Re Traditional Values Management Ltd (In Liq) (No 4)
[2016] VSC 520
•7 September 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2011 01355
IN THE MATTER of TRADITIONAL VALUES MANAGEMENT LIMITED
(IN LIQUIDATION) (ACN 055 106 100)
| ANDREW STEWART REED HEWITT IN HIS CAPACITY AS SPECIAL PURPOSE LIQUIDATOR OF TRADITIONAL VALUES MANAGEMENT LIMITED (IN LIQUIDATION) (SPECIAL PURPOSE LIQUIDATOR APPOINTED) (ACN 055 106 100) | |
| Applicant | |
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JUDGE: | GARDINER AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 August 2016 |
DATE OF JUDGMENT: | 7 September 2016 |
CASE MAY BE CITED AS: | Re Traditional Values Management Ltd (In Liq) (No 4) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 520 |
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CORPORATIONS – Application for further remuneration by special purpose liquidator appointed in liquidation of responsible entity of managed investment scheme – Application for determination of prospective remuneration for the remaining period of special purpose liquidator’s appointment – Determination made that remuneration should be determined in the amount requested including that sought prospectively.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms A Crittenden, solicitor | Clayton Utz |
HIS HONOUR:
Introduction
By an interlocutory process filed 15 July 2016, the applicant (‘Mr Hewitt’) makes application for a determination that he is entitled to further remuneration in relation to work he has completed as Special Purpose Liquidator (‘SPL’) of Traditional Values Management (In Liquidation) (‘TVM’).
On 3 September 2014, Mr Hewitt was appointed as SPL of TVM pursuant to orders made by Ferguson J (as she then was) in proceeding S CI 2014 3849 (‘the orders’).
By interlocutory process filed 7 May 2015, pursuant to order 6(f) of the orders, Mr Hewitt made application for a determination of his remuneration as SPL of TVM for the period 3 September 2014 to 20 February 2015 (‘the first remuneration application’).
On 15 July 2015, I made orders in the first remuneration application determining Mr Hewitt’s remuneration for that earlier period, and published reasons.[1] The background to Mr Hewitt’s appointment as SPL is detailed in those reasons.
[1][2015] VSC 338.
In this application, Mr Hewitt relies principally on his affidavit sworn 25 May 2016 as well as affidavits of Jarrod Rubin Blusztein affirmed 30 June 2016 and Paul John James sworn 15 August 2016. Mr Blusztein’s affidavit is concerned with service on parties required to be served pursuant to order 6(c)(i) to (iii) of the orders. Mr Blusztein’s affidavit evidences that all parties required to be served with this application under the orders have been served. Mr Blusztein indicates that Mr Hewitt has informed him that, as at the date of Mr Blusztein affirming his affidavit, Mr Hewitt has not received any notice of objection to the application.
Under the terms of paragraphs 6(c)(ii) and 7 of the orders, Mr Neil Campbell was required to be served with the requisite documentation. Mr Blusztein states that the solicitors for Mr Hewitt, Clayton Utz, received a letter dated 20 June 2016 from Mr Campbell’s solicitors, K&L Gates, stating that Mr Campbell did not intend to file any material objecting to the remuneration sought by the applicant.
Mr Blusztein indicates that Clayton Utz has not received any other response or objection as to the date of affirming his affidavit. In his affidavit, Mr James, the partner responsible for this matter at Clayton Utz, deposes that as of the date of hearing the application, 15 August 2016, there has been no other response or objection to this application.[2]
[2]As such, Mr Hewitt makes this application under order 6(f) of the orders.
Mr Hewitt sought that the application be dealt with on the papers in the absence of the public and without attendance by or on behalf of Mr Hewitt pursuant to order 6(f)(ii) of the orders.
I decided however to request Mr Hewitt’s solicitors to attend Court for the purpose of enabling me to seek clarification of various matters. This course was adopted to enable the application to be dealt with more expeditiously. One of the matters I raised with Ms Crittenden, a senior associate at Clayton Utz who appeared on behalf of Mr Hewitt on 15 August 2016, was whether the liquidators of TVM, Mr Geoffrey Handberg and Mr Brent Morgan (‘the Liquidators’) had been served with the application and whether they had informed Clayton Utz of their attitude to it. They had not been served and, although I note that the Liquidators were not required to be served under the terms of the orders, I regarded it as appropriate that they be put on notice of the application, being the persons in a position to most informatively critique the application by reason of their knowledge of the background of the TVM administration.
