Re Ricon Super Pty Ltd (in Liquidation) (Receivers And Managers Appointed) - [2024] WASC 484

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   TRAVIS KUKURA as joint and several liquidator of RICON SUPER PTY LTD (IN LIQUIDATION) [2024] WASC 484
CORAM:   HILL J
HEARD:   25 SEPTEMBER 2024 (ADDITIONAL AFFIDAVITS FILED 14 OCTOBER 2024 & 29 OCTOBER 2024)
DELIVERED          :   18 DECEMBER 2024
FILE NO/S:   COR 112 of 2022
BETWEEN:   TRAVIS KUKURA as joint and several liquidator of RICON SUPER PTY LTD (IN LIQUIDATION)
First Plaintiff
GREGORY BRUCE DUDLEY as joint and several liquidator of RICON SUPER PTY LTD (IN LIQUIDATION)
Second Plaintiff
RICON SUPER PTY LTD (IN LIQUIDATION)
Third Plaintiff
TRAVIS KUKURA as joint and several receiver and manager of RICON SUPER PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Fourth Plaintiff
GREGORY BRUCE DUDLEY as joint and several receiver and manager of RICON SUPER PTY LTD (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)
Fifth Plaintiff
CONSUELLA JODIE LYNN
First Interested Party
CHRISTINA BARNES
Second Interested Party

Catchwords:

Corporations - External administration - Application by liquidators and receivers for approval of remuneration - Whether amounts claimed are proportional - Whether work performed was necessary - Turns on own facts

Corporations - External administration - Application by liquidators and receivers for directions - Whether directions should be made - Proper construction of deed of settlement - Whether directions ought to be made in relation to taxation obligations - Turns on own facts

Legislation:

Corporations Act 2001 (Cth) sch 2, s 60-5, s 60-10, s 90-15
Rules of the Supreme Court 1971 (WA) O 51 r 4

Result:

Application for remuneration allowed in part
Directions given

Category: B

Representation:

Counsel:

First Plaintiff	:	S Tomasich
Second Plaintiff	:	S Tomasich
Third Plaintiff	:	S Tomasich
Fourth Plaintiff	:	S Tomasich
Fifth Plaintiff	:	S Tomasich
First Interested Party	:	In Person
Second Interested Party	:	In Person

Solicitors:

First Plaintiff	:	HWL Ebsworth
Second Plaintiff	:	HWL Ebsworth
Third Plaintiff	:	HWL Ebsworth
Fourth Plaintiff	:	HWL Ebsworth
Fifth Plaintiff	:	HWL Ebsworth
First Interested Party	:	In Person
Second Interested Party	:	In Person

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

Barboutis v The Kart Centre Pty Ltd [No 2] [2020] WASCA 41
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Conlan v Adams [2008] WASCA 61
CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121
George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287
Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320
Mariconte v Batiste [2000] NSWSC 288; (2000) 48 NSWLR 724
Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92
Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674
Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse [2019] WASC 167
Re Mali Nominees Pty Ltd (in liq) [2022] VSC 28
Re Say Enterprises Pty Ltd [2018] NSWSC 396
Tay Bok Choon v Tahanson Sdn Bhd [1987] 1 WLR 413

HILL J:

By interlocutory process dated 25 March 2024, the plaintiffs sought various orders including orders approving their remuneration, directions in relation to payments proposed to be made from trust property of the Ricon Superannuation Fund (Fund), as well as various ancillary orders.
After the filing of the interlocutory process, a deed of settlement was entered into between the interested parties (and other parties) in separate proceedings (CIV 1919 of 2022) (Probate Proceedings). As a result, the plaintiffs amended the orders sought by them to, in effect, seek directions as to the payments to be made and transfers of property in accordance with the deed.
At the hearing before me on 25 September 2024, all of the orders sought by the plaintiffs were opposed by Mrs Lynn, a director of the third plaintiff and a member of the Fund, who had been granted leave to be heard as an interested party. Mrs Barnes, who was also given leave to be heard as an interested party, was heard on the question as to whether directions should be made to reflect the deed of settlement to which she was a party.
For the reasons set out below, it is my view that:
(a)the plaintiffs' remuneration as receivers for the period 9 August 2022 to 6 June 2024 should be allowed in the sum of $75,000;
(b)directions should be given in the terms sought by the plaintiffs for the payment of $80,000 (less any tax required to be withheld by the third plaintiff) to Mrs Barnes and her three sisters and as to the order in which payments ought to be made; and
(c)directions should be given in the terms sought in order 3 of the minute of proposed orders filed 20 September 2024 (Amended Minute).

Procedural background

The hearing of the receivers' application has a somewhat complicated history. It was initially listed for directions on 12 April 2024. Shortly prior to the directions hearing, a notice of intention to be heard was filed by Mrs Lynn. On 12 April 2024, orders were made by the court to program the matter through to a hearing on 21 June 2024.
Orders were made on 27 May 2024, by consent, to extend the timeframe for Mrs Lynn to file any affidavits and submissions in opposition to the interlocutory process. On 10 June 2024, Mrs Lynn filed an affidavit opposing the orders sought by the plaintiffs.
On 20 June 2024, Mrs Lynn filed an interlocutory process seeking, among other things, an adjournment of the hearing listed for 21 June 2024. Counsel appeared for Mrs Lynn at the hearing on 21 June 2024. The application for an adjournment was not opposed by the plaintiffs. Directions were made for Mrs Lynn to file any affidavits and submissions in response to the receivers' application, as well as any interlocutory application supported by any affidavits and submissions, by 16 August 2024. Directions were also made for the filing of responsive material and the hearing was adjourned until 25 September 2024.
Shortly afterwards, counsel who had appeared for Mrs Lynn at the hearing advised the court that he no longer acted for her.
No documents were filed by Mrs Lynn on 16 August 2024.
On 16 September 2024, the plaintiffs' solicitors wrote to the court requesting the matter be relisted for directions. The basis for the request was that Mrs Lynn had sought their agreement to an adjournment of the hearing until the end of October 2024, to which they did not consent. In circumstances where no application for an adjournment had been filed, I declined the request to list the matter for directions.
On 20 September 2024, the court received a letter from a doctor sent on behalf of Mrs Lynn requesting that the court consider adjourning the hearing for a period of two months. The request was not accompanied by any application by Mrs Lynn for an adjournment, nor was any application filed at that time.
Shortly prior to the commencement of the hearing on 25 September 2024, Mrs Lynn filed a further affidavit and re‑circulated a copy of the interlocutory process previously filed by her.
At the commencement of the hearing, Mrs Lynn applied for an adjournment of the hearing. After hearing from Mrs Lynn, I dismissed the application for the reasons given on 25 September 2024. Mrs Lynn also sought and obtained leave to rely on her affidavit filed that morning for the purposes of the hearing, subject to the plaintiffs having an opportunity to file a responsive affidavit.
At the hearing, Mrs Lynn also sought leave for her interlocutory process to be heard that day. In circumstances where the interlocutory process had only just been re‑circulated and the other parties had not had an opportunity to address any of the matters raised, I refused this application. Given the history of the matter, I considered that Mrs Lynn had already been given a number of opportunities to file any application in a timely fashion, which had not occurred. In my view, it was simply too late to file or re‑circulate an application on the morning of the hearing and expect it to be heard that day, particularly where this would inevitably result in another adjournment of the hearing. Given these matters, I considered it was more appropriate for the interlocutory process to be listed for directions when judgment is delivered on the plaintiffs' interlocutory process. This will enable the court and the parties to assess what, if anything, in the interlocutory process still needs to be addressed.

