Re AsiaPAC Communications Group Pty Ltd (In Liquidation) (Receivers and Managers Appointed)
[2015] VSC 413
•14 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2015 02141
IN THE MATTER of an application under section 449E(1)(c) of the Corporations Act 2001 (Cth)
| IN THE MATTER OF ASIAPAC COMMUNICATIONS GROUP PTY LTD (IN LIQUIDATION) (ACN 165 203 574) AND ONE TELECOM PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 076 483 657) AND IBOSS INTERNATIONAL PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 161 565 573) | |
| STEWART MCCALLUM AND JOHN LINDHOLM IN THEIR CAPACITIES AS FORMER JOINT AND SEVERAL ADMINISTRATORS OF ASIAPAC COMMUNICATIONS GROUP PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 076 483 657) AND IBOSS INTERNATIONAL PTY LIMITED (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) (ACN 161 565 573) | Plaintiffs |
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JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 14 August 2015 |
CASE MAY BE CITED AS: | Re AsiaPAC Communications Group Pty Ltd (In Liquidation) (Receivers and Managers Appointed) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 413 |
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CORPORATIONS – Insolvency – Application by former administrators for determination of their remuneration pursuant to s 449E(1)(c) of the Corporations Act 2001 (Cth).
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The originating process included an endorsement under Rule 9.2(4)(b) of the Supreme Court (Corporations) Rules 2013 (Vic) requesting that the application be dealt with in the absence of the public and without any attendance by, or on behalf of the plaintiffs. The plaintiffs have served all parties required to be served with notice of the intention to make this application including the Liquidators appointed in the winding ups of the companies as well as the receivers and managers of One Telecom and iBOSS International and the former receivers and managers of AsiaPAC. No such party appeared to oppose or contradict it. In such circumstances it was considered appropriate to deal with the application in the absence of the public and without the necessity for the plaintiffs to attend at Court.
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Legal Principles.................................................................................................................................. 3
The evidence in support of the application.................................................................................. 4
Tasks undertaken by the administrators................................................................................... 8
The application for remuneration................................................................................................. 10
Investigation....................................................................................................................... 12
Creditors............................................................................................................................. 13
Administration................................................................................................................... 15
Assets17
Employees.......................................................................................................................... 18
Trade-on.............................................................................................................................. 19
Remuneration claimed pursuant to orders made by Efthim AsJ on 6 June 2014 in Supreme Court of Victoria proceeding S CI 2014 02799 (the first proceeding) and S CI 2014 02795 (the second proceeding)......................................................................................................................... 22
Application of the criteria prescribed by s 449E(4).................................................................... 26
HIS HONOUR:
Introduction
On 2 May 2014, the plaintiffs, Stewart McCallum and John Lindholm (‘the administrators’) were appointed as joint and several administrators of AsiaPAC Communications Group Pty Ltd (in liquidation) (‘AsiaPAC’) and One Telecom Pty Ltd (in liquidation) (receivers and managers appointed) (‘One Telecom’). On that day, the administrators were also appointed as joint and several administrators of iBOSS International Pty Limited (in liquidation) (receivers and managers appointed) (‘iBOSS’).
In these reasons I shall refer to AsiaPAC, One Telecom and iBOSS collectively as the ‘Companies’. The Companies are now in liquidation and One Telecom and iBOSS are also presently under the control of receivers and managers.
On 6 June 2014 the administrators were replaced as joint and several administrators of the Companies by resolution of the creditors at a concurrent second meeting of creditors of the Companies convened and held under s 439A of the Corporations Act 2001 (Cth) (‘the Act’).
The administrators now make application pursuant to section 449E(1)(c) of the Act for a determination that they are entitled to remuneration for performing their role as voluntary administrators of AsiaPAC and One Telecom. There would seem to be no doubt that an administrator may apply to the court for remuneration under s 449E(1)(c) of the Act notwithstanding that the administration has come to an end when the application is made.[1]
[1]Strazdins v DNPW Pty Ltd [2013] FCA 1368 per Besanko J at [38] – [41].
Arnautovic v El Zorro Transport Pty Ltd [2014] NSWSC 135 per Brereton J at [6] – [10].
The administrators also seek determination of their remuneration, costs and expenses pursuant to the orders made by Efthim AsJ on 6 June 2014 in Supreme Court of Victoria proceedings S CI 2014 02799 (first proceeding) and S CI 2014 02795 (second proceeding) in relation to providing access to the Forensic Image[2] to the parties in the first proceeding and second proceeding.
[2]‘Forensic Image’ is defined in the originating process in the first and second proceedings as ‘a copy of the IT software used by One Telecom and iBoss, the email files on the servers of One Telecom and iBoss and all server files of One Telecom and iBoss’.
The administrators also seek an order that their costs of this application be costs in the liquidation of AsiaPAC, One Telecom and iBOSS, apportioned equally.
The principal affidavit in support of the application is Mr McCallum’s, sworn on 27 January 2015. That affidavit exhibits a number of documents as a single bundle contained in a tabulated volume. In addition, a solicitor at the administrators’ lawyers, Clayton Utz, Vincenzo Murano, has sworn an affidavit on 1 May 2015 which deposes to service on various persons with notice of the application and a copy of Mr McCallum’s affidavit.