Because of this, at the hearing on 15 August 2016, I requested that the application be served on the Liquidators and that they provide any response to the application within seven days of service. In her affidavit sworn 22 August 2016, Ms Crittenden deposes that she provided the documentation in support of the application to the Liquidators’ solicitors, Mills Oakley, on 15 August 2016. On 19 August 2016, Ms Crittenden received an email from the solicitor having the conduct of the matter at Mills Oakley, Mr Lin, which stated, amongst other things, that the Liquidators did not intend to file any objections to Mr Hewitt’s application.
In this application, Mr Hewitt seeks the determination of his remuneration:
(a) in the sum of $98,239 exclusive of GST for the period 20 February 2015 to 29 November 2015 (inclusive);
(b) in the sum of $13,326 exclusive of GST for the period 30 November 2015 to 24 May 2016 (inclusive); and
(c) up to the sum of $20,100 exclusive of GST, being a capped amount based on Mr Hewitt’s reasonable estimate of the work performed that he will be required to complete as SPL of TVM between 25 May 2016 and to the date on which he retires as the SPL of TVM.
Mr Hewitt’s experience and qualifications to perform his role as SPL were set out in my reasons given in the first remuneration application.[3]
[3][2015] VSC 338 at [8]-[10].
In his role as SPL, Mr Hewitt completed a Special Purpose Liquidator’s report (‘the Report’) which was filed with the Court in compliance with the orders.
In the first remuneration application, the quantum of remuneration the Court determined that Mr Hewitt was entitled to, pursuant to the July 2015 orders, related to work that Mr Hewitt and his staff completed between 3 September 2014 and 20 February 2015 inclusive.[4]
[4]Although the orders made in relation to the first remuneration application are expressed as relating to work Mr Hewitt completed as SPL of TVM between 3 September 2014 and 20 February 2015 (inclusive), the last time entries included in the remuneration request approval report of 16 March 2015 related to work completed on 17 January 2015. As such, the time entries dated 20 February 2015 listed in the remuneration report the subject of Mr Hewitt’s present application are not captured by the July 2015 orders.
On 20 May 2015, Sifris J made orders in proceeding number S CI 2014 3849 (‘May 2015 orders’) broadening Mr Hewitt’s role as SPL to include making an assessment of whether TVM should continue prosecuting certain proceedings commenced by the liquidation.
Order 1 of the May 2015 orders provided for Mr Hewitt’s role to be expanded to include:
(a) making an assessment as to whether, on the information available to him, prosecution of the writs filed in the Proceedings would be in the best interests of creditors of TVM (SPL Assessment);
(b) serving the writs filed in the Proceedings; and
(c) following service of the writs, conducting the Proceedings on behalf of TVM.
In this application the remuneration that Mr Hewitt claims relates to:
(a) work completed between 20 February 2015 and 16 July 2015 (inclusive) in relation to the first remuneration application and the July 2015 orders;
(b) work completed between 20 February 2015 and 29 November 2015 (inclusive) relating to:
(i) preparing the first remuneration application and this application;
(ii) the role of Mr Hewitt as SPL as expanded by the 15 May 2015 orders;
(c) work completed between 30 November 2015 and 24 May 2016 (inclusive); and
(d) work to be completed between 25 May 2016 and the date on which Mr Hewitt retires as SPL of TVM.
The legal principles to be applied in this application are referred to at length in my reasons given in the determination of the first remuneration application.[5]
[5]At [40]-[47].
As I observed in the reasons given in respect of the first remuneration application, this application is not one in which I exercise the jurisdiction of determining Mr Hewitt’s remuneration under the statutory provisions of the Corporations Act 2001 (Cth) (‘the Act’). Implementation of the orders involves the exercise of the inherent equitable powers of the Court but in going about that exercise I consider it appropriate to apply the statutory criteria found in s 473(10) of the Act which are concerned with the determination of the remuneration of liquidators. In Thackray & Ors v Gunns Plantations Ltd & Ors,[6] Davies J, in considering an application for remuneration by the receivers of a responsible entity of a managed investment scheme , stated:[7]
The receivers have the burden of establishing their entitlement to an indemnity for the amounts claimed. They have argued that the procedure by which they are to establish their entitlement should be the same as the procedure which applies when a liquidator asks the Court to determine his or her remuneration under s 473(3) of the Act. No party objected to this course and it seems to me to be a sensible approach to take.
[6][2011] VSC 380.
[7]At [59].
