Re Alternate Dwellings Pty Ltd (in liquidation)
[2018] VSC 653
•1 November 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2018 00403
IN THE MATTER of ALTERNATE DWELLINGS PTY LTD (IN LIQUIDATION) (ACN 006 245 307)
| PAUL WILLIAM LANGDON AND PETER ROBERT VINCE IN THEIR CAPACITIES AS LIQUIDATORS OF ALTERNATE DWELLINGS PTY LTD (IN LIQUIDATION) (ACN 006 245 307) | Plaintiff |
| v | |
| ALTERNATE DWELLINGS PTY LTD (IN LIQUIDATION) (ACN 006 245 307) | Defendant |
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JUDICIAL REGISTRAR: | Matthews JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 1 November 2018 |
CASE MAY BE CITED AS: | Re Alternate Dwellings Pty Ltd (in liquidation) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 653 |
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CORPORATIONS – External administration – Application by former administrators and current liquidators for determination of remuneration pursuant to ss 449E(1)(c) and 473(3)(b) of the Corporations Act 2001 (Cth) – Consideration of transitional provisions in respect of the new Insolvency Practice Schedule (Corporations) as Schedule 2 to the Corporations Act 2001 (Cth) – Remuneration approved, with minor adjustments.
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NOTE: The plaintiff has served all parties required to be served with notice of the intention to make this application and no such party appeared to oppose or contradict it. In such circumstances and in light of the provisions of r 9.2 of the Supreme Court (Corporations) Rules 2013, it was considered appropriate to deal with the application in the absence of the public and without the necessity for the plaintiff to attend at Court.
JUDICIAL REGISTRAR MATTHEWS:
Introduction
Nature of the application and material relied upon
The Plaintiffs, Paul William Langdon and Peter Robert Vince, were appointed as administrators of the defendant, Alternate Dwellings Pty Ltd (in liquidation) (‘Company’) on 21 October 2016, pursuant to s 436A of the Corporations Act 2001 (Cth) (‘Act’).[1] On 29 November 2016, the Plaintiffs were appointed liquidators of the Company pursuant to a resolution of creditors at the second meeting of creditors and s 439C of the Act. I shall refer to Mr Langdon and Mr Vince as the Plaintiffs in these reasons, except where it is necessary to distinguish between their roles as administrators and liquidators, where I will refer to them as the Administrators or the Liquidators, as the case may be.
[1]Affidavit of Paul William Langdon sworn 28 May 2018, [5]; Exhibits PWL-1 - PWL-2.
By originating process issued 18 July 2018 and as amended on 2 October 2018, the Plaintiffs apply, under ss 449E(1) and 473(3)(b)(ii) of the Act and r 9.2 of the Supreme Court (Corporations) Rules 2013 (‘Rules’), for the approval of their remuneration in relation to the:
(a) administration of the Company for the period 21 October 2016 to 29 November 2016 (‘Administration Period’) in the amount of $128,269.16 (including GST) (‘Administration Fees Application’); and
(b) liquidation of the Company for the period since 5 October 2017 in the amount of $55,136.40 (including GST) (‘Liquidation Fees Application’).
The applications are supported by three affidavits from Mr Langdon sworn 28 May 2018 (‘First Langdon Affidavit’), 9 July 2018 (‘Second Langdon Affidavit’) and 27 September 2018 (‘Third Langdon Affidavit’), and by two affidavits sworn 8 August 2018 and 18 September 2018 by Jessica Anne Allen of Maddocks, the solicitors for the Plaintiffs (respectively, ‘First Allen Affidavit’ and ‘Second Allen Affidavit’).
For the reasons set out below, I will approve the Plaintiffs’ remuneration in the amount of:
(a) $123,389.56 (including GST), in respect of the Administration Fees Application; and
(b) $49,804.70 (including GST), in respect of the Liquidation Fees Application.
Manner of determining the Application
The amended originating process also contains a request of the type contemplated by r 9.2(4)(b) of the Rules that the Application be dealt with in the absence of the public and without attendance by or on behalf of the Plaintiffs.
Before making an application of this type, r 9.2 of the Rules requires the Plaintiffs to serve certain persons with a copy of the principal affidavit in support of the application and a notice in accordance with Form 16 of the Rules stating that it is the Plaintiffs’ intention to apply to the Court for an order determining their remuneration.
Mr Langdon deposes to having caused, on 30 May 2018, the creditors and members of the Company to be served by post with a copy of the Form 16 notice and the First Langdon Affidavit.[2] Mr Langdon then lists those creditors and members so served.[3] Mr Langdon also deposes to having caused a copy of the Form 16 notice and the First Langdon Affidavit to be served by email on certain creditors and members at the email addresses which Vince & Associates Pty Ltd Chartered Accountants (‘Vince & Associates’), the firm to which the Plaintiffs belong, had used to communicate with then on previous occasions.[4]
[2]Second Langdon Affidavit, [6]. In the Second Allen Affidavit, Ms Allen explains that the Form 16 notice was meant to be exhibit PWL-9 to the Second Affidavit but another document was mistakenly exhibited. She exhibits, at Exhibit JAA-7, a copy of the form 16 notice referred to by Mr Langdon: Second Allen Affidavit, [5(a)].
[3]Second Langdon Affidavit, [6]-[7]. There are some 288 names and addresses on that list. Mr Langdon also says that exhibit PRV-10 to his affidavit is a copy of the statement of posting. This is not correct: Ms Allen corrects this in the Second Allen Affidavit at [5(b)] by saying that it should be a reference to exhibit PWL-10 and exhibits at Exhibit JAA-8 a true copy of the statement of posting.
