Re Newman Rivergums Village Operations Pty Ltd (Subject to Deed of Company Arrangement) - [2024] WASC 134

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   RE NEWMAN RIVERGUMS VILLAGE OPERATIONS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT); EX PARTE MCVEIGH as administrator of NEWMAN RIVERGUMS VILLAGE OPERATIONS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) [2024] WASC 134
CORAM:   MASTER RUSSELL
HEARD:   6 FEBRUARY 2024 & ON THE PAPERS
DELIVERED          :   22 APRIL 2024
PUBLISHED           :   22 APRIL 2024
FILE NO/S:   COR 171 of 2023
MATTER:   IN THE MATTER OF NEWMAN RIVERGUMS VILLAGE OPERATIONS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 160 237 918)

EX PARTE
DERMOTT JOSEPH MCVEIGH as administrator of NEWMAN RIVERGUMS VILLAGE OPERATIONS PTY LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (ACN 160 237 918)
Plaintiff

Catchwords:

Corporations - External administration - Deed of company arrangement - Application for approval of deed administrator's remuneration - Prima facie case that remuneration reasonable - Remuneration approved - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), sch 2 (Insolvency Practice Schedule (Corporations)), s 60-10(1)(c), s 60-12, s 75-40
Insolvency Practice Rules (Corporations) 2016 (Cth), r 75-130(2)
Supreme Court (Corporations) (WA) Rules 2004 (WA), r 9.2

Result:

Deed administrator's remuneration approved

Category: B

Representation:

Counsel:

Plaintiff

L D Ayres

Solicitors:

Plaintiff

Lavan

Cases referred to in decision:

Australian Securities and Investments Commission v Marco (No 15) [2024] FCA 347
Conlan v Adams [2008] WASCA 61
Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320
M2 Assets Pty Ltd v GT Capital Partners Pty Ltd (subject to deed of company arrangement) [No 2] [2023] WASC 111
Re Sakr Nominees Pty Ltd [2017] NSWSC 668
Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459
Venetian Nominees Pty Ltd v Conlan (1998) WAR 96

MASTER RUSSELL:

Introduction

The plaintiff, Dermott Joseph McVeigh, is the deed administrator of a deed of company arrangement executed on 19 July 2016 (DOCA) in respect of Newman Rivergums Village Operations Pty Ltd (subject to a deed of company arrangement) (ACN 160 237 918) (Company).
By originating process filed on 8 November 2023, the plaintiff applies pursuant to s 60‑10(1)(c) of the Corporations Act 2001 (Cth), sch 2 Insolvency Practice Schedule (Corporations) (IPS) for approval of his remuneration as deed administrator of the Company for the period from 7 November 2019 until effectuation or termination of the DOCA.
In support of the application, the plaintiff initially relied on two affidavits sworn by him filed on 8 November 2023 (one of which is confidential), a supplementary affidavit sworn by him filed on 15 January 2024, and two affidavits sworn by Yutong Wu filed on 8 November 2023 and 5 February 2024. The plaintiff also relies on written submissions filed on 29 November 2023 and 5 February 2024.
The application was listed before me in the Master's List on 6 February 2024, when I heard brief submissions from counsel for the plaintiff. The application was adjourned to be determined on the papers on the basis that if any matters needed to be addressed, the plaintiff have the opportunity to do so.
Upon considering the application on the papers, the plaintiff was invited to file further evidence in relation to the details of the work and tasks undertaken by him and his staff the subject of the application to approve the further remuneration sought. The plaintiff has filed, and relies upon, a further affidavit sworn by him on 10 April 2024.
Having now considered the plaintiff's submissions and the evidence including the further evidence, for the reasons that follow, the plaintiff's remuneration as deed administrator of the DOCA for the period from 7 November 2019 to effectuation or termination of the DOCA is determined, approved and fixed in the amount of $135,339 plus GST.