Accordingly, in this application, I intend to use the discretionary template set out in s 473(10) of the Act, which provides:
(10)In exercising its powers under subsection (3), (5) or (6), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a)the extent to which the work performed by the liquidator was reasonably necessary;
(b)the extent to which the work likely to be performed by the liquidator is likely to be reasonably necessary;
(c)the period during which the work was, or is likely to be, performed by the liquidator;
(d)the quality of the work performed, or likely to be performed, by the liquidator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator;
(f)the extent (if any) to which the liquidator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the liquidator 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 liquidator;
(i)whether the liquidator was, or is likely to be, required to deal with:
(i)one or more receivers; or
(ii)one or more receivers and managers;
(j)the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company's creditors;
(k)if the remuneration is ascertained, in whole or in part, on a time basis:
(i)the time properly taken, or likely to be properly taken, by the liquidator in performing the work; and
(ii)whether the total remuneration payable to the liquidator is capped;
(l)any other relevant matters.
By way of background:
(a) on 2 July 2014, the Liquidators caused TVM to commence Victorian Supreme Court proceeding S CI 2014 03330 against Dantay Pty Ltd (‘Dantay Proceeding’);
(b) on 2 July 2014, the Liquidators caused TVM to commence Victorian Supreme Court proceeding S CI 2014 03331 against its former directors, Ms Elizabeth Louise Clegg and Ms Susan Mary Taylor (‘Director Proceeding’); and
(c) on 6 June 2014, the Liquidators caused TVM to commence Victorian Supreme Court proceeding S CI 2014 02835 against its former auditors Price Gibson Pty Ltd, Mr Graeme Desmond Price and Mr Peter John Gibson (‘Auditor Proceeding’),
(collectively, ‘the Proceedings’).
In the Report, Mr Hewitt expressed his opinion as SPL of TVM that, as there existed the possibility that the Liquidators may be joined in the Proceedings as joint tortfeasors, the Liquidators, if they continued prosecuting the Proceedings on behalf of TVM, would be faced with a conflict of interest. Accordingly, Mr Hewitt suggested that the Court consider:
(a) requiring him, as the SPL of TVM, to ‘shadow’ the Liquidators in prosecuting the Proceedings on TVM’s behalf; or
(b) requiring Mr Hewitt to take carriage of the Proceedings and prosecute them on TVM’s behalf.
On 5 March 2015, Mills Oakley, the solicitors for the Liquidators, wrote to Clayton Utz, and proposed, among other things, that Mr Hewitt assess the merits of the claims made in each of the Proceedings to determine whether continuing to prosecute each of the Proceedings was in the best interests of the creditors of TVM.
Between 24 March 2015 and 15 May 2015, Clayton Utz and Mills Oakley exchanged correspondence relating to the Liquidators' proposal that Mr Hewitt assess (independently of the Liquidators) whether prosecuting each of the Proceedings would be in the bests interests of the creditors of TVM.
Mr Hewitt states that after being satisfied of the propriety of doing so, he ultimately consented to the Liquidators’ proposal and, on 20 May 2015, the May 2015 orders were made.
On 12 October 2015, after Mr Hewitt had made the SPL Assessment that it would not be in the best interests of the creditors of TVM for it to continue prosecuting the Proceedings, Sifris J made orders discontinuing the Dantay Proceeding, Auditor Proceeding and Director Proceeding.
As was the case with the first remuneration application, Mr Hewitt seeks determination of his remuneration calculated on a time-cost basis in accordance with the procedures detailed by the Australian Restructuring Insolvency & Turnaround Association (‘ARITA’). Mr Hewitt and his staff recorded details of the time expended on tasks in fulfilling his role as SPL of TVM in an electronic system known as Advanced Professional Solutions (‘APS’).
In his affidavit, Mr Hewitt sets out a table which appears below, listing the names of the people who performed work the subject of the application, their classification, hourly rate and total hours spent completing the work.
Name Classification Hourly rate before 1 July 2015 (exclusive of GST) Hourly rate from 1 July 2015 (exclusive of GST) Hours worked Andrew Hewitt Partner $630.00 $630.00 22.20 Christopher Sequeira Senior Manager $490.00 $495.00 51.00 Raffi Dishoian Assistant Manager $410.00 $420.00 129.00 Mei Lin Lee Senior $380.00 $380.00 12.60 Thomas Austin Senior $310.00 $320.00 0.20 Li Jin Graduate $250.00 $255.00 1.00 Christine Ngyuen-Tran Graduate $220.00 $240.00 0.50 Peter McCabe Administrator $160.00 $160.00 3.80 Leanne Donaldson Administrator $200.00 $200.00 0.60
As I noted in my reasons given in the first remuneration application,[8] although I regard, by reference to the fee schedules in the numerous consents from liquidators that I sight in Corporations List matters, that the rates being charged (which are the same rates applied in the first remuneration application) are at the higher end of the rates being charged by liquidators in Melbourne, I consider they are still within the range of what I would describe as the ‘market’. As I also noted, the task of the SPL also called for heightened experience, judgment and responsibility and the appointment as SPL involved the exercise of more complex discretions than is usual.
