. That concern is said by ASIC to bear against the level of the reasonable remuneration to be allowed to Mr Jones and Mr Smith in respect of all the work done by them in the later seven (7) months of otherwise unblemished professional insolvency work as voluntary administrators.
44Two key issues arise from the interlocutory observations so far. First are the applicable legal principles governing the circumstances in Australia under which an insolvency practitioner, who has earlier acted in a private advice capacity for a corporation, might legitimately go on to take up a subsequent formal appointment as a voluntary administrator appointed to the same corporation(s) - to which they have earlier provided their private insolvency advisory services.
45The second key issue is whether it is at all legitimate for ASIC, under an advocated methodology of attacking the approved levels of remuneration as resolved upon by the corporations' creditors as remuneration determinations, to ask a court to reduce, or to deny the approved remuneration under a review process - based on 'concerns' over conflict of interest, or as to ostensible bias arising potentially in the voluntary administrators' likely future decision-making (even though no such decisions made as administrators are in fact criticised).
Three key factual matters
46To consider the underlying questions, three more key pieces of information need to be identified at an early point.
Disclosure omission by Mr Jones to creditors as regards payment to Ferrier Hodgson for pre-appointment work
47First, it is not in dispute that on 19 October 2018, Ferrier Hodgson had rendered an invoice to GD Pork in respect of pre-appointment work as was carried out by Ferrier Hodgson - in the amount of $110,136.81 (GST included). The invoiced sum was subsequently paid by GD Pork, sometime between 22 to 31 October 2018 (see agreed facts pars 45 and 46). For the purpose of the present applications, Mr Martin Jones swore a number of affidavits in support of the claims and upon the position of the former administrators. Mr Jones was cross‑examined upon his affidavits and more generally at the application hearing.
48Mr Jones accepts that the $110,136.81 payment by GD Pork in respect of Ferrier Hodgson's pre-appointment work (including for some work done by him) was not mentioned as it should otherwise have been in the administrator's report made to creditors. And so, a receipt of those funds by his then firm was not highlighted as being a potential voidable transaction, possibly to be claimed back and recouped later by a liquidator. Mr Jones fully accepts that the payment made to Ferrier Hodgson should have been mentioned in the report and that the failure to make reference to the amount to creditors was an oversight by omission.
49But there is no question of that Ferrier Hodgson invoice and its payment being rendered or received in a covert or surreptitious fashion. The GD Pork payment was made and recorded at the time and it manifests itself in the books of the corporation as an outgoing expenditure to Ferrier Hodgson at the time.
50ASIC however, points to that payment and to the omission to disclose it to creditors in a report - to support its contentions of conflict of interest and of ostensible bias. ASIC asserts the payment to Ferrier Hodgson might have become a subject of pursuit later as a potential unfair preference, or as a voidable transaction - subsequently to be set aside and be recoverable by a liquidator pursuant to the Corporations Act s 558FA, s 558FE or s 558FF. However, no focused liability argument was put at the hearing (noting the possible defences under s 558FG) suggesting an overwhelming or conclusive position about the likely success of a recovery action brought for that sum by a liquidator.
51Factually, it is the case that even though independent liquidators were appointed at the conclusion of the period of voluntary administration at 28 May 2019, that no pursuit of the amount back from Ferrier Hodgson has occurred to date as recovery action taken by the independent liquidators. Sensible economics may well play a part in any such decision, given the relatively small amount concerned, viewed in overall context.
Use of a 'backdoor approach' by ASIC
52The second overarching early point is that it is recognised as a matter of law, that the remuneration for services provided ought not be opposed or undermined under a collateral methodology towards an object of punishing or sanctioning an external administrator. Such a 'backdoor approach' would be legally unprincipled. ASIC accepts that principle in the present application. But it also rejects any suggestion that this is the course it is taking by its present interlocutory application seeking a court review of the administrators' remuneration.
53In Re Barokes Pty Ltd (In Liq) [2020] VSC 555 (Barokes), Hetyey AJ set out the state of the law upon this principle at [69], in terms I would respectfully endorse and adopt. The learned associate justice said:
The court's function in a remuneration application is solely to assess whether the external administrator's fees are reasonable and to determine what those fees should be. However, it is not a forum to inquire into the conduct of an external administrator. Nor should it be used as mechanism to discipline or punish an external administrator [referring at footnote 83 to Re Palmer (1998) 18 FCR 271; Paul's Retail (2009) 76 ACSR 26]. Because the remuneration assessment procedure is a summary one, it is neither appropriate nor possible to examine whether there has been unsatisfactory conduct by an external administrator, including conduct lacking in propriety or tantamount to breach of duty. Were it otherwise, the process could encourage satellite litigation by aggrieved parties with an interest in the external administration. It could also provide an opportunity for a collateral attack on the actions of an external administrator by a party who is otherwise the subject of investigations or claims arising from the company's affairs. Either scenario could unnecessarily delay the finalisation of an external administration. As previously noted, allegations of misconduct, misfeasance, or breach of duty need to be properly tested through evidence, and natural justice afforded to the external administrator. As discussed further below, there are other provisions within the statutory regime which better accommodate the ventilation of grievances by interested persons. (footnote omitted).
54One of the case authorities referred to by Hetyey AJ (at footnote 83) was Barrett J's earlier decision in Paul's Retail [2009] NSWSC 1222; (2009) 76 ACSR 26. While this case did not concern the review of a voluntary administrator's reasonable remuneration, Barrett J nevertheless came to observe (at [77]):
The assessment whether the initially fixed sum is fair and reasonable will be made in the light of all relevant circumstances brought to the court's attention upon the review. These may include circumstances that were not known or foreseen at the time the remuneration was fixed. They may include the circumstance that some work actually done was outside the proper performance of the administrator's functions or was unnecessary, although allegations of misfeasance or breach of duty should not be determined upon a review of remuneration; also notions of punishment are foreign to the process: [referring to his Honour's earlier decision in Re Anderson Group [2002] NSWSC 764; (2002) 20 ACLC 1607].
55Barrett J further observed (at [20]), in that context of the remuneration of a trustee in bankruptcy, that:
There is recognition here that misconduct on the part of a trustee in bankruptcy may mean that the entitlement to remuneration is removed or, I would add reduced. But the adjustment is not punitive in nature. Disallowance of the whole or some part of the remuneration claimed will be no more than a reflection of the realty that itis no part of the function of a trustee or liquidator to act in breach of duty and conduct of that kind attracts no remuneration. The difference between adjustment to allow for such conduct and punishment emerges from the decision in Re Palmer; Ex parte Taylor (1988) 18 FCR 271 where a Deputy Registrar in bankruptcy had denied remuneration to a trustee whose conduct he had found to be improper, an allegation the trustee had strenuously denied in detailed submission made by him in writing.
56In Re Palmer; Ex parte Taylor (1988) 18 FCR 271, Spender J had earlier observed (at page 284):
... It is not part of his function to discipline trustees by the imposition of any penalty, but it is to fix the remuneration to which a trustee is entitled by the Act at a figure that is reasonable in all the circumstances. It is of course not correct that a person is entitled to be paid only if his work manifests no error or is without fault. Such a standard of perfection would be unworkable.
57Some of the observations referred to in the case authorities now mentioned above were rendered in the contexts of a liquidator's remuneration, or under circumstances where a court itself was fixing the level of remuneration to be paid - with the court itself effectively rendering the remuneration determination. Here of course, the creditors have now made the remuneration determinations and the court is being asked by ASIC to review them - by reference to the suggested effects of events prior to the work that was the subject of the remuneration determinations.