[4]Second Langdon Affidavit, [8]. That list contains 74 names and email addresses. Some names appear on both lists.
Mr Langdon deposes that as at 9 July 2018, the Plaintiffs had not received any notice of objection to the remuneration claimed from any of the creditors or members. Accordingly, the 21 day period prescribed by r 9.2(3) of the Rules has passed since the date that the creditors and members were served.
Rule 9.2(2)(d) provides that each member of the Company whose shareholding represents at least 10 per cent of the issued capital of the Company is also to be served with the Form 16 notice and the First Affidavit. The Plaintiffs filed a copy of a search of the records of the Australian Securities and Investments Commission (‘ASIC’). That ASIC search reveals that Glenn Malcolm Brooks, who was also the sole director and secretary of the Company, is the sole shareholder of the Company. The list of persons served with the required documents by post includes Mr Brooks.[5]
[5]Second Langdon Affidavit, [6]-[7].
Mr Langdon and Ms Allen both depose to correspondence with one particular creditor, Rob McMahon, after the Form 16 notice and First Langdon Affidavit were sent to creditors. In summary:
(a) on 30 May 2018, Mr McMahon sent an email to Penny Zuydwyk of Vince & Associates, where he stated that in his opinion no remuneration should be paid due to how the sale of property owned by the Company had been handled, principally two display homes located at Officer, which he says were sold for too little on a valuation that was too low, and that he had raised his concerns at the creditors’ meeting where he was told it was a legitimate valuation;[6]
[6]First Allen Affidavit, [4]; Exhibit JAA-1.
(b) on 18 June 2018, Melissa Jeremiah, a solicitor at Maddocks, sent an email to Mr McMahon attaching a letter to him and a copy of the Administrators’ report to creditors dated 21 November 2016. In that letter, Maddocks provided further details about the valuation of the display assets and requested that he respond in writing by 21 June 2018 in respect of any formal notice of objection to the remuneration claimed;[7]
[7]First Allen Affidavit, [5]; Exhibits JAA-2, JAA-4.
(c) on 19 June 2018, Mr McMahon responded to Ms Jeremiah’s email, wherein set out his concerns about the valuation of the display assets and their sale, and did not refer at all to the Plaintiffs’ remuneration;[8]
[8]First Allen Affidavit, [6]; Exhibit JAA-5.
(d) Mr Langdon deposes that on 21 June 2018, Ms Jeremiah forwarded him a copy of Mr McMahon’s 19 June email, which Mr Langdon says was not a formal objection to the remuneration claimed;[9]
(e) on 26 July 2018, Ms Allen sent an email to Mr McMahon notifying him that the applications had been filed with the Supreme Court and were listed for hearing at 10.00am on 3 August 2018 in Court 5, 436 Lonsdale Street Melbourne. The email also advised Mr McMahon that the Plaintiffs would be seeking to have their remuneration determined in the amount sought, and that while he had not formally served a notice of objection to the Plaintiffs’ application Maddocks intended to provide him with copies of the originating process and supporting documentation and asked him to confirm whether he wished to receive a soft copy of those documents or to confirm a location where Maddocks could deliver a copy;[10]
(f) Ms Allen states that she did not receive a notification that her email to Mr McMahon had not been delivered and that, as at the date of making her affidavit, she had not received a response from him.[11]
[9]Second Langdon Affidavit, [10]; Exhibit JAA-9 (correcting the incorrect exhibit PWL-10 to the Second Langdon Affidavit).
[10]First Allen Affidavit, [7]; Exhibit JAA-6.
[11]First Allen Affidavit, [8].
Mr Langdon also exhibits the correspondence between Maddocks and Mr McMahon, and states that notwithstanding that Mr McMahon’s emails do not amount to a notice of objection in accordance with r 9.2(3) to the remuneration claimed, he does so in order to ‘duly inform’ the Court.[12]
[12]Second Langdon Affidavit, [14]. I note for completeness that there is an error in the descriptions of those exhibits, which is corrected by Ms Allen in the Second Allen Affidavit and the correct exhibits are exhibited to the Second Allen Affidavit. Read together, there is no lack of clarity around what the exhibits are.
The applications were originally listed for 3 August 2018 before an Associate Justice, where his Honour indicated that the hearing would be adjourned and the matter dealt with on the papers.
Having reviewed the Second Langdon Affidavit (corrected where necessary by the Second Allen Affidavit), I am satisfied that it is in order for me to proceed in the way contemplated by r 9.2(4)(c) of the Rules. The creditors and the shareholder have been served with the relevant documents and have not objected to the remuneration claimed by the Plaintiffs. I do not regard the correspondence from Mr McMahon as constituting an objection within the Rules. In any event, even if it was, he was subsequently informed that the applications had been filed and of the return date and details of hearing, and he was asked to confirm how he wished to receive a copy of the originating process and supporting affidavits (which he did not do). Mr McMahon had the opportunity to make a formal objection or to take it further, and he did not do so.
The originating process filed in this case did not contain the endorsement referred to above in paragraph 5. However, in circumstances where all other elements of r 9.2(4) of the Rules have been complied with, there are no notices of objection, and I am otherwise satisfied that it is appropriate that I proceed to determine the applications in the absence of the public and without attendance by or on behalf of the Plaintiffs, I do not regard the failure to endorse the originating process with this request as an impediment to adopting this course. In any event, the originating process was subsequently amended, which amendments included the relevant endorsement.