[8][2015] VSC 338 at [28].
Remuneration for the Period 20 February 2015 to 29 November 2015 (inclusive)
For the period 20 February 2015 to 29 November 2015 (inclusive), Mr Hewitt and his staff expended 220.90 hours on tasks resulting in work in progress in the sum of $98,239 exclusive of GST.
The affidavit exhibits a Remuneration Request Approval Report prepared by Mr Hewitt with assistance from his staff (‘Remuneration Report’). The Remuneration Report, at points 1 and 2 of Part 3 respectively, summarises the work completed by Mr Hewitt and his staff for the period 20 February 2015 to 29 November 2015 together with the period 30 November 2015 to 24 May 2016 (both inclusive).
The affidavit also exhibits extracts from APS, which set out (for those periods):
(a) the person who undertook a task;
(b) a description of each task undertaken;
(c) the amount of time spent on each task and the associated cost; and
(d) a classification of each task by reference to the following 5 general categories of task:
(iii) administration;
(iv)planning;
(v) investigations;
(vi)legal; and
(vii) remuneration.
Tasks Related to the Expanded Scope of Mr Hewitt’s Role, as Outlined in the May 2015 orders, Completed Between 20 February 2015 and 29 November 2015 (inclusive)
Between 20 February 2015 and 29 November 2015 (inclusive), Mr Hewitt and his staff completed the following work:
(a) before the May 2015 orders were made:
(viii) considering Mr Hewitt’s position regarding whether he should be responsible for making the SPL Assessment; and
(ix) performing the initial stages of a number of the tasks set out in paragraphs 35 to 38 below; and
(b) after the May 2015 orders were made, completing the tasks set out in paragraphs 35 to 38 below and making the SPL Assessment.
Mr Hewitt deposes that between 20 February 2015 and 29 November 2015 (inclusive) performing the role as SPL and making the SPL Assessment presented challenges. Those challenges included:
(a) understanding the nature and scope of the Proceedings from a factual perspective;
(b) considering and understanding legal advice provided to the SPL by Clayton Utz regarding TVM’s prospects of success in the Proceedings;
(c) obtaining information relating to the financial resources available to the respective defendants in the Dantay Proceeding, Director Proceeding and Auditor Proceeding to inform the SPL Assessment;
(d) as part of the SPL Assessment, conducting financial investigations and reviewing financial investigations conducted by the Liquidators in respect of the fraud allegedly facilitated by Ms Philistin;
(e) as part of the SPL Assessment, considering:
(x) the extent to which liability would be apportioned to each defendant in each of the Proceedings and whether the respective defendants had the resources available to them to satisfy any award of damages made in favour of TVM; and
(f) having regard to the matters listed in paragraphs 34(a) to 34(e) above in assessing:
(i) the potential cost to TVM of prosecuting the Proceedings; and
(ii) the potential quantum of any amount of damages TVM may be awarded if it were successful in prosecuting the Proceedings.
Administration
Mr Hewitt and his staff spent 7.9 hours, resulting in fees of $2,301 exclusive of GST, in the ‘administration’ category of tasks for TVM. Those tasks primarily concerned:
(a) printing, collating and filing documents;
(b) reviewing and actioning correspondence received from various parties; and
(c) liaising with the ASIC in relation to preparing and lodging ASIC 524 Forms (which forms show the progress of the external administration of TVM).
Planning
Mr Hewitt and his staff spent 6.6 hours, resulting in fees of $3,013 exclusive of GST, in the ‘planning’ category of tasks for TVM. Those tasks primarily concerned:
(a) discussions between Mr Hewitt and his staff regarding the scope of the investigations that were to be conducted as SPL of TVM and the progress and timing of those investigations; and
(b) liaising with Mills Oakley and the Liquidators in relation to his requests for information in respect of TVM to facilitate his completion of the SPL Assessment.
