Re Ausun Property Pty Ltd (in liq)
[2022] VSC 115
•23 March 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 04367
IN THE MATTER of AUSUN PROPERTY PTY LTD (IN LIQUIDATION)
(ACN 152 923 174)
| RENEE SARAH DI CARLO in her capacity as Liquidator of Ausun Property Pty Ltd (In Liquidation) (ACN 152 923 174) | Plaintiff |
| v | |
| LI ZENG (AKA ALEX ZENG) | Other party |
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JUDICIAL REGISTRAR: | Caporale JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 23 March 2022 |
CASE MAY BE CITED AS: | Re Ausun Property Pty Ltd (in liq) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 115 |
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CORPORATIONS - External administration – Court approval of liquidator’s remuneration – Liquidator appointed receiver of trust property – Remuneration application in nature of a trustee’s, rather than a liquidator’s, remuneration - Sufficiency of evidence to determine claim for remuneration - Matters to which the Court should have regard.
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ON THE PAPERS: | Solicitors |
| For the Plaintiff | Pelham Strata Lawyers |
JUDICIAL REGISTRAR:
Background
On 16 June 2021 the Court ordered that Ausun Property Pty Ltd (ACN 152 923 174) be wound up in insolvency (‘Ausun’). The plaintiff was appointed liquidator for the purposes of the winding up.
Ausun was, until the appointment of the plaintiff as liquidator, the trustee of the Don Peria Unit Trust (‘Trust’). After examining the company’s financial statements, the plaintiff was satisfied that Ausun did not act otherwise than as trustee of the Trust and did not undertake any activities or conduct any business in its own right.
By application dated 19 November 2021 the plaintiff sought orders in relation to her remuneration (‘remuneration application’).
On 17 December 2021, Efthim AsJ ordered that a hearing to determine the plaintiff’s remuneration, for the work undertaken over the period 16 June 2021 to 15 December 2021, be listed before me on a date to be fixed.
In support of the remuneration application, the plaintiff relies on three affidavits sworn by her on 19 November 2021, 15 December 2021 and 16 December 2021.
Each of those affidavits, together with the Originating Process, was served on all interested parties. None of the interested parties appeared at the listing of the matter on 17 December 2021. Additionally, all interested parties were advised that the remuneration application would be determined on the papers. No objections were received and the remuneration application will therefore be determined on the papers.
The plaintiff seeks approval from the Court for her remuneration in the sum of $137,290 ($68,949 for the period 16 June 2021 to 15 September 2021; $30,515 for the period 16 September 2021 to 5 November 2021 and $37,826 for the period 6 November 2021 to 15 December 2021). Creditor approval has been given for the two earlier periods.
For the reasons that follow, the plaintiff’s remuneration in the sum of $137,290 is approved by the Court.
Liquidator as receiver of the Trust property
On 17 December 2021 Efthim AsJ ordered that:
1.The Plaintiff be appointed without security as receiver and manager (‘the Receiver’) of the assets of the Trust (‘the Trust Property’).
2. The Receiver is authorised to take possession of, preserve, maintain and sell the assets comprising the Trust Property.
3. The Receiver will have the following powers:
(a)to do all things necessary or convenient to effect the sale or realisation of the Trust Property, with the powers that a liquidator has in respect of property of a company pursuant to s 477(2) of the Corporations Act;
(b)to apply the proceeds from the sale of the Trust Property to discharge the liabilities of Ausun (all of which were incurred by it in its capacity as trustee) in accordance with the priorities set out in s 556 of the Corporations Act; and
(c)to distribute any surplus proceeds from the sale of the Trust Property (if any) to the new trustee of the Trust or, if there is no new trustee, to the Unit Holders of the Trust.
4. The costs, expenses and remuneration incurred by the Plaintiff in relation to the Trust Property, whether incurred as liquidator of Ausun or as Receiver of the Trust Property pursuant to order 1 above (including this application), be paid in accordance with order 3(b) above, from the assets of the Trust, with the quantum of such remuneration and expenses to be approved by the Court.
Accordingly, the remuneration application is in the nature of an approval of a trustee’s remuneration, rather than a liquidator’s remuneration. Such applications enliven the Court’s inherent equitable jurisdiction. The provisions of the Corporations Act 2001 (Cth) (‘Corporations Act’) and the Supreme Court (Corporations) Rules 2013 (Vic) concerning a liquidator’s remuneration do not apply to the remuneration application where the assets held by Ausun as trustee form no part of the insolvent estate of Ausun.[1]
[1]Sutherland, Re (2004) 50 ACSR 297, [10], [14], [17], [20] (Campbell J).