58Despite minor differences in factual circumstances, no different principles apply in my view - concerning an attempted de facto imposition of a penalty, or as an attempted de facto disciplinary sanction against an external administrator - under the guise of denying or reducing the levels of their claimed remuneration approved by creditors for legitimately performed work. And the same principle which stands against back door punishments or sanctions against remuneration would also bear against this court weighing as a matter of discretion, whether to conduct a review of a creditors' remuneration determinations and in turn, to determine whether remuneration already resolved upon for an external administrator was reasonable (under IPS s 60-12). A punishment or sanction exercise is plainly not the objective a court would or should have in mind whilst conducting an IPS s 60-12 remuneration review exercise.
Affidavit evidence of Adrian Saggers relied upon by ASIC
59As a last factual matter, I turn to mention the affidavit of Adrian James Saggers sworn 28 August 2020 (exhibit 1.29), which is relied upon by ASIC in its opposition to the plaintiffs' interlocutory application. Mr Saggers' affidavit spans some 845 pages. An overwhelming component of the affidavit comprises the documentary attachments ASJ‑1 through ASJ‑47. The affidavit undoubtedly serves a legitimate purpose of putting relevant documentary material before the court.
60Mr Saggers, a chartered accountant, swears his affidavit as the senior manager of ASIC's Insolvency Practitioners Stakeholder Team in Perth, where he has been engaged since 2008.
61Whilst Mr Saggers' affidavit was admitted without any admissibility objections by the plaintiffs, it is apparent that much of the direct text in Mr Saggers' affidavit would have been vulnerable to inadmissibility objections - on a basis that it is seen to be (attachments aside) riddled with much non-factual content. In particular, it displays large measures of argument or conclusionary statements - which present in the nature of submission, rather than as true factual evidence. A few examples are sufficient to make the point. For instance, see first par 53 of the Saggers affidavit, at which Mr Saggers argues:
There are inconsistencies between what is referred to in the Engagement letter and 'Updated Engagement letter', in that ...
62Such conclusionary commentary observations are plainly in the nature of submission or argument, rather than constituting true factual evidence. Since there was no objection by the plaintiffs, the affidavit was formally received. Nevertheless, the illegitimate character of such material bears against the level of weight I will afford to it - which in the circumstances, must be slight at best.
63A second example is found at par 76. Here Mr Saggers says:
Based on my reading of the 2 October 2018 meeting file note, I believe that part of it states: 'apparently idea was for 100k per week but this was never agreed.' Given the close proximity of the meeting to the payment to Weston Animal Nutrition of $120,000 (referred to above), it is not implausible that the $120,000 payment was connected to the Companies' efforts to secure a standstill agreement.
64Again, that material is really in the nature of argument, as well as carrying a level of speculation on the part of Mr Saggers. Its character is such that it ought not be found in an affidavit, even allowing for the admissibility of hearsay evidence on the present applications.
65A last chosen example is found at par 101, where Mr Saggers says:
Based on my reading of the above note ...
[referring to a file note of 9 August 2018 prepared by Mr O'Farrell of Quadrant Advisory, which was attended by Mr Jones and others, including Mr Soerensen.]
66Mr Saggers then proceeds:
I believe that Mr Jones was a key participant at the meeting, acting as an advocate for the Companies' proposal for standstill agreements with its lenders.
67Again, no significant evidentiary weight can be afforded to Mr Saggers' argumentative submissions of that nature by him - as a complete outsider to this note. The attempts at file note interpretation are pure argument. They should not be found in any affidavit - even one read at the interlocutory level.
68The paragraphs mentioned above are not the only paragraphs within the text of Mr Saggers' lengthy affidavit which, by reason of their argumentative or conclusionary nature, are ultimately of minimal weight in presently assisting ASIC. The text of Mr Saggers' affidavit is littered with multiple examples of that kind too numerous to recount. I refer further, say, to pars 179, 180 and 184. A better standard is expected than this.
69Consequently, apart from the affidavit's admissible documentary annexure content, much of the text of the Saggers affidavit must largely be treated as submission and argument by ASIC - to which I can afford little weight as evidence.
70Having discussed those three key introductory matters, I can return to discuss some further procedural directions and events that occurred prior to the eventual three-day interlocutory hearing that unfolded on these two applications.
Procedural history
71Under directions of a former case manager of 2 October 2020 (exhibit 1.3) and 13 November 2020 (exhibit 1.4), the parties came to file respective statements of contentious facts. The plaintiffs' lawyers address that in their filed document of 9 December 2020 (exhibit 1.10), followed then by a statement of agreed contentious factual issues filed on 14 December 2020 (exhibit 1.11).
72Next followed ASIC's first tranche of written outline of submissions of 7 April 2021 (exhibit 1.12), including, as mentioned, Schedule A thereto (exhibit 1.13). There followed the plaintiffs' first tranche of written outline of submissions of 28 April 2021, including its Schedule A - being a schedule cross-referencing the plaintiffs' evidence (mostly of Mr Jones) to various subparagraphs of IPS s 60‑12.
73Following that, the matter was set down for a three-day interlocutory hearing before me, to commence on 31 May 2021. But by reason of adverse COVID‑19 Australian travel interruptions prevalent at the time bearing against respective senior counsel travelling to Perth in person, it was agreed between the parties that that scheduled hearing be deferred.
74Ultimately, a hearing came to be rescheduled subsequently across 9 through 11 August 2021. However, COVID‑19 travel restrictions were still prevalent across most of Australia, even at the later time. Consequently, by agreement, the three‑day hearing at that time was agreed to be conducted by video link to the plaintiffs' and intervenor's respective senior counsel located in Victoria and New South Wales, with junior counsel for the plaintiffs and for the intervenor all present in person at Perth.
75The unexpected deferment at 31 May 2021 occurred after I had had some opportunity to consider the participants' first tranches of written submissions and their evidentiary materials as filed to that point.
76As a result, I was somewhat concerned at that point that the parties' written positions, as exchanged, appeared then to be rather like 'passing ships in the night'. With a view to refocussing a more engaged debate, I called the matter on for a directions hearing on 31 May 2021, conducted then only in the physical presence in Perth of junior counsel on each side. At the time, I indicated that without reaching any final positions, I had identified some 22 points or issues I wished the parties to direct their more specific attention at, prior to any rescheduled substantive hearing.
77In particular, I was at then concerned that ASIC (who I note had filed its first tranche of written submissions before the plaintiffs) had insufficiently engaged against many of the issues the plaintiffs had raised in their first tranche of written submissions (exhibit 1.15) - under circumstances concerning opposition against the levels of remuneration for voluntary administrators that looked to be without direct case precedent.
78I proceed next to mention aspects of those 22 points or issues - since the parties' subsequent tranches of exchanged written submissions did later seek to specifically engage with the points as then raised - namely ASIC's second tranche outline of written submissions of 7 April 2021 (exhibit 1.24), responded to by the plaintiffs' supplementary written outline of submissions of 30 July 2021 (exhibit 1.25).
The 22 points raised at 31 May 2021
79By reference to aspects of the transcript of the 31 May 2021 directions hearing, the points I then raised for the parties' further consideration are related below.
Point 1: Lack of precedent
80I commenced as follows (at ts 30):
Essentially, what I'm looking for is precedent, in terms of what the court is being asked to do [here], bearing in mind that the earlier fees, which appear to have been rendered, appear to have been the subject of an earlier remuneration determination ...
Under cl 90-20(1) [sic], the categories of persons who can make [sic] application to court for an order under 90-15 include ASIC. But this is the application of the former joint and several administrators. So I assume that they apply as persons with a financial interest in the external administration of the company under 90-20(1)(a) ...