The originating process contains a request of the type contemplated by r 9.2(4)(b) of the Supreme Court (Corporations) Rules 2013 (Vic) (‘the Rules’) that the application be dealt with in the absence of the public and without attendance by or on behalf of the administrators.
As Mr Murano observes, before making an application of this type, r 9.2 of the Rules requires the administrators 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 administrators’ intention to apply to the Court for an order determining their remuneration.
In his affidavit, Mr Murano identifies the persons who are required to be served within the terms of r 9.2 of the Rules and details the manner in which each of the persons was served with the required documentation.
Mr Murano states he is instructed by the administrators that, as at the date of affirming his affidavit, the administrators have not received any notice of objection to the application. He also states that Clayton Utz has not received any such objection. Because no objection has been received and the 21 day period prescribed by r 9.2(3) of the Rules has passed since the date of last service on the parties to be served, it is requested that the application be dealt with on the papers in the absence of the public and without attendance by or on behalf of the administrators as contemplated by r 9.2(4)(c) of the Rules. I am satisfied having reviewed Mr Murano’s affidavit that it is in order to proceed in that way as contemplated by r 9.2(4)(c) of the Rules.
Legal Principles
The 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:
…
(c)if there is no such agreement or resolution—by the Court.
In exercising the power to determine remuneration under s 449E(1)(c), s 449E(4) prescribes the matters which the Court must take into account in exercising that power. Section 449E(4) provides:
(4)In exercising its powers under subsection (1), (1A) or (2), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a)the extent to which the work performed by the administrator was reasonably necessary;
(b)the extent to which the work likely to be performed by the administrator is likely to be reasonably necessary;
(c)the period during which the work was, or is likely to be, performed by the administrator;
(d)the quality of the work performed, or likely to be performed, by the administrator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the administrator;
(f)the extent (if any) to which the administrator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h)the value and nature of any property dealt with, or likely to be dealt with, by the administrator;
(i)whether the administrator was, or is likely to be, required to deal with:
(i) one or more receivers; or
(ii) one or more receivers and managers;
(j)the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;
(k)if the remuneration is ascertained, in whole or in part, on a time basis:
(i)the time properly taken, or likely to be properly taken, by the administrator in performing the work; and
(ii)whether the total remuneration payable to the administrator is capped;
(l) any other relevant matters.
In the recent decision of Traditional Values Management Limited (In Liquidation) (Special Purpose Liquidator Appointed) (‘Traditional Values’),[3] I reviewed the authorities which describe the general principles applicable to applications by insolvency practitioners for determination of their remuneration. As I observed,[4] the criteria set out in sub-section (10) directs the Court to the factors that are to be taken into account but it will be seen that the question is ultimately whether the remuneration claimed is in all the circumstances reasonable. The principles applicable are set out in paragraphs [42]–[47] of my reasons in Traditional Values and I shall not repeat them here.
[3][2015] VSC 338.
[4]Ibid., at [41].
The evidence in support of the application
In his affidavit, Mr McCallum deposes that he holds the following qualifications and credentials:
(a) Official Liquidator;
(b) Registered Liquidator;
(c) Bachelor of Commerce;
(d) Member of Chartered Accountants Australia and New Zealand (formerly the Institute of Chartered Accountants in Australia);
(e) Graduate Certificate in Forensic Accounting;
(f) Certified Fraud Examiner from 2006 to 2013; and
(g) Member of the Australian Restructuring Insolvency & Turnaround Association.
Mr McCallum states that he has over 12 years’ experience in insolvency administration and forensic services. During that time he has undertaken and managed engagements in Australia, the United Kingdom, Europe, Asia and South America. He has worked on a number of large and complex external administrations and assignments which are detailed in his affidavit. Mr McCallum is obviously an experienced insolvency practitioner who has been involved in numerous large and complex insolvency administrations and significant forensic accounting investigations.
AsiaPAC is the parent company of One Telecom and iBOSS and, because of that relationship, the administrations of the Companies were conducted concurrently.
On 5 May 2014, the creditors of the Companies were given notice of the first meeting of creditors required to be held under s 436E of the Act. The notice of meeting attached a ‘statement regarding remuneration’ which informed the creditors that the administrators would calculate their remuneration using the time based hourly rates method because they were unable to provide a reliable estimate of fees to complete all the tasks in the administrations. The administrators’ estimate of their remuneration for the administrations was between $200,000 and $300,000, but it was indicated that amount might vary, depending upon events occurring in the respective administrations.
On 12 May 2014, during the ‘decision period’ prescribed by the Act, receivers and managers were appointed to One Telecom and iBOSS (‘the One Telecom and iBOSS Receivers’) by a secured creditor of One Telecom and iBOSS. On the same day, receivers and managers were appointed to AsiaPAC (‘the AsiaPAC Receivers’) by a secured creditor of AsiaPAC. The AsiaPAC Receivers retired on 22 December 2014.
On 14 May 2014, the first meeting of creditors of the Companies required under s 436E of the Act was held.
On 28 May 2014, the administrators provided the creditors of the Companies with the report required by section 439A(4)(a) of the Act (‘the s 439A Report’). In the covering letter which accompanied the s 439A Report, the administrators recommended to the creditors that the Companies be placed into liquidation. They also provided notice that, in the event that the creditors resolved to place the Companies into liquidation, it was the administrators’ intention to seek approval of their remuneration for the administration of each of the Companies in the amounts mentioned in the schedules to the s 439A Report.