Principles
Black J summarised the relevant principles in Re National Buildplan Group Pty Ltd (subject to deed of company arrangement)[2] as follows:
...the Court has an inherent jurisdiction to allow an insolvency practitioner, in his or her capacity as trustee of a fund, to receive payment of remuneration, costs and expenses of trust assets: Re Application of Sutherland [2004] NSWSC 798; (2004) 50 ACSR 297 at [10]–[16]. [Counsel] refers to the judgment of Finkelstein J in 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) … to which I referred in Re MF Global Australia Ltd(in liq) (No 2) [2012] NSWSC 1426 at [50], noting that a liquidator may, if acting reasonably, be indemnified out of trust assets for costs and expenses incurred in recovering or attempting to recover, realising or attempting to realise, or protecting or attempting to protect, trust assets and in distributing those assets to the persons beneficially entitled to them. [Counsel] also properly acknowledges that the Court may decline to make such and order if a company did not act solely as trustee and has sufficient assets to meet the liquidator’s remuneration, costs and expenses, and where the work done by the liquidator in relation to trust assets may properly be treated as done in winding up the company’s affairs: Re GB Nathan & Co Pty Ltd(in liq) (1991) 24 NSWLR 674 at 685-689; Re MF Global Australia Ltd (in liq) (No 2)...
[2][2014] NSWSC 146, [34].
The essential task of the Court in determining an application for approval of remuneration is to ensure that the work upon which such a claim is based was work undertaken in the due course of the administration and the amount claimed for doing the work “is a fair and reasonable reward for it”.[3]
[3]Re Anderson Group Pty Ltd (2002) 20 ACLC 1607, [12].
In making a remuneration determination, s 60-12 of Schedule 2 - Insolvency Practice Schedule (Corporations) to the Corporations Act 2001 (Cth) provides that the Court must have regard to whether the remuneration is reasonable. The Court can take into account a number of matters, such as the extent to which the work was necessary and properly performed, and the quality of the work performed. This provision, for the reasons set out above, does not apply to the remuneration application. However, some of the matters listed in s 60-12 provide a useful guide for determining the remuneration application, as do the many authorities that deal with Court approval of a liquidator’s remuneration.
The cases that deal with remuneration determinations under the Corporations Act 2001 emphasise that liquidators must provide sufficient detail of the work that was done and the expenses claimed for the Court to assess the reasonableness of the remuneration claimed.[4]
[4]Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144, [63]-[64].
The test of reasonableness has equal application to the remuneration sought by a liquidator when acting as trustee, as is the case in the remuneration application.
Evidence in support
Background to the plaintiff’s role as trustee
The plaintiff sought legal advice in relation to her ability to deal with various assets given that her appointment left the Trust without a trustee. It is clear that the advice culminated in the orders made on 17 December 2021 by Efthim J, which included orders that the plaintiff be appointed receiver and manager of the assets of the Trust and is authorised to take possession of, preserve, maintain and sell the assets comprising the property of the Trust.
It appears that the director of the company failed to provide the plaintiff with a report on the company’s activities and property, or if he did, it was long after the plaintiff’s appointment as liquidator.
The plaintiff was required to search for bank accounts held by the company.
The company’s externally prepared financial statements revealed a number of debtors.
Land title searches revealed the company was the registered owner of a number of apartments in suburban Melbourne, some of which were leased. Some rental income was paid into the company’s liquidation bank account.
Company assets were discovered at a warehouse leased by the company (‘warehouse’).
National Australia Bank (‘NAB’) was a secured creditor of the company. There were four unsecured creditors and at least one contingent creditor.
A Proof of Debt was submitted by the petitioning creditor.
The company employed two staff.
Documents were received from the company’s external accountant and were reviewed. Potential preference claims were discovered, as well as possible insolvent trading claims.
Work completed from 16 June 2021 to 15 September 2021
For the work completed between 16 June 2021 and 8 July 2021, the plaintiff has prepared a table which sets out the work completed by reference to task areas (and the number of hours devoted to that task together with the cost) and a general description of the types of work undertaken in each task area (‘task table’). The task areas are assets, creditors, employees, investigations and administration. The task areas with the highest cost were creditors (17.2 hours and $8,147) and investigations (13.7 hours and $6,381).
