Re Prime Petfood Pty Ltd
[2019] VSC 572
•22 August 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 06242
IN THE MATTER of PRIME PETFOOD PTY LTD (In Liquidation) (ACN 130 622 105)
| VICTORIAN PETFOOD PROCESSORS (VIC) PTY LTD (ACN 164 353 940) | Plaintiff |
| - and - | |
| PRIME PETFOOD PTY LTD (ACN 130 622 105) | Defendant |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 22 August 2019 |
CASE MAY BE CITED AS: | Re Prime Petfood Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2019] VSC 572 |
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CORPORATIONS – External administration – Application by liquidators for their remuneration made pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) of the Corporations Act 2001 (Cth) – Application was one properly made under repealed provision of s 473(3) by application of s 1581 of the Corporations Act 2001 (Cth) – Orders made determining remuneration and expenses.
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HIS HONOUR:
Introduction
By an interlocutory process filed 14 March 2019, the applicants, Richard John Cauchi and Michael Carrafa in their capacity as joint and several liquidators of Prime Petfood Pty Ltd (‘Prime’) seek orders pursuant to s 60-10(1)(c) of Schedule 2 (Insolvency Practice Schedule) (Corporations) (‘IPS’) to the Corporations Act 2001 (Cth) (‘Act’) for the determination of remuneration and expenses for the performance of their responsibilities as the liquidators of Prime (‘Application’) for the period 22 December 2014 to 30 November 2018.
Because the applicants were appointed as liquidators of Prime on 17 December 2014, s 1581 of the Act provides that s 473 of the Act continues to apply to an application for remuneration despite its repeal when operation of division 60 of the IPS came into force on 1 September 2017. Section 1581 (which itself was repealed and substituted by a new provision) provides:
1581Old Act continues to apply in relation to remuneration for administrators already appointed or appointed during transition period
(1)Despite the repeal of sections 449E and 473 … of the old Act by Schedule 2 to the [ILRA], the old Act continues to apply in relation to the remuneration of an external administrator of a company who is appointed:
(a) before the start time; or
(b) during the transition period.
Although this application is to be properly made pursuant to s 473(3)(b)(ii) (rather than s 60-10(1)(c)) and considered by reference to the criteria in repealed s 473(10) of the Act, in my view there is no material difference in the criteria to which the Court must have regard. I will make an amendment to the interlocutory process of the Court’s own motion so that the application is one made pursuant so s 473.[1]
[1]See Re Tuscan Property Development Pty Ltd [2018] VSC 511, [22] per Matthews JR. Note that the operation of division 60 of the IPS came into force on 1 September 2017, see regulation 10.25.02(3) of the Corporations Regulations 2001 (‘Corporations Regulations’).
In support of the Application, the applicants rely on the affidavits of:
(a) Mr Cauchi, sworn 25 January 2019 (‘First Cauchi Affidavit’);
(b) Ms Hiroa-Maiava, affirmed 30 January 2019 (‘Hiroa-Maiava Service Affidavit’). Ms Hiroa-Maiava is an administrative assistant employed by Harrick Lawyers, the solicitors for the applicants;
(c) Mr Cauchi, sworn 28 February 2019 (‘Second Cauchi Affidavit’); and
(d) Mr Cauchi, sworn 19 March 2019 (‘Third Cauchi Affidavit’).
The matter came before me in the Corporations List. The applicants have indorsed the interlocutory process to seek determination of their remuneration as liquidators in the absence of the public and without any attendance by them or on their behalf. At the first return of the hearing for the application I indicated that, provided the appropriate persons were notified in compliance with r 9.4(3) of the Supreme Court (Corporations) Rules 2013 (‘the Rules’), then pursuant to r 9.4(5) I would consider the Application in the absence of the public and without any attendance by, or on behalf of the applicants.