After an initial review of the applications, I formed the view that further information was required and I caused the applications to be listed for a mention hearing on 19 September 2018, where I raised those matters with the Plaintiffs’ solicitors. On that day, I granted leave to amend the originating process and to file a further affidavit, which the Plaintiffs then did. The Third Langdon Affidavit was filed as a result.
Accordingly, I am satisfied that it is appropriate that I proceed to determine the applications in the absence of the public and without attendance by or on behalf of the Plaintiffs.
Applicable principles
Statutory provisions
The Administration Fees Application is made under s 449E(1)(c) of the Act. That section provides:
449E Remuneration of administrator
(1)The administrator of a company under administration is entitled to receive such remuneration as is determined:
(a)by agreement between the administrator and the committee of creditors (if any); or
(b) by resolution of the company’s creditors; or
(c) if there is no such agreement or resolution – by the Court.
In exercising the power to determine the Administration Fees Application, s 449E(4) of the Act prescribes the matters which the Court must take into account when exercising that power:
(4)In exercising its powers under subsection (1), (1A) or (2), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a)the extent to which the work performed by the administrator was reasonably necessary;
(b)the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary;
(c)the period during which the work was, or is likely to be, performed by the administrator;
(d)the quality of the work performed, or likely to be performed, by the administrator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the administrator;
(f)the extent (if any) to which the administrator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h)the value and nature of any property dealt with, or likely to be dealt with, by the administrator;
(i)whether the administrator was, or is likely to be, required to deal with:
(i)one or more receivers; or
(ii)one or more receivers and managers;
(j)the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;
(k)if the remuneration is ascertained, in whole or in part, on a time basis:
(i)the time properly taken, or likely to be properly taken, by the administrator in performing the work; and
(ii)whether the total remuneration payable to the administrator is capped;
(i)any other relevant matters.
While the criteria in s 449E(4) of the Act direct the Court to the factors that are to be taken into account, the ultimate question is whether the remuneration by the Administrator is reasonable.
The Liquidation Fees Application is made pursuant to s 473(3)(b) of the Act. That section provides:
(3)A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:
(a)if there is a committee of inspection – by agreement between the liquidator and the committee of inspection; or
(b)if there is no committee of inspection or the liquidator and the committee of inspection fail to agree:
(i)by resolution of the creditors; or
(ii)if no such resolution is passed – by the Court.
In exercising the power to determine the Liquidation Fees Application, s 473(10) of the Act prescribes the matters which the Court must take into account when exercising that power. Those matters are relevantly identical, with the necessary changes to account for the different types of external administrator, as those set out in s 449E(4) of the Act, as cited in paragraph 18 above.
For completeness, I note that while ss 449E and 473 of the Act have been repealed, they continue to apply in certain circumstances. I explain that briefly here:
(a) numerous amendments to the provisions of the Act relating to external administrators were made by the Insolvency Law Reform Act 2016 (Cth) (‘ILRA’). Amongst other things, the ILRA repealed ss 449E and 473 of the Act and introduced a new Insolvency Practice Schedule (Corporations) as Schedule 2 to the Act (‘Practice Schedule’). The Practice Schedule contains new provisions relating to insolvency practice, including the remuneration of administrators and liquidators. Division 60 of the Practice Schedule provides that an ‘external administrator’[13] of a company is entitled to receive remuneration for necessary work properly performed by him/her in relation to an ‘external administration’.[14] The amount of that remuneration will usually be set under a remuneration determination, which can be made by the Court under s 60-10(1)(c) of the Practice Schedule. Section 60-12 of the Practice Schedule provides that the Court must have regard to whether the remuneration is reasonable, taking into account certain factors which are then listed. These factors are materially the same as the factors which were set out in ss 449E(4) and 473(10) of the Act;[15]
[13]For the purposes of the Practice Schedule, an external administrator is defined as an administrator, an administrator under a deed of company arrangement, a liquidator, or a provisional liquidator, of the company: s 5-20 of the Practice Schedule.
[14]A company is taken to be under external administration for the purposes of the Practice Schedule on the occurrence of certain events, being under administration, a deed of company arrangement has been entered into, a liquidator has been appointed, or a provisional liquidator has been appointed: s 5-15 of the Practice Schedule.
[15]There are some minor changes to the language used: for example, s60-12 of the Practice Schedule refers to the extent to which the work was ‘necessary and properly performed’, whereas ss 449E(4) and 473(10) of the Act referred to the extent to which the work performed was ‘reasonably necessary’.
(b) the commencement of the new provisions concerning remuneration in Division 60 of the Practice Schedule was deferred until 1 September 2017;[16]
[16]Regulation 10.25.02(3) of the Corporations Regulations 2001 (‘Corporations Regulations’).
(c) section 1581 of the Act was repealed and a new provision was substituted, as follows:[17]
[17]Schedule 13 of the Corporations Regulations.
‘1581 Old Act continues to apply in relation to remuneration for administrators already appointed or appointed during transition period
(1)Despite the repeal of sections 449E and 473 … of the old Act by Schedule 2 to the [ILRA], the old Act continues to apply in relation to the remuneration of an external administrator of a company who is appointed:
(a) before the start time; or
(b) during the transition period.
