Re Accuracy Interiors Pty Ltd (in liq)
[2020] VSC 20
•5 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2019 03617
IN THE MATTER of ACCURACY INTERIORS PTY LTD (IN LIQ) (ACN 609 123 328)
APPLICATION BY:
| RICHARD JOHN CAUCHI AND MICHAEL CARRAFA (IN THEIR CAPACITY AS JOINT AND SEVERAL LIQUIDATORS OF ACCURACY INTERIORS PTY LTD (IN LIQUIDATION)(ACN 609 123 328)) | Plaintiffs |
---
JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 5 February 2020 |
CASE MAY BE CITED AS: | Re Accuracy Interiors Pty Ltd (in liq) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 20 |
---
CORPORATIONS – External administration – Application by liquidators for their remuneration made pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) being Schedule 2 of the Corporations Act 2001 (Cth) – Orders made determining remuneration.
---
HIS HONOUR:
Introduction
By an originating process filed 9 August 2019, the applicants, Richard John Cauchi and Michael Carrafa (‘the applicants’) in their capacity as joint and several liquidators of Accuracy Interiors Pty Ltd (‘Accuracy’) seek orders pursuant to s 60-10(1)(c) of Schedule 2 (Insolvency Practice Schedule) (Corporations) (‘IPS’) to the Corporations Act 2001 (Cth) (‘Act’) for the determination of remuneration and expenses (‘Application’). The remuneration sought is in the sum of $57,290.00 excluding GST from 1 December 2018 to 14 June 2019 for the performance of their responsibilities as the liquidators of Accuracy.
The matter came before me in the Corporations List. As shall be discussed below, the originating process was endorsed with the request contemplated by r 9.2(4)(b) of the Supreme Court (Corporations) Rules 2013 (Vic) (‘Rules’). I am satisfied that the applicants have complied with the provisions in respect of notice required to be given of this Application and consider that it is appropriate to deal with the Application in the absence of the public and without any attendance by, or on behalf of the applicants.
Applicable provisions
Because the applicants were appointed by the members of Accuracy as voluntary liquidators pursuant to s 491(1) of the Act on 2 October 2018, division 60 of the IPS to the Act, which came into force on 1 September 2017, is the relevant division by which the applicants seek their remuneration.
Section 60-10 relevantly provides:
60-10 Remuneration determinations
(1)A determination, specifying remuneration that an external administrator of a company (other than an external administrator in a members’ voluntary winding up) is entitled to receive for necessary work properly performed by the external administrator in relation to the external administration, may be made:
(a) by resolution of the creditors; or
(b)if there is a committee of inspection and a determination is not made under paragraph (a) – by the committee of inspection; or
(c)if a determination is not made under paragraph (a) or (b) – by the Court.
…
(3)[Amount of remuneration] A determination under this section may specify remuneration that the external administrator is entitled to receive in either or both of the following ways:
(a) by specifying an amount of remuneration;
(b)by specifying a method for working out an amount of remuneration.
Section s 60-12 of the IPS to the Act states that 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 a higher level of risk or responsibility than is usually the case;
(h) the value and nature of any property dealt with, or likely to be dealt with, by the 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; and
(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.
Before an application for determination of remuneration can be made, rule 9.2 of the Rules requires the applicants to serve certain persons with a copy of the affidavit in support of the application and a notice in accordance with Form 16 of the Rules stating that it is the applicants’ intention to apply to the Court for an order determining their remuneration.
Rule 9.2 relevantly provides:
9.2 Determination of remuneration of external administrator (Insolvency Practice Schedule (Corporations) s. 60-10(1)(c) and (2)(b))—Form 16
(1)This Rule applies in relation to an application for a determination under section 60-10(1)(c) or (2)(b) of the Insolvency Practice Schedule (Corporations) specifying remuneration that an external administrator of a company is entitled to receive for necessary work properly performed by the external administrator in relation to the external administration.