Investigations
Mr Hewitt and his staff spent 84.9 hours, resulting in fees of $35,788 exclusive of GST, in the ‘investigations’ category of tasks for TVM. Those tasks primarily concerned:
(a) obtaining and reviewing material provided by the Liquidators;
(b) liaising with unit holders in the Trust, including keeping them informed of the progress of the SPL Assessment;
(c) corresponding with Mills Oakley and the Liquidators with respect to the SPL Assessment;
(d) keeping ASIC updated with respect to the progress of the SPL Assessment;
(e) meeting with Mills Oakley, the Liquidators and Clayton Utz to gather information to assist in making the SPL Assessment;
(f) in connection with the SPL Assessment, reviewing documents relating to:
(iii) the Proceedings;
(iv)quantifying the alleged fraud that Ms Lynne Philistin perpetrated against TVM;[9]
[9]Details of the alleged fraud committed by Ms Philistin are set out in paragraphs 14 to 27 of the affidavit in support of the first remuneration application.
(v) the extent to which proportionate liability may have affected the quantum of any damages ordered against the defendants in the Proceedings;
(vi)estimating the quantum of any damages ordered against the defendants in the Proceedings; and
(vii) considering the financial capacity of the defendants in the Proceedings and whether they could satisfy any award of damages made against them;
(g) completing file notes relating to the SPL's investigations and prosecuting the Proceedings;
(h) corresponding with the Liquidators with respect to the manner in which the Liquidators:
(i) estimated the quantum of the net total loss suffered by TVM as a result of the fraud allegedly perpetrated by Ms Philistin (‘Net Total Claim’); and
(ii) prepared the ‘Fraud Loss Analysis spreadsheet’ (‘FLAS’). The FLAS was a schedule used to estimate the quantum of the loss suffered by the Trust by reference to each loan alleged to have been fraudulently facilitated by Ms Philistin;
(i) preparing a memorandum based on sampling TVM’s records to assess the accuracy of the Net Total Claim as calculated by the Liquidators;
(j) in order to prepare the memorandum referred to in paragraph 37(i) above, performing an on-site inspection of the books and records of TVM maintained by the Liquidators and TVM’s books and records generally to ensure the Liquidators had properly identified and quantified all fraudulent loans allegedly facilitated by Ms Philistin as recorded in the FLAS; and
(k) notifying unit holders in the Trust of the outcome of the SPL Assessment.
Legal
Mr Hewitt and his staff spent 73.20 hours, resulting in fees of $35,637 exclusive of GST, in the ‘legal’ category of tasks for TVM. Those tasks primarily concerned:
(a) reviewing correspondence from Clayton Utz, Mills Oakley and Charles Fice Solicitors (‘CFS’) (the solicitors for investors in the Blue Diamond Deposits Trust (No 1)) and conducting internal meetings with Mr Hewitt’s staff regarding that correspondence;
(b) holding 4 meetings with Clayton Utz to discuss legal issues relating to:
(iii) the appropriateness of Mr Hewitt assessing (independently of the Liquidators) whether prosecuting each of the Proceedings would be in the best interests of the creditors of TVM;
(iv)any parameters that should be placed on Mr Hewitt conducting an assessment of the type outlined in paragraph 38(b)(i) above; and
(v) whether TVM should continue prosecuting the Proceedings;
(c) discussing with the Liquidators issues relating to TVM’s prosecution of the Proceedings;
(d) discussing various legal matters with Mills Oakley;
(e) attending to tasks associated with serving writs in the Proceedings;
(f) liaising with Clayton Utz in relation to:
(i) legal issues relating to proportionate liability; and
(ii) the best interests of the creditors of TVM with respect to prosecuting the Proceedings on behalf of TVM; and
(g) attending to tasks relating to TVM discontinuing the Proceedings.
Remuneration
Mr Hewitt and his staff spent 48.30 hours, resulting in fees of $21,500 exclusive of GST, in the ‘remuneration’ category of tasks for TVM. Those tasks primarily concerned:
(a) corresponding with Clayton Utz in relation to:
(iii) the first remuneration application until the making of the July 2015 orders; and
(iv)this application;
(b) corresponding with Clayton Utz in relation to legal fees incurred by Mr Hewitt as SPL;
(c) providing work in progress updates regarding work completed by Mr Hewitt to Mills Oakley and the Liquidators;
(d) preparing correspondence to the Liquidators with respect to:
(i) payment of Mr Hewitt’s remuneration as determined by the July 2015 orders, including preparation of his invoice to the Liquidators; and
(ii) payment of legal fees incurred by Mr Hewitt; and
(e) preparing the Remuneration Report.
