Re Tuscan Property Development Pty Ltd
[2018] VSC 511
•7 September 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2017 01011
IN THE MATTER of TUSCAN PROPERTY DEVELOPMENT PTY LTD (ACN 101 425 558)
| COMMISSIONER OF STATE REVENUE | Plaintiff |
| v | |
| TUSCAN PROPERTY DEVELOPMENT PTY LTD (ACN 101 425 558) | Defendant |
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JUDICIAL REGISTRAR: | Matthews JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 June 2018, further affidavit filed 5 July 2018 |
DATE OF JUDGMENT: | 7 September 2018 |
CASE MAY BE CITED AS: | Re Tuscan Property Development Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2018] VSC 511 |
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CORPORATIONS – External administration – Application by liquidators for determination of remuneration pursuant to s 473(3)(b)(ii) of the Corporations Act 2001 (Cth) – Consideration of transitional provisions in respect of the new Insolvency Practice Schedule (Corporations) as Schedule 2 to the Corporations Act 2001 (Cth) – Remuneration approved.
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APPEARANCES: | Counsel | Solicitors |
| For the Liquidator | J Laidman, solicitor | Hunt & Hunt |
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NOTE: The liquidators have served all parties required to be served with notice of the intention to make this application and no such party appeared to oppose or contradict it. In such circumstances and in light of the provisions of r 9.2 of the Supreme Court (Corporations) Rules 2013, it was considered appropriate to deal with the application in the absence of the public and without the necessity for the liquidators to attend at Court (save as identified in these reasons).
JUDICIAL REGISTRAR MATTHEWS:
Introduction
Nature of the application and material relied upon
Andrew Reginald Yeo and Giuseppe Michele Rambaldi (‘Liquidators’) were appointed as joint and several liquidators of the defendant, Tuscan Property Development Pty Ltd (‘Company’), on 19 April 2017, pursuant to orders made on that day by this Court.
By interlocutory process issued 7 June 2018 in the winding-up proceeding, the Liquidators apply, under s 473(3)(b)(ii) of the Corporations Act 2001 (Cth) (‘Act’)[1] and r 9.2 of the Supreme Court (Corporations) Rules 2013 (‘Rules’), for the approval of their remuneration and expenses incurred in the liquidation of the Company as follows:
[1]As explained in paragraph [22] below, this section of the Act has been repealed but continues to apply in certain circumstances.
(a) for the period 19 April 2017 to 25 March 2018 in the amount of $72,174.28 plus GST;
(b) for future costs and disbursements in the amount of $11,000 plus GST; and
(c) that the Liquidators’ costs and disbursements of this application be costs in the liquidation of the Company
(‘Application’).
The Application is supported by affidavits from:
(a) Mr Yeo sworn 13 April 2018 (‘First Yeo Affidavit’);
(b) Mr Yeo sworn 30 May 2018 (‘Second Yeo Affidavit’);
(c) Jessica Sahnaaz Laidman of Hunt & Hunt, the solicitors for the Liquidators, affirmed 23 April 2018 (‘First Laidman Affidavit’); and
(d) Ms Laidman affirmed 5 July 2018 (‘Second Laidman Affidavit’).
For the reasons set out below, I will approve the Liquidators’ remuneration and internal disbursements in the amount of $83,174.28 plus GST. This includes $11,000 on account of future costs and disbursements.[2] I will also order that the Liquidators’ costs and disbursements of the Application be costs in the liquidation of the Company.
[2]The amounts approved do not include disbursements for legal costs: these were not part of the remuneration application.
Manner of determining the Application
The interlocutory process also contains a request of the type contemplated by r 9.2(4)(b) of the Rules that the Application be dealt with in the absence of the public and without attendance by or on behalf of the Liquidators.[3]
[3]The interlocutory process filed in this case on 7 June 2018 made this request and was said to be pursuant to r 9.4(5)(b) of the Rules. With effect from 1 June 2018, r 9.4 of the Rules was revoked. Rule 9.2 was substituted. Previously, the Rules had provided in r 9.2 for the remuneration of administrators and in r 9.4 for the remuneration of liquidators. The new r 9.2 now deals with remuneration of ‘external administrators’, which includes liquidators. The requirements under the old r 9.4 and the new r 9.2 are relevantly identical. See rr 20 and 23 of Supreme Court (Chapter V Insolvency and Further Powers of Judicial Registrars Amendment) Rules 2018, S.R. No. 56/2018.
Before making an application of this type, r 9.2 of the Rules requires the Liquidators to serve certain persons with a copy of the principal affidavit in support of the application and a notice in accordance with Form 16 of the Rules stating that it is the Liquidators’ intention to apply to the Court for an order determining their remuneration.