[In due course, the plaintiffs' second tranche submissions confirm that to be the case as regards s 90-15.]
81I continued:
So essentially then, there looks, in terms of the period of appointment for the administration, two tranches of fees rendered. The first tranche are the amounts that I mentioned earlier, the subject of an earlier remuneration determination by the creditors, [look] to have been paid. The second amount, the subject of the interlocutory application, have been approved by a meeting of creditors on 28 May 2019. They are held to abide payment, but have not yet been received, as I understand it, by the joint and several administrators.
Hence the application to the court seeking an order that they are entitled to draw down on those amounts. I infer [but] I would like it confirmed that the reason the application is made is because ASIC opposes the drawing down of those amounts, as approved.
[This was subsequently confirmed for ASIC.]
I also assume that the two amounts in question, being the subject of moneys held to abide those fees, and approved by meeting of the creditors of 28 May 2019, in respect of each of the two companies, meets the description of remuneration determinations for the purposes of that definition under ... the dictionary at cl [sic] 5-5, and then subsequently referred to in 60-10.
[There is no dispute as to this as well.]
Point 2: ASIC as intervenor (not amicus curiae)
82My second point concerned ASIC as intervenor on the application. After noting that ASIC was perfectly entitled to be heard as intervenor, I continued (at ts 31):
There's no difficulty in that respect. And prima facie [it] would carry no costs exposure, in terms of seeking to be heard in relation to that. I notice that in the Ten Network Korda decision of 2017 by O'Callaghan J in the Federal Court, that ASIC was amicus curiae upon that application, effectively seeking to assist the court with the orders that were ultimately made by consent. This seems to me to be a different situation.
As amicus curiae, or as an intervener in the public interest, ASIC wouldn't carry a costs exposure.
Point 3: In Ten Network, ASIC did not seek a review of a remuneration determination
83My third point was that, unlike Ten Network Holdings Ltd Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 914 (Ten Network), ASIC in present circumstances had brought its own interlocutory application as an applicant on 28 August 2020 - by which it sought a review of the remuneration determination(s) of the creditors. This application embraced not only the remuneration determinations of 28 May 2019 (in respect of which the first interlocutory application is made by Mr Jones and Mr Smith) but also seeking a review of the earlier first tranche determination made by the creditors at 5 December 2018.
84Noting the content of s 60-11(1) and recognising ASIC's entitlement to apply for a review of a remuneration determination, I came to observe on a preliminary basis, that (see ts 32):
In bringing that application, it seems to me that ASIC goes further than simply being amicus curiae, as it was in the Ten Network case, or intervening to be heard on the interlocutory application, it [is] seeking affirmative relief, by way of the conducting of a review by the court of the remuneration determinations - plural - by creditors. And, as such, [ASIC] seems to me to be advocating a position. And with that, [would follow a potential] costs exposure, in terms of its participation beyond [simply] being heard on the application made by the administrators.
[Subsequently, a potential exposure position to costs depending upon the outcome of this hearing, is not seriously questioned by ASIC.]
Point 4: Court's discretion to conduct review of a remuneration determination
85The fourth point observed upon the wholly discretionary nature of the court's power to conduct a review of a remuneration determination (as defined) - by reference to the explicit wording of s 60-11(3). The provision provided for a court to conduct a review 'if it considers it appropriate to do so'.
86ASIC was asking the court to review all the creditors' remuneration determinations in respect of the fees rendered by the joint and several administrators (Messrs Jones and Smith) attributable to work performed in the seven‑month period of their appointments as voluntary administrators of the two corporations.
Point 5: The Court must have regard to '... whether the remuneration is reasonable, taking into account any or all of ...')
87By reference to IPS s 60-12, the mandatory criterion applicable upon a review was to determine whether the remuneration claimed was reasonable, and as to which the court 'must' then have regard whilst conducting a review of a remuneration determination.
88The remuneration determinations relevant to a presently advocated potential curial review of those determinations were made by the creditors of the two corporations.
Point 6: IPS s 60-12 considerations
89By reference to IPS s 60-12, the as seen specified matters (a) through to (l) all looked to invoke fairly orthodox fee related considerations going to a reasonableness evaluation to be made as regards the quantum of the remuneration amount that was under a review, including (ts 33):
Were the fees of a reasonable amount? Was the work done? Was it done competently? Did the corporations get value for money? Were there any wrong decisions that harmed creditors or members?
Point 7: Plaintiffs address the IPS s 60-12(a) - (l) matters in the first tranche of their written submissions
90It was observed next that the Schedule A to the plaintiffs' first tranche written outline of submissions of 28 April 2021 (exhibit 1.13) had looked to address and engage with the various ss (a) - (l) considerations as assembled under s 60‑12. They presented item by item in that Schedule, with cross‑references back to the affidavit evidence relied upon and found largely within the two affidavits of Mr Jones (Mr Jones' affidavits sworn 2 June 2020 (exhibit 1.17) and 24 November 2020 (exhibit 1.18)).
Point 8: ASIC had not then addressed IPS s 60-12 matter criteria other than subsection (m)
91However, ASIC's first tranche written submissions did not look to '... have engaged with any of the criteria under ss 60-12 items (a) through to (l) [sic] in the same way' as the plaintiffs. I also observed as regards that non-engagement by ASIC (to that point) that (ts 34):
... It would be helpful if it did, in short, because I can't tell, from ASIC's position, in terms of the written materials filed to date ... what its position is ...
92Subsequently, ASIC by its second tranche of written submissions has confirmed that it does not seek to join issue against any of the evidentiary contentions assembled by the plaintiffs under their Schedule A - in relation to the various IPS s 60-12 matter criteria being met - save only in respect of a contention regarding item 60‑12(m) concerning the concluding reference to 'any other relevant matter' - being ASIC's as expressed contentions as to the ramifications of an alleged conflict and bias (see ASIC's second tranche of written submissions at par 19).
Point 9: What is there for a court to 'review' about reasonable remuneration once the plaintiffs' as invoked IPS s 60-12(a) - (l) matter criteria are undisputed?
93Next, I pointed out that, if ASIC did not seek to engage severally against the s 60‑12(a) - (l) matter consideration touchstones for determining what was reasonable remuneration as relied upon by the plaintiffs under Schedule A, then prima facie, this may be (at ts 34):
... a very strong reason for the court not to conduct a review of the remuneration determination, as a matter of discretion lying in the court ...
Point 10: Mr Saggers' affidavit raised no issue as to the work done by the former administrators
94Further, as regards the discretionary considerations informing an exercise of the court's discretion in deciding whether or not to conduct a review, the 'concerns' expressed by ASIC as regards conflict and bias were found in Mr Saggers' affidavit, which (ts 34):
... mainly contains documents, plus Mr Saggers' [sic] submissions or opinions that he adds to that affidavit about the concerns of ASIC.
95I added:
... Certainly, the documents that are appended look to me to be largely relevant. But taking it at face value, it seems to me that the concerns that Mr Saggers [sic] expresses on behalf of ASIC don't look to be focussed on the quality of the work done by the joint and several administrators in the period after their appointment, on 31 October 2018, through to the end of May 2019, when their administration period came to an end.
96I continued:
There doesn't seem to be anything there about the quality of the work done by the administrators in the time that they were administrators. Nothing about the fees that they charged in that period being too high, or the work not being done, or about bad decisions that they made, as administrators, that hurt the companies. I don't detect anything there, in terms of the companies not, in broad terms, getting full value for money, in terms of the work carried on by the administrators in the time that they were administrators.
