Re Central City Pty Limited (Administrators Appointed) - [2025] WASC 171

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE CENTRAL CITY PTY LIMITED (ADMINISTRATORS APPOINTED); EX PARTE TUCKER and HUTSON as joint and several administrators of CENTRAL CITY PTY LTD [2025] WASC 171
CORAM:   COBBY J
HEARD:   ON THE PAPERS
DELIVERED          :   14 MAY 2025
FILE NO/S:   COR 117 of 2023
EX PARTE

RICHARD SCOTT TUCKER AND JOHN ALLAN BUMBAK as joint and several administrators of CENTRAL CITY PTY LIMITED (ADMINISTRATORS APPOINTED)
Plaintiffs

Catchwords:

Corporations - Voluntary administration - Application or approval of joint and several administrators' remuneration - Remuneration determined - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) sch 2 (Insolvency Practice Schedule (Corporations)) s 60-5, s 60-10, s 60-12

Result:

Application approved in part

Category: B

Representation:

Counsel:

Plaintiffs

No appearance

Solicitors:

Plaintiffs

Thomson Geer - Perth

Case(s) referred to in decision(s):

Australian Securities and Investment Commission v Atlantic 3 Financial (Aust) Pty Ltd [2004] QSC 133
Australian Securities and Investment Commission v Groundhog Developments Pty Ltd [2011] QSC 263
Deputy Commissioner of Taxation v Shac Communications Pty Ltd [2024] FCA 488
Owen, in the matter Rivercity Motorway Pty Ltd (AdministratorsAppointed) (Receivers and Managers Appointed) v Madden (No 2) [2012] FCA 312
Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004

COBBY J:

