Re Gunns Plantations Limited (In Liq) (Receivers and Managers Appointed)
[2015] VSC 102
•20 March 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2013 2095
IN THE MATTER of GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 091 232 209) in its capacity as the responsible entity of the managed investment schemes listed in Schedules 1 and 2
BETWEEN:
| DANIEL MATHEW BRYANT, IAN MENZIES CARSON and CRAIG DAVID CROSBIE (in their capacity as joint and several Liquidators of GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 091 232 209) | First Plaintiffs |
| and | |
| GUNNS PLANTATIONS LIMITED (IN LIQUIDATION) (RECEIVERS & MANAGERS APPOINTED) (ACN 091 232 209) in its capacity as the responsible entity of the managed investment schemes listed in Schedules 1 and 2 | Second Plaintiffs |
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JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 November 2014 |
DATE OF JUDGMENT: | 20 March 2015 |
CASE MAY BE CITED AS: | Re Gunns Plantations Limited (In Liq) (Receivers & Managers Appointed) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 102 |
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CORPORATIONS – Application by liquidators managed investment schemes for directions pursuant to s 511 of the Corporations Act 2001 (Cth) – Liquidators remuneration, costs and expenses – Directions sought under s 50 of the Evidence Act 2008 – Whether remuneration, costs and expenses reasonable and proportionate to services undertaken.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr O Bigos | Arnold Bloch Leibler |
| Mr T Burdon, a member of the 2001 and 2002 Gunns Woodlot Schemes, in person. |
HIS HONOUR:
The first plaintiffs, (‘the liquidators’) who are the liquidators of the Gunns group of companies, make application by an interlocutory process dated 29 September 2014 for directions and orders in relation to the costs, expenses and remuneration which they have incurred as the liquidators of Gunns Plantations Limited (‘GPL’) in its capacity as the responsible entity of the managed investment schemes known as the Gunns Woodlot Schemes and the Great Southern Schemes (‘the Schemes’). The application also seeks directions regarding the costs, expenses and remuneration which the liquidators have incurred in relation to the sale of assets used in the Schemes.
The plaintiffs were appointed as voluntary administrators on 25 September 2012 and as liquidators of GPL on 5 March 2013. They are each partners in PPB Advisory (‘PPBA’), a firm specialising in corporate restructuring, recovery and insolvency. Receivers and managers were also appointed to the Gunns Group of companies including GPL on 25 September 2012.
This application follows two previous applications of this character in the Gunns insolvency administration. The first, made before Ferguson J, as she then was, in Re Gunns Plantations Limited (No. 4)[1] concerned, among other things, the costs, expenses and remuneration in relation to the Schemes during the time that the liquidators were voluntary administrators of GPL. The second was an application before Judd J in Re Gunns Plantations Limited (In Liquidation) (Receivers and Managers Appointed)[2] which involved, among other things, the costs, expenses and remuneration of the liquidators for the period 5 March 2013 (when GPL went into liquidation) to 30 November 2013. This application concerns such costs, expenses and remuneration for the period 1 December 2013 to 30 June 2014 (‘relevant period’) as well as those associated with the sale of the Scheme assets.
[1]‘The Administration application’ [2013] VSC 595.
[2]‘The First Liquidation application’ [2014] VSC 239.
The liquidators contend that the total costs for the Great Southern Schemes for the period of liquidation from 1 December 2013 to 30 June 2014, as well as the sale of the assets used in those Schemes, is $2,929,238.71 plus GST. The total costs for the Gunns Woodlot Schemes for the period of liquidation from 1 December 2013 to 30 June 2014, as well as the sale of the assets used in those Schemes, is contended to be $4,975,265.25 plus GST. Those two amounts are the subject of the liquidators’ present claim for indemnity and lien. Scheme related costs after 30 June 2014 will be the subject of a later application.
This application is limited to remuneration and expenses related to the Schemes ands does not include claims for remuneration and expenses relating to the general costs of the liquidation.
In making this and the two previous applications, the liquidators relied on two sources of power. The first of these was s 511 of the Corporations Act 2001 (Cth) (‘the Act’) which provides:
(1)The liquidator, or any contributory or creditor, may apply to the Court:
(a)to determine any question arising in the winding up of a company; or
(b)to exercise all or any of the powers that the Court might exercise of the company were being wound up by the Court. …
(2)The Court, if satisfied that the determination of the question or the exercise of power will be just and beneficial, may accede wholly or partially to any such application on such terms and conditions as it thinks fit or may make such other order on the application as it thinks just.
In the Administration application, Ferguson J observed at [3]:
The reasons why insolvency practitioners seek directions and the circumstances in which such directions will be made were summarised by Goldberg J in Re Ansett Australia Ltd (No 3)[3] as follows:
When liquidators and administrators seek directions from the Court in relation to any decision they have made, or propose to make, or in relation to any conduct they have undertaken, or propose to undertake, they are not seeking to determine rights and liabilities arising out of particular transactions, but are rather seeking protection against claims that they have acted unreasonably or inappropriately or in breach of their duty in making their decision or undertaking the conduct …
There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.
[3](2002) 115 FCR 409.
In the Administration application, Ferguson J considered that the matters which were raised on the plaintiffs’ application were of the character that Goldberg J described and that it was appropriate in that case to give directions to the administrators in the form applied for. I respectfully agree with her Honour’s view.
The second source of power relied on was r 54.02 of the Supreme Court (General Civil Procedure) Rules 2005, which confers power on the Court to give directions to trustees.
Background
GPL, as responsible entity, operated 18 registered managed investment schemes which were involved in the commercial cultivation and harvest of trees. Of these, nine were Gunns Woodlot Schemes which were established and operated by GPL. The remaining nine were Great Southern Schemes. These were originally established and operated by Great Southern Managers Australia Ltd. When Great Southern went into liquidation and receivership in 2009, GPL became the replacement responsible entity.
The members of the Schemes are described as Growers. The Schemes are regulated under Chapter 5C of the Act. Thirty five thousand Growers held approximately 49,000 investments of a value in excess of $1.6 billion. The plantations were spread across all six states and were of an area of approximately 226,000 hectares. Both Ferguson J[4] and Judd J[5] observed that the voluntary administration and subsequent liquidation of the Schemes was a most complex task.
[4] The Administration application, [5].
[5]The First Liquidation application, [76].
On 19 December 2012, Robson J gave directions that the liquidators, who were then the voluntary administrators, were justified in carrying out their duties as administrators of GPL on the basis that if they incurred reasonable expenditure in the care, protection, preservation and/or realisation of the Scheme property, including undertaking the necessary management and maintenance in respect of the Scheme property, they would be entitled to indemnify themselves for that reasonable expenditure and remuneration out of the Scheme property and related assets, secured by an equitable lien.[6]
[6]Re Gunns Plantations Ltd (No 1) [2012] VSC 655 [147]-[152].
During the period that GPL was in administration and subsequently in liquidation, the liquidators sought to restructure the Schemes without success. The liquidators then undertook sale campaigns of the assets used in the Schemes, yielding proceeds of approximately $80 million. GPL was replaced as the responsible entity of some of the Gunns Woodlot Schemes by Primary Securities Ltd in June 2014 pursuant to ss 601FN of the Act.