97If there were any issue about that from ASIC, I asked for it to be clarified.
98Subsequently, ASIC's second tranche of written submissions confirm these prima facie observations. However, ASIC then contends that none of that is really to the point - bearing in mind its plenary expressed concerns over conflict and bias concerning the voluntary administrators arising from events before they accepted their statutory appointments at 31 October 2018 (see par 19 of ASIC's second tranche of written submissions).
Point 11: Discretion to convene a review
99Again, going to the question of whether the court would agree (as a matter of discretion) to conduct a review - if the focus of ASIC's grievances was not upon the work as actually done by the administrators (as appeared to be the position by reference to Mr Saggers' affidavit), then was that not a matter going against the exercise of the court's discretion to conduct a review of the remuneration determination?
Point 12: Focus of ASIC's concerns over pre‑appointment work of Ferrier Hodgson on the basis the voluntary administrator appointments should not have been accepted
100Next, I pointed out that on my reading of Mr Saggers' affidavit, ASIC's expressed concerns (at ts 35):
... looks to be directed to the pre-appointment period, where Mr Jones and his firm, Ferrier Hodgson, before 31 October 2018, were privately engaged by the two corporations to assist them with their restructuring and their financial issues then being encountered.
Referring to ASIC's suggested conflict of interest or an ostensible bias problem arising from events in the pre‑appointment period, I observed that prima facie:
And that, if I understand, should be taken, somehow, to have borne upon whether Mr Jones or Mr Smith should have taken up the appointment as joint and several administrators in due course, after 31 October [2019].
101In due course, ASIC's second tranche of written submissions, in effect, confirm this is indeed its position (see ASIC's second tranche of written submissions at pars 30 and 32).
Point 13: Why should voluntary administrators not be fully remunerated for their administration work if the ASIC concern is over earlier events?
102Next, I observed (at ts 35):
Because of those [ie, conflict and bias] concerns, in terms of the pre‑administration period conduct, giving rise to a suggested conflict of interest or ostensible bias problem, I discern that what Mr Saggers [sic] is saying, on behalf of ASIC, is that somehow - and I don't quite understand this - and I need clarification - Mr Jones and Mr Smith ought not be remunerated or fully remunerated or even partially remunerated for their post-appointment work as joint and several administrators.
Point 14: No absolute bar against a prior, private appointment under Ten Network
103By reference to Ten Network, I observed that there looked to be no suggestion at all by ASIC there that an insolvency practitioner could not have held an earlier private pre-appointment with a corporation over which they were later appointed as a voluntary administrator.
104I said (at ts 36):
In fact, that case is exactly to the contrary. In the decision, which was effectively a decision made in terms of consent orders, O'Callaghan J accepted a submission of ASIC that it was appropriate for - or not inappropriate for a private appointment to be taken up, followed by appointment as joint and several administrators thereafter, providing - and the phrase used is, 'appropriate safeguards are put in place'.
105I continued to observe, prima facie, that:
There's a certain opacity about that phrase, 'appropriate safeguards', that troubles me, and I need some clarity about it. Because to the extent that it is put that that delivers a bright line boundary, or a bright line distinction, in terms of what can and can't be done, I don't see it. That's not to say that it could not be clarified. But it seems to me that there's shades of grey in terms of phrases like 'appropriate safeguards', in terms of drawing the line, if it's possible to draw a line.
Point 15: Ten Network: the relief granted speaks
106By reference to Ten Network, I further observed that O'Callaghan J, as to the relief ultimately granted consensually, had there (at ts 36):
... appointed a registered liquidator and partner ... of Ferrier Hodgson, to look at and prepare a 'limited report for inclusion in the report to creditors' dealing with two things that gave rise to his conflict concern, (a) the relationship to the lawyers who had actually briefed and continued to brief Mr Korda, and Mr Korda's firm, that was Gilbert + Tobin, and (b) akin to here, a concern about the fees in the pre-administration period that had been rendered by Mr Korda or Mr Korda's firm.
I interpolate that the magnitude of the private KordaMentha fees at issue in Ten Network was considerably higher than here (by a factor of 10), being over $1 million.
107My point as to the relief that ultimately issued in Ten Network, was that the concern issue over KordaMentha's fees was to be looked at discretely by an independent person, who was a registered liquidator in a report. Why then, by analogy, was that type of independent report remedy not capable of being used for this case - where independent liquidators had been appointed at the end of the voluntary administration? I referred to [56] of Ten Network, where O'Callaghan J observed as to the first of ASIC's three potential grounds upon which Mr Korda's pre-appointment work might give rise there to a reasonable apprehension of his bias. This had been that:
The first identified ground was that 'sheer volume of the work that was performed prior to the administrator's appointment. The fact that it went for some three months, and the fact that [KordaMentha] was paid more than $1 million for the work'.
108Noteworthy at then was ASIC's shift in Ten Network over that first ground of concern in that decision, by reference to it being, in effect, appeased by Mr Korda's sworn evidence concerning the nature of the pre-administration work as carried out towards the preparation of an administration contingency plan 'in case the informal restructuring negotiations then being conducted by the Ten Group were unsuccessful' (see [59]).
Point 16: Relatively small quantum of the Ferrier Hodgson private fee and Weston Milling transaction amounts
109Point 16 concerned the payments made by the two corporations to Ferrier Hodgson and to Weston Milling - which had raised ASIC's concerns as to potentially voidable transactions vulnerable to a setting aside and recoupment action by a liquidator.
110I had identified two subcomponents. The first was concerned with the fees rendered by Ferrier Hodgson for their private pre-appointment work being potentially recoupable if ever challenged by a liquidator as an unfair preference, or as a potentially voidable transaction. As to the Ferrier Hodgson payment, I observed (at ts 36):
That would relate, in the scheme of things, to what is [a] concern over an economically modest amount of roughly $100,000, which in the scheme of a selloff of assets by the administrators of [in] rough terms - $27.56 million, looks, in relative terms, to be almost trivial.
111I further observed that:
... If there was any concern about the fees rendered for that pre-appointment period of about $100,000, as an undue preference, the position here is that, unlike in the Ten Network Korda case, there were independent liquidators appointed to these two corporations.
112I continued:
Hence the liquidators of the two corporations here have every opportunity to scrutinise [the] avoidable preference issue, over an amount of $100,000 if they choose to do that, remembering that in the Ten Network case, that was one of the things that the report to creditors, in the limited report, consented to in the relief, dealt with.
113The second aspect of point 16 sought further elaboration over ASIC's expressed concern (from a conflict or bias perspective) over Mr Jones' or his staff's involvement in a decision whereby one unsecured creditor, being a key grain supplier to the two corporations (ie, Weston Milling) had come to receive a payment during the pre-administration period. This was roughly in the amount of $160,000 - as came to be received then by Weston Milling. I observed (at ts 37):
And again, if that's the nature of the concern - and I might have got this totally wrong - that's something the independent liquidators could pursue, if in fact, they thought there was any merit or worth in the pursuit of [a] voidable transaction.
114I also observed that the two amounts, in relative economic terms, looked to be bordering on the line of the trivial (economically speaking and measured against the context of the costs of a three day hearing in the Supreme Court of Western Australia).
Point 17: Decision making for voluntary administration compared to liquidation
115Since ASIC's first tranche of written submissions appeared to be invoking many case authorities all dealing with the position for liquidators, I contrasted the character of a liquidation process to that of the necessarily earlier work as conducted by voluntary administrators of corporations, observing (at ts 38):
The focus of administrators, compared to the focus of liquidators, when appointed, is that for administrations, the nature of the appointment is conceptually supposed to be brief. When administrators are appointed, it's always super urgent, and there is a need for the insolvency practitioners concerned to get up to speed, from usually a cold start, with what is happening in terms of the way the companies are performing in order to obtain the best possible returns for creditors and members.