Evidence on the application

At the hearing, the plaintiffs relied on fourteen affidavits, being:
(a)six affidavits of Travis Kukura filed 23 June 2022, 14 July 2022, two affidavits filed on 25 March 2024 (one sworn on 29 January 2024 and the other on 18 March 2024), 29 April 2024 and 12 June 2024;
(b)an affidavit of Desiree Bernedette Pavey filed 29 July 2022;
(c)affidavits of service of Nicole Ann Oskarsson filed 9 April 2024, Amanda Lynne‑Esther Scott filed 9 April 2024 and Rianna Marie Finlay filed 9 April 2024; and
(d)four affidavits of Emilio David Shambrook filed 11 April 2024, 30 April 2024, 12 June 2024 and 20 June 2024.
Mrs Lynn relied on two affidavits filed by her: an affidavit filed 21 June 2024 and one filed 25 September 2024.
Given the late filing of Mrs Lynn's affidavit of 25 September 2024, I granted leave to the plaintiffs to file a responsive affidavit by 14 October 2024. On 14 October 2024, the plaintiffs filed a further affidavit of Mr Kukura.
Given the contents of this affidavit, Mrs Lynn sought and was granted leave on 16 October 2024 to file an affidavit in response. The affidavit filed by Mrs Lynn on 29 October 2024 went beyond responding to the matters raised in Mr Kukura's affidavit of 14 October 2024. In so far as this affidavit goes beyond the leave granted by the court, I have disregarded its contents.
The hearing before me proceeded on the affidavit evidence filed by each of the parties. None of the deponents were cross‑examined. In these circumstances the court is required to apply the approach outlined in Tay Bok Choon v Tahanson Sdn Bhd.[1] Namely, where allegations made in a party's affidavit are credibly denied in an opposing affidavit, I am required to ignore the disputed allegations and determine the application by reference to the undisputed facts.[2] These disputed allegations include the management of the Cowalla Property after the plaintiffs were appointed and whether the Company ever owed money to the petitioning creditor.
[1] Tay Bok Choon v Tahanson Sdn Bhd [1987] 1 WLR 413, 419.
[2] Barboutis v The Kart Centre Pty Ltd [No 2] [2020] WASCA 41 [7].

Relevant factual background

Ricon Super Pty Ltd (Company) was incorporated on 18 October 2013. The Company initially had two directors (Richard Lynn and Consuella Lynn) and one secretary (Mrs Lynn). Mr and Mrs Lynn jointly owned the two issued shares in the Company.[3]
[3] Affidavit of Travis Kukura filed 23 June 2022 [8(e)] ‑ [8(f)].
The Company was previously the trustee of the Fund, having been appointed on 24 October 2013. The Fund is a self‑managed superannuation fund, which was established on 15 October 2012 by Mr and Mrs Lynn, and has two members: Mr and Mrs Lynn.
Mr Lynn died on or about 30 December 2021. At the time of his death, Mr and Mrs Lynn were legally married. Mr Lynn had four daughters from a previous marriage.
On 3 February 2022, orders were made by Master Sanderson to wind up the Company in insolvency and to appoint the first and second plaintiffs as joint and several liquidators of the Company. Master Sanderson ordered that the costs of those proceedings be fixed in the amount of $5,464 and paid out of the assets of the Company.[4]
[4] Affidavit of Travis Kukura filed 23 June 2022, 'TK-2'.
The only trade creditor of the Company is the petitioning creditor who is owed approximately $5,994. Most of this debt comprises the costs ordered by Master Sanderson. The judgment debt that formed the basis of the order was paid in December 2021 although the costs associated with this process were not. Mrs Lynn disputes (and has always disputed) that any amount was ever owed to this creditor by the Company.
At the time orders were made to wind up the Company, there was a balance in the Company's bank accounts of a little over $5,000.[5] Assets registered in the Company's name included a property known as the Cowalla Property, which was unencumbered, together with a ground water licence associated with the Cowalla Property.[6]
[5] Affidavit of Travis Kukura filed 23 June 2022 [14(a)].
[6] Affidavit of Travis Kukura filed 23 June 2022 [14(c)], [16].
On 3 March 2022, the first and second plaintiffs issued an initial letter to creditors of the Company. At that stage, their initial investigations indicated that the Company was trustee of the Fund and, in that capacity, owned the Cowalla Property, on which a related company operated an avocado farm.[7] It is clear from this letter that at this time, the plaintiffs were aware of Mr Lynn's death and that Mrs Lynn was the sole director of the Company.
[7] Affidavit of Travis Kukura filed 23 June 2022, 'TK-5'.
Between 24 February 2022 and 27 July 2022, Mrs Lynn and her son, Mr Tye McKain, communicated with the liquidators regarding the possibility of terminating the winding up of the Company.[8] On 20 April 2022, the plaintiffs informed Mrs Lynn that they estimated the costs of terminating the liquidation would be almost $65,000.[9] Following this, no steps were taken by Mrs Lynn to terminate the winding up; although, she asked for and was granted various extensions of time to enable her to seek legal advice.
[8] Affidavit of Travis Kukura filed 23 June 2022, 'TK-15'.
[9] Affidavit of Travis Kukura filed 23 June 2022, 'TK-22'.
On 2 May 2022, the first and second plaintiffs issued a statutory report to creditors. The report summarised the work that had been done by them to that stage. The work included enquiries to ascertain the assets of the Company, communications with Mrs Lynn, and inspection of the Cowalla Property.[10]
[10] Affidavit of Travis Kukura sworn 29 January 2024, 'TK-1'.
On 23 June 2022, the first and second plaintiffs commenced these proceedings. The orders sought in the originating process included orders that they be appointed as receivers and managers of the Fund. In the affidavits sworn by the first plaintiff in support of the application, Mr Kukura expressed the view that the Company did not hold any assets in its own right, all assets held by the Company were assets of the Fund, and that the debt owed to the petitioning creditor was a liability of the Fund. The Fund's assets included bank accounts, the Cowalla Property, as well as the proceeds of life insurance policies for Mr Lynn and investments in a BT management account and a managed fund. At the time, Mr Kukura believed there was a debt owing to the Fund for outstanding rental payments for the lease of the Cowalla Property.[11]
[11] Affidavit of Travis Kukura filed 23 June 2022 [12(a)], [14], [18].
On 9 August 2022, Master Sanderson made orders appointing the first and second plaintiffs as receivers and managers of the assets of the Fund and any other property that was held by the Company on trust. These orders were required because the Company ceased to be trustee of the Fund on the appointment of the plaintiffs, by reason of both the terms of the trust deed as well as the Superannuation Industry (Supervision) Act 1993 (Cth). At that stage, no new trustee had been appointed. The orders authorised (but did not require) the first and second plaintiffs to take possession of, preserve, maintain and sell the assets of the Fund. The orders also gave them the power to attend to various tasks including the taking of possession of, collection and protection of property of the Fund, the lodgment and recovery of a claim under any insurance policy, and the sale of property of the Fund, including any real property. Master Sanderson ordered that the costs, expenses and remuneration incurred by the first and second plaintiffs in acting as receivers, including the costs of the application, be paid from the property of the Fund.
The evidence of Mr Kukura is that the Fund has two primary assets:[12]
(a)the proceeds of two life insurance policies of Mr Lynn which total approximately $1.2 million; and
(b)the Cowalla Property.
[12] Affidavit of Travis Kukura filed 23 June 2022 [14(c)], [14(e)].
The only creditors of the Fund are the petitioning creditor and the Shire of Gingin for unpaid rates for the Cowalla Property for the financial years ending 30 June 2023 and 30 June 2024.[13] At the time of the appointment of the receivers, no rates were outstanding in relation to the Cowalla Property.
[13] Affidavit of Travis Kukura sworn 18 March 2024 [22(b)] ‑ [22(c)].
Following Mr Lynn's death, a dispute arose between Mrs Lynn and Mr Lynn's four daughters in relation to Mr Lynn's estate. Specifically, there was a dispute as to whether the beneficiaries of his estate were Mrs Lynn (as provided in Mr Lynn's will signed in 2019) or his daughters (in the instructions for a will given to a solicitor shortly prior to Mr Lynn's death). Mr Howard, the proposed executor, commenced proceedings in this court in 2022 in relation to this dispute, being the Probate Proceedings.
On 10 August 2023, the plaintiffs wrote to, among others, Mrs Lynn and Mr Lynn's four daughters providing an update on the receivership and liquidation of the Company and seeking their feedback on the options to finalise matters.[14] The letter stated that on the death of Mr Lynn, he ceased to be a member of the Fund. His entitlement to receive a Death Benefit vested in his estate. At that stage, the plaintiffs considered there were two options to finalise matters: first, for them to apply to the court for directions; or second, for the members of the Fund to appoint a new trustee. The letter acknowledged there was only one member of the Fund; namely, Mrs Lynn, and stated that if she appointed a new trustee, the plaintiffs would take the necessary steps to transfer the assets to the new trustee subject to the exercise of a lien over sufficient assets to pay the creditors and their costs.
[14] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-32'.
On 11 August 2023, Mrs Lynn advised of her intention to appoint a new trustee of the Fund and asked that no further steps be taken until this occurred.[15] In response, the plaintiffs' solicitors informed Mrs Lynn that the receivers would wait to receive feedback from the other interested parties and would take the course of action considered to be in the best interests of the Company and the Fund and after seeking and obtaining directions from the court.[16]
[15] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-33'.
[16] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-36', 'TK-37'.
On 1 September 2023, Mrs Lynn advised the plaintiffs' solicitors that she had appointed Ngai Whanau Super Pty Ltd (Ngai Whanau Super) as the trustee of the Fund.[17] In her email, while she continued to dispute the plaintiffs' costs, Mrs Lynn agreed that the existing costs of the plaintiffs be paid out of the insurance funds received by the Fund and that the plaintiffs should subsequently retire.
[17] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-39'.
On 5 September 2023, Mrs Barnes informed the plaintiffs' solicitors that she and her sisters opposed any transfer of the assets of the Fund until the Probate Proceedings were resolved.[18]
[18] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-47'.
On 8 September 2023 and 16 September 2023, Mrs Lynn renewed her request for the assets of the Fund to be transferred to Ngai Whanau Super.[19] In response, the plaintiffs' solicitors advised that this could only occur after an application to the court which was in the process of being prepared. The plaintiffs' solicitors refused to provide Mrs Lynn with a detailed breakdown of the time and costs sought by the plaintiffs or their solicitors on the basis she was not entitled to this information. The letter stated that the application for approval of remuneration would include the plaintiffs' legal fees and that the application would contain a detailed breakdown of the plaintiffs' remuneration and legal costs for both the liquidation and receivership.[20] I note by way of passing that the application filed by the plaintiffs does not include any breakdown of the legal costs that have been incurred by the plaintiffs.
[19] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-44', 'TK-45'.
[20] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-46'.