After the administration period ended, the liquidators applied to Ferguson J for, among other things, directions that they were entitled to claim the indemnity, secured by an equitable lien, under the principle in Re Universal Distributing[7] in respect of the Scheme related costs incurred during the period of administration.
[7](1933) 48 CLR 171; See discussion in the Administration application at paras [7]-[9].
The costs associated with the voluntary administration period totalled approximately $6 million. Ferguson J gave the relevant directions on 9 September 2013 and shortly after gave the reasons to which reference is made above.
In her orders made on 9 September 2013 Ferguson J declared:
5.The liquidators are justified in carrying out their duties as liquidators of GPL on the basis that, if they incur reasonable expenditure in the care, protection, preservation and/or realisation of the Scheme Property, they will be entitled to:
(a)an indemnity for that expenditure and reasonable remuneration out of the Scheme Property; and
(b) a lien to secure that indemnity.
The application before Judd J in the First Liquidation application, sought approval for costs, remuneration and other expenses of the order of $6.5 million. This did not include any of the costs associated with the sale of the Scheme assets which form part of this application.
In the Administration application, Ferguson J discussed the relevant principles to be applied when considering the Re Universal Distributing aspect of the application:
7.The principle that liquidators are entitled to be paid their costs, charges and expenses incidental to the realisation of assets out of the fund produced by that realisation in priority to others interested in the fund was set out in Re Universal Distributing).[8] In that decision, Dixon J (as his Honour then was) stated:
[8](1933) 48 CLR 171.
If a creditor whose debt is secured over the assets of the company come in and have his rights decided in the winding up, he is entitled to be paid principal and interest out of the fund produced by the assets encumbered by his debt after the deduction of the costs, charges and expenses incidental to the realization of such assets (In re Marine Mansions Co.). The security is paramount to the general costs and expenses of the liquidation, but the expenses attendant upon the realization of the fund affected by the security must be borne by it (In re Oriental Hotels Co.; Perry v. Oriental Hotels Co.). The debenture-holders are creditors who have a specific right to the property for the purpose of paying their debts. But if it is realized in the winding up, a proceeding to which they are thus parties, the proceeds must bear the cost of the realization just as if they had begun a suit for its realization or had themselves realized it without suit (cf. In re Regent's Canal Ironworks Co.; Ex parte Grissell; and see Batten v. Wedgwood Coal and Iron Co.).
In applying this principle, only those expenses appear to have been thrown against the fund belonging to the debenture-holders which have been reasonably incurred in the care, preservation and realization of the property. In the present case the liquidator has employed a material part of his time and energies in recovering moneys, both uncalled capital and debts, which enure for the debenture-holder, and in so far as these services increase the remuneration which he receives, I see no reason why the burden should not be thrown upon the proceeds. The question is not whether moneys available for unsecured creditors should be relieved at the expense of the security. In such a case it may be said that the service of collecting enough to discharge the debenture must in any event be performed in order that a surplus may then arise in which the unsecured creditors may participate. The question in the present case is whether the liquidator can charge against the fund passing through his hands as between himself and the person to whom it is payable, so much of the remuneration fixed for work done in the winding up as is referable to the calling in and conversion of the assets producing the fund. I see no reason why remuneration for work done for the exclusive purpose of raising the fund should not be charged upon it.[9]
[9]Ibid 174–175 (citations omitted).
8.Since that decision, a number of authorities have considered the principle. In Re S & D International Pty Ltd (in liq) (rec & mgr apptd),[10] Robson J summarised the principles to be gleaned from the authorities as follows:
[10][2009] VSC 225.
a.At equity, an equitable lien arises in favour of a liquidator over the funds realised from the sale of company property for the costs he incurs for the care, preservation and realisation of the property in priority to those otherwise interested in the fund....
b.The costs include those that the liquidator fairly incurs in the discharge of his duty to care, preserve and realise the property....
c.The lien may arise whether or not the ultimate sale is [effected] by the liquidator and entitles the liquidator to be paid in priority out of the fund whether or not he is in possession of the fund....
d.The costs and expenses secured by the lien must be incurred exclusively for the care, preservation or realisation of the property and not otherwise expended in the general administration of the mortgagor....
e.The costs and expenses include the liquidator’s reasonable remuneration.[11]
9.As I have noted, the liquidators in this case are taking a similar course to that taken by the receivers and managers of Great Southern. In the Great Southern case, Davies J considered an application by the receivers to establish their entitlement to be indemnified out of the scheme property of ten managed investment schemes. Having considered the authorities, her Honour stated:
It is clear on the authorities that the equitable lien will extend only to the receivers’ costs, expenses and remuneration incurred ‘exclusively’ in the care, preservation and realization of the property and assets of the ten [managed investment schemes] in question. Furthermore, that those costs, expenses and that remuneration must be referrable to the particular scheme against which the claim is made. The lien will not extend to the general receivership costs or costs, expenses and remuneration referable to the care, preservation and realization of the property and assets of any other scheme or schemes.[12]
Her Honour determined that the receivers must satisfy the Court that there was a sufficient nexus between the expenditure and remuneration in the schemes[13] and that the amount claimed was on its face reasonable.[14]
[11]Ibid [273] (citations omitted).
[12]Thackray v Gunns Plantations Limited (2011) 85 ACSR 144 [42].
[13]Ibid [48].
[14]Ibid [60]–[64].
By way of summary, so as to be able to claim an indemnity for the expenditure and remuneration incurred during the period of liquidation the subject of the current application and for the sale of assets used in the Schemes, the liquidators must satisfy the Court that:
(a) There was a sufficient nexus between the expenditure and remuneration and the Schemes the subject of Ferguson J’s direction; and
(b) The prima facie reasonableness of the amounts (referred to as ‘reasonable expenditure’ and ‘reasonable remuneration’ in Ferguson J’s orders).[15]
[15]The Administration application, at [9] referring to Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144 [42] per Davies J.
The plaintiffs contend that the expenditure and remuneration (a) related to the Schemes and (b) were reasonable, and accordingly fall within direction 5 of Ferguson J’s order of 9 September 2013 extracted in paragraph 16 above.
In the First Liquidation application, Judd J elaborated on the second of these requirements at paragraphs [78] and [79] as follows:
78.As to whether the amounts claimed are reasonable, the principles summarised by the Court of Appeal of Western Australia in Conlan v Adams[16] have been adopted by this court.[17] Those principles are as follows:
[16][2008] WASCA 61 [28].
[17]Thackray [60] (citation omitted).
(a)A summary procedure is involved, not unlike that applicable to the taxation of solicitors’ costs, which is not necessarily subject to all the rules that would apply in an action;
(b)The initial task of the Court is to consider whether the liquidator has made out a prima facie case on the evidence before the Court that the remuneration claimed is fair and reasonable. The Court must make that assessment ‘bringing an independent mind to bear on the relevant issues’ even though at that point there is no objector.
(c)There is no absolute rule regarding the amount of detail required to support a remuneration claim. But the evidence relied on should be sufficient to enable potential objectors to review the amounts claimed and ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.
(d)If the liquidator establishes a prima facie case, the Court should allow for an objection procedure to enable objections to be made;
(e)If there are objectors to the claim or any part, the Court should then establish the validity of those objections.