…
(2)At least 21 days before filing an originating process, or interlocutory process, seeking the determination, the external administrator must serve a notice, in accordance with Form 16, of the external administrator’s intention to apply for the determination, and a copy of any affidavit on which the external administrator intends to rely, on the following persons—
(a)each creditor who was present, in person or by proxy, at any meeting of creditors;
(b) each member of any committee of inspection;
(c)if there is no committee of inspection, and no meeting of creditors has been convened and held—each of the 5 largest (measured by amount of debt) creditors of the company;
(d)each member of the company whose shareholding represents at least 10% of the issued capital of the company.
(3)Within 21 days after the last service of the documents referred to in paragraph (2), any creditor or contributory may give to the external administrator a notice of objection to the remuneration claimed, stating the grounds of objection.
(4)If the external administrator does not receive a notice of objection within the period referred to in paragraph (3)—
(a)the external administrator may file an affidavit, made after the end of that period, in support of the originating process, or interlocutory process, seeking the determination stating—
(i)the date, or dates, when the notice and affidavit required to be served under paragraph (2) were served; and
(ii)that the external administrator has not received any notice of objection to the remuneration claimed within the period referred to in paragraph (3); and
(b)the external administrator may endorse the originating process, or interlocutory process, with a request that the application be dealt with in the absence of the public and without any attendance by, or on behalf of, the external administrator; and
(c)the application may be so dealt with.
(5)If the external administrator receives a notice of objection within the period referred to in paragraph (3), the external administrator must serve a copy of the originating process, or interlocutory process, seeking the determination on each creditor or contributory who has given a notice of objection.
(6)An affidavit in support of the originating process, or interlocutory process, seeking the determination must—
(a)include evidence of the matters referred to in section 60-12 of the Insolvency Practice Schedule (Corporations); and
(b)state the nature of the work performed or likely to be performed by the external administrator; and
(c)state the amount of remuneration claimed; and
(d)include a summary of the receipts taken and payments made by the external administrator; and
(e)state particulars of any objection of which the external administrator has received notice; and
(f) if the external administration is continuing—give details of any matters delaying the completion of the external administration
Material filed
In support of the Application, the applicants rely on the affidavits of:
(a) Mr Cauchi, sworn 25 June 2019 (‘First Cauchi Affidavit’);
(b) Ms Hiroa-Maiava, affirmed 2 July 2019 (‘Hiroa-Maiava Service Affidavit’);
(c) Mr Cauchi, sworn 6 August 2019 (‘Second Cauchi Affidavit’);
(d) Mr Haddad, sworn 12 August 2019 (‘Haddad Affidavit’); and
(e) Mr Harrick, sworn 12 August 2019 (‘Harrick Affidavit’).
On 9 December 2019, the applicants’ solicitors filed written submissions.
Ms Hiroa-Maiava deposes that on 28 June 2019, she posted by ordinary pre-paid post letters enclosing a copy of the Form 16 notice of intention to apply for remuneration and the First Cauchi Affidavit sworn 25 June 2019 in support of the Application, (‘Application Documents’) to the following persons:
(a) Li Chen Properties Pty Ltd of 94A Ashburn Grove, ASHBURTON VIC 3147;
(b) CYY Construction Pty ltd, of 13 Swanton Avenue, WILLIAMS LANDING VIC 3027;
(c) SH & H International Pty Ltd of Unit 15, 4 Wests Road, MARIBYRNONG VIC 3032;
(d) June Interiors Pty ltd, of 313 Springvale Road, GLEN WAVERLEY VIC 3150;
(e) Archiclad Pty ltd, of ‘1ST’, Suite 6, Level 1010 Doncaster Road, DONCASTER EAST VIC 3109; and
(f) Mr Li Chen, of 94A Ashburn Grove, ASHBURTON VIC 3147.