The plaintiffs were appointed the joint and several voluntary administrators of Central City Pty Ltd ACN 076750055 pursuant to a resolution of its director made pursuant to s 436A of the Corporations Act 2001 (Cth) on 13 June 2023.
They seek approval of their remuneration as administrators, relying upon the affidavits of John Allan Bumbak sworn 26 July 2023 and Richard Scott Tucker sworn 25 March and 30 April 2024.
I am satisfied that proper notice of the application was provided, and that, with one exception, there has been no opposition to the application.
The company was a property investment holding company which, at the time of the plaintiffs' appointment, owned the Adina Apartment Hotel and the Drunken Elephant Bar & Bistro, both located at 138 Barrack Street, Perth, and the Akara Hotel located at 379 Wellington Street, Perth.
At the time of the appointment of the plaintiffs as administrators, the company had eight unsecured creditors, with total debts comprising $4,231,730, and a single secured creditor, Westpac Banking Corporation.
The company's properties were said to have a value of in excess of $27 million. Each was leased to third parties. The leases were not terminated during the plaintiffs' appointment, the plaintiffs receiving gross rental proceeds in excess of $1.7 million in the course of their appointment.
On 12 July 2023 the first meeting of the Company's creditors was held, no committee of inspection being appointed.
On 28 July 2023 the plaintiffs obtained orders extending the convening period for the second meeting of creditors to 10 January 2024 and orders pursuant to s 447A of the Act allowing that second meeting to be held at any time during the period comprising the convening period upon giving five business days' notice.
Prior to the second meeting of creditors, the plaintiffs caused the Company to enter into contracts for the sale of the Adina Apartment Hotel and the Drunken Elephant Bar & Bistro, the sales being effected in January 2024.
The second meeting of creditors was held on 19 December 2023.
At that meeting, the plaintiffs sought approval of their remuneration to 3 December 2023 in the sum of $335,929.50 and for the period 4 December 2023 to 19 December 2023 in the sum of $18,140.
Both resolutions failed to pass. Although Mr Tucker deposed in his March 2024 affidavit to his belief as to why that occurred, that evidence comprised inadmissible opinion, and I have not had regard to it.
The plaintiffs were appointed as liquidators of the Company at the second meeting of creditors.
As at the filing of the application, the plaintiffs claimed remuneration in the amount of $357,002 (excluding GST), having recorded total fees of $397,863.50 (excluding GST). Although neither plaintiff deposed directly to having calculated their remuneration on a time costing basis, it can be inferred from Mr Tucker's March 2024 affidavit, particularly from the remuneration report that was provided to the creditors of the Company at the second meeting of creditors that was attached to his affidavit, that is what occurred.
The application was initially opposed by Lisa-Michelle Scaffidi, a creditor of and former shareholder in the company. The court was subsequently advised that Ms Scaffidi had withdrawn her opposition to the application on the basis that she had reached an agreement with the plaintiffs that they would limit their remuneration to no more than $310,000.
At the request of the court, the plaintiffs gave a formal undertaking to the court on 11 July 2024 that they would waive any right to be paid or otherwise draw fees from or against the Company's assets of any amount in excess of $310,000 not including GST.
The court is nonetheless required to determine the plaintiff's application, notwithstanding that it is no longer opposed by any person and the agreement reached between the plaintiffs and Ms Scaffidi.[1] The objection to the application having been withdrawn, I am satisfied that it can be determined on the papers.[2]
[1] Australian Securities and Investment Commission v Groundhog Developments Pty Ltd [2011] QSC 263 [13].
[2] Corporations Rules 2001 (WA) r 9.2(2).
Section 60-5 of the Insolvency Practice Schedule (Corporations) set out in sch 2 to the Act (IPSC) provides that an external administrator of a company is entitled to receive remuneration for necessary work properly performed by the external administrator in relation to the external administration, in accordance with the remuneration determinations (if any) for the external administrator. Remuneration determinations may be made by the Court.[3]
[3] IPSC s 60-10.
Pursuant to s 60-12 of the IPSC, the court is to have regard to the following matters in making a remuneration determination:
a.the extent to which the work by the external administrator was necessary and properly performed;
b.the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;
c.the period during which the work was, or is likely to be, performed by the external administrator;
d.the quality of the work performed, or likely to be performed, by the external administrator;
e.the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;
f.the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;
g.the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
h.the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;
i.the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;
j.if the remuneration is worked out wholly or partly on a time‑cost basis, the time properly taken, or likely to be properly taken, by the external administrator in performing the work;
k.whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;
…
m.any other relevant matters.
The principles applicable to determining an external administrator's application for remuneration are well settled, and were recently summarised by Derrington J in Deputy Commissioner of Taxation v Shac Communications Pty Ltd.[4] I gratefully adopt that summary without repeating it here. I have applied those principles in determining the application.
[4] Deputy Commissioner of Taxation v Shac Communications Pty Ltd [2024] FCA 488 [17].
Of particular relevance in the present case are the principles that the determination of whether the remuneration claimed is fair and reasonable does not call for an item-by-item analysis of the work claimed that would be involved in the taxation of solicitors' costs[5] and that there is no touchstone or reliable independent measure of reasonableness other than judicial impression, even where there is detailed evidence before the court.[6]
[5] Australian Securities and Investment Commission v Atlantic 3 Financial (Aust) Pty Ltd [2004] QSC 133 [16].
[6] Owen, in the matter Rivercity Motorway Pty Ltd (AdministratorsAppointed) (Receivers and Managers Appointed) v Madden (No 2) [2012] FCA 312 [20].
In his affidavits, Mr Tucker sought to address each of the factors in s 60-12 so far as concerns the work which was undertaken during the administration. I have had regard to each of those factors, and his evidence relating to each of those factors.
The plaintiffs prepared two summaries of the time costings they and their staff spent on the administration, using the hourly rates referred to in the remuneration report provided to the Company's creditors for the purposes of the second meeting of creditors. The amounts shown in the summaries, which addressed the periods 30 June to 3 December 2023 and 4 to 19 December 2023 respectively, totalled $354,029.50.
The hourly rates charged range between $200 and $395 in relation to administration costs, and otherwise between $395 to $850 per hour (excluding GST).
The plaintiffs also provided time costing records for the work done in the course of the administration, with a brief narrative as to each line item. In addition, Mr Tucker has provided a brief description of the tasks undertaken in respect of the various work streams performed in the administration, although, as will be seen, some of his March 2024 affidavit is inadmissible.
I accept that the amounts incurred in respect of dealing with the Company's creditors, including the secured creditor, statutory tasks, administration and risk management and the bulk of the administration costs to be reasonable given the work that was required and the costs that were incurred. I am not satisfied, however, that the charging of administration costs at $395 an hour is reasonable, and have reduced the amount claimed in that respect to $200 an hour, reducing the amount allowed in respect of that work from the $4,187 claimed to $2,120.