79.The claims made by the liquidators are very substantial. Ordinarily, the court would expect detailed evidence of the work that was done and the expenses claimed in order to assess reasonableness. Testing of remuneration against an appropriate benchmark would ordinarily be required if the court is to be satisfied that there is no overcharging.[18] In Thackray, Davies J said:
The Court is looking for evidence of overcharging. Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the ‘reasonableness’ of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the Court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim. [19]
[18]Thackray [63]–[64].
[19]Thackray [64], citation omitted.
In the previous two applications, Ferguson J and Judd J were satisfied that the two criteria were met and that it was appropriate to make an order for the remuneration and expenses relating to the period of voluntary administration and the first phase of the liquidation respectively. I note that they considered that it was appropriate to approve of the disbursements incurred by the administrators and liquidators. This is to be distinguished in this regard from applications under s 473 of the Act for remuneration where the Court does not involve itself in approval of disbursements incurred by liquidators in such applications.[20]
[20]See Venetian Nominees Pty Ltd v Conlan (1998) 16 ACLC 1653, 1656, 1660.
Notice
Although the liquidators and GPL are the only parties to this proceeding, the following parties have been served:
(a) ASIC;
(b) The receivers and managers (who were appointed on the same day as the liquidators were appointed administrators);
(c) The Committee of Growers;
(d) The Committee of Inspection;
(e) The liquidators of Great Southern Plantations Holdings Pty Ltd (In liquidation) which is a member of six of the Great Southern Schemes;
(f) Gunns Growers Pty Ltd, which represents Growers in every Gunns Woodlot Scheme except the 2009 Gunns Woodlot Scheme;
(g) Trevor Burdon, a grower in the 2001 and 2002 Gunns Woodlot Schemes. Mr Burdon filed a notice of appearance and participated in the present application by handing up an affidavit in unsworn form (the contents of much of which were inadmissible and the document which was treated as a written submissions) and by making oral submissions;
(h) Primary Securities Ltd, the replacement responsible entity for the 2000 and 2001 Gunns Woodlot Schemes, which filed a notice of appearance but which did not participate in the hearing;
(i) Save My Tiwi Trees Inc, representing Growers in the 2005 and 2006 Great Southern Schemes, which filed a notice of appearance but which did not participate in the hearing.
In support of the present application, the liquidators rely on the twenty-second affidavit of Daniel Mathew Bryant affirmed on 26 September 2014 as well as affidavit evidence filed in support of the earlier applications, in particular the sixth affidavit of Mr Bryant affirmed on 1 November 2013 his twelfth affidavit affirmed on 20 December 2013 and an affidavit of one of his fellow liquidators, Craig David Crosbie sworn 6 June 2015.
Each of the persons which I have identified in paragraph 23 who was served with the Court documents was also given a copy of the summaries relating to the liquidators’ claims (to which reference will be made below) and a reasonable opportunity to inspect the source documents upon which the summaries are based.
As I have said, Mr Burdon handed up a document described as his third affidavit. At the hearing of this application there ensued a discussion as to the admissibility of the matters referred to in that affidavit I ruled that much of the affidavit was inadmissible.
Mr Burdon was a grower in Gunns plantations and owned a number of woodlots. He is a committee member on several Growers’ groups and made two previous affidavits which were filed in relation to the hearings concerning allocation of costs before Judd J. He complains about the conduct of the liquidators in selling what he says were viable forest assets which were disclaimed by the liquidators and sold at what he asserts was a fire sale price. He asserts that the professional fees incurred are unreasonable, the hourly rates are very high, the sale outcome of the liquidations was very poor and that his requests for information from the liquidators were repeatedly left unanswered. His document, which really took the form of a submission, requests the Court to do various things. With respect, I do not consider that any of them have any relevance to the application before me.
As regards Mr Burdon’s observations that the professional fees incurred are unreasonable and the rates are very high, they will be the subject of separate consideration by me later in these reasons. As will be seen, I consider that Mr Burdon’s complaints are not made out. To give myself some further comfort in that regard I did, as I describe below, conduct a random sample process for the purpose of closely considering more significant items. Although the provisions of s 473(10) are not applicable in these circumstances, [21] I did, when going about that random examination, bear the criteria mentioned in that subsection in mind in ascertaining whether, in the context of the claim for remuneration in particular the charges being claimed were in order.
[21]Thackray v Gunns Plantations Limited (2011) 85 ACSR 144, 164 [59]-[64] (Davies J).
In his oral submissions Mr Burdon complained that if the profile of the hours that are logged were examined, the charges being claimed were predominantly at the senior management supervisor level, i.e. that the tasks being performed could have been performed by persons lower down the hierarchy at PPBA at correspondingly lower rates of remuneration. Mr Burdon states that when he had occasion to make enquiries, the contact that he had with PPBA and with their lawyers Arnold Bloch Leibler (‘ABL’) was with persons at a senior level. As regards the rates being charged by the liquidators, I accept that to a lay person that the scale of fees being applied is very high when compared with the rates being charged in like industries or professions but in my opinion they reflect the ‘market’ rates for insolvency practitioners issued in this state.
Subsequent to the hearing of this application in court, I requested the solicitors for the liquidators to produce for my review the source documents which were the bases of the summaries. These included PPBA’s spread sheets which set out details in relation to each item the subject of the remuneration claim. Each entry identified the member of PPBA’s personel who performed the task, the date it was performed, the category the task fell into, a narration describing the particular task performed, the time spent on the task and the amount for which remuneration is claimed.
On my calculation, approximately 80% of the amount claimed was in respect of scheme asset realisation, with the balance consisting of what is described as grower liason (5%), landlord liason (2.5%), legal liason (.5%), management of schemes (7%), return on investment (3%) and administration (3%).
While I accept that the summaries that have been generated by the liquidators ‘ staff are an accurate reflection of the source materials, I considered it useful to randomly select 150 entries in the spreadsheet where claims were made for amounts in excess of $1000 and consider, on a prima facia basis, whether the claim made appeared to be in order. In that regard, I considered in particular whether the task being performed was carried out by a person of the appropriate station in PPBA, whether the task as described in the narration appeared to be necessary to be performed and whether it was performed in a reasonable period of time.
The bundle of source documents also contained documentation relating to the claims made for disbursements such as travel, advertising, photocopying and engagement of independent experts to conduct valuations.
Tasks undertaken by liquidators
I now turn to a summary of the tasks undertaken by the liquidators during the period of the liquidation which commenced approximately two years ago and is continuing. These activities are described in the affidavit material, in particular the twelfth and twenty-second affidavits of Mr Bryant. They were summarised in the liquidators written submissions prepared by Dr Bigos, counsel for the liquidators and I consider it appropriate to adopt that summary here:
Expressions of Interest Campaign
(a) On 15 October 2012 shortly after the liquidators were appointed as voluntary administrators, they commenced a campaign seeking expressions of interest for the role of responsible entity to replace GPL in the Schemes. The campaign concluded on 5 April 2013, shortly after the companies went into liquidation.
Restructure proposals
(b) A number of restructure proposals were submitted. The most attractive proposal was that submitted by Macquarie Forestry Services, together with WA Blue Gum, for an alternate responsible entity. During the period of liquidation, the campaign involved extensive discussions, negotiations and meetings with Macquarie Forestry Services, review and consideration of its proposal, and updating Growers about the campaign and the proposal.