I added:
Usually, but not always, that is by the sale of a business as a going concern, or at least by the sale of the business's most valuable and saleable and marketable assets before they deteriorate and lose value. That's always the primary focus of an administration, which is urgent, and is in the nature of a salvage operation ... drawing upon a maritime law analogy ... in terms of the necessary prioritisation of issues to be addressed by voluntary administrators.
116I also referred to observations made by the High Court of Australia in Patrick Stevedores No 2 Pty Ltd v Maritime Union of Australia (No 3) [1998] HCA 30; (1998) 195 CLR 1 at [47] - [54] - concerning what was then a relatively newly introduced Pt 5.3A of the Corporations Law. I drew particular attention to observations at [52] concerning the obligations of an administrator to act impartially as among all parties.
117Ultimately, I was trying to point out and emphasise the necessary requirement for some prioritisation of work under a voluntary administrator's triage role towards initially preserving the worth of a business or assets of a business that was teetering financially, under invariably urgent circumstances - by contrast to the colder nature of a liquidator's subsequent and necessarily more ordered consideration of any potential unfair preference payments or voidable transactions under a liquidation scenario where the corporation is being wound up.
Point 18: Ferrier Hodgson's private pre-appointment work payment was overt and obvious
118This point concerned the fees rendered by Ferrier Hodgson and then paid for the pre‑appointment period, in terms of Ferrier Hodgson charging for private work being rather unsurprising to anyone - where a professional accounting firm with specialist insolvency skills had been engaged.
119Correlative to that, I observed that the payment of the fees rendered by Ferrier Hodgson for the private work had also been overt.
120The point I was attempting to make was that there was no covert payment to Ferrier Hodgson. Anyone looking at the books of the corporations, such as a liquidator, would have readily identified the recorded payment to Ferrier Hodgson, if there was any issue to be pursued about it being chased or recouped in the future.
Point 19: Work done in the pre-appointment period needed to be done at some point anyway
121I posed a hypothetical question as to whether, if Ferrier Hodgson had acted on a pro bono basis during the pre-appointment period, whether that would have appeased ASIC's expressed conflict and bias concerns? The point of the observation was that the private professional work, as performed by Ferrier Hodgson in the pre‑appointment period (in obtaining familiarity with these piggery operation businesses, their creditors, their financial accounts and trading history), would or would likely need to have been performed at some stage anyway by someone and would similarly be professionally charged for at that time. I continued to observe, prima facie, that (see ts 39):
The fact that it was privately done seems to me to have given these joint and several administrators insights, in terms of the knowledge that they held, so that they could hit the ground running once they were appointed as joint and several administrators. In other words, if it's a question about when the work is done, it looks as if much of that work would need to be done anyway. It's just that it was already done prior to them being appointed as joint and several administrators.
122By reference to ASIC's as then foreshadowed objective to cross-examine Mr Jones at the hearing, it looked as if (by reference to par 186 of Mr Saggers' affidavit concerning the apportionment exercise work book as prepared), the court would be asked to draw some adverse inferences in terms of the value of the voluntary administrators' professional work later carried out being 'somehow diminished in terms of its value, or affected by ASIC's conflict of interest or ostensible bias concerns as expressed' (see Mr Saggers' affidavit at pars 186 to 189).
123I continued (at ts 40):
Hence an argument [looks to be made] that the court ought to reduce or reject some component of the remuneration determinations reached by the committee of creditors. It seems to me, notwithstanding the 54 cases cited across both lists of authorities [to that point; more were added later], to me to be without precedent. Again, I stand to be corrected about that. But if, in fact, the court is being asked to embark upon some sort of apportionment exercise, (by reduction) in terms of the ... administration fees and in terms of [value] determinations, then I would like some more guidance about the principle by reference to which that ought be implemented ... [because it does seem to me to be unusual].
Point 20:Barokes: No de facto punishments by attacking remuneration
124The Barokes decision, which was then on the plaintiffs' list of authorities, had not to that time been addressed by ASIC. The decision presented then as being, prima facie, 'particularly relevant'. This was for its (ts 41):
... canvassing of the principle stated in some of the other cases, that you can't use a remuneration determination review, in effect, as a side wind to punish, discipline or run some sort of case of misconduct or impropriety against joint and several administrators, under the guise of attacking their fees.
125Subsequently, ASIC did not seek to challenge the principle. But it would still argue that the position here was different - where these appointments as voluntary administrators, it says, should not have been accepted because of the as expressed conflict and bias concerns (see ASIC's second tranche of written submissions at pars 43 to 51).
Point 21: ASIC's other mechanisms to sanction a voluntary administrator other than by undermining the remuneration determinations made by creditors
126Point 21 was in the following terms (ts 41):
If ASIC's true concern is misconduct, and it wishes to punish the joint and several administrators or hold them to account in some way, then it seems to me, ASIC has a panoply of other remedies under the ASIC Act and under the Corporations Act, in terms of going about that intent if, in fact, that is what it wishes to achieve.
127Subsequently, by its second tranche of written submissions, ASIC accepts it holds other relief remedies. Nevertheless, ASIC says that its challenge against the remuneration determinations is principled and is justified (ASIC's second tranche of written submissions pars 52 and 53).
Point 22: Apprehended bias: Voluntary administrators are not akin to courts or tribunals as regards the making of business decisions for the corporations to which they are appointed
128
My last point raised concerned ASIC's attempted invocation of the principles of apprehended bias in relation to the role and work of joint and several administrators - in some contrast to other situations where a judge is rendering a determination as between disputant parties in the judicial process. Effectively, I was highlighting a necessary distinction of roles - as between a disputant party's entitlement within the curial process to receive a fair hearing from an unbiased decision‑maker
- measured against any importation and attempted wholesale application of the same ostensible bias principles towards work done by joint and several administrators in their unique context of corporate insolvency business decision‑making - which looked to be a distinct process, conceptually.
129Subsequently, ASIC's second tranche of written submissions refers me helpfully to observations made in the Full Federal Court by White J in ASIC v Franklin [2014] FCAFC 85; (2014) 223 FCR 204 - to which I will refer and which with respect, provide some level of acknowledgement of the distinction in roles vis-à-vis ostensible bias considerations around decisions made by administrators of corporations.
Repercussions post 31 May 2021
130My 22 preliminary observations as articulated to the parties on 31 May 2021 were intended to assist in delivering a more focussed framework for the eventual substantive hearing to follow.
131As mentioned, there has duly ensued the second tranches of supplementary written submissions by the plaintiffs and the intervenor, which do address a number of the issues I had mentioned. These submissions need to be read with that background.
132For the position of ASIC, my assessment is that, broadly speaking, it takes minimal issue against most of the points I raised for consideration on 31 May 2021 - save for ASIC eschewing any suggestion it was acting punitively, or was seeking to discipline the joint and several administrators by it objecting to the remuneration determinations as resolved by the creditors and seeking a court review of them.
133From its second tranche of written submissions, ASIC confirms its essential concern is over the taking up of the formal appointments as voluntary administrators at 31 October 2018 by Messrs Jones and Smith - in light of the private pre-appointment work as was performed by Ferrier Hodgson and which is argued to have given rise to contended issues of conflict and bias (see ASIC's second tranche of written submissions at par 21).