On 30 May 2014, the administrators sent a letter to the creditors of the Companies updating a section of the s 439A Report by reason of legal advice received by them in relation to an administrator’s right of indemnity from company property.
On 6 June 2014, the second meeting of the creditors of the Companies was held. Mr McCallum chaired that meeting. The minutes of the second meeting note the position in regard to the approval or failure of approval, as the case may be, of the resolutions regarding remuneration as follows:
Amount
Resolution to Approve Fees
AsiaPAC
From 2 May 2014 to 22 May 2014
$66,030.50
Failed
From 23 May 2014 to the end of the administration
$40,150.00
Failed
One Telecom
From 2 May 2014 to 22 May 2014
$89,521.50
Passed
From 2 May 2014 to 22 May 2014, as regards the assets subject to a fixed charge
$23,910.00
Failed
From 23 May 2014 to the end of the administration
$22,250.00
Failed
iBOSS
From 2 May 2014 to 22 May 2014
$48,254.00
Passed
From 2 May 2014 to 22 May 2014, as regards the assets subject to a fixed charge
$19,888.00
Passed
From 23 May 2014 to the end of the administration
$19,100.00
Passed
Because the resolutions in relation to the AsiaPAC and One Telecom administrations were not passed, the administrators now make application for determination of their remuneration by the Court pursuant to s 449E(1)(c). By reason that the resolution relating to the remuneration sought in respect of their period as administrators of iBOSS was passed, no application is made in this proceeding for determination of their remuneration for that administration.
Mr McCallum states that the resolutions in respect to the administrators’ remuneration, which failed and which are detailed in paragraph 23 above, did not fail because of any positive objection from the creditors of either AsiaPAC or One Telecom. He deposes that failure of the resolutions occurred because:
(a) In relation to remuneration in the sum of $66,030.50 exclusive of GST for the period 2 May 2014 to 22 May 2014 (inclusive) for AsiaPAC, Mr McCallum abstained from exercising his casting vote as chairman of the meeting or from using general proxies in his favour because of his personal interest in the resolution succeeding;
(b) In relation to remuneration in the sum of $40,150.00 exclusive of GST for the period 23 May 2014 to the end of the administration for AsiaPAC, Mr McCallum abstained from exercising his casting vote as chairman of the meeting or from using general proxies in his favour because of his personal interest in the resolution succeeding;
(c) In relation to remuneration in the sum of $23,910.00 exclusive of GST for the period 2 May 2014 to 22 May 2014 (inclusive) for One Telecom, no creditor seconded the proposal and the resolution was not put to a vote at the meeting; and
(d) In relation to remuneration in the sum of $22,250.00 exclusive of GST for the period 23 May 2014 to the end of the administration (inclusive) for One Telecom, no creditor seconded the proposal and the resolution was not put to a vote at the meeting.
Resolutions were also carried by the creditors replacing Mr McCallum and Mr Lindholm as joint and several administrators of AsiaPAC with Mr Peter Vince. Mr Lindholm and Mr McCallum were replaced as joint and several administrators of One Telecom and iBOSS by Mr David Ross and Mr Shanon Thomson. For this reason, from 6 June 2014 Mr McCallum and Mr Lindholm ceased to be administrators of AsiaPAC, One Telecom and iBOSS.
Tasks undertaken by the administrators
The Companies were involved in the telecommunications industry at the time of the appointment of the administrators. One Telecom marketed telephone and internet services to retail customers and iBOSS provided wholesale telecommunications services to retail service providers. AsiaPAC was incorporated in August 2013 for the purpose of acquiring the shares of One Telecom and iBOSS as well as the business and assets of One Mobile Pty Ltd and a company formerly called ispONE Pty Ltd but which had changed its name to its ACN. AsiaPAC’s assets included the iBOSS platform, a telecommunications infrastructure that allows services from wholesale telecommunications operators to be linked to retail suppliers of telecommunication services, and associated plant and equipment.
The operations of the Companies were inextricably linked. AsiaPAC and One Telecom has common directors, Soraya Jainudeen, Zac Swindells and Cameron Adams. iBOSS’s directors are Soraya Jainudeen, Zac Swindells, Cameron Adams and Malik Jainudeen.
At the time the administrators were appointed, the Companies were in the process of applying to become a tax consolidated group and because of the expectation that such consolidation would occur, they did not complete monthly or quarterly reconciliations of intercompany bank accounts.
Mr McCallum says that this presented challenges to the administrators in the administrations of AsiaPAC and One Telecom by reason of the interrelationship between the affairs of AsiaPAC, One Telecom and iBOSS. These difficulties were exemplified by the following:
(a) The majority, if not all, transactions relating to AsiaPAC were processed through the bank accounts of One Telecom and iBOSS;
(b) AsiaPAC's revenue and expenses were recorded and paid for by either One Telecom or iBOSS, and AsiaPAC did not record any of those details;
(c) Financial accounts for the Companies were not prepared on a consolidated basis and had not been audited prior to the appointment of the administrators;
(d) After their appointment, the administrators were required to reconcile numerous intercompany loans between the Companies in attempts to establish the profitability and financial position of each of the Companies;
(e) On initial inspection, the administrators formed the preliminary view that the Companies failed to maintain adequate books and records in accordance with the requirements of s 286 of the Act;
(f) Statements about the Companies' business, property, affairs and financial circumstances were requested from all directors of the Companies pursuant to s 438B of the Act. The administrators only received a statement of that type from Mr Swindells on 22 May 2014; and
(g) Despite employment contracts being between individual employees and either AsiaPAC or Telecommunications Support Services Pty Ltd, iBOSS processed all wage payments and prepared all payslips. Telecommunications Support Services Pty Ltd is a 100% owned subsidiary of AsiaPAC.