Litigation relating to restructure proposals
(c) On 29 April 2013, several weeks after GPL was sent into liquidation, Macquarie Forestry Services and WA Blue Gum gave notice of members’ meetings to be held in respect of six of the Schemes (the 2002 to 2008 Gunns Woodlot Schemes) in relation to a restructure proposal. These notices, and accompanying explanatory memoranda, resulted in litigation. A trial was held before Robson J on 1 July 2013, and his Honour delivered reasons on 16 July 2013. There was a subsequent contested hearing involving a number of third party landowners on 5 August 2013, and Robson J delivered reasons and made orders on 20 August 2013. The liquidators participated in these and other hearings, and have claimed some of their costs. Robson J has reserved the question of costs.
Constitutional amendment to facilitate sales
(d) The liquidators applied for directions that they were justified in amending the constitutions of the Schemes to provide a power of sale (which would extinguish scheme interests). The application came before Robson J, who gave the relevant directions on 31 May 2013. The liquidators proceeded to amend the constitutions of the Schemes.
Sale of assets used in Great Southern Schemes
(e) The liquidators undertook a sale campaign in relation to the Great Southern Schemes. Trust Company was the land owner of the vast majority of the land used in the Great Southern Schemes. The campaign involved discussions and negotiations with New Forests (on behalf of Trust Company), ultimately culminating in a sale to Trust Company for $38.5 million (under a contract of sale dated 25 October 2013 which was completed on 20 December 2013), as well as ancillary aspects such as funding. There was a contested application by the liquidators who sought directions that they were justified in extinguishing the Growers’ rights in order to effect the sale. Following a 2 day hearing, directions were given by Judd J on 17 December 2013. These necessitated amendments to the sale contracts and the negotiation of an agreement with the receivers. Although the contract of sale contained an allocation of the proceeds among Schemes, Judd J was not willing to give directions in relation to the allocation on 17 December 2013. Accordingly the liquidators engaged in further activity in relation to allocation and distribution. The allocation and distribution of the sale proceeds was also the subject of a mediation and contested application for directions by the liquidators, which were given by Judd J on 5 June 2014, who delivered reasons on that date. The funds to be allocated and distributed are being held in an interest bearing account.
Sale of assets used in Gunns Woodlot Schemes
(f) The liquidators undertook, together with the receivers, a sale campaign of the Gunns Tasmanian Forestry Estate, which included the key assets used in the Gunns Woodlot Schemes, as well as non-scheme assets. This involved negotiations with the receivers which resulted in a sale process agreement dated 24 October 2013 between the liquidators and the receivers. It contained an allocation schedule by which the division of sale proceeds, as between the scheme assets and non-scheme assets, could be calculated. The liquidators ran their own sale process. The liquidators were also involved in considering offers together with the receivers. A business sale agreement was concluded by the receivers on 24 April 2014, under which the Tasmanian Forestry Estate was sold for $324.6 million. In another contested application, the liquidators sought directions that they were justified in extinguishing the Growers’ rights in order to effect the sale, under which $40.6 million of the total sale proceeds would be allocated to the scheme assets. Judd J gave directions and delivered reasons on 11 August 2014. The sale of the Tasmanian Forestry Estate was completed on 5 September 2014, and the share referable to the Schemes is held on trust pending allocation and distribution.
Sale of assets on AFP land
(g) The liquidators negotiated and entered into an implementation deed with the AFP receivers, the owners of certain scheme land used in the Gunns Woodlot Schemes, in order to protect the Growers’ interests in trees on that land and to prevent the land from being repossessed by the AFP receivers. The liquidators applied for directions that they were justified in terminating the Growers’ rights and performing the implementation deed. The application was initially opposed, but later the opposition was withdrawn. On 21 May 2014, Judd J gave the relevant directions. The liquidators received funds on account of a value allocation, which are held in an interest bearing account pending allocation and distribution.
Negotiation with individual third party landowners
(h) The liquidators also negotiated and are continuing to negotiate with individual third party landowners. The liquidators sought directions that they were justified in entering into and performing agreements with the third party landowners. On 21 May 2014, Judd J gave those directions. Since then the liquidators have sought to reach agreement with as many third party landowners as possible, and have held meetings of landowners in Tasmania and Western Australia.
Maintenance of plantations
(i) Throughout the period of liquidation, maintenance and protection services for the plantations of the Schemes have been outsourced by the liquidators to Gunns Forest Products Pty Ltd (controlled by the receivers) under service agreements of 22 November 2012. In relation to the Great Southern Schemes, the responsibility for maintenance was transferred to the purchaser, New Forests, on 20 January 2014, one month after the completion of the sale. In relation to the Gunns Woodlot Schemes, the responsibility for maintenance remained with the liquidators until September 2014, when the business sale contract for the Tasmanian Forestry Estate was completed. In addition to the service agreements, the liquidators had to make arrangements for thinning and harvesting of the forests, undertake fire maintenance, engage with the purchaser in relation to funding arrangements under an interim maintenance agreement and reconcile account keeping in relation to maintenance and third party costs.
Categories of expenses and remuneration
The categories in respect of which expenses and remuneration were incurred by the liquidators in relation to the Schemes can be categorised as follows:
(a) Sale of the assets used in the Schemes
Most of the claim the subject of this application (on my calculation nearly 80%) relates to the liquidators work in and relating to the sale of the assets used in the Schemes, which constituted realisation of the Scheme property for the purposes of the Re Universal Distributing principle. The liquidators were involved in the sale campaigns, which resulted in the striking of the sale price of the relevant assets and payment of the sale proceeds.
(b) Preparing for distribution of sale proceeds.
The liquidators undertook further work in relation to allocation of the sale proceeds among the respective Schemes, and distribution of the sale proceeds allocated to a particular Scheme among the Growers in that Scheme.
(c) Negotiating with owners of land used in the Schemes;
The liquidators negotiated and reached agreements with individual third party landowners, and sought directions in relation to the agreements. They also held meetings of landowners in Tasmania and Western Australia.
(d) Maintenance of the plantations used in the Schemes;
The present claim is made only for the maintenance of the plantations used in the Gunns Woodlot Schemes before the entry into the business sale agreement in April 2014. The liquidators contend that it was reasonable for them to outsource the maintenance functions under the service agreements in order to comply with statutory obligations relating to plantation management and fire prevention, to comply with GPL's contractual obligations under head leases to avoid termination and thereby protect Growers’ rights (which derive from head leases), to protect plantations from fire damage, to protect Growers’ insurance policies and to maintain the trees and protect their value. The agreements related to fire management services, fire maintenance and suppression services, regulatory compliance services and additional general forestry maintenance and management services. These functions were directly related to the plantations and the Schemes.
(e) Communicating with the Grower Committee;
The liquidators held Grower Committee meetings on 26 and 27 February 2014, and continued to engage with the Grower Committee, including taking calls from members at any time. The liquidators kept Growers informed by releasing Grower Updates and maintaining telephone hotlines and email enquiry services. A significant amount of time was spent communicating with Growers, particularly as a result of the sales and updating Grower details in anticipation of the distribution of sale proceeds.
(f) Other Scheme related work.
Two employees continued to be retained to undertake Scheme related work, and among other things, dealt with increasing numbers of Grower inquiries.
The liquidators reviewed the documents relating to the replacement of GPL as the responsible entity of the 2000 and 2001 Gunns Woodlot Schemes, and engaged with ASIC in relation to these.