…’
(d) in summary, the upshot of all this is that despite the repeal of ss 449E and 473, the Act as it was prior to the relevant amendments continues to apply in relation to the remuneration of an external administrator of a company who was appointed before the ‘commencement day’ of the relevant sections of the Practice Schedule, being 1 September 2017.[18]
[18]For a more fulsome and useful discussion of how the relevant transitional provisions work, see the ruling of Hetyey JR in In the matter of Allstone Homes (in liquidation) [2017] VSC 500, [8]–[11].
Accordingly, the Plaintiffs’ applications in this case are properly considered by reference to what was ss 449E(1) and (4) and s 473 of the Act, as they were appointed as administrators to the Company on 21 October 2016 and as liquidators on 29 November 2016.
The Court’s approach when considering applications for approval of an administrator’s remuneration
The principles concerning applications for approval of the remuneration incurred by insolvency practitioners are well established and have been referred to in many decisions of this Court. While many of the decisions concern liquidators, the same approach has been applied in respect of administrators.[19] Gardiner AsJ summarised the relevant principles in IMO Traditional Values Management Limited (in liq)[20] (‘Traditional Values’) at paragraphs [18] to [25].
[19]By way of example, see Re AsiaPAC Communications Group Pty Ltd (In Liquidation) (Receivers and Managers Appointed) [2015] VSC 413.
[20][2012] VSC 650 (14 December 2012).
For convenience I adopt his Honour’s summary, which referred to the principles identified by Davies J in Thackray v Gunns Plantations:[21]
[21](2011) 85 ACSR 144 (‘Thackray’).
At [60], her Honour summarised the principles to be applied by reference to the decision of the Full Court of the West Australian Supreme Court in Venetian Nominees v Conlan as follows:
(a)A summary procedure was involved, not unlike that applicable to the taxation of solicitor’s costs, which is not necessarily subject to all the rules that would apply in an action.
(b)The initial task of the Court is to consider whether the liquidator has made out a prima facie case on the evidence before the Court that the remuneration claimed is fair and reasonable. The Court must make that assessment ‘bringing an independent mind to bear on the relevant issues’ even though at that point there is no objector.
(c)There is no absolute rule regarding the amount of detail required to support a remuneration claim. But the evidence relied on should be sufficient to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.
(d)If the liquidator establishes a prima facie case, the Court should allow for an objection procedure to enable objections to be made.
(e)If there are objectors to the claim or any part, the Court should then establish the validity of those objections.
At [63] and [64] of Thackray, her Honour stated:
…. the receivers accepted that the principles set out Venetian Nominees Pty Ltd v Conlan are persuasive and that they should put sufficient evidence before the Court to enable the Court to determine that the amounts claimed are fair and reasonable. That involved providing sufficient detail of the work that was done and the expenses claimed for the Court to assess the reasonableness of the remuneration claimed for that work and the reasonableness of the expenses incurred by the receivers. The reasonableness of remuneration may be adduced by evidence for example of an appropriate benchmark, such as the Insolvency Practitioners Association of Australia rates, for comparative work by persons with the relevant status and qualifications for that kind of work and justification of the hours spent. That amount can then be adjusted up or down to reflect other factors including:
(a) complexity above the norm for the kind of work involved;
(b) novelty and difficulty of the issues faced;
(c) the ultimate outcome obtained by the claimant.
The Court is looking for evidence of overcharging. Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the “reasonableness” of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the Court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim.[22]
[22]Traditional Values, [20], citing Thackray (2011) 85 ACSR 144, [60], [63]–[64] (citations omitted).
Black J of the New South Wales Supreme Court also summarised the applicable principles in In the matter of Sakr Nominees Pty Limited.[23]In addition to the matters referred to above, his Honour stated the following propositions:
[T]he Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred[24].
Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the ‘value’ of a liquidator’s work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors.[25]
[23][2017] NSWSC 668 (‘Sakr’).
[24]Sakr, [23].
[25]Sakr, [23].
His Honour also canvassed a number of authorities regarding the method for calculating the remuneration, such as time costing or remuneration based on a percentage of realisations, concluding that:[26]
Most decisions … have applied time costing as at least the starting point for a calculation of remuneration, although those decisions also emphasise the need for proportionality between the costs of the work done and the value of the services provided.
[26]Sakr, [24].
On this point, his Honour concluded by referring to the New South Wales Court of Appeal decision in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr[27] which he said did not prefer any particular approach over another. Black J then stated:
Whether time-based remuneration or a percentage of recoveries is appropriate in a particular case will depend, in part, on the basis on which the liquidator puts his or her application for remuneration; and, in part, the view taken by the Court.[28]
[27][2017] NSWCA 38.
[28]Sakr, [25].
The Plaintiffs’ evidence
The Company’s activities and assets at the time the Administrators were appointed
The Company was registered in March 1984.[29] At the time the Administrators were appointed, the Company operated a business specialising in the construction and installation of kit homes in Victoria, Queensland and New South Wales.[30]
[29]First Langdon Affidavit, [12].
[30]First Langdon Affidavit, [11].
In October 2016, the Company owned the following assets:[31]
[31]First Langdon Affidavit, [13].
(a) Seven properties in Willow Grove, Victoria;
(b) Two properties in Moe, Victoria;
(c) Display homes which were sold on an ‘as is where is’ basis for an amount of $40,000;
(d) Six motor vehicles plus two box trailers;
(e) Plant and equipment;
(f) Stock;
(g) Intellectual property, including manuals, plans and designs; quoting system; domain name; trademark; and client database; and
(h) Trade debtors and work in progress, for 43 projects for dwellings in various stages of completion.