To date, the assets of the Fund have not been transferred to Ngai Whanau Super. This is because Mr Kukura did not consider this to be 'in the best interests of the parties given the ongoing issues relating to the estate of Mr Lynn'.[21]
[21] Affidavit of Travis Kukura sworn 18 March 2024 [34(c)].
The parties to the Probate Proceedings entered into a deed of settlement on 22 April 2024 (Deed).[22] Pursuant to the terms of the Deed, Mrs Lynn and each of Mr Lynn's daughters agreed that the parties would 'do all things necessary and sign all documents necessary in a timely fashion to authorise' the plaintiffs' application to this court to distribute the funds and assets of the Fund to (cl 4.1):
(a)pay $80,000 to each of Mr Lynn's daughters, a total of $320,000; and
(b)the balance of the estate to Ngai Whanau Super.
[22] Affidavit of Travis Kukura filed 29 April 2024, 'TK-1'.
The Deed has been signed by each of the parties, including Mrs Lynn. Her signature (as well as the signatures of the other signatories to the Deed) has been witnessed by a solicitor. In the Deed, each party warrants they have entered into it having had the benefit of legal advice or the opportunity to take legal advice (cl 3.3) and that the terms of the Deed can be disclosed to the plaintiffs' solicitors and to this court (cl 13).
Following the execution of the Deed, the plaintiffs filed two further minutes of proposed orders in these proceedings: an amended minute of proposed orders filed 12 June 2024; and the Amended Minute. The plaintiffs now seek directions in terms of the Amended Minute to enable the terms of the Deed to be implemented, as well as for the approval of their remuneration and ancillary orders for the completion of the liquidation and receivership.

Should the plaintiffs' remuneration be approved in the amounts sought?

The court has the power to approve the remuneration of the plaintiffs both in their capacity as liquidators (pursuant to s 60‑5 and s 60‑10 of sch 2 of the Corporations Act 2001 (Cth) (Act) (IPS)) and as court‑appointed receivers (O 51 r 4 of the Rules of the Supreme Court 1971 (WA) (Rules)).
Originally, there were four components of the remuneration application, namely:[23]
(a)approval of the remuneration of the first and second plaintiffs (Liquidators) for the period 18 July 2022 to 18 August 2023 of $5,777.00 (ex GST);
(b)approval of the remuneration of the fourth and fifth plaintiffs (Receivers) for the period 9 August 2022 to 6 June 2024, of $155,329.50 (ex GST);
(c)approval of the future remuneration of the Liquidators to the conclusion of the liquidation in the amount of up to $6,590.00 (ex GST); and
(d)approval of the future remuneration of the Receivers to the conclusion of the receivership in the amount of up to $45,567.50 (ex GST).
[23] Plaintiffs' minute of proposed orders filed 20 September 2024.
Mrs Lynn filed a notice of objection to the remuneration claimed, although, no further details were provided as to the basis or grounds of the objection. The primary objection (which was also made by Mrs Barnes in her oral submissions) is that the claimed remuneration is excessive.
At the hearing, following an exchange with the court, the plaintiffs withdrew their application for approval of their future remuneration.[24] As a result, the question for the court is whether the plaintiffs' remuneration up to 6 June 2024 should be approved in an amount exceeding $160,000. Most of the remuneration claimed by the plaintiffs is for work undertaken in their capacity as receivers of the Fund. Mr Kukura's evidence is that over the course of the receivership, he has written off $12,551.50 in time that has been recorded but not claimed as part of this application.[25]
[24] ts 51.
[25] Affidavit of Travis Kukura filed 12 June 2024 [31].
In their capacity as liquidators, the plaintiffs have previously had remuneration of almost $50,000 approved by the Company's creditor.
Remuneration has been charged on a time‑based approach using six‑minute increments and the hourly rate of each staff member. Mr Kukura's evidence is that the hourly rates charged are reasonable and comparable to rates charged in the insolvency market.
Before turning to the specific detail of the amounts claimed, it is important to note that the plaintiffs' claim arises in respect of the external administration of a Company where the initial debt was less than $6,000, with assets of less than $2 million. Given these matters, on its face, the claimed remuneration (of approximately 10% of the assets excluding legal fees and more than 260% of the initial debt) does not appear to be proportional. To explain the basis for the application and the conclusion I have reached, it is necessary to refer in some detail to the evidence of the work that was done. Before doing so, it is useful to set out the statutory provisions and legal principles that are relevant to this application.