The liquidators undertook investigations in relation to custodian accounts held by GPL to determine the nature of the funds and the Schemes entitled to them. They also continued to hold regular telephone conferences with ASIC on Scheme related matters. In addition, there were general administrative tasks related to the schemes, including dealing with insurance, reporting, media, and reviewing third party invoices and reconciling time costs.
In relation to the period of voluntary administration, which was the subject of the application in the Administration application and in relation to the first phase of the period of liquidation, which was the subject of the application in the First Liquidation application, these costs categories were regarded by Ferguson J and Judd J respectively as giving rise to a Re Universal Distributing indemnity and lien.[22] In Great Southern, similar types of costs categories, under the categories of operational costs, legal costs and liquidators’ remuneration, were also regarded by Davies J as giving rise to a Re Universal Distributing indemnity and lien.
[22]The Administration application [2013] VSC 595, [15]-[16]; The First Liquidation application [2014] VSC 239, at [102].
The amount claimed in respect of the GSP sale costs including the GSP Allocation Approval Process Costs and other GSP Scheme related costs incurred during the relevant period is, as I have indicated above, claimed to be $2,929,238.71. This amount is comprised of remuneration, disbursements, legal costs and other third party costs as follows:
| Item | Amount ($)(excl GST) |
| Great Southern Schemes | |
| PPBA Time Costs | 2,257,710.23 |
| PPBA Disbursements | 84,342.60 |
| Legal Costs | 989,081.57 |
| Third Party Costs | (401,895.69) |
| Total Claimed Scheme Related Costs ($)(excl GST) | 2,929,238.71 |
It will be seen that the amount of third party costs is bracketed. Approximately $220,000 of third party costs were incurred during the relevant period but a number of adjustments were also undertaken during the period in relation to third party costs which accrued during the periods the subject of the earlier applications relating to the administration period and the first period of liquidation. These adjustments resulted in a credit in the sum of $620,000, hence the amount being claimed for third party costs is noted as negative.
The GPL sale costs and other GPL Scheme related costs incurred during the relevant period are claimed to be $4,975,265.25. Again, this is comprised of claims for remuneration, disbursements, legal costs and other third party costs as follows:
| Item | Amount ($)(excl GST) |
| Gunns Woodlot Schemes | |
| PPBA Time Costs | 2,412,223.02 |
| PPBA Disbursements | 151,379.63 |
| Legal Costs | 646,923.59 |
| Third Party Costs | 1,764,739.01 |
| Total Claimed Scheme Related Costs ($)(excl GST) | 4,975,265.25 |
Spread sheet summaries
As with the previous applications before Ferguson J and Judd J, the liquidators have sought a direction that they may adduce the evidence in respect of the expenditure and remuneration the subject of this application in the form of summary spread sheets as contemplated by s 50 of the Evidence Act 2008 (Vic). This was an alternative to providing copies of all the supporting documents such as receipts, timesheets and invoices because the source documents of that nature are voluminous. In the Administration application, Ferguson J observed at [12]:
The total scheme-related costs for which the Plaintiff’s (sic) claim a lien for the period of the administration is $6.02 million plus GST. As might be expected, the supporting documentation (for example, receipts and timesheets et cetera) are voluminous. In these circumstances, the Plaintiffs made application under s 50 of the Evidence Act 2008 (Vic) for directions that they may adduce the evidence in respect of the expenditure and remuneration in the form of summary spread sheets. Such orders may be made where it would not otherwise be possible conveniently to examine the evidence because of the volume or complexity of the documents and where a reasonable opportunity has been given to any other party to the litigation to examine or copy the documents in question.
Her Honour went on to say at paragraph 14:
In my opinion, the requirements of s 50 of the Evidence Act have been satisfied and it was appropriate for orders to be made that the summary spread sheets be adduced in evidence in respect of the expenditure and remuneration. Indeed, I am persuaded that it is the only practical way to deal with such evidence and it greatly aided the efficient conduct and disposition of the Plaintiffs’ application in respect of the remuneration and costs.
In this application, the liquidators have followed the regime prescribed in s 50, that is:
(a) there has been service on each other party of a copy of the summary that discloses the name and address of the person who prepared the summary; and
(b) those parties have been given party a reasonable opportunity to examine or copy the documents in question.
The summaries generated to satisfy the requirements of s 50 of the Evidence Act 2008 in this application are exhibits DMB-146 and DMB-147 to Mr Bryant’s twenty-second affidavit.
I consider that the requirements of s 50 of the Evidence Act 2008 have been satisfied and that as in the previous applications it is appropriate for orders to be made that the summary spread sheets be adduced in evidence in respect of the expenditure and remuneration. I also respectfully agree with Ferguson J’s view that this is the only practical way with which to deal with the volume of such evidence and I propose to adopt a similar course in this application.
Exhibit DMB-146 is a spread sheet which sets out the total GSP sale costs (including the GSP allocation approval process costs) and other scheme related costs incurred by the liquidators during the relevant period for the Great Southern Schemes. The total of such sums is $2,929,238.71. The head spread sheet is accompanied by four subsidiary spread sheets which provide a further breakdown of the scheme related costs for GSP in relation to:
(a) PPBA’s remuneration in the sum of $2,257,710.23 (GSP Remuneration Summary);
(b) PPBA’s disbursements in the sum of $84,342.60 (GSP Disbursements Summary);
(c) The liquidators’ legal costs in the sum of $989,081.57 (GSP Legal Costs Summary); and
(d) Third party costs of $401,895.69 (taking into account adjustments).
The spread sheets forming the summary were prepared by Mr Boudrie, a member of the liquidators’ staff, by reference to:
(a) PPBA’s timesheets for the GSP Remuneration Summary;
(b) Invoices issued to PPBA for out of pocket expenses and PPBA’s internal accounting database for overheads for the GSP Disbursement Summary;
(c) The liquidators’ solicitors ABL invoices to the liquidators for the GSP Legal Costs Summary; and
(d) Invoices issued to the liquidators for the GSP Third Party Costs Summary.
As I have noted above, the source documents from which the summaries were prepared have been made available by the liquidators for inspection.
In a similar way, exhibit DMB-147 summarises the GPL sale costs and other Scheme related costs incurred by the liquidators during the relevant period for the Gunns Woodlot Schemes. A total of such sums is $4,975,265.25. The head summary is accompanied by four subsidiary spread sheets which provide further breakdowns of the Scheme related costs in relation to:
(a) Remuneration in the sum of $2,412,223.02 (GPL Remuneration Summary);
(b) PPBA’s Disbursements in the sum of $151,379.63 (GPL Disbursement Summary);
(c) Legal Costs in the sum of $646,923.59 (GPL Legal Costs Summary);
(d) Third Party Costs in the sum of $1,764,739.01 (GPL Third Party Costs Summary).
The summaries contained in exhibit DMB-147 were prepared by Mr Boudrie having regard to:
(a) PPBA’s timesheets for the GPL Remuneration Summary;
(b) Invoices issued to the liquidators for the out of pocket expenses and for the internal accounting database for overheads for the GPL Disbursement Summary;
(c) ABL’s invoices to the liquidators for the GPL Legal Costs Summary; and
(d) Invoices to the liquidators for the GPL Third Party Costs Summary.
These source documents were also made available for inspection.