Work performed in the creditors task area included preparation of initial information for creditors, liaising with NAB in relation to their mortgages and debt, communications and meetings with Valeo Construction (a contingent creditor) in relation to a bank guarantee and preparing proposal notices and voting forms.
Work performed in the investigations task area included conducting statutory searches and issuing letters to various authorities, reviewing the books and records from the company’s external accountants and attending the company’s premises and registered office.
For the period between 16 June and 8 July 2021, the plaintiff performed approximately half of all the work performed in relation to Ausun (at $590 per hour ex GST). Most of the plaintiff’s work was devoted to the creditors and investigation task areas. The bulk of the work on the Ausun matter for this period was performed by a person at the supervisor level (at $360 per hour ex GST) (28 out of a total 52.8 hours). Most of her work was devoted to the creditors, investigation and administration task areas.
The plaintiff prepared another task table for the period 9 July 2021 to the conclusion of the liquidation, which I have treated as a task table for the period 9 July 2021 to 9 September 2021. For this period, the task areas with the highest costs were assets (22 hours and $10,400) and creditors (17 hours and $7,315). Work in the investigation task area also featured largely in this period.
Work performed in the assets task area included liaising with NAB and the owners corporation in relation to the apartments owned by the company, liaising with Harcourts Mitcham (who managed the leased apartments), preparation of rental payments schedule and the collection of rent from tenants.
Work performed in the creditors task area included receiving and following up creditors’ enquiries, continuing to liaise with NAB, preparing reports to creditors, forwarding notices of proposal to all known creditors, preparing and lodging of the proposal outcome with the Australian Securities and Investments Commission (‘ASIC’), preparation for the creditors meeting and issuing circulars to creditors.
For the period between 9 July 2021 to 9 September 2021, the plaintiff performed less than a third of all the work performed in relation to Ausun (at $590 per hour ex GST). Most of the plaintiff’s work was devoted to the assets task area. Again, the bulk of the work on the Ausun matter for this period was performed by a person at the supervisor level (at $360 per hour ex GST) (45 out of a total 82 hours) and the supervisor’s work was spread relatively evenly over all task areas.
The plaintiff prepared another task table for the period 10 September 2021 to 15 September 2021. For this period, the task areas with the highest costs were creditors (10.8 hours and $4,394) and investigations (6 hours and $2,551).
Work performed in the creditors task area included maintaining the creditor enquiry register, commencing the drafting of the Statutory Report to Creditors, communications and discussions with various parties in relation to VCAT regarding Valeo Constructions and bank guarantees, receiving and filing proofs of debt and listing and organising proofs of debts for the meeting of creditors.
Work performed in the investigations task area included reviewing Commonwealth Bank of Australia (‘CBA’) and NAB bank statements, conducing conducting preference reviews on the company’s bank accounts, conducting a review of the solvency position of the company and discussions with the director, his solicitor and a former employee of the company.
For the period 10 September 2021 to 15 September 2021, the bulk of the work in relation to the Ausun matter was performed at the supervisor and secretary level (19.5 hours out of a total of 25.2 hours). Most of the supervisor’s work was devoted to the creditors and investigations task areas.
Work completed from 16 September 2021 to 5 November 2021
The plaintiff prepared another task table for the period 16 September 2021 to the conclusion of the liquidation, which I have treated as a task table for the period 9 July 2021 to 5 November 2021. This task table includes all of the task areas included in the other task tables with the additional task of dividends. For this period, the task areas with the highest costs were assets (21 hours and $9,860), creditors (20 hours and $9,270) and administration (18 hours and $5,800). Work in the investigations task area also featured largely in this period.
Work performed in the assets task area included obtaining documentation supporting the debtors’ amounts, preparing and issuing debtor demands, obtaining quotes in relation to the valuation of the apartments, liaising with the mortgagee in relation to the apartments, collection of rental income in relation to leased apartments, obtaining a valuation in relation to the assets located at the warehouse and collecting realisation proceeds.
Work performed in the creditors task area included holding a meeting of creditors, lodgement of minutes with meetings with ASIC, dealing with proofs of debt and receiving and following up numerous creditors’ enquiries via telephone, email and postal service.
Work performed in the administration task area included lodging forms with ASIC, correspondence with the Australian Taxation Office, lodging business activity statement returns, maintaining bank accounts, recording receipts and payments, generating tax invoices, drawing fees, meetings regarding the status of the liquidation as well as filing documents, records and internal discussions.