Relevant factual background

The following factual background is derived from the affidavits filed in support of the application.
On 30 October 2015, the plaintiff was appointed as the voluntary administrator of the Company by secured creditor, Zorro the X Factor Pty Ltd (ACN 608 878 904) (Zorro), in its own right and as trustee for the Red Earth Debt Fund.[1]
[1] Affidavit of Dermott Joseph McVeigh sworn 11 October 2023, filed 8 November 2023 (McVeigh Affidavit) [9].
On 22 June 2016, the plaintiff issued a report to creditors recommending they vote in favour of a deed of company arrangement which provided for, amongst other things, the sale of the business of the Company and pursuit of a third-party claim against Lendlease Infrastructure Services Pty Ltd (ACN 081 540 847) (Lendlease).[2]
[2] McVeigh Affidavit [10], DJM-10.
On 30 June 2016, at the second meeting of creditors of the Company, the creditors voted in favour of the Company entering into a deed of company arrangement. The DOCA was executed on 19 July 2016 by the plaintiff in his capacity as administrator and as a joint and several deed administrator, together with Martin Bruce Jones.[3]
[3] McVeigh Affidavit [11] - [12], DJM-11, DJM-12.
Mr Jones ceased to be a deed administrator of the DOCA on 26 September 2017.[4]
[4] McVeigh Affidavit [15], DJM-13.
The plaintiff deposes in his affidavits to the work he has undertaken as deed administrator of the DOCA, including issuing examination summonses with a view to conducting public examinations to investigate possible claims the Company may have had against Lendlease and BHP Billiton Iron Ore Pty Ltd (ACN 008 700 981) (BHP). The Company's claims against Lendlease and BHP were ultimately resolved in June 2020 and November 2022 respectively. The details of the settlements are confidential.[5]
[5] McVeigh Affidavit [17] - [33], DJM-15; Confidential Affidavit of Dermott Joseph McVeigh sworn 11 October 2023, filed 8 November 2023 (Confidential McVeigh Affidavit) [4] ‑ [5], DMJ‑16 and DMJ‑17.
To date, the total renumeration that has been approved in the administration is $590,427.40.[6] At the second creditors’ meeting of the Company on 30 June 2016, resolutions were passed approving renumeration for:
(a)the period from 20 October 2015 to 22 June 2026 fixed in the amount of $275,550.50 plus GST;
(b)the period from 23 June 2016 to 30 June 2016 fixed in the amount of $25,000 plus GST; and
(c)the period from 30 June 2016 to the date of execution of the DOCA to the completion fixed up to a maximum amount of $175,000 plus GST.[7]
[6] Affidavit of Dermott Joseph McVeigh sworn 10 April 2024 (Further McVeigh Affidavit) [18].
[7] McVeigh Affidavit [13], DJM-11; Further McVeigh Affidavit [18] - [20].
Further renumeration of $64,876.90 plus GST was approved for the period 20 March 2018 to 23 October 2019 at a creditors’ meeting held on 8 November 2019.[8]
[8] Further McVeigh Affidavit [24], DJM-18.
In October 2019, before the claim against Lendlease was resolved, and before proceedings were commenced against BHP, the plaintiff sought approval of his remuneration as deed administrator. On 8 November 2019, creditors approved remuneration, as set out in a remuneration approval request report dated 24 October 2019, for the period from 24 October 2019 to completion, fixed up to a maximum amount of $50,000 plus GST.[9]
[9] McVeigh Affidavit [34] - [37], and attachments referred to.
By a circular to creditors dated 29 November 2022, the plaintiff provided an update in relation to the Company's claims against Lendlease and BHP, and sought a resolution to be passed approving further remuneration for the period from 7 November 2018 to finalisation of the DOCA in the amount of $135,339 excluding GST. It is this renumeration he now seeks approval of. It relates to further work as set out in the remuneration approval report attached to the circular.[10]
[10] McVeigh Affidavit [38] - [39], DJM-20.
The plaintiff did not include and opted to forgo remuneration for some of his fees for the BHP settlement and statutory lodgements amounting to $8,493 as at the date of the remuneration approval report.[11] He will also be required to undertake further work before the DOCA can be effectuated.[12]
[11] McVeigh Affidavit [40].
[12] As set out in the McVeigh Affidavit [41].
The plaintiff's written submissions set out the amendments to the legislation, which allowed the deed administrator to seek approval of his remuneration by circular resolution under s 75-40 of the IPS.[13] I am satisfied that was the appropriate course in this case.
[13] Plaintiff's written submissions filed 28 November 2023 [28] - [34].
However, the resolution did not pass. By 20 December 2022, the deed administrator received four votes in response to the circular resolution. Neither a majority in number nor in value of the participating creditors voted in favour of the proposal, as required by r 75-130(2) of the Insolvency Practice Rules (Corporations) 2016 (Cth).[14]
[14] McVeigh Affidavit [47] - [49], DJM-22.
In his supplementary affidavit filed on 5 February 2024, the plaintiff deposes to having sent the circular and annexures seeking approval for his remuneration to all creditors of the Company. One of the creditors that returned the voting form in response to the circular resolution was Zorro. Zorro did not approve the proposal relating to the deed administrator's remuneration.
The plaintiff says he took the voting form returned by Zorro at face value when he received it.[15] He later became aware, when his solicitors conducted Australian Securities and Investments Commission (ASIC) searches for the five largest creditors of the Company for the purpose of preparing the application on 23 August 2023, that Zorro was deregistered.[16] Zorro was deregistered on 17 February 2022.[17] As such, Zorro's vote was invalid. However, even discounting Zorro's vote, the outcome was still such that the majority in value did not vote in favour of the proposal.[18]
[15] Supplementary affidavit of Dermott Joseph McVeigh sworn 15 January 2024 (Supplementary McVeigh Affidavit) [4] - [6], DJM-18.
[16] Supplementary McVeigh Affidavit [7] - [10].
[17] Wu Affidavit, YW-18, page 407.
[18] Supplementary McVeigh Affidavit [11] - [14].
As the remuneration request has not been approved by the Company's creditors, the deed administrator now seeks orders for the determination and approval of his remuneration by the court under s 60‑10(1)(c) of the IPS.

