Re Solfire Pty Ltd (in liq) (No 2)
[1998] QSC 92
•14 May 1998
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No.7862 of 1996
Before the Hon. Mr Justice Shepherdson
[Re Solfire Pty Ltd]
IN THE MATTER of the Corporations Law
and
IN THE MATTER of SOLFIRE PTY LTD
(ACN 010 680 494) (in liquidation)
CATCHWORDS: COMPANY LAW -
1. Application by members of company for
(a)termination or permanent stay of winding up
(b)review of fees and expenses of provisional liquidator and liquidator (including legal costs incurred by provisional liquidator and liquidator)
(c)orders that liquidator and provisional liquidator furnish proper itemised accounts of their respective costs and expenses including legal costs incurred by lawyers retained by them
2.Power to review liquidators fees and outlays - ss.473, 477(2) and (6) Corporations Law and Rules 96 and 97 of the Companies (Qld) Rules 1985 considered
3.Liquidators fees disclosed in “one line sums” - no evidence of how calculated - no evidence as to contents of relevant scale on which based
4.Solicitors fees - “one line bills” - no bill of costs in taxable form - liquidator and provisional liquidator swear these fees are reasonable - power of court to order delivery of solicitors bills of cost in taxable form
re: Queensland Forests Limited (in liquidation) (1966) Qld.R 180; followed
re: Burns Philp Investment Pty Ltd v Dickins (No 2) (1993) 31 NSWLR; followed
re: Beddoe; Downes v Cottam (1893) 1 Ch 547; followed
re: Walsh Halligan Douglas’ Bills of Costs (1990) 1 Qd.R 288;
re: Malleson Stewart Stawell and Nankivell v Williams (1930) VLR 410
Counsel:Mr EJ Morzone for the applicants
Mr MD Martin for the respondent liquidator
Solicitors:Clayton Utz Solicitors for the applicant
Baker Johnson Lawyers for the respondent liquidator
Hearing date: 29 January 1998
REASONS FOR JUDGMENT - SHEPHERDSON J.
Judgment delivered 14 May 1998
Neal Malone and Gregory John Willis who describe themselves as contributories of the above company have applied for the following orders:-
That the winding up of the above named company “Solfire” be terminated or permanently stayed.
Alternatively:
(a)upon the payment by the applicants to the trust account of Baker Johnson lawyers of amounts owing under judgment debts to La Belle Curtains and F Webb & Co Pty Ltd the winding up of Solfire be stayed;
(b) the winding up of Solfire be stayed:-
(i) pending:
(1)the liquidator and provisional liquidator furnishing to the Court a proper itemised account of their respective costs and expenses (including their legal costs incurred with Baker Johnson lawyers in accordance with the Costs Act 1867) of and incidental to the winding up;
(2)the approval or review by the court of the costs and expenses of the liquidator and provisional liquidator (including their legal costs) of and incidental to the winding up; or
(ii) until further order of the Court;
(c) the applicants be entitled to be heard upon the approval or review by the Court of the costs and expenses referred to sub-para.(b)(i) above;
(d) upon:
(i) finalization of the matters referred to in sub-para.(b)(i) above
(ii) the receipt of payment by the Applicants into the trust account of Baker Johnson lawyers of the due amount of the costs expenses of the liquidator and provisional liquidator approved or determined by the court (which receipt should be sufficiently evidenced by the issue of a trust account receipt by Baker Johnson lawyers in writing);
the winding up of Solfire be terminated or permanently stayed.
This application is addressed to the liquidator of Solfire (Trevor John Schmierer), the Australian Securities Commission, the two named judgment creditors and to the provisional liquidator Ivor Worrell - Worrell is one of two provisional liquidators.
Mr E Morzone of counsel appeared for the applicants. Mr M Martin who opposed the application appeared for the respondent liquidator, Schmierer, but there was no appearance by other respondents. It is fair however to say that an affidavit by Worrell was read by Mr Martin and there is no doubt that the debts due to the judgment creditors La Belle Curtains and F Webb & Co have been properly secured by the applicants. Furthermore, the Australian Securities Commission did not seek to be represented.
The essence of the application heard by me concerned the relief sought in sub-paras.2(b) and (c) of the application.
It is necessary to say something of the facts. Solfire was first registered on 17 December 1986. It conducted the business of manufacturing curtains and interior design consultant. The applicants were the sole shareholders in the company, each holding one of the two issued shares. Each share had a nominal value of $1 and was fully paid. It appears that both the applicants were actively involved in the conduct of Solfire’s business. In about December 1992, F Webb & Co and La Belle Curtains Pty Ltd began action in the Magistrates Court at Brisbane against Solfire. The proceedings arose from a dispute as to moneys outstanding and in particular from disagreements between the applicant Malone and a Patrice Moriarty a director of the two plaintiffs.
On 17 April 1996 a trial of the Magistrates Court action began. Solfire was represented by a barrister and solicitor. The applicant Malone took advice from the barrister, and on 19 April 1996 the trial was adjourned and set down for a further 10 days hearing beginning on 5 August 1996. Acting on legal advice the two applicants took a Bill of Sale from Solfire after having been advised that it was “legally valid and above board”. According to the information before me, the applicants believed that course would prevent dilution of the assets of Solfire due to the cost of defending the claims in the Magistrates Court actions which Malone believed to be without substance. The trial was resumed on 5 August and on 8 August 1996, Solfire (by the applicant Malone) wrote to the Magistrate trying the action, advising in effect that Solfire had made an offer of settlement which if not accepted would result in Solfire no longer appearing in the proceedings.
On 9 August 1996, F Webb & Co obtained judgment in the action against Solfire for $8,998.68 and on the same day La Belle Curtains Pty Ltd obtained judgment against Solfire for $38,139.99.
On 13 August 1996 a statutory demand was served on Solfire seeking payment of the two judgment debts. Solfire’s application to set the demand aside failed.