Allocation
Reference is made in the summaries (exhibits DMB-146 and DMB-147) to ‘method 1’ and ‘method 2’. This is a reference to the methodology of allocation of scheme costs. ‘Method 1 General Scheme Costs’ have been assigned to method 1, where costs relate to one or more schemes. If the costs relate to more than one scheme, then the costs are apportioned amongst the Growers and those relevant schemes according to the number of hectares that each Growers’ interest relates to. On the other hand, method 2 is where the work undertaken relates to the schemes generally, but due to the nature of the task, is not referable to any one or group of schemes. As the nature of the task prevents the liquidators from accurately allocating such costs to any one of the Schemes, they have equally apportioned the costs across all the Schemes. The method 2 general costs are apportioned amongst the Growers in the Schemes according to the number of hectares that each Growers interest relates to. In the earlier applications there methods 3 and 4 were applied but they have no application to the costs the subject of this application.
In Mr Bryant’s twelfth affidavit,[23] he set out the methods for allocating costs:
[23]At paras 56-68.
(a) To a particular scheme;
(b) Across multiple schemes; and
(c) Between schemes and the general liquidation i.e. non schemes.
It is proposed to allocate the GSP sale costs and GPL sale costs as follows:
(a) Trust Company Sale: in proportion to the proceeds of sale allocated to each Great Southern Scheme pursuant to the orders of the Honourable Justice Judd made on 5 June 2014. The liquidators consider that such an allocation is reasonable on the basis the amount of work undertaken by them should be proportionate to the proceeds that could be realised (i.e. it would not be reasonable for them to spend an inordinate time realising assets of little value and, conversely, it is reasonable to spend more time realising assets of value);
(b) Third Party Landowner Agreements: all Third Party Landowner Agreements are conducted on a single scheme. Where the liquidators have been able to identify the particular Third Party Landowner Agreement to which the work relates, the liquidators have allocated those costs to the particular Scheme to which the Third Party Landowner Agreement relates. Where they have been unable to identify the particular Third Party Landowner Agreement or the work is otherwise general in nature (for example, attending Third Party Landowner meetings), the liquidators have:
(i) identified the work as relating to either the Gunns Woodlot Schemes or Great Southern Plantations Schemes; and
(ii) allocated the costs between the Gunns Woodlot Schemes or Great Southern Plantations Schemes in proportion to the number of hectares in each Scheme located on Third Party Land.
(c) AFP Implementation Deed: in proportion to the number of hectares of the AFP Scheme Land that was used in each of the AFP Schemes. As set out in paragraph 31 [of the affidavit], Judd J made orders that the liquidators would be justified in allocating the sale proceeds in this way. For the reasons set out in paragraph 52(a), they consider it is reasonable to allocate costs in the same way as proceeds are allocated; and
(d) TFE Sale: in proportion to the proceeds of sale to be allocated to each Gunns Woodlot Scheme. An application will be made to the Court in respect of the allocation of the proceeds of sale from the TFE sale. For the reasons set out in paragraph 52(a), the liquidators consider it is reasonable to allocate costs in the same way as proceeds are allocated.
In relation to the Trust Company sale proceeds and TFE sale proceeds, given that:
(a) The liquidators lien would be payable prior to distribution and in priority to any other costs and expenses; and
(b) deducting the total sale costs and then allocating the net sale proceeds to the Schemes has the same effect as allocating the gross sale proceeds to the Scheme and then deducting the proportionate sale costs,
the liquidators intend to simply deduct the total Trust Company sale costs from the Trust Company sale proceeds and the TFE sale costs from the TFE sale proceeds and then allocate the net sale proceeds to the relevant Schemes. A number of parties who intervened in the applications in relation to the Trust Company Sale and TFE Sale have obtained orders for payment of their costs out of the sale proceeds. The liquidators have paid, and continue to pay, the Contravener Costs out of the gross sale proceeds prior to any allocation.
In relation to the other scheme related costs incurred during the relevant period, the liquidators propose allocating them as follows:
(a) Services Agreements and Interim Maintenance Agreement: in proportion to the number of hectares in each Scheme located in either Tasmania (for the Services Agreement relating to Tasmania) or on the mainland (for the Services Agreement relating to all land other than Tasmania). The liquidators consider this is reasonable on the basis that the cost of providing the services is most closely related to the number of hectares to which the work relates;
(b) Other General Maintenance Costs: Where the liquidators have been able to identify the particular scheme or schemes to which the cost relates, they have allocated the cost to that scheme or those schemes. Where they have been unable to identify the particular scheme or schemes or the work is of a general nature, the liquidators have allocated it in proportion to the number of hectares in each scheme. They consider this is reasonable because the type of tasks being undertaken is more closely related to the size of the Schemes;
(c) Grower Committee and Grower Liaison: Where the liquidators have been able to identify the particular scheme or schemes to which the cost relates, they have allocated the cost to that scheme or those schemes. Where they have been unable to identify the particular scheme or schemes or the work is of a general nature, they have allocated it in proportion to the number of hectares in each scheme. They consider this is reasonable because:
(iii) the number of hectares in each scheme is closely related to the number of Growers in each scheme; and
(iv)the time spent on these tasks is closely related to the total number of Growers in each scheme;
(d) Employees of the Gunns Group: in proportion to the number of hectares in each scheme. The liquidators consider this is reasonable because the type of tasks being undertaken by the employees is more closely related to the size of the Schemes;
(e) Legal Liaison, Scheme Investigation and Grower proceedings: Where the liquidators have been able to identify the particular scheme or schemes to which the cost relates, they have allocated the cost to that scheme or those schemes. Where they have been unable to identify the particular scheme or schemes or the work is of a general nature, they have allocated it in proportion to the number of hectares in each scheme. They consider this is reasonable for the same reasons set out in paragraph 54(c)(i) and 54(c)(ii);
(f) Return on Investment: Where they have been able to identify the particular scheme or schemes to which the cost relates, the liquidators have allocated the cost to that scheme or those schemes. Where they have been unable to identify the particular scheme or schemes or the work is of a general nature, they have allocated it in proportion to the number of hectares in each scheme. The liquidators consider this is reasonable for the same reasons set out in paragraphs 54(c)(i) and 54(c)(ii);
(g) Other Administrative Costs: Where the liquidators have been able to identify the particular scheme or schemes to which the cost relates, they have allocated the cost to that scheme or those Schemes. Where they have been unable to identify the particular scheme or schemes or the work is of a general nature, the liquidators have allocated it in proportion to the number of hectares in each scheme. They consider this is reasonable for the same reasons set out in paragraphs 54(c)(i) and 54(c)(ii). In relation to the insurance tasks, they charged Growers an administrative fee for arranging insurance or making insurance claims on their behalf. As a result, the liquidators have adjusted our expenses for which we have been paid a separate fee.
The same methodology as set out in paragraph 53 was used in the Administration Costs Application and the First Liquidation Costs Application. Since making the Administration Costs Application, the liquidators have undertaken a reconciliation of the land used in each scheme. As a result, they have adjusted the Service Agreement costs allocated to each scheme in the Administration Costs Application. The First Liquidation Costs Application incorporated this adjustment.
In paragraph 58 of his twenty-second affidavit Mr Bryant explains the rationale by which the GSP sale costs and GPL sale costs have been allocated. I consider that the approach with which has been taken in respect of the allocation of such costs has been satisfactorily justified by the explanations given. Similarly, in relation to the other scheme related costs incurred, I accept the explanation as to why they have been allocated as they have been in paragraph 60 of the twenty-second affidavit. Those costs include the services agreements and interim maintenance agreement, other general maintenance costs, Grower committee and Grower liaison, costs associated with employees of the Gunns Group, legal liaison, return on investment and other administrative costs. That methodology was used in the earlier applications, subject to necessary adjustments.