The persons served with the Application Documents as set out above are those required to be served in accordance with r 9.2(2) of the Rules. Despite service of all the relevant parties, Mr Cauchi deposed on 6 August 2019 that no objectors came forward to take issue with the matters raised by the applicants in the Application Documents within the 21 day period, or at all. On 12 August 2019, Mr Haddad deposed that the envelopes posted to the addresses of Mr Li Chen and Li Chen Properties Pty Ltd were returned to the offices of the solicitors for the applicants, Harrick Lawyers, marked return to sender. No notices of objection to the Application were received.
I consider that, as the appropriate persons insofar as it is practicable, have been notified as required by r 9.2(2) the Rules, and there have been no objections, that as stated above, it is appropriate to accede to the applicants’ request and determine the Application in the absence of the public.
Affidavit of Richard John Cauchi sworn 25 June 2019
In the First Cauchi Affidavit Mr Cauchi deposes that Accuracy was incorporated on 4 November 2015 and operated a plastering business.
On 2 October 2018, a resolution was passed by members of Accuracy that it be placed into a Creditors’ Voluntary Liquidation pursuant to s 491(1) of the Act and he and Mr Carrafa were appointed joint and several liquidators of Accuracy on the same date.
He deposes that on 19 December 2018, he sent a Statutory Report by Liquidator (‘December 2018 Report’) pursuant to s 70-50 of the IPS to the Act providing an update on the progress of the liquidation and seeking the approval of further remuneration. The December 2018 Report enclosed, inter alia, the following documents;
(a) Accuracy’s statutory information;
(b) list of known creditors;
(c) information sheet - offences and recoverable transactions;
(d) remuneration approval report;
(e) Information Sheet on Proposals without meetings; and
(f) Voting Forms.
The remuneration approval report contained, inter alia:
(a) an executive summary outlining the details of the fees and internal disbursements that the applicants are seeking approval for;
(b) a description of the four remuneration methods available and an explanation of the method of remuneration that has been selected by the applicants;
(c) a description of the major tasks remaining, their estimated timeframe for completion, together with the estimated cost of undertaking same;
(d) tables describing the work completed from 1 December 2018 to 17 December 2018 (First Table) and the work to be completed from 18 December 2018 to the finalisation of the liquidation (Second Table) (Part 3.3);
(e) calculations of the remuneration for the work carried from 1 December 2018 to 17 December 2018 (‘First Calculation’) and for the work to be completed from 18 December 2018 to the finalisation of the liquidation (‘Second Calculation’) (Part 3.4); and
(f) proposed resolutions for voting on the approval of the Liquidators’ remuneration.
On 19 December 2018, the December 2018 Report was sent to the addressees listed in Schedule 1 annexed to the First Cauchi Affidavit.
On 22 January 2019, Archiclad Pty Ltd, the only creditor that responded to the vote in respect of the remuneration of the applicants, rejected the remuneration sought.
Works performed form 1 December 2018 to 17 December 2018 (First Table and First Calculation)
Mr Cauchi deposes that the applicants have outstanding remuneration in the amount of $4,381.00 excluding GST for work undertaken during the liquidation from 1 December 2018 to 17 December 2018.
The nature of the work performed by the applicants and their directors and staff, during the liquidation period of 1 December 2018 to 17 December 2018, included the following tasks:
(a) reviewing Accuracy’s records;
(b) liaising with unsecured creditors of Accuracy;
(c) liaising with the Department of Jobs and Small Business;
(d) preparation of Fair Entitlement Guarantee documents;
(e) review of Accuracy’s books and records, including banking records, with respect to any voidable transactions;
(f) preparation of letter of demand with respect to an unfair preference payment; and
(g) preparation of the December 2018 Report.
Work likely to be performed from 18 December 2018 to Finalisation (Second Table and Second Calculation)
Mr Cauchi deposes that the applicants sought approval for remuneration of $45,619.00 excluding GST for the period of 18 December 2018 to the finalisation of the liquidation, which he anticipated at the time to be June 2020.
He states that since the December 2018 Report, transactions which appear to constitute unreasonable director-related transactions and unfair preferences have been identified through further investigations, which he intends on pursuing as potential claims in order to attempt to maximise the return to creditors.