On about 18 September 1996 a barrister informed Malone that because of its failure to set aside the statutory demand, Solfire should apply to wind itself up. On 18 September 1996 the applicants entered into a written agreement with Solfire; this agreement recited Solfire’s indebtedness to the applicants in the sum of $127,924.17, that loans to Solfire from the applicants were secured by a registered Bill of Sale, that Solfire had a number of creditors and that the applicants had agreed to pay out and indemnify Solfire in respect of certain of its creditors, and that Solfire was desirous of satisfying and obtaining a release of the Bill of Sale. By the deed, the applicants as directors agreed to pay creditors listed in annexure “A” and to indemnify Solfire in respect of its obligation to pay those creditors, and that such payments should be made no later than 1 December 1997. In consideration of those payments and indemnity and in satisfaction of moneys lent by the applicants as directors to Solfire, Solfire was to pay to the applicants the sum of $190,666.14 in full and final satisfaction and in release of the Bill of Sale. In was expressly agreed that the applicants as directors should only be responsible for payment of creditors outlined in the schedule to the deed and should not be responsible for any debts owing to F Webb & Co and La Belle Curtains Pty Ltd. The sum of $190,666.14 was made up as follows:-
| Cash payment | $181,945.81 |
| Plant stock and equipment as per 1996 balance sheet | 8,220.33 |
| Business name of Biggest Little Curtain Store (owned by Solfire) | 500.00 |
| $190,666.14 |
It appears from Australian Securities Commission records that on or about 29 October 1996, provisional liquidators of Solfire were appointed but no copy of the order is before me. The provisional liquidators were Ivor Worrell and Rajendra Kumer Khatri. It appears that their provisional liquidatorship ceased on 18 December 1996. On 19 September 1996 Solfire filed application No 7862 of 1996 in this Court seeking an order that Solfire be wound up under the provisions of the Corporations Law and a liquidator appointed.
On 19 December 1996 a senior deputy registrar of this Court ordered that Solfire be wound up under the provisions of the Corporations Law and that Trevor Schmierer was appointed liquidator for the purposes of the winding up.
On 15 May 1997 an application by the liquidator of Solfire for a mareva injunction was heard by the Honourable Mr Justice Dowsett. I do not have the material which was before his Honour, but it appears from his Honour’s judgment given on 15 May 1997 that the application was designed to protect the applicant liquidator against the possibility that he may subsequently recover a judgment against the two present applicants which they are unable to satisfy. It appears that his Honour was here referring to another application made by the liquidator to this Court in which he sought a declaration that the Bill of Sale to which I have referred was void and that judgment be entered against the two present applicants for $190,664.14.
To return to the judgment of the Honourable Mr Justice Dowsett, his Honour, apart from dismissing the application ordered that the applicant liquidator pay the costs including the reserved costs of the two present applicants who were the respondents to that application.
I mention that part of the material before me consists of a letter (undated) written by the barrister retained by Solfire’s solicitor in the Magistrates Court action. This letter was addressed to Solfire’s solicitor and sets out what was said to be the factual situation leading to the registration of the Bill of Sale as well as legal aspects and included a statement that the Bill of Sale was in effect bona fide.
I return now to the application which I have already mentioned in which the liquidator sought a declaration that the Bill of Sale was void and that he have judgment against the two present applicants. On 12 September 1997 the Honourable Mr Justice Ambrose delivered his reserved judgment in the application (also No. 7862 of 1996). His Honour made declarations that the transaction which Solfire entered into with the two present applicants between 8 August and 19 September 1996 which related to the payment of $181,945.81 of the company’s funds for the benefit of the two present applicants on 9 August 1996 constituted an insolvent and uncommercial transaction within s.588FE of the Corporations Law and is voidable at the option of the liquidator and that subject to the effect of s.588FG(3) of the Corporations Law on the use of part of the sum of $181,945.81 for the discharge of tax liabilities of the company, the two present applicants have no rights prejudiced by the orders which he then made. He ordered the two present applicants to transfer to the liquidator “the plant, stock and equipment as per the company balance sheet”, to pay to the applicant liquidator the sum of $181,945.81 which was the amount of money paid by Solfire to the solicitor for the two present applicants in trust for them on 9 August 1996 and which was subsequently paid out of his trust account at their direction between 9 August 1996 and 9 May 1997 and he ordered that the two present applicants have liberty to prove in the winding up as unsecured creditors for moneys they lent to or paid on behalf of the company prior to the winding up order made on 19 December 1996.In his Honour’s reasons for judgment he did not deal with the matter of costs of the application.
On or about 26 September 1997 the applicant Malone received a notice from the Australian Securities Commission requiring him to appear for an examination in relation to the affairs of Solfire and other matters mentioned in the notice.
On 2 October 1997, Malone attended the office of the Australian Securities Commission in Brisbane and was examined on oath by three persons concerning the affairs of Solfire and his actions as one of its directors.
On 9 October 1997, in response to requests made by Baker Johnson, the solicitors for the liquidator, the applicant Malone paid $100,000 into the trust account of Clayton Utz the solicitors at Brisbane acting for the present applicants.
On 11 November 1997 in response to a further request by Baker Johnson, Malone paid into the trust account of Clayton Utz a further sum namely $44,627.79.
To put the payments totalling $144,627.79 into context the evidence before me shows that on 24 September 1997 the liquidator wrote to Mr Nash of Clayton Utz asking his firm in future to contact the liquidator’s solicitor Mr Craig Bax of Baker Johnson lawyers. In this letter the liquidator advised that his solicitor had instructions to proceed with all steps necessary to obtain payment of the moneys referred to in the judgment of Mr Justice Ambrose. He went on:-
“I will not be revoking those instructions unless I have some form of security or moneys held in a trust account from Mr Malone and Mr Willis for the judgment debt. Nor is it my intention to incur fees and expenses in relation to assisting the directors having the winding up order stayed unless I receive payment in the sum of $10,000 for further fees and expenses which I may incur.” (see exhibit LSN1)
On 30 September 1997 Baker Johnson wrote to Clayton Utz stating they had firm instructions to issue bankruptcy notices and writs of execution to recover the judgment debt in full “unless and until we receive full payment of same”.
On 10 October 1997 Clayton Utz wrote to Baker Johnson confirming that $100,000 had been deposited into their trust account “with a view to payment of creditors of Solfire Pty Ltd including the liquidators costs and expenses ... We are holding these funds pending our clients instructions as to their distribution we look forward to hearing from you as to confirmation regarding a stay in relation to intended bankruptcy and enforcement action by the liquidator against the directors.” A photocopy of the receipt for $100,000 was also sent to Baker Johnson.
On 17 October 1997 Clayton Utz wrote to the Australian Securities Commission at Brisbane confirming instructions from the applicant Malone to bring an application to terminate the winding up of Solfire, noting Malone’s proposal to restructure his business affairs so that he might continue to use Solfire in his business, noting that Malone intended to pay out all the creditors of Solfire who were owed money prior to it being wound up and to this end had deposited $100,000 into the Clayton Utz trust account. The letter further stated that Malone had good prospects of succeeding once his affairs are restructured given his long standing in the curtain business and given his expertise in that area. Australian Securities Commission was asked to confirm it would either consent in writing to termination of the winding up or at least not oppose the orders sought.