Recoveries made by the Plaintiffs during the administration and liquidation
The Administrators made recoveries of $13,766.[32]
[32]First Langdon Affidavit, [15].
The recoveries during the Liquidation Period amount to $1,224,500 from the sale of real property, plant and equipment, motor vehicles and display homes; an insolvent trading claim; and unfair preference claims. This also included the sale of some intellectual property which was being finalised at the time Mr Langdon swore the First Affidavit.[33]
[33]First Langdon Affidavit, [16]-[17].
The Liquidators have made payments to secured creditors in the amount of $741,474.64.[34]
[34]First Langdon Affidavit, [18].
Previous approval, or attempts to obtain approval, from creditors for the Plaintiffs’ remuneration
The Administration Period
The second meeting of creditors during the administration of the Company was held on 29 November 2016. As noted in paragraph 1 above, at that meeting the creditors resolved to place the Company into liquidation. At that meeting, the Administrators sought approval of their remuneration for the period 21 October 2016 to 16 November 2016 in the amount of $96,395 plus GST. The minutes of that meeting record, and Mr Langford confirms, that ‘all creditors unanimously advised that they would not propose any resolutions with respect of [sic] the Administrators’ or the Liquidators’ remuneration” and no such resolution was proposed at the meeting.[35]
[35]Exhibit PWL-14; Third Langdon Affidavit [6].
Accordingly, the Administrators seek Court approval for their remuneration for the Administration Period in the amount of $128,269.16 (including GST),[36] pursuant to s 449E(1)(c) of the Act.
[36]Or $116,608.33 excluding GST; Exhibit PWL-6.
The Liquidation Period
The Liquidators’ remuneration for the period in which the Company has been in liquidation (ie after 29 November 2016) has been partly approved by the committee of inspection. I explain that further here.
Mr Langdon deposes that at a meeting of the committee of inspection held on 20 June 2017, the Liquidators sought approval for their remuneration for the period from 29 November 2016 onwards. He says that at that meeting, a committee member, Mike Bland, informed him:
that the committee would not approve the Liquidators’ remuneration until such time as an insolvent trading claim was issued against the director. He informed me that if the committee voted in favour of the Liquidators’ remuneration, the committee would “lose their leverage over the Liquidators”.[37]
[37]Third Langdon Affidavit, [7]. See also the minutes of that meeting, Exhibit PWL-15.
That meeting was then adjourned to 22 June 2017.[38]
[38]Exhibit PWL-15.
At the adjourned meeting held on 22 June 2017, the Liquidators proposed two resolutions:[39]
(a) That the remuneration of the Liquidators and their staff be approved up to the sum of $87,613 (plus GST) for the period 29 November 2016 to 22 May 2017 (‘Liquidation First Period’); and
(b) That the remuneration of the Liquidators and their staff be approved in the amount of $80,000 (plus GST) for the period from 23 May 2017 onwards.
[39]Third Langdon Affidavit, [8]; Exhibit PWL-16.
The first resolution was carried, but the second one was not.[40]
[40]Third Langdon Affidavit, [8]; Exhibit PWL-16.
At a committee of inspection meeting held on 8 November 2017, the committee of inspection approved the Liquidators’ remuneration in the amount of $36,940.50 (plus GST) for the period 22 May 2017 to 5 October 2017 (‘Liquidation Second Period’).[41]
[41]Third Langdon Affidavit, [10]; Exhibit PWL-18.
Therefore, the Liquidators remuneration for the period between 29 November 2016 and 5 October 2017 has been approved by the committee of inspection in the amount of $124,553.50 (excluding GST).[42] Mr Langdon deposes that the committee of inspection has not approved the Liquidators’ approval for their remuneration for the period since 5 October 2017, as the Liquidators have not sought such approval in light of the comments made by the committee of inspection.[43]
[42]Third Langdon Affidavit, [12].
[43]First Langdon Affidavit, [55].
Accordingly, the Liquidators seek Court approval for their remuneration for the period since 5 October 2017 (‘Liquidation Third Period’) in the amount of $55,136.40 (including GST),[44] pursuant to s 473(3)(b)(ii) of the Act.
[44]Or $50,124.00 excluding GST; Exhibit PWL-7 - PWL-8.
Work performed by the Administrators and their staff during the Administration Period
Mr Langdon described the work undertaken during the Administration Period. In summary, it included the following:[45]
[45]First Langdon Affidavit, [29] – [35].
(a) collection, review and analysis of the books and records of the Company;
(b) analysis of the Company’ s assets including inter alia:
(i) attending the premises to identify the plant and equipment, including motor vehicles;
(ii) engaging a valuer to value the plant and equipment and prepare a realisation strategy and ultimately sell the plant and equipment at public auction;
(iii) attending the display homes to inspect and engage a valuer to conduct valuations of the display homes at Officer and seek legal advice regarding the sale of the display homes;
(iv)liaising with conveyancer, customers and secured creditors; and
(v) reviewing and considering various customer contracts and leasing arrangements.
(c) communicating with creditors of the Company and the preparation for the creditors’ meeting including the preparation of the section 439A report;
(d) liaising with employees and the Department of Education and Training;
(e) arranging appropriate insurance and assessing risk exposure; and
(f) investigating the affairs of the Company including potential recovery proceedings in order to report to creditors as to whether it was in the best interests of the creditors to allow the voluntary administration of the Company to continue or for the Company to be wound up.