Mr McCallum details the receipts taken and payments made by the administrators during the administration as required by r 9.2(6)(d) of the Rules. I shall not detail them here except to say that they are relatively modest in amount.[5]
[5]Affidavit of Stewart McCallum of 27 January 2015, para 25.
The application for remuneration
Mr McCallum exhibits documents described as Remuneration Approval Request Reports, both dated 25 July 2014 for the work completed in relation to the administration of AsiaPAC[6] and One Telecom[7] respectively.
[6]Tab 8.
[7]Tab 9.
Mr McCallum deposes that in arriving at the amount of remuneration for which determination is sought, it has been calculated on a time cost basis in accordance with the procedures detailed by the Australian Restructuring Insolvency and Turnaround Association. He states that the administrators and their staff recorded details of the time expended on the tasks in the administration of the Companies in an electronic system known as ‘Aderant Expert 8.0’. Each fee earner involved in the administration was directed by the administrators to enter their time spent on a particular task by reference to which of the Companies the entry related.
In relation to the administration of AsiaPAC:
(a) For the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff expended 173.3 hours on tasks in the administration resulting in work in progress in the sum of $66,030.50 exclusive of GST; and
(b) For the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff expended 53.1 hours on tasks in the administration resulting in work in progress in the sum of $19,504.00 exclusive of GST.
In relation to the administration of One Telecom:
(a) For the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff expended 43.6 hours on tasks in the administration resulting in work in progress in the sum of $23,910.00 exclusive of GST; and
(b) For the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff expended 81.9 hours on tasks in the administration resulting in work in progress in the sum of $25,675.50 exclusive of GST.
In an additional document which is exhibited to Mr McCallum’s affidavit,[8] there is an extract from the records generated by the Aderant Expert 8.0 program which provides the following information in respect of the AsiaPAC and One Telecom administrations:
[8]Tab 10.
(a) The person who undertook the task for the administration;
(b) The date it was performed;
(c) His or her hourly rate;
(d) A narrative describing the task undertaken;
(e) The amount of time spent on each task applying the applicable hourly rate and the associated cost; and
(f) A classification of each task by reference to the following 6 general categories of task:
(i) Investigation;
(ii) Creditors;
(iii) Administration;
(iv)Assets;
(v) Employees; and
(vi)Trade-on.
The statement regarding remuneration which accompanied the notice to the creditors of the first meeting appends a ‘Schedule of hourly rates and general guide to staff experience’ at the administrators’ firm, Ferrier Hodgson. It lists the hierarchy of the firm from partner down to senior secretary, states their respective hourly rates and describes the experience that a person of that rank within the hierarchy would have accrued. The hourly rates are higher than the average rates I see in schedules appended to consents to act by liquidators in winding up proceedings that I hear in the Corporations List in this Court. The charge out rate for a partner is $650 per hour, the next rank below, director, being charged out at $575 per hour and then senior manager at $515 per hour. The most junior accountant is charged out at a rate of $170 per hour. While being high, the rates are still within the ‘market’ for Melbourne liquidators and are comparable to those charged by large firms of insolvency practitioners conducting insolvency administrations of above average size and complexity.
In his affidavit, Mr McCallum details the tasks completed by the administrators and their staff relating to each of the six categories described as follows:
Investigation
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 4.3 hours, resulting in fees of $1,573.00 exclusive of GST, in the investigation category of tasks for One Telecom. Those tasks primarily concerned:
(a) Reviewing company books and records; and
(b) Conducting and summarising statutory searches.
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 25.6 hours, resulting in fees of $10,226.00 exclusive of GST, in the investigation category of tasks for AsiaPAC. Those tasks primarily concerned:
(a) The collection and review of company books and records;
(b) Conducting and summarising statutory searches;
(c) Analysing computer networks and information technology systems; and
(d) Creating a forensic image of computer servers, drives, employee emails and local drives (this does not include any work undertaken by the administrators in relation to the orders made by Efthim AsJ in the first proceeding and the second proceeding).
Creditors
The administrators are aware of 42 creditors of AsiaPAC. In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 35.3 hours, resulting in fees of $14,244.00 exclusive of GST, in the creditors category of tasks for AsiaPAC. Those tasks primarily concerned:
(a) Attending to inquiries from creditors;
(b) Preparing for, and attending, the first meeting of creditors of AsiaPAC (held concurrently with the first meetings of the other Companies). This involved tasks such as:
(vii) Preparing meeting notices, proxies and advertisements;
(viii) Preparing an agenda, certificate of postage, attendance register, list of creditors and reports to creditors;
(ix) Drafting minutes of the meeting and lodging those minutes with ASIC; and
(x) Responding to stakeholder queries following the meeting;
(c) Preparing the 439A Report; and
(d) Receipting and filing proofs of debt.