Remuneration for the Period 30 November 2015 to 24 May 2016
For the period 30 November 2015 to 24 May 2016, Mr Hewitt and his staff expended 30.5 hours on tasks resulting in work in progress in the sum of $13,326 exclusive of GST.
The Remuneration Report, at point 2 of Part 3, summarises the work completed by Mr Hewitt and his staff for this period. Mr Hewitt’s affidavit exhibits extracts from APS, which set out for that period information in relation to work completed by Mr Hewitt and his staff as explained in paragraph 31 above. The table in paragraph 28 above sets out the names of the people who performed work, their classification, hourly rate and total hours spent completing work.
For this period, Mr Hewitt and his staff completed the following tasks relating to the task categories listed in paragraph 32(d) above.
Administration
Mr Hewitt and his staff spent 2.3 hours, resulting in fees of $684 exclusive of GST, in the ‘administration’ category of tasks for TVM. Those tasks primarily related to internal filing of documents.
Remuneration
Mr Hewitt and his staff spent 27.9 hours, resulting in fees of $12,516 exclusive of GST, in the ‘remuneration’ category of tasks for TVM. Those tasks primarily concerned:
(a) engaging in correspondence with Clayton Utz in respect of preparing the Application;
(b) corresponding with Clayton Utz in relation to legal fees incurred by Mr Hewitt;
(c) providing work in progress updates regarding work completed by Mr Hewitt to Mills Oakley and the Liquidators;
(d) preparing correspondence to the Liquidators with respect to payment of legal fees incurred by Mr Hewitt; and
(e) preparing the Remuneration Report.
Investigations
Mr Hewitt and his staff spent 0.30 hours, resulting in fees of $126 exclusive of GST, in the ‘investigations’ category of tasks for TVM. Those tasks primarily concerned liaising with ASIC to provide an update on Mr Hewitt’s appointment as SPL.
Receipts and Payments
As at the date of swearing this affidavit, Mr Hewitt has:
(a) not made any payments on TVM’s behalf; and
(b) received the following payments:
(iii) $215,640 exclusive of GST pursuant to the July 2015 orders for work he completed between 3 September 2014 and 20 February 2015 (inclusive) as SPL of TVM; and
(iv)$288.11 exclusive of GST in appointee disbursements.
Mr Hewitt has provided details of tasks completed by him and his staff during the periods 20 February 2015 to 29 November 2015 and 30 November 2015 to 24 May 2016 (both inclusive) relating to each of the 5 categories listed in paragraph 32(d) above. In my view, the evidence in Mr Hewitt’s affidavit and corresponding exhibits, comply with the standard required for this type of application as described in my earlier reasons.[10] I consider on the evidence before me, that the work performed to date by Mr Hewitt as SPL and his staff was of the necessary quality and involved dealing with complex and out of the ordinary issues, particularly as described in paragraphs 33 to 34 above. In my view, the information contained in the spread sheet in the termination Request Report complies with the standard required and described in Venetian Nominees Pty Ltd[11] and with the requirements of s 9.4(7) of the Supreme Court (Corporation) Rules 2013 (Vic). The tasks described in the narration appear to have been carried out by a person in the appropriate position within the hierarchy of Mr Hewitt’s firm. As best as I can tell, it also appears that the time involved in respect of each entry I have chosen is reasonable. Most of the day to day activities of the administration appear to have been appropriately delegated down the hierarchy to a person appropriate for the level of task involved. As the table in paragraph 28 reveals, much of the work done has been performed by Mr Sequeira, a senior manager, and Mr Dishoian, an assistant manager, with what appears to be an appropriate level of involvement on the part of Mr Hewitt.
[10][2015] VSC 338 at [40] to [48].
[11]Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96.
In coming to that determination, I have not examined each and every entry in the spread sheets closely but instead have chosen at random approximately 60 entries for which the amount being charged was in excess of $500 and assessed, having regard to the narrative, and the time spent and amount charged, whether the claim appears to be reasonable and whether the task being performed was necessary in the circumstances.