Mr Yeo deposes that the creditors of the Company are the Australian Taxation Office, Tony Mosca, Anna Maria Mosca, and Alexandra Mosca (‘Creditors’).[4] Mr Yeo deposes that on 6 July 2017 he was informed by the Company’s registered tax agent, Tino Di Battista of Nexia Australia, that no further amounts remained outstanding to the plaintiff, being the Commissioner for State Revenue (‘SRO’).[5]
[4]Second Yeo Affidavit, [4].
[5]The Commissioner for State Revenue was the creditor who applied for the Company to be wound up: First Yeo Affidavit, [4], [18]–[20].
Mr Yeo also deposes that at the time the Liquidators were appointed, Tony Mosca (‘Mr Mosca’) was a director and secretary of the Company, and Anna Maria Mosca (‘Mrs Mosca’) was a director of the Company. Each of the two directors held 50% of the shares in the Company.[6]
[6]First Yeo Affidavit, [8], and exhibit ARY-3.
Ms Laidman deposes to having served, on 13 April 2018 by post, a copy of the Form 16 notice dated 13 April 2018 (‘Notice’)[7] and the First Yeo Affidavit, on the Creditors.[8]
[7]A copy of the Notice is contained in exhibits JSL-1 to JSL-3 of the First Laidman Affidavit.
[8]First Laidman Affidavit, [3].
Mr Yeo deposes that the Liquidators had not received any notice of objection to the remuneration claimed from any of the Creditors.[9] Accordingly, the 21 day period prescribed by r 9.2(3) of the Rules has passed since the date that the Creditors were served.
[9]Second Yeo Affidavit, [5].
Rule 9.2(2)(d) provides that each member of the Company whose shareholding represents at least 10 per cent of the issued capital of the Company is also to be served with the Notice and the First Yeo Affidavit. As set out above, Mr and Mrs Mosca, each a 50% shareholder in the Company, were served with those documents.
It is necessary for me to further explain how service and notice of the forthcoming Application was effected on Mr and Mrs Mosca.
In the First Yeo Affidavit, Mr Yeo deposes in some considerable detail to the efforts he and his staff made to contact Mr and Mrs Mosca during the course of the liquidation. In summary, Mr Yeo and his staff attempted to contact Mr and Mrs Mosca by post at the address listed on the ASIC search for the Company as their contact address, which was also the Company’s registered office and principal place of business in Lilydale, to which there was no response. They also conducted a property search and ascertained that the Company was the registered proprietor of land at Bayswater North. By visiting that property, members of the Liquidators’ staff learned that it was occupied by another entity. Through conducting an ASIC directorship search, the Liquidators learned that Mrs Mosca was a director of another company, Tuscan SMSF Pty Ltd, and that her contact address listed in that search was another address in Doncaster (‘Doncaster Property’). Letters were then sent to Mr and Mrs Mosca at the Doncaster Property. Mr Yeo states that he did not receive any response from Mr or Mrs Mosca to any of the correspondence he sent and his staff were unable to make contact with them in person.[10]
[10]First Yeo Affidavit, [7]–[17]; Exhibits ARY-3 to ARY-7.
Mr Yeo also deposes to contact he had with Mr Tino Di Battista of Nexia Australia, the Company’s tax agent, and also with Michael Leonard of Ark Legal, solicitors for Mr and Mrs Mosca. In summary:[11]
[11]First Yeo Affidavit, [18]–[43].
(a) commencing on 2 May 2017 and continuing to around 26 February 2018, Mr Yeo or his staff had numerous letters, emails or telephone calls with Mr Di Battista. It is apparent from those communications that Mr Di Battista was in touch with Mr and Mrs Mosca and that they were aware of the steps that were being taken in the liquidation. It is apparent that they left Mr Di Battista to deal directly with the Liquidators;
(b) a meeting of creditors of the Company was convened by the Liquidators and held on 5 March 2018, which Mr Di Battista attended. He held proxies for all creditors;[12]
(c) from around 22 February 2018, the Liquidators had a number of telephone calls, emails or letters with Mr Leonard; and
(d) on 2 March 2018, Mr Leonard sent an email to Tim Bradd of Pitcher Partners (Mr Yeo and Mr Rambaldi are partners of Pitcher Partners) to say that if the Liquidators filed an application to the Court to have their fees approved, his firm had instructions to accept service.[13]
[12]First Yeo Affidavit, [39].
[13]Exhibit ARY-25 to the First Yeo Affidavit.