In relation to period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 34.8 hours, resulting in fees of $13,095.00 exclusive of GST, in the creditors category of tasks for AsiaPAC. Those tasks primarily concerned:
(a) Receipting and filing proofs of debt and corresponding with the State Revenue Office and Australian Taxation Office in relation to proofs of debt;
(b) Preparing for, and attending, the second meeting of creditors of AsiaPAC (held concurrently with the first meetings of the other Companies). This involved tasks such as:
(xi) Preparing meeting notices, proxies and advertisements;
(xii) Preparing an agenda, certificate of postage, attendance register, list of creditors and reports to creditors; and
(xiii) Responding to stakeholder queries following the meeting.
The administrators are aware of 51 creditors of One Telecom. Notwithstanding this, the administrators' staff attended to numerous customer telephone calls representing some 51,812 services in relation to telephone service failures and supply issues. In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 55.6 hours, resulting in fees of $17,286.50 exclusive of GST, in the creditors category of tasks for One Telecom. Those tasks primarily concerned:
(a) Attending to inquiries submitted by creditors;
(b) Preparing the 439A Report;
(c) Receipting and filing proofs of debt;
(d) Preparing for, and attending, the second meeting of creditors of One Telecom (held concurrently with the first meetings of the other Companies). This involved tasks such as:
(xiv) Preparing meeting notices, proxies and advertisements;
(xv) Preparing an agenda, certificate of postage, attendance register, list of creditors and reports to creditors;
(xvi) Drafting minutes of the meeting and lodging those minutes with ASIC; and
(xvii) Responding to stakeholder queries following the meeting; and
(e) Responding to queries from One Telecom customers in relation to telephone service failures and supply issues.
Administration
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 46.0 hours, resulting in fees of $17,155.50 exclusive of GST, in the category of tasks relating to the administration of AsiaPAC. Those fees relate to tasks including the following:
(a) attending to general correspondence regarding the administration of AsiaPAC;
(b) filing documents and updating checklists;
(c) identifying issues requiring advice from insurance specialists and corresponding with insurers;
(d) preparing correspondence to open and close bank accounts, requesting bank account statements and preparing bank account reconciliations;
(e) attending to lodgement of the requisite notices with statutory and regulatory bodies such as ASIC and the Australian Tax Office; and
(f) discussions regarding progressing the administration.
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 8.0 hours, resulting in fees of $3,178.50 exclusive of GST, in the category of tasks relating to the administration of AsiaPAC. Those fees relate to tasks which include the following:
(a) attending to general correspondence regarding the administration of AsiaPAC;
(b) filing documents and updating checklists;
(c) requesting bank account statements and preparing bank account reconciliations;
(d) attending to lodgement of the requisite notices with ASIC and correspondence with ASIC; and
(e) discussions regarding progressing the administration.
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 0.5 hours, resulting in fees of $185.00 exclusive of GST, in the category of tasks relating to the administration of One Telecom. Those fees relate to discussions regarding the implications of the sale of One Telecom assets to Vocus Communications Limited (‘Vocus’).
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 13.3 hours, resulting in fees of $4,187.00 exclusive of GST, in the category of tasks relating to the administration of One Telecom. Those fees relate to tasks which include the following:
(a) Attending to general correspondence regarding the administration of One Telecom;
(b) Filing documents and updating checklists;
(c) Requesting bank account statements and preparing bank account reconciliations;
(d) Attending to lodgement of the requisite notices with ASIC and correspondence with ASIC; and
(e) Discussions regarding progressing the administration.
Assets
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 9.1 hours, resulting in fees of $3,290.00 exclusive of GST, in the category of tasks relating to the assets of AsiaPAC. Those fees relate to tasks which include the following:
(a) Liaising with potential purchasers of AsiaPAC and maintaining a register of expressions of interest of entities interested in purchasing AsiaPAC as a going concern;
(b) Reviewing plant and equipment asset listings; and
(c) Reviewing leases and liaising with landlords.
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 0.3 hours, resulting in fees of $87.00 exclusive of GST, in the category of tasks relating to the assets of AsiaPAC. Those fees relate to tasks which include reviewing leases and liaising with landlords.
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 39.4 hours, resulting in fees of $21,877.50 exclusive of GST, in the category of tasks relating to the assets of One Telecom. Those fees relate to tasks which include the following:
(a) Preparing information memoranda and a data room in preparation for the potential sale of assets;
(b) Liaising with potential purchasers of the One Telecom customer base;
(c) Negotiating with potential purchasers of the One Telecom customer base and considering offers made to purchase the One Telecom customer base;
(d) Reviewing contracts of sale for the One Telecom customer base to Vocus and attending to issues relating to the settlement of that sale;
(e) Discussions with lawyers regarding the sale of the One Telecom customer base; and
(f) Liaising with the One Telecom and iBOSS Receivers.
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 8.0 hours, resulting in fees of $2,410.00 exclusive of GST, in the category of tasks relating to the assets of One Telecom. Those fees relate to tasks which include reviewing leases and liaising with landlords.
Employees
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 14.0 hours, resulting in fees of $5,075.00 exclusive of GST, in the category of tasks relating to the employees of AsiaPAC. Those fees relate to tasks which include the following:
(a) Dealing with general inquiries from employees; and
(b) Preparing, reviewing and sending correspondence to employees in relation to their entitlements and options.