134ASIC's second tranche of written submissions also confirms that the present challenges taken against the creditor‑approved remuneration determinations for the joint and several administrators - by reference to ASIC's concerns bearing upon a contended apportioned reduction of remuneration amounts - is indeed without direct support of any prior case law precedent (see ASIC's second tranche of written submissions par 8).
IPS s 60-12
135As I have mentioned, IPS s 60-12 identifies what are the enumerated 'any or all' matters to which a court can have regard whilst it is in the process of conducting a review as to the reasonableness of an external administrator's remuneration.
136IPS s 60-12 reads:
In making a remuneration determination under paragraph 60-10(1)(c) or (2)(b), [identifying circumstances where it is the court that issues the determination, rather than under a resolution of creditors], or reviewing a remuneration determination under section 60-11, 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 by the external administrator was necessary and properly performed;
(b)the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;
(c)the period during which the work was, or is likely to be, performed by the external administrator;
(d)the quality of the work performed, or likely to be performed, by the external administrator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;
(f)the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the external administrator was, or is likely to be, required to accept the 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 external administrator;
(i)the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;
(j)if the remuneration is worked out wholly or partly on a time‑cost basis - the time properly taken, or likely to be properly taken, by the external administrator in performing the work;
(k)whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;
(l)if:
(i)a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration;
(ii)the matter is, or includes, remuneration of the external administrator.
the contents of the report on the review that relate to that matter;
(m)any other relevant matters.
137For present circumstances, ASIC invokes on its application seeking a court review of the creditors' remuneration determinations, only the miscellaneous provision, seen as the last of the thirteen (13) component subparagraphs above, namely s 60‑12(m).
138Having exposed the terms of IPS s 60-12 as it applies to the present applications, I turn to undertake an examination of the court's jurisdictional power and role in the present applications by the plaintiffs and the intervenor.
The court's role in the present applications
139ASIC's opposition position as intervenor is expressed under its first tranche of written outline of submissions of 7 April 2021. ASIC says there (at par 2):
The plaintiffs seek approval to draw down remuneration for work that they performed as voluntary administrators of GD Pork Pty Ltd (GD Pork) and GD Pork Holdings Pty Ltd (GDPH) (collectively the Companies). The Australian Securities and Investment Commission (ASIC) seeks orders for the review, reduction and part repayment of that remuneration.
140ASIC's submission contends (at par 11) that a court may review a determination upon ASIC's application (referring to IPS s 60-11(1) and (3)). Indeed, the court may. ASIC adds that the court holds a separate power under IPS s 90-15(1) to make orders 'as it thinks fit' in relation to the external administration of a company, including orders for the repayment of remuneration (by IPS s 90-15(3)). This appears to be referring specifically to s 90-15(3)(f), which cites as an example of orders that may be made - 'an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company'.
c.the sale of the Companies' business, and whether it was in the best interest of the creditors;
d.whether there are any claims that could be made against the Administrators, the Companies' director, the Companies' officers, Quadrant Advisory, Lavan and any other advisers in connection with the Companies' failure to achieve an informal restructure, and whether the Companies traded while insolvent during the informal restructuring period.[96]
[96] First Jones Affidavit, attachment MJ-16, page 397.
81.In the letter dated 7 May 2019, ASIC also informed the Administrators that:[97]
[97] Saggers Affidavit, attachment AJS-6, page 78.
a.it considered that the information the Administrators provided in their original DIRRI and in Mr Jones' letter of 2 April 2019 was not fulsome;
b.its view was that the Administrators should immediately take steps to resign as voluntary administrators.
82.On 10 May 2019, by letter of that date, Lavan informed ASIC, amongst other things, that the Administrators did not consider it to be in the best interests of creditors for the Administrators to retire and be replaced, because:[98]
[98] First Jones Affidavit, attachment MJ-17, page 399; Saggers Affidavit, attachment AJS-7, page 82 to 84.
a.new administrators would be required to urgently prepare a report for creditors and convene the second meeting of creditors;
b.it was considered extremely likely that the Companies would be placed into liquidation at the second creditors' meeting because no DOCA proposals had been received at that time; and
c.the Administrators would be prepared to agree not to accept appointment as liquidators of the Companies at the reconvened second creditors' meeting, and to recommend at the meeting that an alternate liquidator, Ian Francis of FTI Consulting, be appointed.
83.On 13 May 2019, by letter of that date, ASIC responded to Lavan's letter of 10 May 2019 stating that:
a.the Administrators' proposal was not acceptable to ASIC, as in ASIC's view a fair minded observer might apprehend that the Administrators might not discharge their duties concerning the preparation of the report required to be prepared under s.439A of the Corporations Act 2001(Cth) in an impartial or independent manner and in the interests of creditors as a whole;
b.ASIC requested that the Administrators resign as voluntary administrators forthwith, that they do not attempt to seek remuneration approval at the second creditors meeting or any subsequent meetings of the Companies' creditors or committee, and that they apply to Court for a review of their remuneration.[99]
[99] First Jones Affidavit, attachment MJ-18, page 402; Saggers Affidavit, attachment AJS-8, page 89 to 90.
84.On 14 May 2019, Lavan provided to ASIC:[100]
[100] First Jones Affidavit, attachment MJ-19, page 405; Saggers Affidavit, attachment AJS-9 and AJS-10, page 99 to 101.
a.a copy of the Administrators' report of the Companies that was issued to creditors on 27 November 2018. This report was subsequently lodged with ASIC on 15 May 2019;
b.the minutes of meeting of creditors of the Companies held on 27 November 2018;
c.a proposal, in addition to the terms which Lavan had put to on 10 May 2019, that Administrators would not draw any remuneration approved at the reconvened second creditors' meeting, and instead would make an application to Court for approval of that remuneration; and
d.notice of their intention to issue a supplementary Major Report to creditors to reflect these matters, among other things.
85.On 14 May 2019, Mr Jones and Mr Smith completed replacement DIRRIs for the Companies.[101]
[101] First Jones Affidavit, attachment MJ-23, page 566.
86.On 15 May 2019, Lavan provided to ASIC an amended draft supplementary Major Report to creditors of the Companies.[102]
[102] Saggers Affidavit, attachment AJS-11, page 146.
87.On 15 May 2019, ASIC provided to Lavan a copy of the draft supplementary Administrator's report, containing its comments on the document, and requesting a further amended version of the report to be provided to ASIC.[103]
[103] Saggers Affidavit, attachment AJS-12, page 167.
88.On 16 May 2019, ASIC wrote to Lavan, informing them that it accepted the proposal set out in Lavan's letter of 14 May 2019.[104]
[104] First Jones Affidavit, attachment MJ-20, page 408.
89.On 17 May 2019, Ferrier Hodgson provided ASIC with the Administrators' supplementary Major Report for each of the Companies.[105] The reports were provided to creditors of the Companies on the same day.[106]
[105] First Jones Affidavit, attachment MJ-22, page 489 and attachment MJ-23, page 566.
[106] Saggers Affidavit, attachment AJS-13 and attachment AJS-14, page 189.
90.On 28 May 2019, the concurrent reconvened second meetings of creditors of the Companies were held.[107]
[107] First Jones Affidavit, attachment MJ-24, page 572.
91.At the date of the reconvened second creditors meetings of the Companies, no DOCA proposals for either of the Companies had been received.[108]
[108] First Jones Affidavit, attachment MJ-24, page 574.
92.At the reconvened second meetings of creditors of the Companies, the Administrators informed creditors of their investigations which a liquidator would explore further and noted matters for further investigation.[109]
[109] First Jones Affidavit, attachment MJ-24, page 575-576.