The application under s 60-10

Notice of the application given and no notice of objection

Notice of the plaintiff's application was given to the Company's creditors,[19] and they have each been served with the application and supporting affidavits as required by r 9.2 of the Supreme Court (Corporations) (WA) Rules 2004.[20] The Australian Securities and Investments Commission Property Law Group was served with the application and supporting affidavits in relation to Zorro and two other creditor companies that have been deregistered.[21]
[19] As set out in the McVeigh Affidavit [7] and Affidavit of Yutong Wu affirmed 8 November 2023 (Wu Affidavit) [9] - [10].
[20] Wu Affidavit [10] - [35] and the attachments referred to.
[21] As set out in the Wu Affidavit [36] ‑ [39] and the attachments referred to.
There has been no objection raised by any of the creditors in relation to the application.[22] The Australian Securities and Investments Commission Property Law Group has advised it will not take any steps to assert any interest the deregistered companies may have in relation to the application, and has no objection to it.[23]
[22] Wu Affidavit [42] - [43].
[23] Wu Affidavit [40] - [41].
The Company's sole shareholder is Pilbara Accommodation Holdings Pty Ltd (Pilbara).[24] The plaintiff and deed administrator of the Company is also the deed administrator and receiver of Pilbara. Notice of the application was given to him as deed administrator and receiver of Pilbara. He has confirmed, in that capacity, that he has considered the application and does not object to it because there will be no distribution available to Pilbara from the Company in any event, irrespective of the remuneration sought.[25]

Applicable principles

[24] Affidavit of Yutong Wu affirmed 5 February 2024 (Second Wu Affidavit) [6] - [7], YW‑23.

[25] Second Wu Affidavit [9] - [14], and the attachments referred to.