Statutory provisions

Pursuant to s 60-5(1) of the IPS:
An external administrator of a company is entitled to receive remuneration for necessary work properly performed by the external administrator in relation to the external administration, in accordance with the remuneration determinations (if any) for the external administrator.
The remuneration of an external administrator can be approved by a resolution of creditors, a committee of inspection (if there is one), or by the court.[26] The remuneration of a court-appointed receiver can only be fixed by the court.
[26] Corporations Act 2001 (Cth) sch 2, s 60-10.
Section 60-12 of the IPS sets out the matters which the court can take into account in determining whether the remuneration is reasonable, being:
(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.
Unless an order is made by the court, the plaintiffs will only be entitled to the default amount for the liquidation, as calculated in accordance with s 60‑15 of the IPS. In the plaintiffs' case, the maximum default amount (exclusive of GST) is $5,448.
The relevant principles that apply to the assessment can be summarised as follows:[27]
(a)The plaintiffs are entitled to the costs, charges and expenses properly incurred in the discharge of their ordinary duties, or, in the case of a receiver, in the performance of extraordinary services that have been sanctioned by the court.
(b)The ultimate question is what amount of remuneration is 'reasonable'. This involves considering whether the work in respect of which remuneration is claimed was reasonably undertaken, and whether the amount claimed for it is fair and reasonable.
(c)The plaintiffs bear the onus of justifying the reasonableness and prudence of the tasks undertaken for which remuneration is sought, and the reasonableness of the remuneration claimed for them.
(d)If a time-based approach is adopted, the court is guided by professional scales of charges, with emphasis on the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work. The court will usually act on time sheets created in their office, provided that they do significantly more than merely detail the total number of hours spent by the liquidator or receiver and officers of particular grades on his or her staff.
[27] Re Say Enterprises Pty Ltd [2018] NSWSC 396 [6].
An important consideration in determining reasonableness is the concept of proportionality (being the relationship of the work done and the remuneration claimed to the value of the estate and the services provided).[28] Proportionality is also to be assessed by reference to the difficulty and importance of the task to be performed.[29]
[28] Higgins v JSS Logistics Pty Ltd (in liq) [2022] FCA 1320 [19].
[29] Conlan v Adams [2008] WASCA 61 [47].
In assessing the reasonableness of the claim for remuneration, it is sufficient for the court to take an impressionistic approach. Where the claim for remuneration includes a claim for disbursements, no court approval or specific order is necessary in the absence of a challenge, although, receivers should scrutinise them to ensure that they are reasonable and properly payable. The court has an inherent jurisdiction to review receivers' disbursements as they are officers of the court. In order to obtain prior protection in respect of the payment of a disbursement, a receiver may seek a direction that they would be justified in paying certain disbursements.

Creditors' approvals of remuneration

In their first report to creditors, the plaintiffs sought approval for their remuneration. At that stage:[30]
(a)the plaintiffs' fees were $29,312, which covered the period from 3 February 2022 to 30 April 2022;
(b)the plaintiffs' anticipated incurring a further $20,000 in fees to the conclusion of the liquidation if an application was brought to terminate the liquidation in a timely fashion; and
(c)in the event the plaintiffs were required to sell the Cowalla Property, the plaintiffs estimated their fees could be a further $50,000 to $75,000 (over and above the two amounts for which approval was sought).
[30] Affidavit of Travis Kukura filed 23 June 2022, 'TK-6', page 69.
The report included a summary of the time charged by each of the people working on the matter falling within the following categories:[31]
[31] Affidavit of Travis Kukura filed 23 June 2022, 'TK-6', page 73.

Work Fees (ex GST)

Administration $7,351.00

Assets $6,041.50

Creditors $5,762.00

Investigations $10,157.50

It also included a broad description of the work undertaken in each of these categories.[32]
[32] Affidavit of Travis Kukura filed 23 June 2022, 'TK-6', pages 75 - 79.
The plaintiffs' remuneration of $29,312 together with anticipated additional fees of $20,000 was approved by the sole creditor of the Company.[33]
[33] Affidavit of Travis Kukura sworn 29 January 2024 [4].
Subsequently, on 31 August 2023, the plaintiffs sought approval from the creditor of the Company (without a meeting) for their remuneration for the period 18 July 2022 to 18 August 2023 in the amount of $72,742.50.[34] This amount comprised the work undertaken by the plaintiffs in both their capacity as liquidators (in the amount of $5,777) and receivers ($66,965.50). Approval was given by the sole creditor of the Company. In so far as this approval concerns their remuneration in their capacity as receivers, the plaintiffs accept the creditor did not have the power to approve these fees and the approval is not binding. Mr Kukura acknowledged that this issue arose because of the 'bundling' of the work done by the plaintiffs without consideration as to whether it was work in the liquidation or receivership.[35]
[34] Affidavit of Travis Kukura sworn 29 January 2024, 'TK-2'.
[35] Affidavit of Travis Kukura sworn 29 January 2024 [29].
In the second report to creditors, Mr Kukura estimated that the total remuneration for the appointment would be between $175,000 and $250,000 (plus GST). He explained that the difference between this estimate and that contained in the first creditors' report (a total of $50,000) arose from the following:[36]
(a)progressing the application for the plaintiffs' appointment as receivers and managers of the Fund;
(b)the submission of insurance claims for Mr Lynn held by the Company;
(c)dealing with the complex legal issues regarding the appointment of a liquidator of a corporate trustee of a self-managed superannuation fund including meetings with lawyers, considering legal advice received from lawyers and counsel, and determining the next steps in the context of the liquidation;
(d)correspondence with the members and beneficiaries of the Fund;
(e)various matters relating to the Cowalla Property and seeking advice on those matters;
(f)the realisation of assets, including the Cowalla Property, as required; and
(g)the application to court seeking directions, including the appointment of a new trustee.
[36] Affidavit of Travis Kukura sworn 29 January 2024, 'TK-2', pages 40 - 41.
The report acknowledged that the estimated costs would be impacted by whether the trustee of the Fund was replaced or whether the plaintiffs would be required to seek directions from the court.
Given the relatively small amount of remuneration sought, no further approvals have been sought or obtained from creditors.[37]

Formal matters

[37] Affidavit of Travis Kukura sworn 29 January 2024 [30].

I am satisfied that the plaintiffs have given notice of their intention to apply to the court for approval of their remuneration to Mrs Lynn, her two sons, Mrs Barnes (on behalf of her and her sisters), the solicitor for Mr Howard (the executor under the disputed will), as well as the Australian Securities and Investments Commission (ASIC) and the Australian Taxation Office (ATO). These parties have also been provided with a copy of the supporting affidavit of Mr Kukura sworn 29 January 2024.[38]
[38] Affidavit of Nicole Ann Oskarsson filed 9 April 2024; Affidavit of Rianna Marie Finlay filed 9 April 2024; Affidavit of Amanda Lynne-Esther Scott filed 9 April 2024.
This notice was given at least 21 days prior to the filing of the interlocutory process, as required by r 9.2(2) of the Supreme Court (Corporations) (WA) Rules 2004 (Corporations Rules). The supporting affidavit addressed each of the matters in r 9.2(6) of the Corporations Rules.