By letter dated 5 November 1997 addressed to Clayton Utz, Baker Johnson noted the following fees claimed by liquidators:-
1.Provisional liquidator $7,151.20
2. Liquidators fees to date 16,312.69
3.Liquidators estimate of fees to complete the job $15,000.00
The letter went on to list the following files held by Baker Johnson which were said to be “being billed and the costs will be available tomorrow”:-
File No Particulars
97.1059 Recovery of voidable payment
97.1066 Mareva injunction
97.2835 Stay of winding up
96.2324 Examination
96.2583 Injunction
96.2582 Winding up
The letter went on to say that file No.96.2582 had been billed, that that file related to the winding up of the company and that costs and outlays on that file were in the sum of $4,788.60. An estimate was given as to balance fees in respect of the other matters and the letter promised “exact amounts will be forwarded to you tomorrow”.
The letter also said:-
“Additionally the costs of the liquidation includes the costs orders made in favour of Mr Malone, Mr Willis and Midasville Pty Ltd. We note that as part of the stay application you were going to consider providing a discharge from your clients and Midasville Pty Ltd in respect of such costs. In the event that such discharge is not provided then our client will require a further sum of $20,000 to be held pending the receipt of the discharge in that regard.”
The letter sought copies of receipts for payments which relate to the creditors “your clients have supposedly paid” and went on to calculate the amounts owing to La Belle Curtains and F Webb & Co. These amounts to 5 November (including interest) were $44,585.05 and $10,122.09 respectively. The letter noted the daily interest accrual rate.
In a letter dated 6 November 1997 written to Clayton Utz, Baker Johnson listed their costs and outlays, and I will come to this list shortly. The letter included the statement that “assuming your clients can prove that all other creditors apart from the petitioning creditors have been paid, your clients will need to pay to our trust account as a condition of our client agreeing to the stay the sum of $144,627.79". It was in consequence of that statement that the additional $44,627.79 was paid to the trust account of Clayton Utz on 11 November 1997.
I return now to the Baker Johnson files against the liquidator and the fees and outlays in respect of each. They are:-
File No. Description Fees and Outlays
96.2582 winding up $4,788.60
97.1059 recovery of voidable payment 19,328.65
96.2583 injunction 6,034.05
97.2835 stay of winding up 6,500.00
(an estimate only)
97.1066 mareva injunction 2,697.60
96.2350 examination 12,093.00Total $51,441.90
In summary then the total of $144,627.79 demanded included Baker Johnson’s legal fees the provisional liquidators fees and outlays, the liquidators fees and the liquidators estimated fees to complete the job (to use Baker Johnson’s words) as well as the debts owing to La Belle Curtains and FH Webb and Co.
It is true to say that no itemised Bill of Costs has been prepared by Baker Johnson and produced to Clayton Utz or to this Court in respect of any of the matters in respect of which Baker Johnson claims costs.
In respect of the provisional liquidators’ fees a one page document shows the $7162.50 is made up as follows:-
Classification No. of Hours Rate Per Hour Cost
$ $
Principal Appointee/Partners15.4 278.00 4,281.20
Managers Grade 1 13.5 202.00 2,727.00
Intermediate Grade 1 0.6 85.00 51.00
Total Fees 7,059.20
Outlays 92.00
TOTAL 7,151.20
The material before me does not disclose how the liquidator’s professional fees and outlays totalling $16,312.69 are calculated; nor is there any detail of the estimate of $15,000 for the liquidator’s future fees.
Further correspondence ensued between Baker Johnson and Clayton Utz. There have been demands by the liquidator for further sums of money in respect of additional interest owing to La Belle Curtains and FH Webb & Co and other matters. Further moneys demanded amounted to $10,698.42 but this demand was not met. This $10,698.42 included a claim for $10,000 made by a Lorraine Boyd said to be a creditor which claim the applicants disputed. In the letter dated 5 December 1997 written by Clayton Utz to Baker Johnson the former said that Malone was not prepared to admit in writing that he owed the debts referred to in the letter under reply (dated 4th December 1997 and including Boyd’s claim) and as a contributory in respect to the winding up claimed to have a right to have the liquidator’s costs and expenses reviewed to ensure that they are in accordance with the scale of the Insolvency Practitioners Association of Australia and also to insist on the costs of Baker Johnson being taxed. Other matters were canvassed in this letter. I note that this correspondence occurred under threat by Baker Johnson to enforce the judgment of Mr Justice Ambrose pronounced on 12 September 1997.
Baker Johnson rejected the claim that its costs should be taxed stating the right to such taxation extends to petitioning creditors cost’s only and that the liquidator and provisional liquidators have accepted and confirmed Baker Johnson’s costs. By that letter dated 8 December 1997 a further $20,000 was sought by the liquidator to be paid “as security against the costs orders pending a review of your clients attitude”.
In a letter dated 10 December 1997 Clayton Utz notified Baker Johnson (at the latter’s invitation) of a Court decision on which it relied and further requested Baker Johnson to provide certain particulars to substantiate the liquidator’s costs and expenses. Clayton Utz maintained their clients right to review of the provisional liquidators and liquidators fees and outlays and to have the costs of Baker Johnson taxed.
The application before me was filed on 11 December 1997.
The principal matters in the application before me concern the right (if any) of the applicants to have the fees and outlays claimed by the provisional liquidator and the liquidator justified or reviewed and the right (if any) to have Bills of Costs of the solicitors Baker Johnson reviewed on taxation.
The respondent liquidator has relied on (inter alia) affidavits of Ivor Worrell and the liquidator himself. The affidavit of Ivor Worrell shows that the provisional liquidators commenced “certain actions” against Malone, Willis and Midasville Pty Ltd - described as “their company” - to protect and preserve assets of Solfire immediately following their appointment. Worrell swears they took this step on advice from their solicitors - presumably Baker Johnson. Worrell has not condescended to give any greater particulars of the provisional liquidator’s fees other than in the summary which I have earlier set out. He swears:-
“9.I have reviewed the bills of cost received from Baker Johnson Lawyers in relation to the legal fees and disbursements incurred by them in respect of this matter.