For the period 16 September 2021 to 5 November 2021, the bulk of the work in relation to the Ausun matter was performed at the supervisor level (32.5 hours out of a total 71 hours), with 11 hours spent on each of the assets and creditors task areas. The plaintiff spent 28.50 hours working on the Ausun matter during this period, with the majority of her time spent on the assets and creditors task areas.
Work completed from 6 November 2021 to 15 December 2021
The plaintiff prepared another task table for the period 6 November 2021 to 15 December 2021. This task table includes all of the task areas included in the other task tables (but no divided task area). For this period, the task areas with the highest costs were investigations (43.5 hours and $20,881), assets (15.8 hours and $7,620) and creditors (12.9 hours and $5,012).
Work performed in the investigations task area included reviewing CBA bank statements, preparing an investigations workpaper, conducting further solvency assessments, discussions with the liquidator of Ausun Property CBD Pty Ltd, liaising with legal practitioners in relation to various matters requiring investigation, and obtaining and reviewing documentation from the company’s former solicitors.
Work performed in the assets task area included enquiries and discussions in relation to the purchase of one of the apartments, finding and liaising with potential real estate agents, maintaining a register of rent monies received, work in relation to the sale of prefabricated buildings located at the warehouse and collecting sales proceeds in relation to the sale of the prefabricated buildings.
Work performed in the creditors task area included attending to various enquiries by the owners corporation, maintaining a creditor enquiry register, reviewing and preparing correspondence to creditors, and discussions with the landlord (of the warehouse) including negotiating post-appointment amounts payable for rent and outgoings.
For the period 6 November 2021 to 15 December 2021, the bulk of the work in relation to the Ausun matter was performed at the supervisor level (44.4 hours out of a total 82.10), with 20.8 hours spent on investigations, 7.10 hours on assets and 11.30 hours on creditors. The plaintiff spent 36.60 hours working on the Ausun matter during this period, with the majority of her time spent on the investigations and assets task areas.
The plaintiff has also prepared a table which compares, on a task basis, her estimated future remuneration outlined in her Statutory Report to Creditors dated 16 September 2021 compared to her actual remuneration from 16 September to 15 December 2021. That table again sets out, in some detail, the work actually performed (and the cost) in the assets, creditors, employees, trade on, investigations, dividend and administration task areas.
Consideration
The evidence filed by the plaintiff in support of the remuneration application is sufficient to decide if the work undertaken by her, or on her behalf, is reasonable or not. This is despite no ‘work in progress’ reports being included in the evidence. These reports usually include information about the person who undertook the task, the date it was performed, his or her hourly rate, the amount of time spent on each task applying the applicable hourly rate and the associated cost, a task area classification and, importantly, a narrative describing the task undertaken. These reports are very helpful in deciding whether or not to approve, in whole or in part, liquidator’s remuneration. However, even without such a report, I am satisfied that there is sufficient evidence before me to decide the remuneration application, especially given the relatively short period involved and other evidence about the tasks undertaken by the plaintiff and her staff, including the detailed task tables.
Given the tasks that had to be performed by the plaintiff in this liquidation, the work performed by her and her staff was necessary and properly performed. There is nothing in the evidence to suggest that any of the work performed was not required for the plaintiff to properly perform her role as liquidator (and trustee).
The work performed was over a six month period and was not ‘strung out’ or delayed by the plaintiff. The evidence demonstrates that the plaintiff performed her tasks expeditiously and in a timely manner.
There were some extraordinary issues in relation to this matter, including the plaintiff acting as trustee of the Trust property and obtaining the necessary legal advice and Court orders to allow for this. The plaintiff was thereafter required to deal with a number of real estate properties and other assets of the Trust.
The division of work between the plaintiff and her staff appears to be appropriate. Much of the work was appropriately undertaken at the supervisor level. The work performed by the plaintiff was in the task areas where it was proper and necessary that she undertake that work, especially in the investigations and assets task areas.
The hourly rates charged by the plaintiff and her staff are within the ‘market’ for Melbourne liquidators and are comparable to those charged by other insolvency practitioners.
The task tables, together with the remuneration calculations setting out who did what work at what hourly rate, demonstrate that the time spent on the tasks appears to be proportionate and reasonable in the circumstances.
Overall, the evidence establishes that the remuneration sought by the plaintiff for Court approval is fair and reasonable.
Orders
I will order that the plaintiff’s remuneration in the sum of $137,290 exclusive of GST for the period 16 June 2021 to 15 December 2021 be approved.
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