Upon reviewing the Yeo affidavits and the First Laidman Affidavit, I formed the view that further information and explanation as to service of the Notice and the First Yeo Affidavit on Mr and Mrs Mosca was required. Given that Mr and Mrs Mosca appear to have never corresponded with the Liquidators directly or confirmed that they had received documents sent to the Doncaster Property, my view was that more information was needed to establish that these documents had come to their notice. Therefore, I caused the Application to be listed for a mention hearing on 26 June 2018 where I raised these matters with the Liquidators’ solicitor. I then indicated that if they wished to do so, the Liquidators could file further affidavit material in respect of those matters. The Liquidators availed themselves of this opportunity and the Second Laidman Affidavit was filed on 5 July 2018.
In that affidavit, Ms Laidman deposes that in addition to serving the documents by post to Mr & Mrs Mosca at the Doncaster Property on 13 April 2018, on that day she also sent a copy of the documents, along with a cover letter, to Mr Leonard.[14] She also deposes that on 9 May 2018, she received an email from Mr Leonard to say he acted on behalf of Mr Mosca and asked her to telephone him. Ms Laidman states that she spoke with Mr Leonard by telephone on 11 May 2018, who said he had received the documents and he had instructions from his client to agree to the remuneration sought by the Liquidators. Ms Laidman says that she asked Mr Leonard to put that in writing in an email, but she had not received that from him.[15]
[14]Second Laidman Affidavit, [3].
[15]Second Laidman Affidavit, [4]–[7].
Having reviewed all of the affidavits, I am satisfied that it is in order for me to proceed in the way contemplated by r 9.2(4)(c) of the Rules. The Creditors and shareholders have been served with the relevant documents and have not objected to the remuneration claimed by the Liquidators.
Accordingly, I am satisfied that it is appropriate that I proceed to determine the application in the absence of the public and without further attendance by or on behalf of the Liquidators.
Applicable principles
Statutory provisions
This application is made under s 473(3)(b) of the Act. That section provides:
(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.
In exercising the power to determine the Liquidators’ remuneration, s 473(10) of the Act prescribes the matters which the Court must take into account when exercising that power:
(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;
(i)any other relevant matters.
While the criteria in s 473(10) of the Act direct the Court to the factors that are to be taken into account, the ultimate question is whether the remuneration claimed by the Liquidators is reasonable.
For completeness, I note that while s 473 of the Act as it was has been repealed, it continues to apply in certain circumstances. I explain that briefly here:
(a) numerous amendments to the provisions of the Act relating to external administrators were made by the Insolvency Law Reform Act 2016 (Cth) (‘ILRA’). Amongst other things, the ILRA repealed ss 473(3) and (10) of the Act and introduced a new Insolvency Practice Schedule (Corporations) as Schedule 2 to the Act (‘Practice Schedule’). The Practice Schedule contains new provisions relating to insolvency practice, including the remuneration of administrators and liquidators. Division 60 of the Practice Schedule provides that an ‘external administrator’[16] of a company is entitled to receive remuneration for necessary work properly performed by him/her in relation to an ‘external administration’.[17] The amount of that remuneration will usually be set under a remuneration determination, which can be made by the Court under s 60-10(1)(c) of the Practice Schedule. Section 60-12 of the Practice Schedule provides that the Court must have regard to whether the remuneration is reasonable, taking into account certain factors which are then listed. These factors are materially the same as the factors which were set out in s 473(10) of the Act;[18]
[16]For the purposes of the Practice Schedule, an external administrator is defined as an administrator, an administrator under a deed of company arrangement, a liquidator, or a provisional liquidator, of the company: s 5-20 of the Practice Schedule.
[17]A company is taken to be under external administration for the purposes of the Practice Schedule on the occurrence of certain events, being under administration, a deed of company arrangement has been entered into, a liquidator has been appointed, or a provisional liquidator has been appointed: s 5-15 of the Practice Schedule.
[18]There are some minor changes to the language used: for example, s 60-12 of the Practice Schedule refers to the extent to which the work was ‘necessary and properly performed’, whereas s 473(10) of the Act referred to the extent to which the work performed was ‘reasonably necessary’.
(b) the commencement of the new provisions concerning remuneration in Division 60 of the Practice Schedule were deferred until 1 September 2017;[19]
[19]Regulation 10.25.02(3) of the Corporations Regulations 2001 (‘Corporations Regulations’).
(c) section 1581 of the Act was repealed and a new provision was substituted, as follows:[20]
[20]Schedule 13 of the Corporations Regulations.