93.At the meetings on 28 May 2019, the creditors of the Companies approved the Administrators' remuneration and disbursements for the companies in the following periods:
a.in respect of GD Pork, for the period between 17 November 2018 and 5 May 2019, $762,486 plus GST;
b.in respect of GD Pork, for the period between 6 May 2019 to 28 May 2019, $45,000 plus GST;
c.in respect of GD Pork Holdings, for the period between 17 November 2018 and 5 May 2019, $23,895 plus GST; and
d.in respect of GD Pork Holdings, for the period between 6 May 2019, $5,000 plus GST.[110]
[110] First Jones Affidavit, attachment MJ-24, page 575-579.
94.At the meetings on 28 May 2019, the creditors of the Companies also resolved that:
a.the Companies be wound up; and
b.Ian Francis and Michael Ryan of FTI Consulting be appointed joint and several liquidators of the Companies.[111]
[111] First Jones Affidavit, Attachment MJ-24, page 579; Saggers Affidavit AJS-47, page 744.
95.The remuneration approved by the creditors of the Companies at the meetings on 28 May 2019 included amounts claimed by the Administrators for:
a.investigating and reporting to creditors about voidable preferences;
b.investigating and reporting to creditors about the conduct of the Companies' management, including insolvent trading issues; and
c.pursuing the sale of the Companies' assets and businesses, including in trading them to facilitate that sale.
96.With effect from 28 May 2019, the Administrators ceased to hold office as joint and several administrators of the Companies.[112]
[112] First Jones Affidavit, attachment MJ-5, page 130.
97.On 11 June 2019, Lavan wrote to ASIC stating that the Administrators were in the process of making an application to Court in respect of their remuneration and asking ASIC to indicate what course it should take with respect to lodging a Form 5603 pursuant to section 70-6 of the Insolvency Practice Rules (Corporations) 2016, which requires information about the administrators remuneration, receipts and payments.[113]
[113] Saggers Affidavit, attachment AJS-15, page 349.
98.On 17 June 2019, ASIC wrote to Lavan informing it that the Administrators should lodge the Form 5603 reporting nil fees drawn and including all transactions that occurred during the period of return.[114]
[114] Saggers Affidavit, attachment AJS-15, page 348.
99.The Administrators currently hold the amount of about $974,409.70 (including GST) on account of their claims for remuneration for work performed regarding the Companies up to 28 May 2019 but have not drawn down on this sum.
Schedule 2
Schedule A-Consideration of evidence in relation to s 60-12 of the IPS
IPS s 60-12(a): the extent to which the work by the external administrator was necessary and properly performed
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| Financial review and securing assets, trade on of Companies and other administration tasks | SOAF at paragraph [56]. Jones I at paragraphs [37.2], [38], [64.5] and [64.7]-[64.10]. Jones 2 at paragraphs [17], [52]-[57] and [63]. | SOAF at paragraph [56]. Jones I at paragraphs [37.2], [38], [64.5], [64.7] [64.10] Jones 2 at paragraphs [17], [52]-[57] and [63] | NIA |
| The administrators undertook necessary work in securing the Companies assets, feeding and looking after livestock and trading on the business. | |||
| Sales and marketing campaign | SOAF at paragraphs [58], [67]-[68], [70] and [77]. | SOAF at paragraphs [58], [67]-[68], [70] and [77]. | NIA |
| Jones 1 at paragraphs [37.3], [38.11] [38.21], [39]-[43], [63] and [64.6]. | Jones I at paragraphs [37.3], [38.1l]-[38.21], [39]-[43], [63] and [64.6]. | ||
| Jones 2 at [58]-[62]. | Jones 2 at [58]-[62]. | ||
| The administrators conducted a sales and marketing campaign ultimately leading to |
Work done Evidence Evidence agreed and uncontroverted Evidence contested the sale of the Companies' business to
Westpork
Meeting with and reporting to creditors SOAF at paragraphs [59]-[66] and [90]-
[95].
Jones I at paragraphs [44]-[57], [64.2]
[64.3] and [75]-[85].
Jones I annexures MJ-8 to MJ-10, MJ-21 to MJ-22 and MJ-24.
The administrators held meetings with creditors as required, adjourned the second creditors meeting (as voted on by the creditors) and issued the necessary reports to creditors with the requisite information pursuant to the Act.
SOAF at paragraphs [59]-[66] and [90]-[95].
Jones I at paragraphs [44]-[57], [64.2]-[64.3] and [75]-[85].
Jones I annexures MJ-8 to MJ-10, MJ-21 to MJ- 22 and MJ-24.
NIA Statutory obligations SOAF at paragraphs [57], [69], [71]-[73],
[75]-[76], [78]-[89] and [97]-[98].
Jones I paragraphs [34], [58]-[62], [64. I],
[644] and [65]-[74].
Jones I annexures MJ-7 page 151, MJ-11 to MJ-20 and MJ-23.
The administrators were required to undertake certain actions in accordance with their obligations under the Act (ie)
SOAF at paragraphs [57], [69], [71]-[73], [75] - [76], [78]-[89] and [97]-[98].
Jones I paragraphs [34], [58]-[62], [64.1], [644]
and [65]-[74].
Jones I annexures MJ-11 to MJ-20 and MJ-23.
NIA
Work done Evidence Evidence agreed and uncontroverted Evidence contested issuing the DIRRI and Supplementary
DIRRI, extending the convening period and liaising with ASIC)
Statutory investigations Jones I at [38.27].
Jones I annexures MJ-8 to MJ-9.
Jones 2 at [21], [22.2]-[22.3], [29]-[4 I] and
[46]-[5 I].
Saggers at paragraph [181l
The administrators conducted necessary statutory investigations into voidable transactions, the Companies' management or the sales and marketing campaign.
NIA Jones I at [38.27].
Jones I annexures MJ-8 to MJ-9.
Jones 2 at [21], [22.2]-[22.3], [29]-[4 I] and [46]
[5 l].
Saggers at paragraph [181].
ASIC do not consider the administrators' investigations into voidable transactions, the Companies' management or the sales and marketing campaign (devised during the Engagement) were properly performed.
ASIC submissions at paragraphs [41]-[49].
IPS s 60-12(b): the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed
Work done Evidence Evidence agreed and uncontroverted Evidence contested NIA All work performed or to be performed has been completed. NIA NIA
Work done Evidence Evidence agreed and uncontroverted Evidence contested Administration period SOAF at paragraphs [54] and [96].
Jones I annexure MJ-6 page 142, annexure MJ-5 page 130.
The administration of the Companies began on 31 October 2018 and ceased on 28 May 2019, lasting for a period of roughly 7 months.
SOAF at paragraphs [54] and [96].
Jones I annexure MJ-6 page 142, annexure MJ-5 page 130.
ASIC have identified in their submissions at paragraph [3] the period of the administration.
NIA Requirement to shut down immediately Jones 2 at paragraph [55.1].
A minimum 13-week period would have been required to wind-down the Companies businesses and deal with livestock.
Jones 2 at paragraph [55.1]. NIA
IPS s 60-12(d): the quality of the work performed, or likely to be performed, by the external administrator
Work done Evidence Evidence agreed and uncontroverted Evidence contested Sales and marketing process Jones 2 at paragraph [58].
The work done in commencing and pursuing the sales campaign was properly undertaken.
Jones 2 at paragraph [58]-[59].
SOAF at paragraphs [65] and [93].
Jones 1 annexure MJ-10 page 346 - 347, annexure MJ-24 page 576-579.