Liquidators' remuneration for the period 18 July 2022 to 18 August 2023

The Liquidators seek approval for their fees of $5,777 for this period. The work done by the Liquidators over this period included:
(a)dealing with insurance requirements for the Cowalla Property including obtaining, reviewing and considering pre-appointment policies;
(b)communicating with all interested parties regarding the liquidation;
(c)tasks associated with making the application to court for their appointment as Receivers;
(d)preparation and issue of the report to creditors;
(e)providing updates to petitioning creditor(s); and
(f)preparing and lodging relevant ASIC forms.
The plaintiffs categorised this work as falling within the following categories:

Work Fees (ex GST)

Administration $1,423.50

Assets $726.00

Creditors $1,642.00

Investigations $1,985.50

In support of the application, the plaintiffs adduced copies of electronic timesheets in evidence that record time entries that add up to the total amount claimed.
In circumstances where the Liquidators have already received almost $50,000 for their remuneration, it is not clear from the evidence before the court, why the additional work that has been done was either necessary or proportionate. Given there are only two creditors of the Company and the Company has very limited assets, these amounts do not, on their face, appear proportionate or reasonable. The major assets of the Company (the Cowalla Property and the proceeds of the life insurance policies), are assets of the Fund and the subject of the receivership.
In my view, the amount which the Liquidators have already received approval for appropriately remunerates them for the necessary work that has been properly performed by them in the liquidation of the Company. While I accept that the external administration of this matter has been challenging due to a number of factors, including the nature and volume of correspondence received from the interested parties, I do not consider that these matters justify any further amount being approved for the plaintiffs' remuneration in their capacity as liquidators.

Receivers' remuneration for the period 9 August 2022 to 6 June 2024

The plaintiffs, in their capacity as receivers and managers of the Fund, seek approval for their fees of $155,329.50 for this period. This comprises amounts for three different periods, namely:
(a)$74,185 for the period 9 August 2022 to 20 October 2023;
(b)$70,405 for the period 21 October 2023 to 21 April 2024; and
(c)$10,739.50 for the period 22 April 2024 to 6 June 2024.

Claim for period 9 August 2022 to 20 October 2023

The plaintiffs prepared a 'Receivership Remuneration Report' for the work undertaken between 9 August 2022 to 20 October 2023. Some of this work was also the subject of the plaintiffs' second report to creditors.[39]
[39] Affidavit of Travis Kukura sworn 29 January 2024, 'TK-3'.
The plaintiffs categorised this work as falling within the following categories:

Work Fees (ex GST)

Assets $27,812.50

Investigations $43,229.50

Administration $3,143.00

In his affidavit sworn 29 January 2024, Mr Kukura set out the work done in respect of each of these categories. The use of these categories is consistent with the guidance given by ARITA.[40]
[40] ARITA Practice Statement Insolvency 5.
In relation to the assets, this work is described as follows:[41]
[41] Affidavit of Travis Kukura sworn 29 January 2024 [42] ‑ [44].
42.Plant and equipment:
(a)Liaising with the insurance broker in respect of insurance for plant and equipment on the farm property located at 966 Nabaroo Road, Cowalla, Western Australia (Cowalla Property).
(b)Inspection of plant and equipment on the Cowalla Property.
43.Land and buildings:
(a)Liaising with third parties regarding the status of the property of the Trust, including the Cowalla Property and meeting with owners/occupiers of neighbouring properties to discuss shared fences and security matters.
(b)Consulting with HWLE regarding:
(i)the lease agreement in relation to the Cowalla Property;
(ii)preparation and lodgment [sic] of a caveat over the Cowalla Property;
(iii)the obligations of a receiver in the context of the terms of the lease, including considering maintenance required to be undertaken at the Cowalla Property; and
(iv) preparation and issuance of default notices in respect of the lease over the Cowalla Property.
(c)Travelling to the Cowalla Property for inspection and to document the status and maintenance of it, as well as to document any third-party property present.
(d)Corresponding with the insurance broker regarding insurance policies and renewal required for the Cowalla Property and other property.
(e)Liaising with WA Police and the insurance company regarding break-ins at the Cowalla Property and liaising with HWLE in respect of queries from WA Police.
(f)Obtaining quotes to undertake slashing and property maintenance, as required under the lease agreement and consistent with receivership obligations.
(g)Instructing a property maintenance contractor regarding works to be undertaken at the Cowalla Property, including in respect of the fire breaks, slashing required by the local council and repair works to fences and gates and security concerns as a result of the break-ins.
(h)Considering depreciation schedules for details of assets owned by the Trust to compare with assets at the Cowalla Property.
44.Other assets:
(a)Attending to the compilation of relevant documentation for insurance claim and lodging claims for life insurance policies with Zurich.
(b)Liaising with Zurich regarding life insurance policies and the status of the claims, including completing forms for the payout of the insurance policies.
(c)Liaising with the pre-appointment insurance broker regarding policies and status of claims.
(d)Corresponding with the beneficiaries of Mr Lynn's estate regarding the insurance policy claim.
(e)Issuing correspondence to, and liaising with, the Coroner's Court for updates on the investigation into Mr Lynn's death.
(f)Liaising with HWLE regarding the implications of receiving and drawing on the Life Insurance Proceeds, including reviewing and considering advice received on these matters.
(g)Arranging for the Life Insurance Proceeds to be transferred into an interest bearing term deposit account.
(h)Liaising with the post appointment insurance broker regarding the life insurance policy claim.
(i)Liaising with the Company's pre-appointment accountants regarding investment funds held in the Magellan Wholesale Plus Global Fund and liaising with the Fund regarding same.