Work performed by the Liquidators and their staff during the Liquidation Third Period
Mr Langdon also deposed to the work undertaken during the Liquidation Third Period. In summary it included the following:[46]
[46]First Langdon Affidavit, [39]-[45], [49]-[54].
(a) liaising with solicitors and other activities with respect to potential voidable transactions, including finalising recoveries;
(b) liaising with solicitors and other activities with respect to a potential claim for insolvent trading, including attending to settlement of claim;
(c) arranging and negotiating the sale of the Company’s intellectual property;
(d) receiving and responding to queries from the creditors of the Company;
(e) convening and holding meetings of the committee of inspection;
(f) preparation of minutes of meetings, and of statutory forms lodged with ASIC and the ATO;
(g) receipt and filing of proofs of debt;
(h) preparing an annual general meeting report;
(i) dealings with the Department of Jobs and Small Business regarding employee claims;
(j) attending to employee enquiries;
(k) meetings with former employees to obtain details of unfinished projects;
(l) tasks associated with investigating and recovery of insolvent trading claim;
(m)meetings with the director and former employee in relation to director’s personal guarantees and financial position; and
(n) briefing solicitors in respect of the application for the determination of the plaintiffs’ remuneration, including preparing documents and remuneration reports.
The Plaintiffs’ method for calculating remuneration and their rates
Mr Langdon deposes that he has calculated the Plaintiffs’ remuneration on a time-cost basis. He says that he considers time-based charging to be the most appropriate method, as the appointment as Administrators and as Liquidators had inherent uncertainties at the time and throughout the appointment, and there were no asset realisations which could be used to calculate remuneration on any other basis, such as a percentage of recoveries.[47]
[47]First Langdon Affidavit, [21].
Mr Langdon explains that remuneration was calculated in accordance with Vince & Associates’ standard schedule of hourly rates (‘Rates’). In his opinion, based on his experience as an insolvency practitioner, the Rates are appropriate and comparable to market rates for firms of the size of Vince & Associates, and the hourly rate attributed to each employee reflects their experience, seniority and capability.[48]
[48]First Langdon Affidavit, [23].
The process used by Mr Langdon for calculating remuneration on a time basis is explained as follows:[49]
[49]First Langdon Affidavit, [24].
(a) Time is charged in six-minute intervals in accordance with the Rates;
(b) Time is allocated to one of the following categories which broadly describes the nature of the work performed:
(vi)Assets – work done to identify, get in, preserve, secure or realise assets;
(vii) Creditors – work done liaising or meeting with creditors, preparing reports to creditors, preparing for and attending meetings of creditors, fielding creditor enquiries, dealing with proofs of debt and secured creditor claims;
(viii) Investigations – work undertaken to investigate the affairs of the Company, including the collection and review of books and records, performing and reviewing public searches, and analysing the financial affairs and previous transactions of the Company;
(ix) Employees – work undertaken to deal with employee enquiries, termination of employees and dealing with employee claims; and
(x) Administration – general administrative work including file reviews, general correspondence, statutory reporting and insurance related matters;
(c) A narration is also entered describing the specific work performed; and
(d) Mr Langdon reviews the time spent in the ordinary course and, if necessary, amend the time claimed if his view is that the time recorded was not reasonable for the relevant task or if the time should not otherwise have been charged. Mr Langdon says that in this process, he does not increase the time allocated to a particular task.
Mr Langdon deposes that he has caused to be prepared a document showing each entry of time comprising the remuneration and a description of the specific work involved (‘WIP Reports’), for the relevant periods.[50]
[50]First Langdon Affidavit, [25].
Mr Langdon notes that much of the work was performed by himself or senior members of his staff. He states that it was necessary for them to do so, because of the following issues:[51]
[51]First Langdon Affidavit, [57].
(a) The nature of the business, being the construction and installation of kit homes in three states;
(b) Negotiations concerning 43 projects on foot at the time of appointment, with dwellings in various stages of completion;
(c) The number of assets that were required to be identified and assessed;
(d) Dealings with secured creditors and the collection of secured stock;
(e) Negotiations for the sale of the Company’s intellectual property; and
(f) Dealing with creditors and employees.
Mr Langdon concludes by stating that the remuneration claimed has been properly and reasonably incurred, is reasonable, and the work performed has been performed efficiently and capably by employees of an appropriate level of experience.[52]
[52]First Langdon Affidavit, [60].
Administration Period
The Rates for each employee, along with their position and the time spent during the Administration Period, are set out below:[53]
[53]First Langdon Affidavit, [22].
Employee Position Hourly rate (ex GST)
$Time Amount (ex GST)
$Paul Langdon Appointee 480 60.70 29,136.00 Peter Vince Appointee 480 20.80 9,984.00 Danielle Roche Director 480 10.28 4,936.00 Brooke Quibell Senior 270 84.90 22,923.00 Matthew Leombruni Senior 270 50.80 13,716.00 Stefanie Krienke Intermediate 210 104.40 21,924.00 Penny Zuydwyk Senior Secretary 170 21.50 3,655.00 Julie Anne Jopp Senior Secretary 170 14.20 2,414.00 Carole McDougall Computer Operator 170 0.30 51.00 Eva Seci Administrative Assistant 130 11.93 1,551.33 Angus McWhirter Administrative Assistant 130 23.90 3,107.00 Harry Gaston Administrative Assistant 130 18.10 2,353.00 Jacqui Woodhouse Administrative Assistant 130 6.60 858.00 Total (ex GST) 428.41 116,608.33 GST 11,660.83 Total (inc GST) 128,269.16
According to Mr Langdon, by reference to the WIP Report for the Administration Period (‘Administration WIP Report’)[54] the following table shows the breakdown of the remuneration for the Administration Period by reference to the categories described in paragraph 48(b) above:[55]
[54]Exhibit PWL-6.