Remuneration
The GSP Remuneration Summary contained in Exhibit DMB-146 to Mr Bryant’s affidavit sets out a breakdown of the liquidators total remuneration claimed in relation to the GSP sale costs (including the Allocation Approval Process Costs) and for other scheme related costs incurred by the liquidators during the period the subject of the application in relation to the Great Southern Scheme. The GSP sale costs cover the following four time periods (with some overlap):
(a) The presale process covering March 2013 to April 2013 inclusive;
(b) The sale process covering May 2013 to September 2013 inclusive;
(c) The sale approval process covering October 2013 to December 2013 inclusive; and
(d) The allocation approval process covering January 2014 to June 2014.
Similarly, the GPL Remuneration Summary, contained within Exhibit DMB-147, sets out a breakdown of the liquidators total remuneration claimed in relation to the GPL sale costs and for other scheme related costs incurred by the liquidators during the relevant period in relation to the Gunns Woodlot Schemes. The GPL sale costs cover the following three time periods (with some overlap):
(a) The presale process covering March 2013 to September 2013 inclusive;
(b) The sale process covering October 2013 to December 2013 inclusive; and
(c) The sale approval process covering January 2014 to June 2014. The spread sheets break up in each case the various components to which I have referred into the respective time periods.
The amount for which the liquidators claim a lien for their remuneration for the period of the present application comprises the following:
(a) $646,694.51 for work relating to the Great Southern Schemes carried out in the period from 1 December 2013 to 30 June 2014;
(b) $1,611,015.61 for work relating to the sale of the assets used in the Great Southern Schemes from March 2013 to June 2014;
(c) $916,226.39 for work relating to the Gunns Woodlot Schemes carried out in the period from 1 December 2013 to 30 June 2014;
(d) $1,495,996.64 for work relating to the sale of the assets used in the Gunns Woodlot Schemes from March 2013 to June 2014.
In his second affidavit, one of the liquidators, Mr Crosbie deposes as to the method of charging which has been adopted. Of the four basic methods that can be used to calculate the remuneration charged by insolvency practitioners, time based hourly rates, fixed fee, percentage (where the total fee charge is based on a percentage of some variable, such as the gross proceeds of assets released), and contingency (where the fee is contingent on a particular outcome being achieved). It was considered that time based hourly rates was the most appropriate methodology for charging on the Gunns Group Companies’ insolvency. Mr Crosbie stated that the reasons for this were:
(a) It ensured creditors and Growers would only be charged for work that was performed;
(b) It allowed the liquidators to allocate their remuneration to one or more specific Schemes;
(c) The liquidators identified that they would be required to perform a number of tasks which did not relate to the realisation of assets and therefore a percentage or contingency fee were not appropriate; and
(d) The liquidators were unable to accurately predict the level of fees that would be required due to the complexity of the insolvency and therefore a fixed fee could not be determined.
PPBA, when using a time based methodology selects one of several rate scales. In order of the lowest to the highest rate per hour, the rate scales are titled General, Corporate and Large Complex. For each insolvency administration for which they are appointed, the liquidators select the most appropriate rate having regard to the assignment. Mr Crosbie states that having regard to the size and complexity of the Gunns Group Companies’ insolvency the large complex rate may have been appropriate, however, given the type of engagement they considered the corporate rate appropriate in the circumstances. Mr Crosbie sets out the rates charged in respect of the corporate rate in paragraph 17 of his second affidavit. Those scale rates were attached to the notice of first meeting of creditors. The scale of fees charged by the liquidators has remained constant throughout the liquidation.
Mr Crosbie states that the rates are comparable to other large national corporate restructuring and insolvency firms. In the First Liquidation application Judd J observed at paragraph 106:
…the charge-out rates are set out in the second affidavit of Craig David Crosbie. The fees are reasonable and proper.
In his submissions both written and oral, Mr Burdon voiced heavy criticism of the scale of charges being exacted by the liquidators. As I have said, I accept that to the lay person the hourly rates seem extraordinary but I have to have regard to the prevailing rates being charged by liquidators generally and what the prevailing ‘market’ rate is. Like Judd J, I accept that the scale is within the acceptable range.
In the course of conducting my ‘random survey’ which I have described previously in these reasons, I was mindful when examining the narrative in respect of the items that I chose to examine as far as possible whether the task being undertaken was being performed by a person of the appropriate station within the hierarchy of PPBA. As best as I could ascertain I could not identify any item which was obviously being performed by an over-qualified person. As both Judd J and Ferguson J observed in the previous applications, the Gunns administration was a most complex insolvency administration, certainly well above the run of the mill administration or liquidation.
As in the previous applications, time records were maintained in which PPBA staff recorded their time against specific codes which distinguished between scheme related and non-scheme related tasks, and specified the particular scheme involved and the nature of the task.
The evidence produced by the liquidators in support of this application for remuneration disbursement legal costs and third party costs was, in my opinion of the requisite standard to enable me to ascertain whether the amounts being claimed are fair and reasonable.
I consider that, on a review of the narrative in the summaries which succinctly describes the tasks performed, on a prima facie basis the work which has been undertaken for which remuneration is claimed during the second liquidation period involved only the sale, care, preservation or realisation of the assets of the Schemes or the liquidation of those Schemes. I also consider that the claim for remuneration is reasonable and proportionate to the services undertaken by the liquidators and their staff. This was confirmed by my review of the randomly selected entries in the source material to which I have referred.
Disbursements
As regards the liquidators disbursements, the disbursements incurred which are the subject of the present application the disbursements fall into the following categories:
(a) Valuation costs in relation to the Trust Company sale and the TFE sale, including the GSP allocation approval process;
(b) Photocopying and printing;
(c) Postage;
(d) Travel;
(e) Advertising;
(f) Conference calls; and
(g) Other, including courier and information technology expenses.
In the present application the disbursements of the plaintiffs comprises:
(a) $7,872.23 for disbursements relating to the Great Southern Scheme carried out in the period from 1 December 2013 to 30 June 2014;
(b) $76,470.37 for disbursements relating to the sale of the assets used in the Great Southern Schemes from March 2013 to June 2014;
(c) $12,714.50 for disbursements relating to the Gunns Woodlot Schemes carried out in the period from 1 December 2013 to 30 June 2014;
(d) $138,665.13 for disbursements relating to the sale of the assets used in the Gunns Woodlot Schemes from March 2013 to June 2014.
Mr Bryant’s fellow liquidator, Mr Crosbie in his second affidavit deposed that there were some 35,000 Growers and in his affidavit listed the main activities to which the photocopying and printing charges related. Mr Bryant says that a substantial proportion of the photocopying charges incurred during the period the subject of the present application relates to similar activities. As to the advertising costs claimed in this application Mr Bryant deposes that they were incurred mainly in relation to:
(a) Advertising in relation to the Trust Company sale;
(b) Advertising the liquidators’ sale process;
(c) Advertising in relation to the allocation and distribution hearing before Judd J; and
(d) Advertising in relation to the TFE (Tasmanian Forestry Estate Sale) application.