10.The terms of Baker Johnson’s retainer with myself and Mr Khatri are essentially as follows:
(a)that Baker Johnson would spec the matters
(b) that Baker Johnson would carry and pay all outlays (which in this case include fees payable to counsel and senior counsel);
(c) that Baker Johnson would be paid at the rate of $200 per hour
(d) that the majority would be carried out by a partner in the firm
11.From my experience the professional fees charged by legal practitioners in this area on an hourly rate would exceed $200 per hour
12.I have been engaged in excess of 800 corporate administrations as a principal and substantially more as an employed accountant. The fees charged for the work carried out by Baker Johnson are in my view reasonable
13.We have accepted the fees rendered by Baker Johnson in respect of this administration.”
The affidavit of the liquidator Schmierer includes the following:-
“33.I have reviewed the Bills of Costs received from Baker Johnson lawyers in relation to the legal fees and disbursements incurred by them in respect to this matter.
34.The terms of Baker Johnson’s retainer with myself are essentially as follows:-
(a)that Baker Johnson would spec the matters;
(b)that Baker Johnson would carry and pay all outlays (which in this case would include fees payable to counsel and senior counsel);
(c)that Baker Johnson would be paid at the rate of $200 per hour;
(d)that the majority of the work would be carried out by a partner in the firm;
35.From my experience the professional fees charged by legal practitioners in this area on an hourly rate would exceed $200 per hour;
36.I have been engaged in excess of 300 corporate administrations as a principal and substantially more as an employed accountant. The fees charged for the work carried out by Baker Johnson are in my view reasonable.
37.I have accepted the fees rendered by Baker Johnson in respect of this administration.”
The affidavit of Schmierer raises other matters to which I shall later refer.
Review of Fees and Expenses of the Provisional Liquidator and the Liquidator
By sub.s473(2) of the Corporations Law a provisional liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by the Court. This Court has jurisdiction under s.473. There is no provision in the legislation for review by the court of a provisional liquidator’s remuneration. There is provision for such a review in case of the remuneration of a liquidator but absence of such a provision in the case of a provisional liquidator is readily understood given that the legislation provides that it is the Court which is to determine the remuneration to which a provisional liquidator is entitled.
In the state of the evidence before me, I find that I do not have sufficient information to enable me to determine the remuneration of the provisional liquidators. The document I have is scant. It shows the number of hours which each of the three classifications of persons have spent, presumably in performing work in relation to the provisional liquidation. Furthermore, the scale from which the hourly rates appearing in the summary were obtained has not been proven. I accept that I am bound by the decision of the Full Court of the Supreme Court of Queensland in re Queensland Forests Limited (in liquidation) (1966) Qd.R 180. In that case a chartered accountant applied for the determination by the court of his remuneration as liquidator in the winding up of a company basing his claim on rates recommended by the Institute of Chartered Accountants in Australia. A chamber judge held that the statement that the figures claimed were based on the recommended rates and that the claimant considered them reasonable did not establish the reasonableness of the charges and fixed the remuneration at a reduced amount by making an estimation based on charges with which he had familiarity as a result of everyday experience.
On appeal the Full Court held that a scale of charges compiled and recommended by a reputable professional body should, by virtue of the very fact that it is so compiled and so recommended, be regarded as reasonable. The Court set aside the chamber judge’s decision and held that having regard to all the circumstances the rates claimed by the liquidator were reasonable.
That case still holds the field in Queensland and I gather has been assiduously relied on by liquidators and provisional liquidators. The material before me refers to the scale of charges of the Insolvency Practitioners Association of Australia but no such scale is before me. I might add that the decision in re: Queensland Forests Limited (in liquidation) has not been followed in Victoria (see re Standard Insurance Company Ltd (in liquidation) (1967) VR 600 in which the Full Court of the Supreme Court of Victoria held that evidence of a scale such as the scale in re Queensland Forests was not conclusive).
In my view, when a provisional liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in taxable form provided by a solicitor to his client (see Order 91 Rule 47). He should identify the person or persons and the grade or grades of the person or persons engaged in the particular task concerning the provisional liquidation, he should identify that task and dates on which time was spent on it, the amount of time spent on it and he should identify the relevant rate, according to the grade of the person or persons performing the work. I also consider that he should require the person performing the work to keep reasonably detailed diary notes and time sheets which documents should be open to inspection by persons entitled to see them.
In my view a court armed with that information should be able to determine the remuneration for the provisional liquidator. I note in passing that sub-s.473(2) refers to remuneration by way of percentage. Remuneration by way of percentage appears to be presently unfashionable. I have noted with interest the remarks of Young J in Burns Philp Investment Pty Ltd v Dickens (No 2) (1993) 31 NSW LR 280 at pp.284-5 and the comments of P O Lawrence J in re Carton Limited (1923) 128 LT629 quoted by Young J at p.284. It is I think timely to recite what Young J said:-
“. . . in Re Carton Ltd (1923) 128 LT 629, P O Lawrence J said (at 631) that ordinarily remuneration should be on a percentage basis and that one should avoid wherever possible a time basis. He then went on to say (at 632):
‘... The court as a general rule only fixes remuneration on a time basis if there is no other method which would operate to give the liquidator a fair remuneration. Experience has shown that the time occupied by a liquidator and his clerks affords a most unreliable test by which to measure the remuneration. Even the best accountant may spend hours over unproductive work, let alone his more or less efficient staff of clerks. Moreover, it is quite impossible to check charges based on such a system and to gauge the value of odd hours said to have been spent on the affairs of the company. The court has long since come to the conclusion that the proper method to adopt whenever it is practicable is to assess the remuneration according to the results obtained.’
Time costing has been adopted by the solicitors’ and accountants’ profession because it is evidently commercially profitable for them to adopt this method. Generally speaking the court scales of remuneration have shied away from this method because it rewards the inefficient and it is very difficult to check. Indeed, those who have used time costing have found difficulties with it. Thus it is not unusual if an hour is broken into 10 units of six minutes for each telephone call to be charged at 2 units on the basis that it takes time to switch off from what one is doing, switch on to the subject matter of the telephone call and then switch off again before resuming one’s former work. Whilst this theory may have something to commend it, it may result in a person who makes twenty short telephone calls in a particular hour being able to charge 40 minutes actual work as if he or she had spent 4 hours. Again, at least in the United States, the concept of a billable hour often tends to mean the time that an ordinary worker would have spent on the job not the time that was actually spent on it. However, despite the wisdom of P O Lawrence J’s words and the problems with time costing, the system is one which is now more popular than it was in the 1930s, has been recognised in the approved scales for company liquidations . . .”