The fact that a SPL was appointed is a step in the liquidation of a company which is out of the ordinary. In order to fulfil his role as SPL and complete the SPL Assessment in accordance with the May 2015 orders, Mr Hewitt deposes that he and his staff were required to understand and analyse a number of complex issues. In particular, Mr Hewitt and his staff were required to conduct a financial and legal analysis of whether TVM’s prosecution of the Proceedings would be in the bests interests of its creditors, having regard to:
(a) the cost to TVM of prosecuting the Proceedings (including Mr Hewitt’s remuneration and legal costs) and whether TVM had sufficient resources available to fund the prosecution of the Proceedings;
(b) the extent to which liability would be apportioned to each defendant in each of the Proceedings in the event that TVM successfully prosecuted the Proceedings;
(c) the likely quantum of any damages awarded in favour of TVM in the Proceedings and whether the defendants had available to them sufficient resources to satisfy any damages awarded in favour of TVM; and
(d) the likelihood TVM would be successful in prosecuting the Proceedings, which involved complex legal issues relating to negligence and apportionment of liability, fiduciary duties, directors’ duties, estoppel and interpreting the terms of deeds of release.
Mr Hewitt contends, and I agree, that undertaking an analysis of the type outlined in the preceding paragraph is a step outside the usual course of a liquidation.
Throughout his appointment as SPL, Mr Hewitt and his staff were required to deal with:
(a) the Liquidators;
(b) Secured Creditors (as defined in paragraph 9 of the April 2015 Affidavit); and
(c) unit holders in the Trust.
I consider that it is appropriate to make orders determining Mr Hewitt’s remuneration as SPL for the two periods in the amounts sought. I see no reason to reduce the amounts sought.
Prospective Order for Remuneration for the Period 25 May 2016 to the date of Mr Hewitt’s Retirement of SPL of TVM
Mr Hewitt deposes that, after the date of swearing his affidavit, he will be required to complete the following work in his role as SPL of TVM:
(a) attend to matters arising from this application; and
(b) take the necessary steps to retire from the position as the SPL of TVM,
(collectively, ‘the Post-Affidavit Work’) and seeks a prospective order in that regard.
Mr Hewitt states that in relation to matters arising from this application, Mr Hewitt and his staff will be required to liaise with Clayton Utz as to the progress of the application and provide instructions to Clayton Utz in response to any questions the Court may have with respect to the application.
Mr Hewitt states that in order to complete the tasks outlined in paragraphs 53 and 54 above, based on his experience in other external administrations, he anticipates that he and his staff will be required to perform 28 hours of work, resulting in fees of $10,890 exclusive of GST. In his affidavit he sets out a table which includes the personnel that he anticipates will be required to perform the tasks outlined in paragraphs 53 and 54 above, including their classification, hourly rate and estimated hours required to complete the tasks outlined in paragraphs 53 and 54 above and the estimated cost of that work (exclusive of GST).
Name Classification Hourly rate from 1 July 2015 (exclusive of GST) Hours worked Cost
exclusive of GSTAndrew Hewitt
Partner
$630.00
5.00
$3,150.00
Raffi Dishoian
Assistant Manager
$420.00
15.00
$6,300.00
Peter McCabe
Administrator
$160.00
4.00
$640.00
Leanne Donaldson
Administrator
$200.00
4.00
$800.00
Total
28.00
$10,890.00
He states that in relation to taking the necessary steps to retire from his position as SPL of TVM, he has been informed by Mr James, of Clayton Utz, and believes, that he will be required to approach the Court and request that an order be made to the effect that:
(a) the objects of his appointment as the SPL of TVM have been achieved; and
(b) it is in order for him to retire from the position as SPL of TVM.
In addition to the above, Mr Hewitt states that he will be required to complete the following work in relation to retiring as SPL of TVM:
(a) inform the Liquidators and the unit holders in the Trust of his retirement as SPL; and
(b) complete and file the necessary notices with ASIC.
In order to complete the tasks outlined in paragraphs 56 and 57 above, based on his experience in other external administrations, Mr Hewitt anticipates that he and his staff will be required to perform 24 hours of work, resulting in fees of $9,210 exclusive of GST. He sets out a table which includes the people that he anticipates will be required to perform those tasks outlined, their classification, hourly rate estimated hours required to complete the tasks outlined above and the estimated cost of that work (exclusive of GST).
| Name | Classification | Hourly rate from 1 July 2015 | Hours worked | Cost |
| Andrew Hewitt | Partner | $630.00 | 5.00 | $3,150.00 |
| Raffi Dishoian | Assistant Manager | $420.00 | 11.00 | $4,620.00 |
| Peter McCabe | Administrator | $160.00 | 4.00 | $640.00 |
| Leanne Donaldson | Administrator | $200.00 | 4.00 | $800.00 |
| Total | 24.00 | $9,210.00 |
The quantum of remuneration listed in paragraphs 55 and 58 above is based on what Mr Hewitt states is his reasonable estimate of time expended and work in progress that he will incur as SPL of TVM for the work set out in paragraphs 53, 54, 56 and 57 above. He requests that the Court makes orders:
(a) determining that, upon his retirement as SPL, he will be entitled to remuneration not exceeding the amount of $20,100 exclusive of GST for the Post-Affidavit Work;
(b) in the event that the quantum of his work in progress as SPL of TVM for Post-Affidavit Work amounts to less than $20,100 exclusive of GST, Mr Hewitt will only draw from TVM remuneration in the quantum of the work in progress; and
(c) in the event that that the quantum of his work in progress as SPL of TVM for Post-Affidavit Work amounts to more than $20,100 exclusive of GST, Mr Hewitt may approach the Court for further orders to determine his remuneration.