The disbursements have been allocated by reference to the task to which the disbursement relates and adopting the methodology to which reference has been made above. The GSP Disbursement Summary contained within Exhibit DMB-146 breaks down the disbursements into the respective periods in which they have been incurred as does the GPL Disbursement Summary in Exhibit DMB-147.
On my review of the summaries I consider that the disbursements which have been incurred are reasonable and should be allowed. I also find that the disbursements related solely to the sale care preservation and realization of the assets of the Schemes or the liquidation of the Schemes. Again, this was confirmed by my review of the randomly selected entries in the source material.
Legal costs
As to the legal costs component of the application, these comprise:
(a) $87,844.05 for legal work relating to the Great Southern Schemes carried out in period from 1 December 2013 to 30 June 2014;
(b) $901,237.52 for legal work relating to the sale of the assets used in the Great Southern Schemes from March 2013 to June 2014;
(c) $305,182.11 for legal work relating to the Gunns Woodlot Schemes carried out in the period from 1 December 2013 to 30 June 2014;
(d) $341,741.48 for legal work relating to the sale of the assets used in the Gunns Woodlot Schemes from March 2013 to June 2014
The method of allocation of the liquidators’ legal costs employed in the earlier applications is adopted in the present application. Mr Bryant is informed by Ms Sheridan, a partner at ABL and believes that the same method of allocation of costs subject to some changes is being continued. In Mr Bryant’s twelfth affidavit he deposed that one of the files maintained by ABL relates to general work undertaken by ABL for GPL. This file includes work which is generally scheme related, non-scheme related and some third party landowner costs. ABL has reviewed each line item of its time costs in respect of this file and divided the costs into three categories being:
(a) General scheme related;
(b) Third party landowner; or
(c) Non-scheme related.
The spread sheet setting this out is Exhibit DMB-148 to Mr Bryant’s twenty-second affidavit. It divides the tasks undertaken by ABL (not including disbursements) and the time costs incurred into the categories identified. The invoices which are the source material for this summary are available for inspection.
The general scheme related costs have been allocated in proportion to the number of hectares in each Scheme. As with the other summaries, the GSP Legal Costs Summary and the GPL Legal Costs Summary include breakdowns of the legal costs relating to such sale costs between the several GPL sale periods. As in the previous applications ABL also maintained a separate file for work undertaken in relation to ASIC and in this instance none of the tasks were Scheme related.
Of these, legal fees and disbursements are comprised of the following:
(a) General scheme related costs totalling $71,564.65 for the Great Southern Schemes and $83,530.61 for the Gunns Woodlot Schemes. It is proposed to allocate these costs partly under method one and partly under method two;
(b) Individual land owner related costs totalling $16,279.40 for the Great Southern Schemes and $34,898.19 for the Gunns Woodlot Schemes and it is proposed that all of these be allocated under method one;
(c) Costs relating to the sale to the AFP receivers totalling $186,753.32 for the Gunns Woodlot Schemes only where it is proposed to allocate these under method one which is described below.
The evidence explains the method by which the liquidators lawyers, ABL, uses for charging and sets out the charge-out rates. The evidence contains a detailed analysis of the staff member hours, by work and allocation in addition to a schedule setting out the allocation of costs between files or matters.
I am satisfied that the charges for legal expenses that have been incurred are reasonable and proportionate to the services undertaken and that the allocation of those legal expenses is fair and reasonable. As Judd J observed in the First Liquidation application,[24] the legal costs have been charged by a reputable legal firm experienced in insolvency work in a very large and complex insolvency administration which called for a high level of professional skill and responsibility. I am also satisfied that the allocation of those legal fees as detailed in the evidence are fair and reasonable and that the services for which such fees were incurred related solely to the sale care preservation and realization of the assets of the Schemes or the liquidation of the Schemes.
[24]At paragraph 106.
Third Party Costs
The third party costs summaries are also contained within Exhibits DMB-146 and DMB-147 respectively. The spread sheets outline the costs that have accrued during the period the subject of the present application but which are yet to be paid. The third party costs which were claimed in the earlier applications were calculated based on accrued costs.
Since those applications, some costs have been invoiced and paid and the costs claimed for the period the subject of this application have been adjusted having regard to any difference between the amount previously claimed and the amount actually invoiced or paid. Both the GSP Third Party Costs Summary and the GPL Third Party Costs Summary include breakdowns of the third party costs which are broken down into the several sale periods.
I am satisfied on a review of the GSP Third Party Costs Summary and the GPL Third Party Cost Summary that the costs incurred are reasonable and proportionate to the services undertaken.
In summary, in my opinion on a consideration of the evidence to which I have referred, the expenses incurred, work performed and the other costs and disbursements for which remuneration are claimed is, on an application of the formulation in Re Universal Distributing appear on their face to be characterised as relating ‘exclusively to the care, preservation or realisation of the assets of the Schemes, or the administration of the Schemes’. In my view, the evidence also indicates that on the face of the material, the work was necessary and the liquidators were acting reasonably in incurring the expenses and performing the work.
In that regard, I consider that the evidence contains sufficient information to enable the Court to assess that, prima facie, the amounts claimed appear to be reasonable and that the liquidators exercised commercial judgment in relation to the work that was done. As to the cost attaching to that work, the amounts claimed appear, on their face, to be proportionate to the value of the services provided by the liquidators given the size, importance and complexity of the task performed and the principles by which the liquidators have allocated the expenses and remuneration amongst the Schemes are appropriate, fair and reasonable.[25]
[25]See The Administration application at [18].
I will hear plaintiffs’ counsel on the terms of the orders required to effect these reasons.
SCHEDULE 1
GUNNS WOODLOT MANAGED INVESTMENT SCHEMES
| 1. | Gunns Plantations Woodlot Project 2000 ARSN 092 354 535 |
| 2. | Gunns Plantations Woodlot Project 2001 ARSN 094 182 279 |
| 3. | Gunns Plantations Woodlot Project 2002 ARSN 099 584 675 |
| 4. | Gunns Plantations Woodlot Project 2003 ARSN 104 213 710 |
| 5. | Gunns Plantations Woodlot Project 2004 ARSN 108 690 080 |
| 6. | Gunns Plantations Woodlot Project 2005 ARSN 113 092 854 |
| 7. | Gunns Plantations Limited Woodlot Project 2006 ARSN 118 534 106 |
| 8. | Gunns Plantations Limited Woodlot Project 2008 ARSN 128 933 237 |
| 9. | Gunns Plantations Ltd Woodlot Project 2009 ARSN 135 490 292 |
SCHEDULE 2
GREAT SOUTHERN MANAGED INVESTMENT SCHEMES
| 1. | Great Southern Plantations 1998 ARSN 092 780 204 |
| 2. | Great Southern Plantations 1999 ARSN 092 452 849 |
| 3. | Great Southern Plantations 2000 ARSN 085 669 361 |
| 4. | Great Southern Plantations 2001 ARSN 089 958 029 |
| 5. | Great Southern Plantations 2002 ARSN 095 343 963 |
| 6. | Great Southern Plantations 2003 ARSN 099 131 825 |
| 7. | Great Southern Plantations 2004 ARSN 107 811 709 |
| 8. | Great Southern Plantations 2005 ARSN 112 744 877 |
| 9. | Great Southern Plantations 2006 ARSN 112 744 902 |
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