Ms Hiroa-Maiava deposes that on 25 January 2019, she served a letter enclosing a notice of intention to apply for remuneration and the First Cauchi Affidavit, including exhibits, (‘Application Documents’) on the following persons:
(a) Deputy Commissioner of Taxation;
(b) Victorian Petfood Processors (VIC) Pty Ltd, care of Mitch Karafill & Co;
(c) Tesbury Meats Pty Ltd;
(d) Ms Tzena Donlevy Rivett;
(e) Mills Oakley; and
(f) Ms Allison Marie Rivett.
The persons served with the Application Documents as set out above are those required to be served in accordance with r 9.4(3) of the Rules. I note that in this instance, despite service of all the relevant parties, no objectors have come forward to take issue with the matters raised by the applicants in the Application Documents.
I consider that as the appropriate persons have been notified as required by r 9.4(3) of the Rules that it is appropriate to accede to the applicants’ request.
Background
Prime was incorporated on 14 April 2008 and carried on business as the supplier of pet food to retail businesses. The directors of Prime were Tzena Donlevy Rivett and Andrew David Carruthers. Raymond Edgar Rivett was the secretary.
On 4 October 2013, Mr Rivett became the sole director and secretary of Prime. Its only shareholder is Tzena Donlevy Rivett.
On 17 December 2014, the Court ordered that Prime be wound up in insolvency and Mr Caraffa and Mr Cauchi were appointed as liquidators in the winding up.
On 13 July 2018, Mr Cauchi sent a report to creditors indicating that he and Mr Caraffa had been appointed as liquidators of Prime and that the first meeting of the creditors had been scheduled for 30 July 2018. The documents provided to the creditors included:
(a) declaration of independence, relevant relationships and indemnities;
(b) Form 529A, notice of first meeting of creditors;
(c) remuneration approval report; and
(d) information sheet on proposals without meetings.
The remuneration approval report contained, inter alia, the following information:
(a) an executive summary outlining the details of the fees and external disbursements of which the liquidators were seeking approval for;
(b) a description of the four remuneration methods available and an explanation for two methods of remuneration that had been selected by the liquidators;
(c) resolutions for voting on the approval of the liquidators remuneration;
(d) a section outlining the charges for the disbursements incurred by the liquidators; and
(e) an explanation of the relevant sections of the Act relating to the remuneration of external administrators and the approval of such remuneration by creditors, a committee of inspection or by the Court.
On 30 July 2018, the first meeting of creditors was held. The quorum was not present and the meeting was adjourned for resumption on 9 August 2018.
On 9 August 2018, the first meeting of creditors was resumed but Mr Cauchi was not able to obtain approval of remuneration from the creditors, hence the need for this application.
In his first affidavit, Mr Cauchi details the work performed by him and Mr Caraffa which included, but was not limited to, the following tasks:
a.Meetings with Mr Rivett and Prime Petfood’s solicitor, Denis Raftis, to discuss Prime Petfood’s business, property, affairs and financial circumstances (section 4 of the 13 July Report) and a detailed analysis of the financial reports and the financial position of Prime Petfood;
b.Reviewing company records;
c.Investigation of the assets of the company subject to security interests registered on the Personal Property Securities Register and the disclaimer of assets subject to registered securities;
d.Investigation of outstanding debts to priority creditors and unsecured debts;
e.Meetings with Harrick Lawyers and the Australian Taxation Office relating to a successful application of unfair preference payments;
f.Investigation into insolvent trading transactions. Particularly transactions during periods where Prime Petfood appeared to be insolvent;
g.Conducting public examinations of the Director and Former Director in relation to several transactions where they appear to breach their Director’s Duties;
h.Investigation into the Sale Agreement on 1 February 2014 with Prime 100 Pty Ltd;
i.Investigation of payments from Prime Petfood to Prime 100 Pty Ltd from 16 December 2013 to 16 August 2014;
j.Investigation of a loan namely, “Loan - Rivett” from Prime Petfood to the Rivett family;
k.Investigation into the sale of an aircraft from Prime Petfood to Handbury Beef Pty Ltd on 2 January 2014;
l.Instructing solicitors in relation to public examinations and breach of Director Duties; and
m. Preparation of 13 July 2018 report.