In the present case, I cannot review the provisional liquidators’ fees and outlays. I can determine them but on the material before me am unable to do so. I propose to make certain orders concerning these fees and outlays and these orders will appear near the end of these reasons.
I turn now to the application to review the remuneration of the liquidator.
The applicants rely on sub.paras.473(6) and 477(6) of the Corporations Law. Sub-s.473(6) reads:-
“(6) Where the remuneration of a liquidator is determined in the manner specified in sub-paragraph (3)(b)(i) the Court may, on the application, of the liquidator or of a member or members referred to in sub-section (5), review the liquidators remuneration and may confirm, increase or reduce that remuneration.”
Sub-para.(3)(b)(i) of s.473 reads:-
“(3) A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined;
.....................................................
(b)if there is no committee of inspection or the liquidator and the committee of inspection fail to agree;
(i) by resolution of the creditors; or
. . .”
It is said in the present case that by resolution of the creditors on 11 December 1997 the remuneration for the liquidator was agreed at $16,007.85 but before coming to that matter I mention sub-s.(5) of s.473 which is referred to in sub-s.473(6). I note in passing that the draftsman of s.473 has used “sub-paragraph” and “sub-section” interchangeably and in s.473 both mean the same thing. Sub-s.5 relevantly provides:-
“(5)Where the remuneration of a liquidator is determined in the manner specified in paragraph (3)(a) the Court may, on the application of:
(a) a member or members whose share holding or share holdings represent in the aggregate at least 10% of the issued capital of the company;
. . .
review the liquidator’s remuneration and may confirm, increase or reduce that remuneration.”
I am satisfied that the applicants before me have locus standi and are entitled to apply to have the liquidator’s remuneration reviewed. The evidence shows the applicants are the only shareholders in Solfire and their share holding represents in the aggregate 100 per cent of the issued capital of Solfire. In addition they are in my view entitled to apply to this court pursuant to s.477(6) of the Corporations Law and I shall mention this aspect shortly.
“Remuneration” is not defined in the Corporations Law and in its ordinary meaning is pay for services rendered (Chalmers v Smith (1946) 73 CLR 19 at 37 per Williams J.)”
The liquidator’s remuneration then is in effect pay for services rendered. In performing those services the liquidator may be required to exercise one or more of the powers appearing in s.477 of the Corporations Law. In the case before me the liquidator did exercise some of those powers and I note particularly sub-ss.477(2)(a)(b) which reads:-
“(2) Subject of this section, a liquidator of a company may:
(a)bring or defend any legal proceeding in the name and on behalf of the company;
(b)appoint a solicitor to assist him or her in his or her duties;”
Here the liquidator did exercise the powers in sub-paras.(a) and (b) and I note that the provisional liquidator also purported to exercise the same power.
However, the exercise of any of the powers in s.477(2) is expressly made “Subject to this section” and I note that that phrase is given considerable effect by s.477(6) in which it is said:-
“(6)The exercise by the liquidator of the powers conferred by this section is subject to the control of the Court, and any creditor or contributory, or the Commission may apply to the Court with respect to any exercise or proposed exercise of any of those powers.”
Effectively then any one of the three classes named in sub-s.477(6) may apply to this Court with respect to a liquidator’s exercise of any of the powers in s.477.
In my view when a liquidator retains a solicitor to assist him in his duties, as he has done here, then subject to the specific terms of the retainer, he is responsible for and liable to pay the solicitor for the latter’s fees and outlays reasonably incurred in the performance of his retainer.
In my view the solicitors fees and outlays for which the liquidator is liable form part of the liquidator’s remuneration. That this is so is readily apparent from the right of a liquidator to be indemnified against expenses properly incurred. (See in re Beddoe. Downes v Cottam (1893) 1 Ch 547 at p.558 where Lindley LJ said “The words ‘properly incurred . . . are equivalent to ‘not improperly incurred’.”) In re Burns Philip Investments Pty Ltd (supra) at p.283 Young J followed in re Beddoe).
I note that in Mayne v Jaques (1960) 101 CLR 169 the High Court of Australia was concerned with the right to remuneration of a trustee in bankruptcy other than a salaried official receiver or a trustee undertaking the administration of a bankrupt estate gratuitously. The Court held that such a trustee had a right of remuneration out of the assets of the bankrupt estate for work done by him in the course of the administration of that estate.
I note also the decision of the Court of Appeal in re Silver Valley Mines (1882) 21 Ch.D. 381 in which is a discussion of the circumstances in which a court may deprive a liquidator of costs in respect of an application to court in the course of a liquidation.
In the case before me, I am not specifically asked to refuse the liquidator’s costs of an application to court. I am asked to review his remuneration but that review may call into question whether costs incurred by the liquidator on an application to Court were “not improperly incurred”.
How then is the liquidator’s remuneration fixed? Sub-s.473(3) of the Corporations Law part of which I have already quoted reads:-
“(3) A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:
(a) if there is a committee of inspection - by agreement between the liquidator and the committee of inspection; or
(b) if there is no committee of inspection or the liquidator and the committee of inspection fail to agree;
(i) by resolution of the creditors; or
(ii) if no such resolution is passed - by the Court.”
It appears that in Queensland a liquidator’s remuneration (apart from outlays which are expenses not improperly incurred) is generally calculated by reference to the scale of fees of the Insolvency Practitioners Association of Australia. It appears that liquidators generally apply the principle of re Queensland Forests Limited (in liquidation) (supra) which I have earlier discussed. The matter of remuneration by way of percentage appears no longer considered.
In the material before me, I have no indication at all as to how the liquidator’s remuneration (apart from the amount of outlays being costs claimed by Baker Johnson) is calculated. In his affidavit relied on before me the liquidator has sworn that at a meeting of creditors held on 11 December 1997 his professional [fees] and outlays incurred (excluding legal costs) to 15 October 1997 in the sum of $16,312.69 were approved by creditors as required by s.473(3)(b)(i) of the Corporations Law.
He further swore that at the same meeting of creditors [of which he was chairman] his future fees and outlays (excluding legal fees) were approved by creditors pursuant to s.473(3)(b)(1) in the sum of $15,000.
As appears from correspondence passing between Baker Johnson and Clayton Utz this latter figure is an estimate.
I have already stated my view that when a provisional liquidator who relies on a professional scale of fees seeks to have his remuneration determined by the court, he should prepare a document not dissimilar in form to a Bill of Costs in taxable form provided by solicitors to clients. That document should provide the detail I have already stated. The views and comments I have earlier made apply equally to a liquidator who seeks to have his remuneration determined pursuant to s.473(3).