In making a determination under s 60-10(1)(c), the court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters set out in s 60-12 of the IPS, as applicable:
(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;
(l)if:
(i)a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and
(ii)the matter is, or includes, remuneration of the external administrator;
the contents of the report on the review that relate to that matter;
(m)any other relevant matters.
While the criteria in s 60-12 of the IPS direct the court to the factors that are to be taken into account, the ultimate question is whether the remuneration claimed by the plaintiff is reasonable.
The principles concerning applications for approval of the remuneration incurred by insolvency practitioners are well established. While many of the decisions concern liquidators, the same approach has been applied in respect of administrators.[26] Many of the applicable authorities relate to s 449E of the Corporations Act 2001 (Cth), which though now repealed, contained factors in materially the same terms as those in s 60‑12 of the IPS.[27]
[26] See for example Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96.
[27] There are some minor changes to the language used: for example, s 60‑12 of the IPS refers to the extent to which the work was 'necessary and properly performed'; s 449E(4) of the Corporations Act 2001 (Cth) referred to the extent to which the work performed was 'reasonably necessary'.
I refer to and respectfully adopt Strk J's recent summary of the relevant principles in M2 Assets Pty Ltd v GT Capital Partners Pty Ltd (subject to deed of company arrangement) [No 2],[28] referring in turn to Jackson J's observations and summary of the relevant authorities in Higgins v JSS Logistics Pty Ltd (in liq).[29] The principles were also recently referred to and applied by Feutrill J in Australian Securities and Investments Commission v Marco (No 15).[30]
[28] M2 Assets Pty Ltd v GT Capital Partners Pty Ltd (subject to deed of company arrangement) [No 2] [2023] WASC 111 [40] - [42], which related to determination of the remuneration of a provisional liquidator under s 60-16 of the IPS, and to which the matters in s 60-12 of the IPS apply in the same way as for a determination under s 60-10 of the IPS.
[29] Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320 [18] - [20] and the authorities referred to, including Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459 [54] ‑ [60] (Bathurst CJ with whom the other members of the court agreed); Re Sakr Nominees Pty Ltd [2017] NSWSC 668 [29] (Black J); Conlan v Adams [2008] WASCA 61 [28] (McLure JA, Buss JA & Newnes AJA agreeing); Venetian Nominees Pty Ltd v Conlan (1998) WAR 96, 102 (Kennedy & Ipp JJ, Wallwork J agreeing).
[30] Australian Securities and Investments Commission v Marco (No 15) [2024] FCA 347 [72] - [74], [76] ‑ [82]
The onus is on the insolvency practitioner to establish the remuneration claimed is reasonable, and for work that was (or is) reasonably necessary and properly performed. The court is not required to undertake a line‑by‑line review but must consider whether, on the materials provided and bringing an independent mind to bear, the plaintiff has made out a prima facie case on the evidence that the remuneration claimed is fair and reasonable. The remuneration should be proportionate to the value of the services provided and the difficulty and importance of the tasks performed.

Is the remuneration sought fair and reasonable?

In his letter dated 29 November 2022 included in the circular to creditors, the plaintiff provided an update in relation to the Company's claims against Lendlease and BHP. The circular also included the remuneration approval report, in which the plaintiff details the tasks and time spent and the remuneration claimed for the period from 7 November 2019 to finalisation in the amount of $135,339 excluding GST.[31]
[31] McVeigh Affidavit [38] - [39], DJM-20.
The further remuneration sought by the plaintiff as deed administrator of the DOCA is calculated on a time‑cost basis, setting out the hourly rates of the plaintiff and other Avior Consulting personnel. It includes work and tasks relating to asset realisation, largely the claims against Lendlease and BHP, and administrative and statutory tasks.
Appendix B to the Remuneration Approval Report provides a summary breakdown of the work undertaken by the plaintiff and other personnel of Avior Consulting. A more detailed breakdown of the work is set out in Appendix C. In total, the claim for remuneration of $135,339 relates to 295.5 hours by the personnel and at the rates set out in Appendices B and C. The work and tasks undertaken is broken down into three categories. The first includes general correspondence, preparing minutes of creditors' meetings and other tasks as set out relating to attendances on and distribution to the secured creditor. The total time spent in relation to that work was 15.3 hours at a cost of $7,856.
The second category of work and by far the largest volume and value of work relates to investigation and pursuit of the claims against Lendlease and BHP as set out in Appendix C, which totals 228.3 hours at a value of $109,873.
The third category of work is administration including document maintenance, conducting file reviews, bank account administration, preparation and lodgement of statutory forms, ASIC, ATO and other statutory reporting and general administration. The total hours claimed in this category is 51.9 hours at a value of $17,610.
The information provided in Appendices B and C to the remuneration report is in a summary form. When considering the application on the papers on the evidence filed at that stage, I was not satisfied there was sufficient detail as to the work and tasks performed by the plaintiff and his staff, when they were performed, by whom, the hourly rates charged and the level of experience of those undertaking the work. I also sought to clarify that there was no overlap between the renumeration the subject of this application and that previously approved.