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 4.0 hours, resulting in fees of $1,067.50 exclusive of GST, in the category of tasks relating to the employees of AsiaPAC. Those fees relate to tasks which include the following:
(a) Dealing with general inquiries from employees;
(b) Preparing, reviewing and sending correspondence to employees in relation to their entitlements and options;
(c) Calculating employee entitlements, reviewing employee files and company books and records; and
(d) Reconciling superannuation accounts.
Trade-on
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 43.3 hours, resulting in fees of $16,040.00 exclusive of GST, in the category of tasks relating to the trading of AsiaPAC’s business. Those fees relate to tasks which include the following:
(a) Liaising with staff, suppliers and the Telecommunications Industry Ombudsman;
(b) Attending the worksite;
(c) Authorising purchase orders and maintaining a purchase order registry; and
(d) Preparing and authorising receipt vouchers and payment vouchers.
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the Administrators and their staff spent 2.1 hours, resulting in fees of $633.00 exclusive of GST, in the category of tasks relating to the trade-on of AsiaPAC. Those fees relate to tasks which include the following:
(a) Liaising with suppliers and maintaining a purchase order registry ;
(b) Entering receipts and payments into accounting systems;
(c) Finalising trading profit and loss statements; and
(d) Preparing and reviewing administration trading forecasts.
In relation to the period 2 May 2014 to 22 May 2014 (inclusive), the administrators and their staff spent 3.7 hours, resulting in fees of $1,847.50 exclusive of GST, in the category of tasks relating to trading on One Telecom’s business. Those fees relate to tasks which include the following:
(a) Liaising with staff and suppliers to ensure the company continued to provide services;
(b) Attending the worksite; and
(c) Entering receipts and payments into the accounting system.
In relation to the period 23 May 2014 to 6 June 2014 (inclusive), the administrators and their staff spent 0.7 hours, resulting in fees of $219.00 exclusive of GST, in the category of tasks relating to the trade-on of One Telecom. Those fees relate to tasks which include the following:
(a) Liaising with suppliers and maintaining a purchase order registry;
(b) Entering receipts and payments into the accounting system; and
(c) Finalising trading profit and loss statements.
The administrators seek that their remuneration during the administrations of AsiaPAC and One Telecom be determined in the sums set out in paragraph 34 and 35 above.
Mr McCallum contends that such claim is reasonable having regard to the tasks that the administrators completed which he says were, in his opinion, reasonably necessary, and having regard to the factors which are detailed above in these reasons. He contends that the work performed by the administrators in their tasks was of the necessary quality and involved dealing with complex issues, particularly in relation to the intermingling of the Companies’ affairs which is referred to in paragraph 30 above. Those same features meant that the administrators were required to deal with extraordinary issues arising from the intermingling of the Companies’ affairs.
In addition, from 12 May 2014 onwards, the administrators were required to deal with the Receivers who had been appointed to AsiaPAC, One Telecom and iBOSS. The nature of the property dealt with by the administrators included secured property and property subject to third party claims and leases. The administrators were also involved in negotiations and the ultimate sale of One Telecom’s assets. There was some interaction with the creditors which required attending to enquiries made by them and reporting back to them. In my view the evidence adequately addresses the matters mentioned in s449E(4) of the Act and reveals that the administration involved a higher level of complexity and responsibility than the average insolvency administration.
As I have noted, the exhibited bundle[9] contains an extract from the Aderant Expert 8.0 Database maintained for these administrations which provided the information mentioned in paragraph 36 above.
[9]Tab 10.
The narrative for each entry is quite detailed and informative. In reviewing that document, I did not examine each and every entry. Instead, 100 entries were chosen randomly with an arbitrary threshold of $300 being charged. Each such entry was examined by me more closely to ascertain, as far as is possible whether having regard to the task being performed it was being undertaken by a person of the appropriate level of responsibility in the administrators’ staff, whether the time taken appeared to be reasonable and whether the task being performed appeared to be necessary in the conduct of the administrations.
In addition, I also note that the s 439A Report annexed a document titled ‘Administrators Remuneration Report’ which was a 40 page document detailing the administrators claim for remuneration for consideration by the creditors at the second meeting of creditors. The tables which break down the work performed into the six task categories to which I have referred provide a narrative as to what the tasks involved, the time spent and the amount claimed. The document contains spread sheets setting out the calculation of remuneration, identifying the various persons in the hierarchy of Ferrier Hodgson, ranging from the administrators down to accounts supervisor/assistants, who were involved in the administration.
The spread sheets reveal that a great part of the work in the administrations was delegated to and carried out by a senior manager, assistant managers, a senior analyst and an analyst. For example, in the AsiaPAC administration for the period 2 May to 22 May 2014, a total of 173.3 hours was spent by the administrators and their staff, of which Mr McCallum was occupied for 12.2 hours.
In that part of the Report dealing with the administration of AsiaPAC, from the commencement of the administration to 6 June 2014, the average hourly rate charged is $381 across the range of tasks performed by the various members of the administrators’ staff. The greater part of the work is done by a senior manager, senior analyst and analysts. Similar information is provided in respect of the One Telecom administration.
The evidence demonstrates to me that, prima facie, there has been an appropriate level of delegation through the hierarchy of the firm across the six task categories.
In my view the Remuneration Request Reports[10] together with the extract from the Aderant Expert 8.0 program[11] complies with the requirement of r 9.2.6 of the Rules and the standard described by the Full Court of the Western Australian Supreme Court in Venetian Nominees v Conlan (‘Venetian Nominees’)[12] and establishes that the remuneration sought is prima facie fair and reasonable.