In the present case no particulars have been provided as to how the $16,312.69 claimed by the liquidator is calculated. I find it impossible therefore to review the remuneration claimed. The applicants recognise this difficulty and have asked me first to order that the liquidator do properly particularise the $16,312.69 which has been claimed as his remuneration (apart from legal costs). Before deciding whether I should accede to that request I must deal with a submission by Mr Martin, counsel for the liquidator that the applicants have in effect agreed the liquidator’s remuneration at $16,312.69 and are therefore not entitled to have that remuneration reviewed.
In his affidavit read before me the liquidator has sworn that the proper forum to raise the matter of review of his costs [remuneration] the costs of the provisional liquidators and the legal fees incurred by the liquidator and the provisional liquidators “would have been the creditors meeting where my costs and outlays were unanimously approved”. Mr Martin relies on this passage in the liquidator’s affidavit. Exhibit G to the liquidator’s affidavit is a photocopy of minutes of a meeting of the creditors of Solfire held on 11 December 1997. The liquidator was the chairman of that meeting. The minutes note that creditors, La Belle Curtains Pty Ltd and F Webb & Co Pty Ltd had provided proxies to Patrice Moriarty and Ian Yorston respectively. Under the heading “Remuneration” the following appears in the minutes:-
“It was resolved ‘that the Official Liquidators remuneration and that of his staff for the period 19 December 1996 to 15 November 1997 be approved and paid in the sum of $16,007.85 such remuneration being calculated on a time basis in accordance with the scale set by the Insolvency Practitioners Association of Australia from time to time’
moved: Patrice Moriarty
seconded: Ian YorstonThe Chairperson declared the motion had been carried unanimously.”
Under the heading “Future Remuneration” the following resolution appears in the minutes:-
“It was resolved ‘that the future remuneration of the Official Liquidator from 16 November 1997 to the completion of the administration be approved, such remuneration being calculated on a time basis in accordance with the scale set by the Insolvency Practitioners Association of Australia from time to time, to a limit of $15,000 and that the Liquidator be authorised to make periodic payments on account of such accruing remuneration. Above this amount, the liquidator must seek creditors further approval or the approval of the court’
moved: Patrice Moriarty
seconded: Ian Yorston
The Chairperson - declared the motion had been carried unanimously.”
The minutes recorded that the Chairperson noted that the directors of the company being Neal Malone and Gregory John Willis were not present and that their solicitor Mr Lloyd Nash attended on their behalf. Mr Nash is a member of Clayton Utz.
Mr Martin has argued that the presence of the two applicants (by their solicitor) effectively means that the applicants assented to the above resolutions. I reject that argument. There is no suggestion that either Malone or Willis was entitled to vote, nor that Nash was their proxy at that meeting. The meeting was, as the minutes state a meeting of creditors and it is apparent that the motions regarding remuneration and future remuneration purported to be pursuant to s.473(b)(i).
Section 473(6) gives the court power to review such a resolution and it is that power which I am now asked to exercise.
I should at this stage say that the present case is rather unusual. It is clear that funds held in trust are more than sufficient to pay the two outstanding creditors who were in fact the petitioning creditors. These creditors should be paid. Once this is done the remaining matters in dispute concern the quantums of the remuneration of the provisional liquidators and the liquidator, the matter of the costs of the solicitor retained by the provisional liquidators and the liquidator and whether or not the provisional liquidators and liquidators are liable to those solicitors for legal costs and if so for how much. Another possible issue is whether costs incurred by the liquidator and/or provisional liquidators on an application to Court were “not properly incurred”.
Obviously, given that the applicants seek to have the winding up terminated and given their stated intention as deposed to in the affidavit material of ensuring that all creditors have been paid, they as the only members of the company have a very real interest in seeing that the payments to the liquidators by way of remuneration are proper and in respect of the outlays claimed have not been improperly incurred.
Also obviously, before the liquidation is terminated the liquidator must know with certainty how much is properly due to him from the assets of Solfire to which he can look in exercise of his right of indemnity. The amount due to him will include outlays not improperly incurred and he will need to know the provisional liquidators’ remuneration.
To that end he has required that the applicants pay sufficient funds into a trust account. That requirement has been substantially met.
As I have said, the case is unusual. I have the impression that Solfire has, from a practical point of view never been insolvent at material times but because of the failure to set aside the statutory demands accepted a deemed insolvency and caused Solfire to be wound up. I have the further impression that from a purely commercial point of view, Solfire was probably well able to pay out the debts of La Belle Curtains Pty Ltd and FH Webb & Co but obstinately refused to do so. Had the amounts demanded in the statutory notices been paid within time there probably would have been no winding up. The applicants now appear to have come to their senses commercially and there appears no doubt that the liquidation will be terminated. As I have said the applicants have a real and genuine interest in seeing that the liquidator and provisional liquidators are paid what they are lawfully entitled to (and that includes outlays to solicitors) and no more.
As I have said the quantum claimed by the liquidator is a one line sum.
It is my firm view that when, as here, the liquidator sought to have the meeting of creditors determine his remuneration he should have provided the creditors with a document or documents containing such details and information as would enable each creditor to make up his or her mind on the reasonableness or otherwise of the quantum claimed as remuneration. There is nothing in the evidence before me to suggest that creditors at the meeting of 11 December 1997 were presented with any detail beyond the “one line” or “lump figure” of $16,007.85. The problem confronting any creditor in the absence of such information and where he has been presented with only a lump sum is not dissimilar to the problem confronting a solicitor’s client who has been presented with a lump sum Bill of Costs. In Malleson Stewart Stawell and Nankivell v Williams (1930) VLR 410 Mann J said:-
“These authorities show that the Courts have repeatedly held that a bill of costs must contain such details as will enable the client to make up his mind on the subject of taxation, and will enable those advising him to advise him effectively as to whether taxation is desirable or not.”
It may be that in the majority of liquidations where the winding up is concluded with very little or no dividend being paid to creditors, creditors pay little heed to the matter of determination of a liquidator’s remuneration, no doubt on the basis that the creditors will receive very little (if any) return from the winding up and therefore the creditors do not focus on whether or not the quantum of the remuneration sought is reasonable and proper.