Mr Cauchi states that the investigations since the December 2018 Report have caused the remuneration sought for the period of 18 December 2018 to the finalisation of the liquidation to increase. Since the December 2018 Report, the following matters were identified:
(a) unfair preference claims;
(b) funds withdrawn from Accuracy’s bank account by the director that appear to be unreasonable director related transactions; and
(c) further debtor retention claims.
Mr Cauchi states that the nature of the work performed to date and likely to be performed by the applicants, their directors and staff from 18 December 2018 to the finalisation of the liquidation, includes but is not limited to the following tasks:
(a) receipting and filing Proof of Debts not related to dividend;
(b) reviewing debtors’ ledgers, liaising with debtors and their solicitors, liaising with key stakeholders regarding the collectability of debtors/retentions;
(c) reviewing further Accuracy documents, books and records;
(d) liaising with the director, secured and unsecured creditors of Accuracy, shareholders, employees and former employees of Accuracy, the Department of Jobs and Small Business, the Australian Taxation Office (‘ATO’) and ASIC;
(e) managing and adjudicating Retention of Title claims;
(f) assisting the Department of Jobs and Small business with queries relating to outstanding employee entitlements;
(g) reconciling superannuation accounts;
(h) preparation and reconstruction of various financial statements;
(i) conducting and summarising statutory searches;
(j) review of specific transactions with respect to voidable transactions;
(k) liaising with the ATO’s legal representatives in respect to the unfair preference claims issued against the ATO in the amount of $569,351.00;
(l) investigating potential unfair preference payments to Archiclad Pty Ltd amounting to $2,641,278.51;
(m) pursuing recovery actions on debts owed to Accuracy amounting to $3,632,536.17;
(n) reviewing potential voidable transactions with respect to withdrawals from Accuracy’s bank accounts;
(o) subject to the above, finalising claims against the director and any other relevant parties;
(p) reconciliation of bank accounts;
(q) preparation and lodgment of Business Account Statement;
(r) preparation of dividend calculation;
(s) preparation and advertisement of notice of intention to declare a dividend;
(t) adjudication of creditor claims for dividend purposes;
(u) distribution of dividends; and
(v) preparation of report to ASIC.
He states that the tasks described are necessary in the liquidation and are to be properly performed to ensure a greater return to creditors.
Complexity of the work to be performed or likely to be performed
Mr Cauchi deposes that should the abovementioned voidable transaction claims be defended, the complexity of the work will necessarily increase as the identified claims against the Director of Accuracy and recovery actions against debtors of Accuracy may require the need for litigation and voluminous correspondence with the relevant parties.
Quality of work
Mr Cauchi deposes that the tasks have been and will be performed by staff at the appropriate positions in the hierarchy within his firm.
He states that the remuneration approval report within the December 2018 Report contains a Schedule of Hourly Rates & Guide to Staff Experience (‘Schedule’). The First and Second Tables show the areas of tasks, allocation to staff members by reference to the complexities and the significance of each task. He states that the applicants as liquidators will delegate tasks to junior staff where appropriate, subject to appropriate review and supervision by senior staff and appointees.
Extraordinary issues and higher level of risk
Mr Cauchi deposes that no extraordinary issues nor any issues associated with a higher level of risk have been identified.
Value and nature of any property dealt with or likely to be dealt with
Mr Cauchi deposes that as the applicants have identified debts due to Accuracy with an estimated realisable value of $3,632,536.17, a significant amount of time and work will be needed to realise the assets.
Number, attributes and conduct of creditors
Mr Cauchi deposes that as at the time of swearing his affidavit, he is aware of 3 secured and 27 unsecured creditor claims. The December 2018 Report was sent to a total of 86 parties inviting them to put their Proof of Debt forward. He deposes it is possible that the number and quantum of creditors may increase if there are further Proofs of Debt received.