Prior to appointment, the plaintiffs gave an estimate of the likely costs of the administration, which were said to be $130,000 to $200,000, which was subsequently increased to a maximum of $150,000 to $250,000.
Upon appointment, the plaintiffs issued an initial remuneration notice dated 30 June 2023, which estimated the total cost of the administration to be $200,000 to $300,000.
Mr Tucker's evidence is that the costs incurred were higher than the estimates provided because:
a.significant time was incurred in dealing with the director's and Ms Scaffidi's requests to be consulted on all matters pertaining to the sale of the properties, including which valuer and selling agent were to be engaged by the plaintiffs, and the plaintiffs spent more time in dealing with the director of the company and Ms Scaffidi than would ordinarily be the case in an administration;
b.the company's financial records and bank accounts were commingled with other entities controlled by the director and Ms Scaffidi, leading to difficulties taking control of the company's bank account and obtaining financial information, including general ledgers and trial balances;
c.there were difficulties obtaining information regarding the use of sinking fund payments made to the company;
d.the company had failed to pay strata company levies, and the plaintiffs experienced difficulties in obtaining financial and other information regarding the strata company.
Prior to reaching agreement with the plaintiffs, Ms Scaffidi filed an affidavit in opposition to the application taking issue with the amounts claimed by the plaintiff by way of remuneration. The plaintiffs took objection to portions of that affidavit, which it is now unnecessary to resolve. I have had regard to Ms Scaffidi's affidavit, while remaining cognisant of the objections to it, in considering their question whether the plaintiffs have made out the onus of establishing that the work was properly performed in the due course of the administration.
The principal component of the costs claimed by the plaintiffs relates to their dealings with the company's assets, in respect of which $187,242.50 is claimed in respect of the period 30 June to 3 December 2023.
The plaintiffs retained independent valuers in relation to the sale of the company's properties, and retained the real estate agents CBRE to act on the company's behalf in relation the sale of the properties. As is to be expected, the plaintiffs also retained solicitors to act in relation to the sale of the assets.
The bulk of the work giving rise to the amount of $187,242.50 is recorded as having been performed by a partner in the plaintiffs' firm. That individual is recorded as having spent 135.20 hours (the equivalent of 13.5 working days) in connection with dealing with the company's assets, at an hourly cost of $850. A business analyst, charged at $395 an hour (exclusive of GST) is said to have spent a further 91 hours in dealing with the company's assets.
In the plaintiffs' report provided to the second meeting of creditors, attached to Mr Tucker's March 2024 affidavit, the work undertaken by the plaintiffs and their staff in relation to the sale of the company's assets was described as including securing and preparing the company's assets for sale, including the following 'key tasks':
a.inspecting the properties and liaising with the company and its advisers and employees regarding information required for the sale process;
b.notifying lessees of the plaintiffs' appointment;
c.reviewing the leases of the properties;
d.liaising with the strata manager of 138 Barrack Street, Perth on several aspects in preparation for sale of that property;
e.managing the capital expenditure approval process for the Adina Hotel;
f.seeking to put a 'compliant lease' in place with Arnmac Pty Ltd regarding part occupation of the ground level, 379 Wellington Street;
g.seeking revised lease terms with Medina Property Services Pty Ltd to assist with the sale campaign;
h.obtaining quotes from four valuers, before appointing Cushman and Wakefield to value the properties;
i.responding to what was described as Cushman and Wakefield's 'extensive information request';
j.obtaining from three building service suppliers to complete a technical due diligence report on the companies' properties, before Napier and Blakely;
k.arranging insurance;
l.obtaining marketing submissions from four real estate agents, before appointing CBRE to market the properties for sale by way of expression of interest.
In his March 2024 affidavit, Mr Tucker gave inadmissible opinion evidence as to costs savings he claimed to have been achieved by means of the plaintiffs' staff undertaking work in relation to the marketing of the properties for sale, by way of comparison to costs he said were likely to have been incurred had those tasks been left to the real estate agents retained to act on the sale. I infer from that claim that the plaintiffs took a more involved role in the marketing and sale of the company's properties than might usually be the case, but it is not possible from the evidence to form a precise view as to the extent of the involvement of the plaintiffs and their staff in the process.
I have not had regard to Mr Tucker's evidence to the extent that the plaintiffs assert that their costs should be assessed as reasonable by reference to the cost saving Mr Tucker claims was achieved, that evidence being inadmissible due to Mr Tucker's failure to disclose the bases for his opinions, including (amongst other things) the various agreements with the real estate agents to which Mr Tucker sought to draw favourable comparisons, why the plaintiffs' staff were qualified to carry out the relevant work, and why their having done so resulted in a lessened cost to the company.
There was also no explanation as to why the plaintiffs determined it to be appropriate to take what they appear to accept to have been an unusual level of involvement in relation to the valuation and sale of the properties. That is particularly so when the plaintiffs have claimed that the costs incurred in the administration were otherwise increased by their dealing with the director and Ms Scaffidi in relation to the sale of the company's assets, a matter which was within the control of the plaintiffs to a degree.
Having regard to the appointment by the plaintiffs of solicitors, a valuer and a real estate agent to act in relation to the marketing and sale of the company's properties, it is difficult to assess the appropriateness of the remuneration charged by the plaintiffs in relation the sale of the company's properties. I bear in mind that, while the company owned the three properties, the business conducted at each property was carried on by a lessee, so that it can be inferred the plaintiffs were not required to be involved in those businesses on a daily basis.
The court has a very wide discretion in allowing and fixing the level and basis of remuneration.[7] In the present case, the proportionality of a partner of the plaintiffs being engaged for such an extensive period of time in dealing with the company's assets, in circumstances where the plaintiffs retained competent professional advisors in respect of the same subject matter, is not readily apparent, even when regard is had to the individual line item narrations for the work in question.
[7] Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004 [18].
In all the circumstances, I am not satisfied that the plaintiffs have established that the whole of the remuneration claimed is fair and reasonable. Doing the best that I can with the information available, I would reduce the amount claimed in respect of dealing with the company's properties by 25 hours, being equivalent to $21,250.
Taking into account that reduction and the reduction referred to above in respect of the charging for administrative tasks, I approve the plaintiffs' remuneration in the amount of $333,685.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LT
Associate to the Hon Justice Cobby
13 MAY 2025