Remuneration claimed pursuant to orders made by Efthim AsJ on 6 June 2014 in Supreme Court of Victoria proceeding S CI 2014 02799 (the first proceeding) and S CI 2014 02795 (the second proceeding).
[10]Tabs 8 and 9.
[11]Tab 10.
[12](1998) 20 WAR 96.
In the first proceeding, Efthim AsJ ordered that the administrators provide to the plaintiffs in that proceeding (Mr Franklin and Mr Stone in their capacities as the One Telecom Receivers) a copy of the Forensic Image as that expression is defined in the originating process in that proceeding. The administrators were given a right to be indemnified out of the assets of One Telecom, iBOSS and AsiaPAC for their reasonable costs and expenses incurred in connection with that task, including re-imaging the relevant servers and computers, verifying and producing copies of the Forensic Image, and responding to all requests for such access, together with their costs of the proceeding. That right of indemnity was secured by a lien over the property of the Companies and had priority over the debts of the secured creditors.[13]
[13]See Tab 11.
In the second proceeding, the administrators were also ordered to provide to the plaintiffs in that proceeding a copy of the Forensic Image. Again, they were awarded a right to be indemnified for their reasonable costs and expenses incurred in connection with providing that material, together with their costs of the proceeding, out of the assets of the Companies in priority to certain secured creditors.[14]
[14]See Tab 12.
The parties to the first and second proceedings have not reached agreement in relation to the appropriate quantum for their remuneration pursuant to Efthim AsJ’s orders made on 6 June 2014. For this reason they seek determination of their remuneration under s 449E(1)(c) of the Act for their performance of those orders.
On 1 July 2014, the administrators issued a memorandum of fees in respect of their costs and expenses for performing what they were ordered to do by Efthim AsJ’s orders in the first and second proceedings. Those costs and expenses related to work undertaken by employees of the administrators who specialised in computer forensics. Those employees were not otherwise engaged in work for the administrations.
In this regard the administrators incurred costs and expenses of $7,998 exclusive of GST as follows:
(a) AsiaPAC for $2,666.00, exclusive of GST;
(b) One Telecom and iBoss for $2,666.00, exclusive of GST; and
(c) Cameron Kevin Adams for $2,666.00, exclusive of GST.
These fees are for work performed in the period 5 June 2014 to 12 June 2014.
At my request a narrative was supplied by the administrators’ solicitors and reveals that an employee of manager rank with Ferrier Hodgson, apparently a specialist in information technology, spent approximately 16.5 hours carrying out this task. The compilation of the Forensic Image involved identification of material to be excluded under the terms of Efthim AsJ’s orders, such as ensuring that information relating to the iBoss Platform and other material was not present in what was provided to the parties. The performance of the technical requirements of the orders by a person who was appropriately qualified was justified. It was apparently overseen by Craig Morgan, a manager working in the administrations. The charges exacted appear to be fair and reasonable.
Mr McCallum exhibits an extract,[15] again obtained from the Aderant Expert 8.0 program, which sets out the fees in connection with providing access to the Forensic Image to the parties in the first and second proceedings.
[15]Tab 16.
I have examined the entries on that extract and prima facie it appears that the tasks undertaken related to performance of Efthim AsJ’s orders (as well as some tasks which were related to the second meeting of creditors and the appointment of liquidators to the Companies for which the administrators are entitled to be remunerated). The remuneration sought appears to be prima facie fair and reasonable.
In relation to the period from 9 May 2014 to 25 June 2014 (inclusive), the administrators and their staff spent 36.9 hours, resulting in fees of $19,819.00 exclusive of GST, performing tasks in connection with providing access to the Forensic Image to the parties in the first and second proceedings. Those fees relate to tasks which include the following:
(a) Correspondence regarding the appointment of the One Telecom and iBOSS Receivers;
(b) Correspondence regarding the One Telecom and iBOSS Receivers' request to replace the administrators;
(c) Discussions with Clayton Utz and associated work resulting from correspondence received from the solicitors for the One Telecom and iBOSS Receivers;
(d) Attending the hearing of the first proceeding and the second proceeding (which occurred over two days); and
(e) Preparing for aspects of the concurrent second meeting of creditors of the Companies relating to the Forensic Image.
On 15 July 2014 the administrators’ solicitors, Clayton Utz, sent a letter to the solicitors for the Receivers of One Telecom and iBOSS requesting agreement in relation to the payment of the administrators’ costs detailed above and the administrators’ legal costs in the first and second proceedings.
In addition to the three invoices relating to the costs and expenses referred to in paragraph 72 above, the letter also contained copies of Clayton Utz’s invoices in respect of the firm’s involvement on behalf of the administrators in the first and second proceedings as well as an invoice of Damien McAloon, a barrister engaged by Clayton Utz to appear on behalf of the administrators in the first and second proceedings. I note that the legal fees do not form part of this application for determination of remuneration.
There was no response to that letter and Clayton Utz sent a further letter to the Receivers’ solicitors, Clamenz Evans Ellis Lawyers, on 15 August 2014. Clayton Utz stated that the administrators intended to apply funds which were held by them in satisfaction of the costs. The letter noted that the costs sought significantly exceeded the amounts held by the administrators.