The liquidators did not receive any remuneration during the period of the liquidation. In the First Cauchi Affidavit, Mr Cauchi exhibits a table of the remuneration claimed by him and Mr Caraffa for the period 22 December 2014 to 30 November 2018 which details the work undertaken by him, Mr Caraffa and their staff, and the time and fees incurred for each task.
Mr Cauchi contends the liquidators are entitled to the sum of $90,610 excluding GST as remuneration for work undertaken during the period of the liquidation plus the further amount of $2,601.78 excluding GST as remuneration for non-professional disbursements incurred during the liquidation making a total of $93,211.78 plus GST. Mr Cauchi indicates that the sum of $27,133.37 is currently held by the liquidators.
Applicable principles
As I have mentioned, by reason of s 1581 of the Act, the application is properly made under s 473(3)(b)(ii) of the Act but the relevant criteria in the repealed s 473(10) of the Act and s 60-12 in the IPS of the Act are materially the same.
The submissions which have been filed on the liquidators’ behalf address each of the criteria mentioned in s 60-12 (which are materially the same as s 473(10)) insofar as they are relevant in the circumstances of the case.
As the submissions observe, the process to be undertaken by the Court in applications of this type is a summary procedure and the rules of evidence are not strictly applied. The principles are detailed in the decision of the Full Court of the West Australian Supreme Court in Venetian Nominees Pty Ltd v Conlan[2] (‘Venetian Nominees’). The burden lies with the liquidators to establish that the remuneration claimed is fair and reasonable. The first task of the Court considering these applications is to determine whether the applicants have made out a prima facie case for the amounts claimed. This is irrespective of whether or not there are any objectors.
[2](1998) 20 WAR 96 (‘Venetian Nominees’).
It is only once the Court has satisfied itself that the liquidators have made out a prima facie case for determination of the amount claimed that the absence of objectors of contradictors becomes relevant. In Conlan v Adams, another decision of the Full Court of Western Australia, the Full Court observed that the phrase ‘prima facie’ in this context means:
…[T]hat the claimant’s evidence is sufficient to enable the court to determine whether the claimed remuneration is fair and reasonable. So, for example, there must be evidence relating to the work done by particular persons, how long it took to do the work, their hourly rate and the reasonableness of the rate.
However, it cannot be intended that the reasonableness of each item of work undertaken should positively emerge solely from the description of the item in the schedule. If in doubt as to the reasonableness of an item, reference can and should be made to relevant documents in the liquidator’s possession relating to the work the subject of the claim ...[3]
[3]Conlan v Adams (2008) 65 ACSR 5211 at [31]-[32].
The matters which the applicants submit are relevant in the present application are as follows:
Section 473(10)(a)- the extent to which the work performed by the liquidator was reasonably necessary
The liquidators have prepared a table of remuneration (‘Table’), which itemises the work performed in date order. The Table contains details as to the date the identified tasks were performed, a summary description of each task undertaken, including whether the task was related to the assets, investigations, creditors, or to the administration generally. The Table also identifies the employee undertaking the task, their position, charge out rate, and the time spent on the task. I consider that the form and contents of the Table comply with the standard described in Venetian Nominees.[4]
Section 473(10)(c)- the period during which the work was, or is likely to be, performed by the liquidator
[4]Venetian Nominees (n 2).
The period for which remuneration is claimed is from 22 December 2014 to 30 November 2018.
Section 473(10)(d)- the quality of the work performed, or likely to be performed, by the liquidator
The liquidators have complied with statutory requirements, reported to creditors, realised assets, and undertaken public examinations of the former directors for the purposes of investigating transactions occurring prior to their appointment.