NIA
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| SOAF at paragraphs [65] and [93]. Jones 1 annexure MJ-10 page 346-347, annexure MJ-24 page 576-579. Saggers at paragraph [I 74]. The Companies' creditors approved the administrators' remuneration. | Saggers at paragraph [174]. | ||
| Trading on the Companies | Jones 2 at paragraphs [52]-[53]. The work done in trading on the Companies was properly undertaken. SOAF at paragraphs [65] and [93]. Jones 1 annexure MJ-10 page 339, annexure MJ-24 page 570. The Companies' creditors approved the administrators' remuneration. | Jones 2 at paragraphs [52] - [53]. SOAF at paragraphs [65] and [93]. Jones I annexure MJ-IO page 339, annexure MJ- 24 page 570. | NIA |
| Statutory investigations | Jones I at [38.27]. Jones I annexures MJ-8 to MJ-9. Jones 2 at [21], [22.2], [29]-[4I] and [46] - [5I]. | NIA | Jones I at [38.27]. Jones I annexures MJ-8 to MJ-9. Jones 2 at [21], [22.2], [29] - [4 I] and [46]-[5 I]. Saggers at paragraph [181]. |
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| Saggers at paragraph [181]. The administrators conducted necessary statutory investigations into voidable transactions, the Companies' management or the sales and marketing campaign. | ASIC submissions at paragraphs [22] and [41] ‑ [49]. ASIC do not consider the administrators' investigations into voidable transactions, the Companies' management or the sales and marketing campaign (devised during the Engagement) were properly performed. |
IPS s 60-12(e): the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| Complexity of work performed during the administration | Jones I at [94]-[95] and [97]. Jones 2 at paragraphs [17] - [l 9] and [52] [57]. Jones 4 at paragraph [55] and annexure MJ-1 I page 8. Saggers annexure AJS-13 (being the Supplementary Administrators' Report at MJ-21 and MJ-22) pages 200 and 231, annexure AJS-23 pages 400-40 I. The administration of the Companies' business was complex and involved | Jones I at [94]-[95] and [97]. Jones 2 at paragraphs [17]-[19] and [52]-[57]. Jones 4 at paragraph [55] and annexure MJ-1 I page 8. Saggers annexure AJS-13 (being the Supplementary Administrators' Report at MJ-21 and MJ-22) pages 200 and 231, annexure AJS-23 pages 400-40 I ASIC do not address the complexity of the work to be performed. | NIA |
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| consideration of a number of competing factors (including feeding and transporting livestock and liaising with Commonwealth and State regulatory bodies). |
IPS s 60-12(1): the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| Extraordinary issues dealt with during the administration | Jones I at paragraphs [89.2] - [91] Jones 2 at [17.12] - [17.14], [18]-[19] and [55]-[57]. Jones 4 annexure MJ-11 page 8. Saggers annexure AJ - 13 (being the Supplementary Administrators' Report at MJ-21 and MJ-22) pages 200 and 231, annexure AJS-23 pages 400-401. The Companies conducted a Iivestock breeding and fattening business. The administrators were required to take on the responsibility of the welfare of 46,568 pigs which meant complying with specific welfare legislation. | Jones I at paragraphs [89.2] - 9I] Jones 2 at [17.12] - [l7.14], [18] - [19] and [55] [57]. Jones 4 annexure MJ-11 page 8. Saggers annexure AJS-13 (being the Supplementary Administrators' Report at MJ-21 and MJ-22) pages 200 and 231, annexure AJS-23, pages 400 - 401 . ASIC has not addressed the extraordinary issues faced by the administrators as set out in the evidence. | NIA |
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| The sole director of the Companies resigned meaning the administrators could not simply resign from their role as there was no one to hand over control of the Company to. The sole director of the Companies and another senior staff member were facing serious criminal charges which resulted in both going to jail. |
IPS s 60-12(g): the extent (if any) to which the external administrator was, or is likely to he, required to accept a higher level of risk or responsibility than is usually the level
| Work done | Evidence | Evidence agreed and nncontroverted | Evidence contested |
| Risks taken on in administration | Jones 2 at [17.12]-[17.14], [18]-[19] and [55] - [57]. Saggers annexure AJS-13 (being the Supplementary Administrators' Report at MJ-21 and MJ-22) page 200. The administrators were required to take on the responsibility of the welfare of 46,568 pigs which meant complying with specific welfare legislation. | Jones 2 at [I 7.12] - 17.15], [I 8] - [I 9] and [55] - [57]. Saggers annexure AJS-13 page 200. ASIC has not addressed the additional risks that were taken on by the administrators in this regard. | NIA |
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| The Companies conducted a livestock breeding and fattening business which required communication with Commonwealth and State regulatory bodies. |
IPS s 60-12{h): the value and nature of any property dealt with, or likely to be dealt with, by the external administrator
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| Value assessed at time of appointment | Jones I annexure MJ-9 pages 279-280. Jones 2 at paragraph [57]. The assets of the Companies dealt with and ultimately sold by the administrators were worth $27,566,000 prior to the administration. | Jones I annexure MJ-9 pages 279-280. Jones 2 at paragraph [57]. ASIC has not addressed the value of the property dealt with by the administrators. | NIA |
| Value of Companies with trade on or shut down | Jones 2 at [55] and [60]-[6 I]. Jones 2 annexures MJ-29 and MJ-30. The value of the Companies' assets would materially diminish if the administrators ceased operations of the Companies' business due to death of livestock and loss | Jones 2 at [55] and [60]-[6I]. Jones 2 annexures MJ-29 and MJ-30. | NIA |
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| of necessary Iicences to maintain the business as a going concern. |
IPS s 60-12{i): the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| Jones I annexure MJ-8 page I 87-188, annexure MJ-10 page 339 and annexure MJ-24 page 570. Jones 4 annexure MJ-11 page 12. SOAF at paragraphs [65] and [93]. The Companies had between 50-200 creditors (28 of who had proved debts) at the time of the Major Report. The administrators estimated the value of unsecured debt to be $10,520,000. 2 creditors were secured with a value of $26,567,000. Creditors approved the administrators' remuneration. | Jones I annexure MJ-8 page 187-188, annexure MJ-IO page 339 and annexure MJ-24 page 570. Jones 4 annexure MJ-11 page 12. SOAF at paragraphs [65] and [93]. ASIC have not made comment or put forward evidence as to the number and attributes of the creditors. | NIA |
IPS s 60-12(j): if the remuneration is worked out wholly or partly on a time-cost basis--the time properly taken, or likely to be properly taken, by the external administrator in performing the work
| Work done | Evidence | Evidence agreed and uncontroverted | Evidence contested |
| All remuneration recorded on a time cost basis | SOAF at paragraphs [65], [93] and [99]. Jones I annexure MJ-8 page 238-246, annexure MJ-24 pages 575-579. Saggers annexure AJS-10 pages 114 - 115, annexures AJS-45 and AJS-46 pages 610 - 736. Remuneration worked out wholly on a time-cost basis (apart from disbursements) and equivalent to $974,409.70. WIP was recorded on a time-cost basis. | SOAF at paragraphs [65], [93] and [99]. Jones I annexure MJ-8 page 238-246, annexure MJ-24 pages 575-579. Saggers annexure AJS-10 pages 114-115, annexures AJS-45 and AJS-46 pages 610 - 736. ASIC has done its own review of remuneration contained at Schedule A of ASIC's submissions. The remuneration is based on a review ofWIP on a time-cost basis. | NIA |
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RC
Associate to the Honourable Justice Martin
1 DECEMBER 2021
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