[55]First Langdon Affidavit, [26].
Category Time Amount charged (ex GST)
$Assets 63.15 21,891.00 Creditors 162.13 49,663.00 Employees 7.10 1,950.00 Investigations 34.03 10,357.00 Administration 162.00 32,747.33 Total (ex GST) 482.41 116,608.33 GST 11,660.83 Total (inc GST) 128,269.16 Liquidation Third Period
The Rates for each employee, along with their position and the time spent during the period between 5 October 2017 and 10 May 2018, are set out below:[56]
[56]First Langdon Affidavit, [36].
Employee Position Hourly rate (ex GST)
$Time Amount (ex GST)
$Paul Langdon Appointee 480 29.80 14,304.00 Peter Vince Appointee 480 1.00 480.00 Ian Grant Manager 380 0.10 38.00 Brooke Quibell Supervisor 320 20.00 6,400.00 Brooke Quibell Senior 270 35.35 9,544.50 Stefanie Krienke Senior 270 8.60 2,322.00 Penny Zuydwyk Senior Secretary 170 3.55 603.50 Julie Anne Jopp Senior Secretary 170 0.45 76.50 Eva Seci Senior Secretary 170 3.55 603.50 Carole McDougall Computer Operator 170 0.60 102.00 Suzanna Chin Ying Ying Administrative Assistant 130 1.05 136.50 Anife Jaupi Administrative Assistant 130 2.60 338.00 Simon Tran Administrative Assistant 130 1.35 175.50 Total (ex GST) 108 35,124.00 GST 3,512.40 Total (inc GST) 38,636.40
According to Mr Langdon, by reference to the WIP Report for this same time period,[57] the following table shows the breakdown of the remuneration for the period 5 October 2017 to 10 May 2018 by reference to the categories described in paragraph 48(b) above.[58] Although ‘Legal’ isn’t described in that paragraph, it includes the work performed in preparing these applications, including briefing solicitors, reviewing and amending affidavit material, and preparation of the WIP Reports.[59]
[57]Exhibit PWL-7.
[58]First Langdon Affidavit, [38].
[59]First Langdon Affidavit, [43].
Category Time Amount charged (ex GST)
$Assets 14.50 6,390.00 Creditors 35.40 11,793.00 Employees 5.80 2,046.00 Investigations 4.25 1,168.50 Legal 28.30 9,398.00 Administration 19.75 4,328.50 Total (ex GST) 35,124.00 GST 3,512.40 Total (inc GST) 38,636.40
The Rates for each employee, along with their position and the time spent and to be spent in the period from 11 May 2018, are set out below:[60]
[60]First Langdon Affidavit, [46].
Employee Position Hourly rate (ex GST)
$Time Amount (ex GST)
$Paul Langdon Appointee 480 9.00 4,320.00 Peter Vince Appointee 480 4.00 1,920.00 Brooke Quibell Supervisor 320 15.50 4,960.00 Penny Zuydwyk Senior Secretary 170 3.00 510.00 Eva Seci Senior Secretary 170 7.00 1,190.00 Carole McDougall Computer Operator 170 3.00 410.00 Suzanna Chin Ying Ying Administrative Assistant 130 4.73 615.00 Jacqui Woodhouse Administrative Assistant 130 1.50 195.00 Nicole Adlam Administrative Assistant 130 1.50 195.00 Simon Tran Administrative Assistant 130 4.50 585.00 Total (ex GST) 53.73 15,000 GST 1,500 Total (inc GST) 16,500
According to Mr Langdon, by reference to the WIP Report for this same time period,[61] the following table shows the breakdown of the remuneration for the period from 11 May 2018 by reference to the categories described in paragraph 48(b) above.[62]
[61]Exhibit PWL-8. This does not provide narrations for each task, presumably as they are future tasks and this report is more in the nature of an estimate.
[62]First Langdon Affidavit, [48]. The work described as ‘Legal’ is of a similar nature to that described in paragraph 55 above.
Category Time Amount charged (ex GST)
$Assets 7.00 2,720.00 Creditors 11.00 3,400.00 Employees 0.50 160.00 Legal 12.00 4,800.00 Administration 23.23 3,920.00 Total (ex GST) 15,000 GST 1,500 Total (inc GST) 16,500 Consideration
Plaintiffs’ prima facie case for approval
Based on all of the evidence provided, I am satisfied that the Plaintiffs have made out a prima facie case for payment of their remuneration for the administration and the liquidation, within the meaning referred to in paragraph 25 above. That is, the Plaintiffs have made out a prima facie case that the remuneration claimed is fair and reasonable, and there is sufficient information to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken.
From my experience in matters associated with insolvency administrations, I know the hourly rates specified by the Plaintiffs to be commensurate with the hourly rates typically charged by insolvency practitioners.[63]
[63]Mr Langdon also confirms that the hourly rates are comparable to other firms of a similar size to Vince & Associates: First Langdon Affidavit, [23].
Although no objection has been taken to the remuneration claimed by the Administrator, the Court is still required to review the claimed remuneration, taking the matters identified in ss 449E(4) and 473(10) of the Act into account.