However, when a case such as the present one comes along then there is a focus on the manner on which a liquidator seeks a determination of his remuneration pursuant to s.473(3)(b)(i). Indeed, whether he comes under that part or any other part of s.473(3), at the end of the day the question to be answered is whether or not the remuneration is proper. Creditors asked to determine a liquidator’s remuneration, whether the company is solvent or not and whether the creditors receive any dividend or not must receive in advance of a creditors meeting sufficient detail of the remuneration claimed, to enable the creditors to make a properly informed decision on the reasonableness or otherwise of the remuneration. In my view, it is only when creditors are so informed that they are capable of considering and if thought fit, passing a resolution pursuant to s.473(3)(b)(i).
As to a liquidator’s outlays a liquidator relying on s.473(3) whether it be sub-section (3)(a) or (b) must in my view provide sufficient information to the committee of inspection or the creditors (as the case may be) as will enable them to make a properly informed decision as to whether the outlays claimed were not improperly incurred.
As will later appear, I propose to order that the liquidator provide proper particulars, along the lines which I have already indicated to show exactly how the quantum of his remuneration claimed is made up.
As to the future remuneration, it is my present view that resolution appears to be invalid and beyond the power of the meeting. However, I am prepared to hear argument on this aspect. The resolution in effect gave the liquidator carte blanche. It also completely ignored the rights of the members of the company who had a very real interest in seeing that the quantum paid to the liquidator was proper.
Solicitors Costs
Each of the provisional liquidators and the liquidator has retained the solicitors Baker Johnson. Each of Worrell (one of the provisional liquidators) and Schmierer (the liquidator) has sworn an affidavit saying that the fees charged him by Baker Johnson are reasonable. How each of these men can make such a statement (each in an affidavit couched in almost identical terms) when all he has is a one line bill escapes me. It is apparent that no Bill of Costs has been prepared in respect of any of the matters for which Baker Johnson has made a claim in costs against its clients (the provisional liquidators and liquidator) and which are earlier set out in these reasons.
The one line detailing of costs for each matter is not a Bill of Costs. A Bill of Costs must sufficiently particularise the charges to enable the client to take informed advice as to whether he should demand taxation (per Dowsett J in re Walsh Halligan Douglas’ Bills of Costs (1990) 1 Qd.R 288 at p.294). His Honour cited earlier well established authority which requires that a bill of costs contain “such details as will enable the client to make up his mind on the subject of taxation and will enable those advising him to advise him effectively as to whether taxation is desirable or not” per Mann J in Malleson Stewart Stawell and Nankivell v Williams (1930) VLR 410.
If it were the case that either of Messrs Worrell or Schmierer were seeking to have itemised Bills of Costs delivered in each of the matters in which Baker Johnson claims costs, I should have no hesitation in so ordering. Neither seeks such an order and each says the amounts claimed in each “one-line” bill is reasonable.
However, it is the two members of Solfire who seek in effect such an order so that this Court can review that aspect of the remuneration of the liquidator (s.473(6)). The question arises - is a liquidator obliged to have his solicitor’s costs taxed? In division 10 of the Companies (Qld) Rules 1985 the matter of “Costs” is referred to. It appears that the provisions of the Companies (Qld) Rules 1985 apply as far as practicable to proceedings taken under the Corporations Law of Queensland (see Rules of Court Corporations (Interim) Rules 1991). Rule 96 of the Companies (Qld) Rules 1985 reads:-
“96(1) A liquidator may, and in all proper cases shall, require any solicitor, manager, auctioneer, broker or other person employed by a liquidator in a winding up by the Court to deliver his bill of costs, charges or expenses to the liquidator for the purpose of taxation.
96(2) Such request may be in Form 46 and shall be made a sufficient time before the declaration of a dividend in the winding up.
96(3) If the person so requested fails to deliver his bill within the time stated in the request or such extended time as the Registrar may allow, the liquidator shall declare and distribute the dividend without regard to such person’s claim, and subject to any order of the Registrar the claim shall be forfeited.
96(4) The bill of costs, charges or expenses shall be lodged with the liquidator.
96(5) The liquidator shall lodge the bill of costs, charges or expenses with the taxing officer.”
Rule 97 reads:-
“97 Where a bill of costs, charges or expenses in any winding up has been lodged with the taxing officer he shall give notice of an appointment to tax to the liquidator and to any person to or by whom the bill of costs, charges or expenses is to be paid.”
It appears therefore that there is a discretion in a liquidator as to whether or not he should require a Bill of Costs from any solicitor whom he has employed but in terms of rule 96(1) he shall demand such a bill “in all proper cases”. (the underlining is mine)
What then is a “proper case” for such a demand? In Burns Philp Investment Pty Ltd v Dickens (No 2) (supra) Young J had an application in which relief was sought under s.536 of the Corporations Law; that section enabled the court to inquire into an allegation that a liquidator has not faithfully performed his or her duties. His Honour accepted the right of a liquidator to be indemnified against “all proper expenses” and applied in re: Beddoe (supra) at p.558 and a passage from the judgment of Lindley LJ which I have already quoted. He equated “all proper expenses” to “not improperly incurred”.
Young J went on to consider what is covered by a charge not improperly incurred by a liquidator. At pp.285 and 286, after having found little guidance as to how one goes about working out whether a liquidator’s expense is properly incurred, Young J stated what he described as various guidelines that have become apparent from cases on analogous situations. They are:-
The whole trend of decisions by judges when liquidators make applications for directions under s.479 or s.511 of the Corporations Law is that the court expects the liquidator to use his commercial judgment and not to come to the court on every conceivable point - the court must give to liquidators a fair degree of latitude where they have incurred expense as a result of the exercise of their commercial judgment even if there is a loss to the company by so doing.
“In the case of solicitors it is clearly established on the authorities that if the charges in a solicitor’s bill appear to be rather high, the court may order the bill to go to taxation notwithstanding that the time for sending the bill for taxation has well and truly expired ... on like principles, if a liquidator’s bill for disbursements is extremely large that in itself may constitute grounds for enquiring into the liquidator’s conduct or his bill. The idea should never be permitted to be held that whilst liquidators make losses on many insolvent company liquidations, they can make up ground by over servicing those companies who have sufficient funds to pay the bill.”
(the underlining is mine)
“There is these days the general view that if a person feels aggrieved by what has occurred in the administration of the law, then that person should have access to the courts in order to test the position, it being left to the court’s decision as to costs to keep the floodgates in position.”