The plaintiff was invited to address those matters by filing further evidence. The plaintiff filed a further affidavit sworn by him on 10 April 2024,[32] in which he deposes that since operating Avior Consulting in 2012, he has caused all time work and tasks done by him and staff assisting him in all external administrations to be recorded on a computerised system using MYOB software. Each person engaged in an external administration, including the one this application concerns, is required to enter accurate details reflecting the work or task performed. The information entered includes:[33]
[32] Further McVeigh Affidavit.
[33] Further McVeigh Affidavit [5].
(a)the date of the work or task;
(b)the time taken in hours (divided into six-minute units to make 10 units per hour);
(c)the actual work action undertaken by the person doing the work or task, which is selected from the following categories via the MYOB system:
(i)Creditors;
(ii)Investigation;
(iii)Administration;
(iv)Trade-on; and
(v)Assets;
(d)an explanation or 'narrative' of the work or task undertaken, which is entered by the person making each entry.
The plaintiff deposes in the Further McVeigh Affidavit that all staff engaged in working on an administration are trained on time recording in MYOB and are required to record time and details contemporaneously at the time the work is done to maximise accuracy.[34] The plaintiff states that in the administration the subject of the application, he used a time‑costing based approach to the administration due to the flexibility inherently required in work of its nature, and he believes that the individual time and tasks recorded is accurately reflected in the MYOB records.[35]
[34] Further McVeigh Affidavit [6].
[35] Further McVeigh Affidavit [7] - [8].
The plaintiff attaches to the Further McVeigh Affidavit the detailed time records extracted from the MYOB records for the work the subject of his application for remuneration.[36] He deposes that he has personally reviewed the work printouts and believes that the work as itemised is appropriate, fair and reasonable, taking into account the position or level of the person undertaking the work, the time spent, the rate applied and the actual work done.[37]
[36] Further McVeigh Affidavit [10], DJM-23.
[37] Further McVeigh Affidavit [10] - [12].
He also provides an explanation as to the skill, levels or positions of those who undertook the work or tasks, including himself, and explains, by reference to examples, the descriptions and narratives used in the MYOB time records.[38]
[38] Further McVeigh Affidavit [11] - [17].
The plaintiff deposes to his belief that there is no overlap between the work done or time spent the subject of the remuneration previously approved and the current remuneration request before the court. In support of this, he annexes copies of the printouts of timekeeping records for the periods relating to the remuneration previously approved.[39]
[39] Further McVeigh Affidavit [18] - [31], DJM-24, DJM-25, DJM-26.
I have considered and accept the plaintiff's explanation of the time spent by him and his staff in undertaking the work and tasks the subject of the application for approval of his remuneration. I am also satisfied there is no overlap between the work and remuneration claimed and that previously approved.
I accept the reasons given by the plaintiff for exceeding his earlier remuneration estimate.[40] I am satisfied that further time and expense was incurred in relation to the claims against Lendlease and BHP, which were not included in the previous remuneration request and which were not covered by the litigation funding. Those claims have been settled. The terms of settlement, in each case, are confidential. As such, I do not refer to them in these reasons. As is evident from Appendix D to the remuneration report, the investigations undertaken, subsequent negotiation and litigation ultimately resulted in a significant recovery for the secured creditor, after payments.
[40] McVeigh Affidavit [42] - [45].
The work undertaken by the plaintiff as deed administrator involved some complexity. He was required to deal with matters that were out of the ordinary and were not anticipated in his earlier remuneration approval request. The plaintiff received some funding in relation to the Lendlease claim. He was not funded in relation to the BHP claim and, as such, assumed personal risk and exposure to legal fees and costs. This demonstrates the plaintiff’s bona fides.
The plaintiff has provided details of the work done and calculated the remuneration on an hourly rate basis, with the time and hourly rate attributed to him and to staff performing the work.[41] I accept that the time spent and the rates sought are reasonable given the work that was required and the complexity of the tasks performed.
[41] McVeigh Affidavit [42] - [45], DJM-20.
The Company's creditors and ASIC have been given notice of the application. None have sought to be heard or given notice of any objection to the remuneration being approved.
I am satisfied that, in all the circumstances, the remuneration sought of $135,339 excluding GST is prima facie fair and reasonable and proportionate to the difficulty and importance of the tasks performed by the deed administrator.

Conclusion and orders

For these reasons, the deed administrator's remuneration is approved and fixed in the amount of $135,339 together with any applicable GST.
I will make orders substantially in the terms of orders 2 to 6 of the plaintiff's minute of proposed orders filed on 2 February 2024. That includes an order that any person aggrieved by the making of the orders has liberty to apply to set aside the orders within 14 days of service of the orders upon them.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AP
Associate to Master Russell
22 APRIL 2024