There were subsequent negotiations between Clayton Utz and Clamenz Evans Ellis Lawyers from 22 August 2014 to 30 September 2014 by correspondence which was without prejudice. As of the date of Mr McCallum’s affidavit, the administrators had not received any money or agreement to draw the administrators’ costs from the funds held by the One Telecom and iBOSS Receivers in satisfaction of the orders.
Application of the criteria prescribed be s 449E(4)
I now turn finally to the consideration of the matters mentioned in s 449E(4) of the Act which the court is required to take into account in exercising the power to determine the administrators’ remuneration. I consider that the evidence filed in support of the application demonstrates that the administrators have made out a prima facie case that their claim for remuneration is fair and reasonable. The evidence in this regard complies with the standard required by the Rules and described in Venetian Nominees. In this regard it also addresses the requirements relevant to s 449E(4)(a) to (d) which collectively amount to an assessment as to whether the claim made is fair and reasonable. Section 449E(4)(e) to (g) relate respectively to the complexity of the works performed, the extent to which the administrators were required to deal with extraordinary issues and the extent to which they were required to accept a higher level of risk or responsibility than is usually the case. In this regard I consider that the work performed in the administrations by the administrators and their staff was above that to be encountered in a run of the mill administration. The intermingling of the affairs of the Companies which gave rise to the difficulties described in Mr McCallum’s affidavit[16] meant that the factors mentioned in sub-paragraphs (e) to (g) called for more than the average level of judgment, responsibility and experience than an insolvency practitioner would encounter in an administration.
[16]Affidavit of Stewart McCallum of 27 January 2015, para 24.
The nature of the assets dealt with in the administrations is detailed in paragraphs 48 to 51 above. It included secured property and property subject to third party claims and leases. The administrators were involved in negotiations for the ultimate sale of One Telecom’s assets. As to the Companies’ creditors, the administrators dealings with them are described in paragraphs 41 to 43 above. They were not particularly numerous (42 for AsiaPac and 51 for One Telecom) but in regard to One Telecom the administrators were involved attending to customer telephone calls representing approximately 50,000 services in relation to service failures and supply issues. There is no evidence that the administrators were involved with a high number of fractious creditors as is sometimes the case.
The administrators seek determination of their remuneration on a time basis applying the procedures detailed by the Australian Restructuring Insolvency and Turnaround Association. This course was adopted because, as was indicated to the creditors in the notice advising of the first meeting of creditors, it was not possible to provide a reliable estimate of fees to complete all the necessary tasks in the administrations. They estimated to the creditors that their fees for conducting the administrations were in the range of $200,000 to $300,000. If one includes the remuneration approved of by the creditors, my reckoning is that the remuneration claimed for all these administrations is approximately $270,000, so the estimate was reasonably accurate. The administrators have, as described above in these reasons, provided a detailed account of their time spent on the various tasks in the administrations and so as far as one can tell, on an examination of the narratives, the time spent on those tasks seems to be proportionate and reasonable in the circumstances.
On a collective application of the criteria in s 449E(4), I consider that there should be no reduction in the amount sought by the administrators in their performance of their obligations as administrators of AsiaPac and One Telecom and for their performance in carrying out the orders of Efthim AsJ in the first and second proceedings.
I will make orders pursuant to s 449E(1)(c) of the Act as follows:
1.Pursuant to rule 9.2(4)(b) of the Supreme Court (Corporations) Rules 2013 (Vic), the application be dealt with in the absence of the public and without attendance by or on behalf of the plaintiffs.
2.A determination that the administrators are entitled to:
(a)in their capacity as voluntary administrators of AsiaPac Communications Group Pty Ltd (in liquidation):
(i)remuneration in the sum of $66,030.50 exclusive of GST for the period 2 May 2014 to 22 May 2014 (inclusive); and
(ii)remuneration in the sum of $19,504.00 exclusive of GST for the period 23 May 2014 to 6 Jun 2014 (inclusive); and
(b)in their capacity as voluntary administrators of One Telecom Pty Ltd (in liquidation) (receivers and managers appointed):
(i)remuneration in the sum of $23,910.00 exclusive of GST for the period 2 May 2014 to 22 May 2014 (inclusive); and
(ii)remuneration in the sum of $25,675.50 exclusive of GST for the period 23 May 2014 to 6 June 2014 (inclusive); and
(c)as regards the orders made by the Honourable Associate Justice Efthim on 6 June 2014 in Supreme Court of Victoria proceedings S CI 2014 02799 (first proceeding) and S CI 2014 02795 (second proceeding):
(i)remuneration in the sum of $7,998.00 exclusive of GST, in relation to providing access to the Forensic Image (as defined in paragraph 62 of the affidavit of Stewart McCallum dated 27 January 2015) to the parties to the first proceeding and second proceeding; and
(ii)remuneration in the sum of $19,819.00 exclusive of GST, in relation to costs and expenses incurred in connection with providing access to the Forensic Image (as defined in paragraph 62 of the affidavit of Stewart McCallum dated 27 January 2015) to the parties to the first proceeding and second proceeding.
3.The plaintiffs’ costs of and incidental to making this application be costs in the liquidation of AsiaPac Communications Group Pty Ltd (in liquidation), One Telecom Pty Ltd (in liquidation) (receivers and managers appointed) and iBoss International Pty Ltd (in liquidation) (receivers and managers appointed), apportioned equally.
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