In relation to investigations, the work is described as follows:[42]
[42] Affidavit of Travis Kukura sworn 29 January 2024 [45] ‑ [46].
45.Conducting the following investigations into the affairs of the Company as trustee and its property.
(a)Reviewing the Trust's books and records.
(b)Corresponding with the Trust's accountant regarding the Trust deed.
(c)Liaising with the Trust's accountant and auditor regarding books and records.
(d)Attending to phone calls from the members and beneficiaries of the Trust.
(e)Reviewing bank statements relevant to the Trust.
(f)Meeting with the internal RSM Superannuation team regarding:
(i)accrued entitlements under Trust;
(ii)queries regarding the trust deed; and
(iii)Trust compliance queries.
(g)Liaising with the Australian Taxation Office (ATO) regarding the status of the Company as trustee of the Trust and ancillary matters.
(h)Reviewing and considering implications of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) and liaising with HWLE regarding same.
(i)Issuing correspondence to the members and beneficiaries of the Trust regarding the Company's disqualification as trustee of the Trust and matters arising because of the operation of the SIS Act.
(j)Liaising with HWLE regarding obligations of Receivers in respect of the Trust.
(k)Considering options in Receivership given complexities described above and issuing correspondence to the members and beneficiaries of the Fund detailing the options available in the Receivership and liquidation of the Company.
(l)Liaising with the members and beneficiaries of the Trust in response to the Receivers' letter regarding the options available.
(m)Considering implication of variations to the trust deed sent by various members and beneficiaries of the Trust.
46.Litigation and recoveries:
(a)Preparing briefs to solicitors.
(b)Considering Court applications in respect of appointment as Receivers as well as application for directions as to how the property of the trust should be dealt with.
(c)Liaising with members and beneficiaries regarding appointment as Receivers.
(d)Discussions with HWLE regarding the application to Court in respect of (amongst other things) selling the Cowalla Property in circumstances where the asset of the Trust and the Company are sufficient to pay the creditors in full (Directions Application).
(e)Reviewing brief prepared for counsel in respect of proposed Directions Application.
(f)Corresponding with the members and beneficiaries of the Trust regarding the Directions Application, the trust deed, Life Insurance Proceeds and the SIS Act.
(g)Preparing file notes from conversations held with the members and beneficiaries of the Trust and other related parties.
(h)Providing instructions for affidavits in respect of Directions Application, including reviewing draft affidavits.
(i)Liaising with HWLE regarding responses received from the members and beneficiaries to the proposed Directions Application.
Following the hearing, Mr Kukura filed a further affidavit providing further details of the work that was done and why he contended this work was proportional and reasonable. In summary, his evidence, which I accept, was that significant work was required to be done for the plaintiffs to understand their obligations of maintaining the Cowalla Property and to address various issues at the Cowalla Property (including responding to reports of break-ins), to lodge the claim under Mr Lynn's life insurance policy, consider the terms of the Deed and the relevant legislation, the impact of the Probate Proceedings, and to address the assertions made by Mrs Lynn (and her children) about the plaintiffs' conduct.
I accept that the work done by the Receivers in lodging a life insurance claim and taking steps to insure and safeguard the Cowalla Property was necessary, given these matters comprised the Fund's major assets. I also accept that it was necessary for the Receivers to understand their obligations as receivers and managers of a self‑managed superannuation fund including under the relevant federal legislation. However, given the amounts owed to the creditors of the Company and the Fund as summarised above at [49], I do not consider the amount sought by the plaintiffs is proportionate. In my view, the plaintiffs' remuneration for this period should be allowed in the sum of $50,000.

Claim for period 21 October 2023 to 21 April 2024

The details of the plaintiffs' claim for this work is set out in Mr Kukura's affidavit filed 29 April 2024. This work has been categorised as falling within the following items:

Work Fees (ex GST)

Assets $4,540.00

Investigations $65,777.50

Creditors $87.50

The original affidavit filed in support of the application did not provide an overview of the work done in each of these categories but provided a more general overview. This work included tasks associated with this application, including 'reviewing timesheets and preparing schedules for inclusion in remuneration affidavits'. It was apparent from the description of the work that almost the entirety of the amount claimed in this time period was associated with the interlocutory application filed by the plaintiffs.
Mr Kukura's evidence, in his affidavit filed after the hearing, confirmed this position. In addition to the work involved in the application, his evidence was that it was also necessary to consider the taxation obligations of the Company and liaise with the former accountant and auditor of the Fund.[43]
[43] Affidavit of Travis Kukura filed 14 October 2024 [33].
It is clear from the evidence before the court that a significant portion of the costs incurred has arisen from the plaintiffs' refusal to transfer the assets of the Fund to Ngai Whanau Super. Two reasons were given for their this refusal. First, the plaintiffs' concerns about the existence of the Probate Proceedings. In their view, the issues between the 'beneficiaries' needed to be resolved as to how the assets of the Fund should be dealt with. Second, because of these concerns, the plaintiffs had concerns about Mrs Lynn and transferring the assets to Ngai Whanau Super.
In taking this position, it is my view that the plaintiffs conflated the interests of the beneficiaries of Mr Lynn's estate with the interests of the members of the Fund. It is not clear on the evidence before me why this was the case and why the plaintiffs spent time and effort on matters that appear to be unrelated to the activities of the Company or Fund to which they were appointed, but instead concern the personal estate of Mr Lynn.
That said, I accept there was some complexity in relation to the liquidation and receivership which justified an application for directions and that it was necessary for the plaintiffs to seek approval of their remuneration. However, these matters do not, in my view, justify the quantum of the remuneration sought by the plaintiffs.
Taking an 'impressionistic' approach as to the amount that would reflect the work that was reasonable, necessary, and proportionate for the following reasons, I consider that the plaintiffs' remuneration for the period between 21 October 2023 and 21 April 2024 should be approved in the amount of $25,000.
First, this amount reflects my view that on the appointment of a replacement trustee of the Fund, the plaintiffs should have transferred the assets to the new trustee (as was initially set out in their letter to the interested parties), or sought directions from the court approving the transfer of the assets. The question as to what, if anything, should occur to protect the interests of Mrs Barnes and her sisters was, in my view, a matter for those parties in the context of the Probate Proceedings. It was not a dispute which it was necessary for the trustee to remain a party to.
Second, had this occurred, the plaintiffs could have finalised the receivership by no later than December 2023 and avoided the significant costs that have been incurred in this matter. On this basis, I have significantly discounted the costs that have been claimed.

Claim for period 22 April 2024 to 6 June 2024

The details of the plaintiffs' claim for this work is set out in Mr Kukura's affidavit filed 12 June 2024. This work has been categorised within the following items:[44]
[44] Affidavit of Travis Kukura filed 12 June 2024 [26].

Work Fees (ex GST)

Assets $758.00

Investigations (including litigation) $9,981.50

Once again, the original affidavit filed in support of the application did not explain the work that was done in each of these categories, but simply provided a more general overview of the work done. This included tasks associated with this application such as 'reviewing timesheets and preparing schedules for inclusion in remuneration affidavits'.
Further details of the work done was provided by Mr Kukura in his affidavit filed after the hearing. This work included the costs involved in the amendments to the interlocutory application before the court, reviewing the Deed (including considering various issues that arose from the deed), and writing to the parties on alternative options.
Once again, it is not clear from the evidence before me why this work was necessary and how it was related to the payment of creditors or the activities of the Company or Fund to which they were appointed. These matters primarily concern the personal estate of Mr Lynn.
In these circumstances, I am not satisfied that this further work was necessary or proportionate and do not consider that any further amount should be allowed.

Conclusion

In assessing the reasonableness of the plaintiffs' claim for remuneration, I have taken an impressionistic approach of the total amount claimed. I do not consider that, on the evidence before me, the receivers have discharged their onus in establishing the total amount claimed was necessary or proportionate.
In my view, their remuneration for the period 9 August 2022 to 6 June 2024 should be allowed in the sum of $75,000. This takes into account the amount of the original debt (less than $6,000), the number of creditors (two), and the value of the estate (of approximately $2 million), balanced against the complexity that has arisen largely because of the conduct of and claims made by Mrs Lynn, which they have been required to respond to.
For the reasons set out above, I do not consider the amount claimed by the plaintiffs is proportionate or reflects work that was necessary. By way of example, from my assessment of the time entries, an amount in excess of $25,000 has been sought for this part of the application; namely, their remuneration. While I accept that there will always be some costs associated with the application for remuneration, this amount is disproportionate and reflects, at least in part, inconsistencies in the manner in which time was recorded and a failure to distinguish between tasks associated with the liquidation and those associated with the receivership. In my view, these are not costs that should be sought to be recovered from the assets of the Fund.