Amount of remuneration to be approved
As noted above, the Plaintiffs seek approval for their remuneration in the amount of $128,269.16 (including GST) for the Administration Period and $55,136.40 (including GST) for the Liquidation Third Period.
In terms of the matters identified in s 449E(4) and s 473(10) of the Act, I am satisfied that:
(a) the work performed and to be performed by the Plaintiffs was and is likely to be reasonably necessary;
(b) as set out above, some of the work required of the Plaintiffs was complex;
(c) the Administrator was not required to accept a higher level of risk or responsibility than was usually the case, save for the matters described in paragraph 53 above; and
(d) the remuneration was calculated on a time basis, and the time taken for each task and the level of employee performing that task is set out in sufficient detail, by reference to the WIP Reports and the material contained in the First Langdon Affidavit.
I have reviewed the WIP Reports and the description of work given by Mr Langdon. These contain sufficient detail for me to be generally satisfied (apart from a small number of minor matters, which I address in paragraph 65 below) as to the amounts claimed. In particular, I am satisfied that:
(a) there was an appropriate degree of delegation of the work to be performed, in that the matters which were of a more routine nature were performed by more junior employees and charged at lower hourly rates. I accept Mr Langdon’s evidence that much of the work performed required more senior employees to carry it out. Further, it is apparent from a review of the minutes of meetings of creditors and the committee of inspection[64] that the creditors in this case actively sought information from the Plaintiffs and raised many issues in respect of the Company’s collapse and the conduct of the Administration/Liquidation, as they were entitled to do. It is therefore apparent that many of the interactions with creditors needed to be performed by senior employees, as they were;
[64]Exhibits PWL-14, PWL-15, PWL-16 and PWL-18.
(b) the tasks described are reasonable to have been performed, and the time taken to perform them (and therefore the amounts charged for them) were reasonable;
(c) there is no evidence of duplication, or unnecessary duplication, of work. As well as being satisfied that individual employees were not unnecessarily duplicating each other’s work, I have paid particular attention to the WIP Reports for each period, including those for the Liquidation First Period[65] and the Liquidation Second Period,[66] to ensure that the same work was not being claimed more than once and that the remuneration for the tasks the subject of the Liquidation Fees Application has not already been approved by the committee of inspection; and
(d) the estimate given by Mr Langdon for the Liquidators’ remuneration from 11 May 2018 is reasonable.
[65]Exhibit PWL-17.
[66]Exhibit PWL-19.
Further, it is unsurprising and reasonable that creditors express dissatisfaction with being left ‘out of pocket’ when a company becomes insolvent and enters external administration and with the costs associated with administrations and liquidations. However, I would observe here that it is likely to be counter-productive to refuse, as creditors did at the second meeting of creditors in the Administration of the Company, to even countenance a resolution in respect of the Administrators’ remuneration,[67] or to refuse to approve a portion of the Liquidators’ remuneration in order to try and achieve ‘leverage over the Liquidators’.[68] Apart from anything else, such an approach is likely to increase the costs of the Administration/Liquidation, including the costs of seeking Court approval for the remuneration. Of course, it is appropriate that creditors scrutinise remuneration claims and ensure that the claims are reasonable, and these comments should not be taken as detracting from that task.
[67]See paragraph 34 above.
[68]See paragraph 37 above.
Upon reviewing the WIP Reports, there is a small number of items where I consider the costs charged or the time taken to be excessive, although I do point out that these are minor. These are:[69]
[69]These figures are all GST-exclusive figures.
(a) In relation to the Administration Period:
(xi) a total of $3,402 is charged for Stefanie Krienke to prepare the minutes of the first creditors’ meeting, where her charge out rate at that time was $210 per hour. In my view, and despite the fact that the minutes for that meeting are extensive, that is too much. I would reduce the amount allowed for this to $1,000;
(xii) a total of $1,260 is charged for Ms Krienke to prepare the minutes of the first creditors’ committee meeting. Again, I consider that this is too much and would reduce the amount allowed to $500; and
(xiii) a total of $1,674 is charged for Brooke Quibell to box up the Company’s books and records, where her charge out rate at that time was $270 per hour. I consider this to be too much, and would reduce the amount allowed to $400.
(b) In relation to the Liquidation Third Period:
(i) a total of $1,647 is charged for Ms Krienke in the period from around 2 to 24 November 2017 to prepare the minutes of an adjourned committee of inspection meeting. While this looks like it was for two meetings, I consider it to be too much and I would reduce it to $800; and
(ii) a total of $9,398 is charged for ‘Legal’ in the period 5 October 2017 to 10 May 2018 and then an estimate of $4,800 is given for ‘Legal’ for the period from 11 May 2018, giving an overall amount of $14,198. Those costs concern these applications, and all together I consider them to be too high. I would reduce this by $4,000, leaving an approved amount of $10,198.
Conclusion
Taking the reductions in the preceding paragraph into account, this brings the remuneration for the:
(a) Administration Period to $112,172.33 (excluding GST). The GST on that amount would be $11,217.23; and
(b) Liquidation Third Period to $45,277 (excluding GST). The GST on that amount would be $4,527.70.
Accordingly, I will approve the Plaintiffs’ remuneration in the amount of:
(a) $123,389.56 (including GST), in respect of the Administration Fees Application; and
(b) $49,804.70 (including GST), in respect of the Liquidation Fees Application.
Orders will be made in accordance with the above.
The Court requests that the Plaintiffs’ solicitors forward draft orders in accordance with these reasons to the Associate to Judicial Registrar Matthews.
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