Remuneration method
Mr Cauchi states that the remuneration has been and will continue to be calculated on time based hourly rates, which is calculated by the number of hours reasonably spent by each staff member in his firm multiplied by the relevant hourly rate.
The First and Second Tables in the remuneration approval report enclosed in the December 2018 Report contain a narrative which describes the task undertaken by each staff member, the time that has been and will be spent on each task and the hourly rate.
Remuneration approved
Mr Cauchi deposes that the creditors have resolved to approve remuneration in the sum of $50,000.00 excluding GST for the period of 2 October 2018 to the finalisation of the liquidation. Descriptions of tasks and calculations of remuneration were included in the remuneration approval report enclosed in the Initial Notice to Creditors dated 16 October 2018 (‘Initial Notice to Creditors’). The approved remuneration capped amount was reached on 30 November 2018.
He states that the nature of the work performed by the applicants, during the period of 2 October 2018 to 30 November 2018, included but was not limited to the following tasks:
(a) attending Accuracy’s premises for inspection;
(b) conducting investigations of books, records and PPSR searches;
(c) meetings with stakeholders to gather books and records;
(d) identification of creditors and debtors;
(e) identification of potential claims for unfair preference payments and recoveries;
(f) engaging with the relevant parties to establish the value of assets;
(g) investigation into employee entitlements;
(h) compliance with statutory reporting requirements; and
(i) preparation of Initial Notice to Creditors.
Mr Cauchi deposes that the remuneration has exceeded the previous approval obtained from creditors and seeks approval of remuneration for the period 1 December 2018 to 14 June 2019 in the sum of $57,290 excluding GST. This was previously estimated to be $45,619.00 excluding GST as stated in paragraph 21 above.
Applicable principles
As the applicants’ written submissions observe, the process to be undertaken by the Court in applications of this type is a summary procedure and the rules of evidence are not strictly applied. The principles are detailed in the decision of the Full Court of the West Australian Supreme Court in Venetian Nominees Pty Ltd v Conlan[1] (‘Venetian Nominees’). The burden lies with the liquidators to establish that the remuneration claimed is fair and reasonable.
[1](1998) 20 WAR 96 (‘Venetian Nominees’).
The first task of the Court considering these applications is to determine whether the applicants have made out a prima facie case for the amounts claimed. This is irrespective of whether or not there are any objectors.
It is only once the Court has satisfied itself that the liquidators have made out a prima facie case for determination of the amount claimed that the absence of objectors of contradictors becomes relevant. In Conlan v Adams[2], another decision of the Full Court of Western Australia, the Full Court observed that the phrase ‘prima facie’ in this context means:
…[T]hat the claimant’s evidence is sufficient to enable the court to determine whether the claimed remuneration is fair and reasonable. So, for example, there must be evidence relating to the work done by particular persons, how long it took to do the work, their hourly rate and the reasonableness of the rate.
However, it cannot be intended that the reasonableness of each item of work undertaken should positively emerge solely from the description of the item in the schedule. If in doubt as to the reasonableness of an item, reference can and should be made to relevant documents in the liquidator’s possession relating to the work the subject of the claim ...[3]
[2]Conlan v Adams (2008) 65 ACSR 521.
[3]Ibid [31]-[32].
Applicants’ submissions
The matters which the applicants submit are relevant in the present Application are as follows:
Section 60-12(a) - the extent to which the work performed by the external administrator was necessary and properly performed
The applicants have annexed a remuneration approval report to the Report to Creditors dated 19 December 2018. The remuneration approval report provides tables which show how the amount of remuneration has been calculated. The tables relating to Part 3.3 of the remuneration approval report describe the tasks that had been completed and were to be completed for each different task area and provide the total of the hours spent to date and projected to be spent per category. The tables relating to Part 3.4 of the remuneration approval report provide the names of the employee, their position, rate per hour and the hours spent to date and projected to be spent per task per category.