Payment of legal costs

In their application, the plaintiffs did not seek approval or directions for the payment of their legal costs. On the evidence before me, as at July 2023, these costs exceeded $110,000. It is unclear whether this amount included counsel fees, although it appears this is not the case. Given the events that have occurred since that date, it is clear that the plaintiffs' legal costs will significantly exceed this amount, although it is not clear by how much.
Given my conclusion as to the costs that have been incurred by the plaintiffs, my preliminary view is that I should exercise my discretion to review the disbursements and costs (including legal costs) that have been incurred by the plaintiffs in their capacity as receivers and managers. Before doing so, given this has not been raised previously with the plaintiffs, I will hear from the plaintiffs before making an order to this effect.

Should the directions sought by the plaintiffs be made?

Pursuant to s 90‑15(1) of the IPS, the court may make 'such orders as it thinks fit in relation to the external administration of a company'. The power is broad and is at least as extensive as the powers formerly available under s 479(3) and s 511 of the Act. The principles which govern the exercise of this power can be summarised as follows:[45]
(a)the power to give advice is intended to facilitate the liquidator's performance of their functions and should be interpreted widely to give effect to that purpose;
(b)the court may give a direction where it is just and beneficial to the liquidation to do so;
(c)the function of the power is to give the liquidator advice as to the proper course of action to take in the liquidation;
(d)the court will not give a direction as to a matter of commercial or business judgment; there must be a legal issue of substance or procedure, including an issue of power, propriety or reasonableness; and
(e)the power will generally not be used to determine substantive rights and make binding orders, although the width of s 90‑15 allows the court to do so if the necessary parties are before the court.
[45] Re Mali Nominees Pty Ltd (in liq) [2022] VSC 28 [23].
Subject to the liquidator making full and fair disclosure of the material facts, the effect of a direction is to protect the liquidator from claims that they have acted unreasonably, inappropriately, or in breach of their duties; it does not determine rights and liabilities that arise out of the proposed transaction.[46] Put another way, the order of the court sanctions a proposed course of conduct by the liquidator.[47]
[46] Re GB Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674, 679 ‑ 680.
[47] Re GB Nathan & Co Pty Ltd (in liq) (679 ‑ 680).
As was noted by Vaughan J in Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse:[48]
A direction that an external administrator may properly and justifiably carry out a proposed course of conduct is used to signify that it is appropriate that he or she do so. It is a conventional form of direction in common use. It is implicit in such an order that the court is approving the proposed conduct. Often a proposed direction in this form will raise an issue of propriety or reasonableness. Directions are available and appropriate on that basis.
[48] Re GGA Lifestyle Pty Ltd (Administrators Appointed); ex parte Woodhouse [2019] WASC 167 [23] (citations omitted).
In so far as the application is brought by the plaintiffs in their capacity as receivers and managers, I accept that the power of the court to appoint a receiver carries with it the implied power to give directions to enable them to discharge and carry out those functions for which they were appointed without the real risk of litigation. The function of the court on an application for directions by a court‑appointed receiver is analogous to its function with respect to a provisional liquidator. It is appropriate for the court to give directions in order to provide guidance to the receiver, not only on matters of law, but also on the propriety or reasonableness of the contemplated exercise of discretion.[49]
[49] Mariconte v Batiste [2000] NSWSC 288; (2000) 48 NSWLR 724 [75] ‑ [76].
In this case, I am satisfied that as Liquidators and Receivers, the plaintiffs have standing to bring the application and that the interlocutory application has been served on all interested parties who have been given a reasonable opportunity to appear and oppose the orders sought.

Should directions be given to authorise payments in terms of the Deed?

Documents filed by Mrs Lynn prior to the hearing listed on 21 June 2024 raised a number of issues in relation to the Deed, including that she agreed to the terms of the Deed under pressure and without the benefit of any legal advice. No further particulars or evidence have been provided for either of these contentions.
I accept that the plaintiffs' obligations to make the payments in accordance with the Deed requires the plaintiffs to consider how these payments can be made and what their obligations are in respect of any payments. This is particularly the case in circumstances where:
(a)the plaintiffs are not a party to the Deed but are required to implement it; and
(b)Mrs Lynn has raised questions about its enforcement and implementation.
On the face of the Deed, Mrs Lynn's signature has been witnessed by her solicitor. There is no evidence that any action has been commenced in relation to the Deed nor are any orders sought in these proceedings or the Probate Proceedings as to its validity. The effect of the directions sought by the plaintiffs will not determine any rights or liabilities of Mrs Lynn or the other parties to the Deed. However, it will provide some protection to the plaintiffs if they act to distribute the funds they hold in accordance with its terms.
Given the matters raised by Mrs Lynn, I consider it is entirely appropriate for the plaintiffs to seek directions. In circumstances where the Deed remains on foot and has been executed by all parties, I am satisfied that it is appropriate to make directions that the plaintiffs would be justified and acting reasonably to give effect to the terms of the Deed by making the payments and transferring the assets as contemplated by cl 4.1 of the Deed.
The next question is whether the amount to be paid to Mrs Barnes and her three sisters is a payment inclusive or exclusive of any obligation to withhold tax. The answer to this question turns on the proper construction of the Deed.
The principles which govern the proper construction of an agreement are well‑known. They were summarised by the Court of Appeal in Pilbara Iron Ore Pty Ltd v Ammon as follows:[50]
The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract. The instrument must be read as a whole.
The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business commonsense may be a topic on which minds may differ. (citations omitted)
[50] Pilbara Iron Ore Pty Ltd v Ammon [2020] WASCA 92 [85] ‑ [86].
Where an agreement uses definitions, the words of the definition should be read into the operative text (unless the context requires otherwise).[51]
[51] George 218 Pty Ltd v Bank of Queensland Ltd [No 2] [2016] WASCA 182; (2016) 313 FLR 287 [82] and the cases cited; Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219.
A contract can only have one correct meaning. The single legal meaning of the contract is determined by identifying the objective intention of the parties by reference to the text of the contract, construed in light of its context and purpose.[52]
[52] CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 [158].
In this case, the relevant clause of the Deed is cl 4, and in particular, cl 4.1.1. This clause provides that:
The parties will do all things necessary and sign all documents necessary in a timely fashion to authorise the liquidators and receivers and RICON SUPER PTY LTD, being RSM AUSTRALIA PARTNERS (Liquidators), to apply to the Supreme Court to distribute the funds and assets held by the Liquidators as follows.
4.1.1.1.First in payment of a sum of $80,000 each to each of CHRISTINA, SARAH, BETHANY and KATE, being a total sum of $320,000; and
4.1.1.2.thereafter the balance to NGAI WHANAU SUPER PTY LTD.