With respect to the Post-Affidavit Work, Mr Hewitt believes the costs he has anticipated are reasonable and necessary, having regard to his experience, and that he has obligations as SPL of TVM including the steps needed in order for him to retire as SPL.
Mr Hewitt states that in his opinion, if the Court were to make orders in the form proposed in paragraph 59 above, the likelihood of him making a further application to the Court requesting that his remuneration as SPL of TVM be fixed, will be reduced. If he is not required to make a further application to the Court, he considers the best interests of TVM would be served and costs to creditors would be minimised by reason of avoiding the need to take the steps required by the orders, including:
(a) preparing an affidavit supporting his further application for remuneration;
(b) serving on the parties specified in the notice in accordance with Form 16 of the Supreme Court (Corporations) Rules 2003 (Vic) and, amending as necessary, a copy of the orders and an affidavit supporting his application for further remuneration;
(c) waiting 21 days after service of the documents listed in paragraph 61(b) above for any objections from the parties upon whom the documents are served before making a further remuneration application; and
(d) arranging for the preparation of a further affidavit to be filed in support of his application for further remuneration:
(v) relating to the service of the documents listed in paragraph 61(b) above if no objections are made to his application; or
(vi)outlining the particulars of any objections made to his application.
In addition to the above:
(a) interested parties upon whom this affidavit will be served in connection with such further application will have an opportunity to object to his estimate of Mr Hewitt’s Post-Affidavit Work remuneration; and
(b) if he is not required to make a further application to the Court, TVM will not bear the legal costs associated with Mr Hewitt making the further application.[12]
[12]The legal costs that Mr Hewitt incurred in respect of the first remuneration application were $23,281.43 inclusive of GST.
There has been some resistance to the making of orders in favour of insolvency practitioners for their prospective remuneration.[13]
[13]See discussion in Re Korda; In the Matter of Stockford Limited (2004) 140 FCR 424 per Finkelstein J (‘Stockford’).
In my view, the terms of s 473(10), which were introduced by the Corporations Amendment (Insolvency) Act 2007 (Cth),[14] clearly contemplate that a court, when going about the exercise of determining a liquidator’s remuneration, can, if adequate evidence and information is provided, determine a liquidator’s remuneration prospectively. Section 473(10)(b) speaks of ‘the extent to which the work likely to be performed by the liquidator is likely to be reasonably necessary’ and s 473(10)(c) speaks of ‘the period which the work was, or is likely to be, performed by the liquidator’. Similar phrases are found in ss 473(10)(d), (e), (f), (g) and (h). The same situation applies in respect of the remuneration of administrators. The discretionary criteria set out in s 449E(4) in relation to administration, are mutatis mutandus, identical and provide for, in my view, prospective determinations of remuneration.[15] These provisions were introduced after the decision of Finkelstein J in Re Stockford.[16] Provided there is adequate evidence to ascertain whether the prospective remuneration sought is reasonable, I would consider it appropriate to make a determination or award for such prospective remuneration. The costs of bringing yet a further application would result in the incurring of disproportionate legal costs of an amount approximating that of the remuneration being sought as well as adding to the amount being claimed for the remuneration involved in preparing the application itself.
[14]No 132 of 2007.
[15]See also s 425(8) in regard to receivers’ remuneration.
[16]Re Korda; In the Matter of Stockford Limited (2004) 140 FCR 424.
I consider that it is appropriate to make the order for prospective remuneration that is proposed. The amounts claimed appear to be reasonable having regard to what will probably be involved in the completion of the tasks required to be carried out by Mr Hewitt. The evidence is informative and comprehensive enough for me to determine that the amount sought for prospective remuneration is reasonable and necessary for Mr Hewitt to complete his task as SPL and will be undertaken by those persons with the appropriate level of experience in Mr Hewitt’s organisation.
I will ask Mr Hewitt’s solicitors to submit orders which implement those reasons.
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