As has been mentioned, the liquidators received no objections to their Notice of Intention to Apply to the Court for Remuneration. There has been no suggestion that the work performed was not of sufficient quality, or that legal action commenced should not have been commenced, or that assets have been squandered, nor has there been criticism in that regard by any creditor at the meeting of creditors held on 30 July 2018 and resumed on 9 August 2018.
Section 473(10)(e)- the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator
Mr Cauchi contends that the liquidation of Prime was made more complex and taken out of the ordinary because of inter alia:
(a) the investigation into the sale of assets to Prime 100 Pty Ltd in February 2014;
(b) the investigation of the ‘loan-Rivett’ resulting in a public examination of Mr Rivett;
(c) an investigation into the transaction entered into with Handbury Beef Pty Ltd on 2 January 2014 for the sale of an aircraft; and
(d) reviewing voluminous books and records of Prime, including its management accounts to determine the true financial position of Prime.
At the time of the appointment of the liquidators, Prime was a party to three proceedings involving related parties.
Section 473(10)(h)- the value and nature of any property dealt with, or likely to be dealt with, by the liquidator
The liquidators were appointed following the sale and/or transfer of the majority of Prime’s tangible assets. These transactions were investigated by the liquidators.
Aside from cash, the liquidators were required to investigate assets including loans due to Prime.
Section 473(10)(i)- whether the liquidator was, or is likely to be, required to deal with one or more receivers, or one or more receivers and managers
Section 473(10)(i) is not relevant to this application as the liquidators were not required to deal with controllers or managing controllers during the winding up, and it is not anticipated that this will occur in the future as the winding up is close to completion.
Section 473(10)(j)- the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors
The number of creditors in the winding up is 10, being 3 secured and 7 unsecured creditors.
There are no other relevant attributes or conduct of creditors relevant to this application, save that the proxy appointed for two creditors at the resumed creditors meeting held on 9 August 2018 stated that he would not vote in favour of resolutions approving the liquidators’ remuneration and disbursements “until an appropriate outcome concerning the assignment of the identified rights of action had been reached”.
Section 473(10)(k)- if the remuneration is ascertained, in whole or in part, on a time basis: (i) the time properly taken, or likely to be properly taken, by the liquidator in performing the work and (ii) whether the total remuneration payable to the liquidator is capped;
The Table sets out in detail the exact time taken by the liquidators and their employees in performing the work. It is submitted by the liquidators that the time taken for all work described in the Table was time properly taken by the liquidators and employees of experience appropriate to each task in exercise of the joint and several liquidators’ duties. As noted above, there were no objections received by the liquidators, and no suggestion that the time taken to perform work was not properly taken. No such criticism were raised by any creditor at the meeting of creditors held on 30 July 2018 and resumed on 9 August 2018.
I have reviewed the material exhibited to Mr Cauchi’s affidavits and conducted a random sample of significant items in the Table. I consider that the tasks referred to were performed by a person of the appropriate station in the hierarchy of the liquidators’ firm and that the tasks in question appeared to be necessary for the conduct of the liquidation. Further, the time taken to perform such tasks appeared to be reasonable.
The matters specified in s 473(10)(b),(f),(g) have no relevance to the present application.
Consideration
I consider that the evidence filed by the applicants meets the required standards so as to enable me to determine that the remuneration application is reasonable. The evidence was sufficient for me to exercise my power under s 473(3)(b)(ii). I have examined the applicants evidence and the amount claimed by the applicants appears to be fair and reasonable. I do not propose to make any deduction from the amount claimed.
I will make the following orders:
(a) The interlocutory process is amended on the Court’s own motion so that the application is for one properly made under s 473(3)(b)(ii) of the Act.
(b) The Liquidators’ Remuneration for the period 22 December 2014 to 30 November 2018 be determined in the amount of $90,610 (excluding GST).
(c) The Liquidators’ disbursements for the period be determined in the amount of $2,601.78 (excluding GST).
I will ask the liquidators’ solicitors to provide a draft form of order to my Associate within 7 days to give effect to these orders.
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