The applicants submit that the level of detail provided in the tables go far beyond the material provided by the liquidators in Venetian Nominees, which was descriptive in ‘general terms’ and did not provide the Court the opportunity to determine who did the work, or how long it took for each particular category of work to be performed.[4] It is submitted that the tables in the remuneration approval report contain sufficient information for the Court to perform its function in this Application, in addition to the materials provided in the First Cauchi Affidavit including the Report to Creditors exhibited to that affidavit.
[4]Venetian Nominees (n1) at 104-5.
The applicants submit that all work described in the tables in the remuneration approval report was necessary, and was properly performed by the applicants and employees of experience appropriate to each task in exercise of the applicants’ duties as liquidators.
Section 60-12(c) - the period during which the work was, or is likely to be, performed by the external administrator
As mentioned above in the First Cauchi Affidavit, the applicants submit that the identified claims against the Directors of Accuracy and recovery actions against debtors of Accuracy may require the need for litigation and correspondence with the relevant parties.
Section 60-12(d) - the quality of the work performed, or likely to be performed, by the external administrator
The applicants submit that they have complied with statutory requirements, reported to creditors and have disclaimed the necessary assets.
As has been noted above, the applicants received no objection to their notice of intention to apply to the Court for remuneration. There has been no complaint that the work performed was not of sufficient quality, or that legal action commenced should not have been commenced, or that assets have been squandered.[5] No such complaints have been raised by any creditor upon receipt of the Report to Creditors dated 19 December 2018.
Section 60-12(e) - the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator
[5]See Macks & Anor v Maka & Anor (2015) 110 ACSR 279 at [44].
The applicants submit that this matter is addressed in paragraphs 10 and 14 of the First Cauchi Affidavit.
The applicants’ tasks included, but were not limited to the following:
(a) liaising with the director, secured and unsecured creditors of Accuracy, shareholders, employees and former employees of Accuracy, the Department of Jobs and Small business, the ATO and ASIC;
(b) liaising with the ATO’s legal representatives in respect to the unfair preference claims issued against the ATO in the amount of $569,351.0022;
(c) investigating potential unfair preference payments to Archiclad Pty Ltd amounting to $2,641,278.5123;
(d) recovering actions on debts (debtors/retentions) owed to Accuracy;
(e) reviewing potential voidable transactions with respect to withdrawal from Accuracy’s bank accounts; and
(f) reviewing voluminous books and records including management accounts in order to determine the true financial position of Accuracy.
Section 60-12(h) - the value and nature of any property dealt with, or likely to be dealt with, by the external administrator
The applicants submit that as liquidators they identified debts due to Accuracy with an estimated realisable value of $3,632,536.17 which required a significant amount of time and work to realise.
Section 60-12(i) - the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors
The number of creditors in the winding up is 30, being 3 secured and 27 unsecured creditors.
The applicants do not point to any relevant attributes or conduct of creditors relevant to this Application.
Section 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
As mentioned in paragraph 42, the applicants submit that the Tables set out in detail the time taken by them and their employees to perform the work.
It is submitted by the applicants that the time taken for all work described in the Tables was time properly taken by the applicants and employees of experience appropriate to each task in exercise of the applicants’ duties as liquidators.
The applicants reiterate that there were no objections received in response to their Notice of Intention to Apply to the Court for Remuneration, and no suggestion that the time taken to perform work was not properly taken.
The applicants submit that the matters specified in ss 60-12(b),(f),(g),(k),(l),(m) have no relevance to the present Application, and I agree with this submission.
Consideration
I consider that the evidence filed by the applicants meets the required standard so as to enable me to determine that the Application is reasonable. The evidence was sufficient for me to exercise my power under s 60-10(1) of the IPS to the Act. Having considered the evidence and the relevant statutory criteria and the applicants’ written submissions, I consider that the amount claimed by the applicants appears to be fair and reasonable and I do not propose to make any deduction from the amount claimed.
I will make the following orders:
(a) The Liquidators’ Remuneration for the period 1 December 2018 to 14 June 2019 be determined in the amount of $57,290.00 (excluding GST).
0
1
0