A person in his or her normal business dealing would not normally obtain trade services without first obtaining three competitive quotes. Whilst there is more difficulty with professional services because of the reluctance of persons to provide estimates and the nature of the work being done “one still would expect people to take precautions to see the person is going to charge a fee which is competitive.”
(the underlining is mine)
If the liquidator can see that it is going to be cheaper to sub-contract the work rather than have it done at his hourly rate of [$300] there can be no complaint about such sub-contracting.
A liquidator is not expected to carry on the entire winding up without consultation.
His Honour stated that these matters were general guidelines in the sort of case before him but that the list was not exhaustive. I would with respect adopt each of the matters stated in the guidelines - many are relevant to the case before me.
I note particularly his Honour’s statement that a liquidator’s bill for disbursements if extremely large in itself may constitute ground for enquiring into the bill. In my respectful view that applies in the present case. Unfortunately, the manner in which the affidavit evidence by Worrell and Schmierer has been drafted and the manner in which these two men have attempted, by their affidavit evidence, to persuade me that the one line charges are reasonable has engendered in me a prima-facie impression that each of the liquidator and the provisional liquidators has been prepared to accept without further enquiry, the quantum of the solicitors charges. I should have expected that when the liquidator received a series of one line bills totalling some $51,000 he should at the very least have complied with rule 96 above set out and required a proper bill of costs instead of accepting the correctness of the one line bills. He has not done this. He has sworn that the solicitors charges are reasonable. Furthermore this was not a large liquidation - the assets concerned were comparatively minor and the comments in guidelines Nos. 2 and 3 above appear relevant.
Furthermore, each of these men swore that a term of the Baker Johnson retainer was that Baker Johnson would “spec” the matters. I interpret that to mean that if in respect of any particular matter in which Baker Johnson undertook work on the retainer no success was obtained then Baker Johnson would not charge and would not be paid. I have not heard argument on this aspect. In England such an agreement is champertous and illegal (Wallersteiner v Moir (No.2) 1975 1QB 373). Whether or not it is so in Queensland is a matter on which I shall, if necessary, hear argument. I mention also if I am correct in my interpretation of “spec”; why should each of Worrell and Schmierer tell me the amount charged for an unsuccessful matter is a legitimate outlay? This is a matter on which further evidence may be put before me.
In summary then I consider that I have ample authority to make orders which have the effect of requiring Baker Johnson to prepare itemised bills in respect of each of the matters for which it has a claim of costs against the provisional liquidator and the liquidator. If my interpretation of a term of the retainer is correct then it may be that after reading these reasons Baker Johnson decides not to persist with one or more of the bills referred to.
The question of legal costs in this case obviously is an important one. As already indicated, the persons who at the end of the day will be footing the bills for the solicitor’s costs properly incurred are the two applicants. The application before me has turned into adversary proceedings between the applicants on one-side and the liquidator, provisional liquidators and solicitors on the other. If the itemised bills are produced and relied on and if no agreement can be reached between the parties as to the proper quantum of any of the bills in question and liability therefor, then if there is liability and if any bill has to be taxed, in my view the one-sixth rule must apply. This means that if less than
one-sixth is taxed off the particular bill then the applicants must pay the costs of the taxation. However if the bill when taxed is reduced by one-sixth or more the solicitors must pay the costs of taxation.
The orders I make are as follows:-
IT IS ORDERED THAT:
Upon the payment by the Applicants to the trust account of Baker Johnson Lawyers of the due amounts on account of the following debts of Solfire:
a.judgment debt owing to La Belle Curtains Pty Ltd in the amount of $38,139.99 together with interest thereon at the rate of 11.5% p.a. from the 8th August, 1996 to the date of payment;
b.judgment debt owing to F Webb & Co in the amount of $8,998.68 together with interest thereon at the rate of 11.5% p.a. from the 8th August, 1996 to the date of payment
the winding up of the company Solfire be stayed;
The winding up of the company Solfire be so stayed:
a.pending:
i.the liquidator Trevor John Schmierer and the provisional liquidators Ivor Worrell and Rajendra Kumer Khatri furnishing to the applicants and to the Court, a proper itemised account of the respective costs and expenses of the liquidator and provisional liquidator including an itemised bill of costs or itemised bills of cost in taxation form of their legal costs not improperly incurred with Baker Johnson lawyers of and incidental to the winding up;
ii.in the absence of an agreement between the parties, the review by the Court of the remuneration of the liquidator including his legal costs not improperly incurred with Baker Johnson;
iii.the determination by the Court of the provisional liquidators’ remuneration including their legal costs not improperly incurred with Baker Johnson;
b.until further order of the Court;
That the said liquidator and provisional liquidators do furnish the material referred to in paragraph 2. a. i. above within 28 days.
The Applicants be entitled to be heard upon the review by the Court of the costs and expenses and the application for determination referred to in paragraph 2 above.
The application to terminate or permanently stay the winding up and the matter of costs of and incidental to this application be adjourned to a date to be fixed to be brought on before me by any party on at least 7 clear days notice in writing to the others.
I should add that this application is one which in my view is capable of resolution - the two judgment creditors’ debts will I expect be paid very shortly and the antagonists should in my respectful view bear in mind the risk as to further costs in this litigation and by whom these costs will be borne. It is my tentative view that certainly up to and including the date of delivery of these reasons for judgment, the applicants are entitled to have their costs paid on a party and party basis by the liquidator and arguably the provisional liquidators. However, I shall hear further argument on this if required by any party. I point out that such an order will still leave the question as to whether or not the liquidator and arguably provisional liquidators are entitled to be indemnified as to those costs out of the assets in the winding up. If such right of indemnity does exist in respect of those costs it will mean that the successful applicants will be paying their own costs of this application on a solicitor and client basis as well as all the party and party costs (at least) ordered to be paid by the liquidator and possibly the provisional liquidators. Such a result appears to be unfair and unjust. In addition, if the indemnity does exist then I assume that if the applicants obtain against the liquidator and possibly the provisional liquidator an order for costs of this application, the applicants may well be asked to pay, by way of indemnity, the difference between the party and party costs and solicitor and own client costs to the intent that the liquidator and provisional liquidators have a complete indemnity. Again such a result appears to be unfair and unjust.
It may well be that if this application is not resolved between the parties, there will be evidence from both sides touching on the need for the present application and whether the respondents have been justified in resisting the present application.
I would also add that in respect of the payment by the liquidator or provisional liquidators of costs ordered to be paid by them, I can foresee arising questions similar to those to which I have just referred in discussing possible difficulties concerning the costs of the present application.