The plaintiffs' evidence is that these payments are required to be made from the proceeds received by the Fund from the life insurance policies and that, pursuant to s 302‑145(1) of the Income Tax Assessment Act 1997 (Cth), the third plaintiff is required to withhold from these payments amounts for taxation; namely, 15% for PAYG and 2% for the Medicare levy.[53] If these amounts are withheld, Mr Lynn's daughters will receive less than $80,000, although depending on their personal circumstances, they may be entitled to claim back some or all of the tax that has been withheld.
[53] Affidavit of Travis Kukura filed 12 June 2024 [10] ‑ [11]; Plaintiffs' note in relation to taxation of payments filed 25 September 2024.
Mrs Barnes says that the Deed, which requires the plaintiffs to pay each of them the sum of $80,000, is silent on any obligation to pay tax, and that any taxation obligations are not to be borne by them. In her view, all of the assets held by the plaintiffs are assets of Mr Lynn's estate.
On its face, the obligation created by the clause is clear. It requires the parties to the Deed to authorise the plaintiffs in these proceedings to apply for directions to enable a payment of $80,000 to be made to each of Mr Lynn's daughters with the total payment being a sum of $320,000. The remainder of the assets and funds are then to be paid or transferred to Ngai Whanau Super.
The clause does not address the taxation obligations of any party and whether the payments in cl 4.1.1.1 are a net or gross payment. There is no other clause in the Deed which addresses the taxation obligations of any party.
For the following reasons, it is my view that on the proper construction of the Deed, cl 4.1.1.1 requires the sum of $320,000 to be deducted from the funds held by the plaintiffs to enable payments to be made to each of Mr Lynn's four daughters. If the Receivers are required to withhold any amounts for taxation, on which I make no comment, these amounts form part of this global amount. That is, the payment of $80,000 is a gross amount and not a net amount.
First, the obligation to make the payments is an obligation imposed on the plaintiffs and not the estate of Mr Lynn. For this reason, the payment is not a distribution under his will. While I accept that Mrs Barnes and her sisters may have viewed all of the assets of the Fund as forming part of Mr Lynn's estate, this does not reflect the legal basis on which these assets were held.
Second, the text of the clause requires the payment of $80,000 to each of the daughters totalling the sum of $320,000. The only way that these amounts can total $320,000 is if the payment of $80,000 is a gross and not a net payment.
Third, it is clear from the text of the clause that the parties objectively intended that each of Mr Lynn's four daughters would receive the same amount (namely $80,000). If the payment does not include the withholding tax and their individual taxation obligations are different, this will not be achieved.
Fourth, the taxation obligations of each of these parties are personal obligations. These obligations may differ. If the sum of $80,000 was a net amount, it would be necessary for the plaintiffs to understand the individual circumstances of each of the four daughters before payment was made to them to ensure the total amount received by each was $80,000. There is nothing in the terms of the Deed which requires them to provide information to the plaintiffs to enable this calculation to be done.
This construction is consistent with the context of the Deed, namely that once a defined amount was deducted, the balance of the assets held by the plaintiffs are to be transferred to a company associated with Mrs Lynn. It is also consistent with the purpose of the Deed, which was to settle the Probate Proceedings.
In my view, the directions sought by the plaintiffs in orders 2 and 3(a), (d) and (e) of the Amended Minute are broadly consistent with both the terms of the Deed as well as the provisions of the Act, in so far as to how the assets of a company in liquidation are to be distributed. In so far as the directions seek orders that the plaintiffs would be justified and acting reasonably in deducting any tax from the amounts payable to each of Mr Lynn's daughters, for the reasons set out above, I consider this is consistent with the terms of the Deed.

Should directions be made in relation to the lease of the Cowalla Property?

On 31 December 2017, the Company entered into a written lease agreement with Ricon (WA) Pty Ltd as trustee for the Salt and Light Trust in relation to the Cowalla Property (Lease).[54] The initial term of the Lease was for 10 years with annual rental payments commencing at $5,000 (for 2018) and rising to $12,500 (for 2021), with annual adjustments occurring under the terms of the Lease.
[54] Affidavit of Travis Kukura sworn 18 March 2024, 'TK-50'.
Mrs Lynn contends that the Lease was terminated on 1 July 2021 and that all outstanding rental payments at that time were forgiven.[55]
[55] Affidavit of Travis Kukura sworn 18 March 2024 [106].
It is clear that there is a dispute between Mrs Lynn and the plaintiffs as to whether the Lease has been terminated and whether any rental arrears are due and can be recovered. The plaintiffs have issued notices of default and as at 31 December 2013, the arrears (including interest) were approximately $49,000. The plaintiffs have been advised that the costs of recovery of this amount are likely to be between $10,000 and $50,000.[56]
[56] Affidavit of Travis Kukura sworn 18 March 2024 [114(a)], [114(c)].
Given the amount of any rental arrears is in dispute and the likely costs of any recovery action, I accept Mr Kukura's evidence that any attempt to recover the arrears of the Lease would be uneconomic and that what is proposed is reasonable in all of the circumstances.
On this basis, I accept it is appropriate to give the directions sought in orders 3(b) and (c) of the Amended Minute.

Should directions be made in relation to the preparation and lodgement of business activity statements, taxation returns, and audited accounts for the Trust?

The plaintiffs seek a direction that they would be justified and acting reasonably in not preparing and lodging tax returns, business activity statements and audited accounts for the period they were trustee of the Fund. Mr Kukura's evidence is that tax returns were not completed for 'several years' prior to the plaintiffs' appointment and that the costs involved in preparing a lodging the outstanding tax returns would be disproportionate.
This issue has, in part, arisen because of Mrs Lynn's appointment of Ngai Whanau Super as the trustee of the Fund and her advice of this change to the ATO. The plaintiffs say that as a result of this, the Receivers have been unable to register and lodge any business activity statements for the Fund, or deal with the ATO.
I note that there is an inherent contradiction in the plaintiffs' submissions on this aspect of their interlocutory process from the position advanced in relation to their remuneration. The submissions in support of these directions contend that the third plaintiff is no longer in control of the Fund and that this has passed to Ngai Whanau Super; although, the remainder of the submissions proceed on the basis that the plaintiffs retain control of the Fund and that Ngai Whanau Super has not been validly appointed.
The evidence before the court is that the Fund last filed a tax return for the financial year ended 30 June 2020.[57] That is, at the time the first and second plaintiffs were appointed as Liquidators, only the tax return for the financial year ended 30 June 2021 had not been filed. There is no evidence as to whether the Company was in default of its obligations at that time.
[57] Affidavit of Travis Kukura filed 23 June 2022, 'TK-7'.
From the date of their appointment in February 2022, the plaintiffs have been in control of the Company. They have been in control of the Fund since 9 August 2022. Since this time, the plaintiffs are aware as to what income has been received and what costs have been incurred. This is not information that is known to Mrs Lynn. For this reason, I do not accept that Ngai Whanau Super is in a better position to prepare the business activity statements and tax returns. It is not clear from Mr Kukura's evidence what work is required, what information is required, how long it will take or how much it will cost to prepare the business activity statements or the tax returns.
Without this information, I do not accept that the plaintiffs are justified or that it is reasonable for them not to prepare these documents. If they undertake this work, I accept that they will be entitled to remuneration for this work. Given this, the plaintiffs and Mrs Lynn should confer as to the most cost‑effective manner in which the Company and the Fund can become compliant with their obligations, including how the necessary documents can be lodged.
At present, I do not consider it is appropriate to give the directions sought by the plaintiffs.

Conclusion

The external administration of the Company and the Fund has, in my view, been unnecessarily prolonged because of the issues between the interested parties, and between the plaintiffs and Mrs Lynn. It is in the interests of all parties to seek to resolve these matters in the most timely and cost‑effective manner possible. If claims are sought to be maintained against the Receivers, it is likely that matters will drag on and the costs will quickly overtake the remaining assets of the Fund.
As the matter currently stands, I consider that orders should be made to fix the Receivers' remuneration in the sum of $75,000 and for directions to be made in terms of order 2 (as to the order but not the amount of payment of the plaintiffs), and order 3 of the Amended Minute.
Before making final orders, I will hear from the parties as to the terms of the orders, the costs of the interlocutory application, and whether orders should be made for the review of all disbursements and costs paid by the plaintiffs (including legal costs).

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KC
Associate to the Honourable Justice Hill
18 DECEMBER 2024

Work	Fees (ex GST)
Administration	$7,351.00
Assets	$6,041.50
Creditors	$5,762.00
Investigations	$10,157.50