1581Old Act continues to apply in relation to remuneration for administrators already appointed or appointed during transition period
(1)Despite the repeal of sections 449E and 473 … of the old Act by Schedule 2 to the [ILRA], the old Act continues to apply in relation to the remuneration of an external administrator of a company who is appointed:
(a) before the start time; or
(b) during the transition period.
…
(d) in summary, the upshot of all this is that despite the repeal of ss 473(3) and (10), the Act as it was prior to the relevant amendments continues to apply in relation to the remuneration of an external administrator of a company who was appointed before the ‘commencement day’ of the relevant sections of the Practice Schedule, being 1 September 2017.[21]
[21]For a more fulsome and useful discussion of how the relevant transitional provisions work, see the ruling of Hetyey JR in In the matter of Allstone Homes (in liquidation) [2017] VSC 500, [8]–[11].
Accordingly, the Liquidators’ application in this case is properly considered by reference to what was ss 473(3) and (10) of the Act, as Mr Yeo and Mr Rambaldi were appointed as liquidators of the Company on 19 April 2017.
The Court’s approach when considering applications for approval of a liquidator’s remuneration
The principles concerning applications for approval of the remuneration incurred by insolvency practitioners are well established and have been referred to in many decisions of this Court. Gardiner AsJ summarised the relevant principles in IMO Traditional Values Management Limited (in liq)[22] (‘Traditional Values’) at paragraphs [18] to [25].
[22][2012] VSC 650 (14 December 2012).
For convenience I adopt his Honour’s summary, which referred to the principles identified by Davies J in Thackray v Gunns Plantations:[23]
[23](2011) 85 ACSR 144 (‘Thackray’).
At [60], her Honour summarised the principles to be applied by reference to the decision of the Full Court of the West Australian Supreme Court in Venetian Nominees v Conlan as follows:
(a)A summary procedure was involved, not unlike that applicable to the taxation of solicitor’s costs, which is not necessarily subject to all the rules that would apply in an action.
(b)The initial task of the Court is to consider whether the liquidator has made out a prima facie case on the evidence before the Court that the remuneration claimed is fair and reasonable. The Court must make that assessment ‘bringing an independent mind to bear on the relevant issues’ even though at that point there is no objector.
(c)There is no absolute rule regarding the amount of detail required to support a remuneration claim. But the evidence relied on should be sufficient to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.
(d)If the liquidator establishes a prima facie case, the Court should allow for an objection procedure to enable objections to be made.
(e)If there are objectors to the claim or any part, the Court should then establish the validity of those objections.
At [63] and [64] of Thackray, her Honour stated:
…. the receivers accepted that the principles set out Venetian Nominees Pty Ltd v Conlan are persuasive and that they should put sufficient evidence before the Court to enable the Court to determine that the amounts claimed are fair and reasonable. That involved providing sufficient detail of the work that was done and the expenses claimed for the Court to assess the reasonableness of the remuneration claimed for that work and the reasonableness of the expenses incurred by the receivers. The reasonableness of remuneration may be adduced by evidence for example of an appropriate benchmark, such as the Insolvency Practitioners Association of Australia rates, for comparative work by persons with the relevant status and qualifications for that kind of work and justification of the hours spent. That amount can then be adjusted up or down to reflect other factors including:
(a) complexity above the norm for the kind of work involved;
(b) novelty and difficulty of the issues faced;
(c) the ultimate outcome obtained by the claimant.
The Court is looking for evidence of overcharging. Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the “reasonableness” of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the Court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim.[24]
[24]Traditional Values [60], citing Thackray (2011) 85 ACSR 144, [63]–[64] (citations omitted).
The Liquidators’ evidence
Communications regarding the possible termination of the winding-up
By letter dated 6 July 2017, Mr Di Battista informed Mr Yeo that he was instructed to make an application to the Court for the termination of the winding up. He said that all outstanding lodgements would be completed in two weeks and nothing further remained owing to the SRO.[25]
[25]First Yeo Affidavit, [20]; Exhibit ARY-10.
By letter dated 14 July 2017, Mr Yeo requested an update from Mr Di Battista on the proposed termination and advised that his costs to that date were $39,447.[26]
[26]First Yeo Affidavit, [21]; Exhibit ARY-11.
By letter dated 11 October 2017 from his then solicitors, Frenkel Partners, Mr Yeo sought an update from Mr Di Battista as to the lodgement of outstanding tax returns and the application to terminate the winding-up of the Company, and requested that a response be provided by 20 October 2017.[27]
[27]First Yeo Affidavit, [22]; Exhibit ARY-12.
By letter dated 8 December 2017, Mr Di Battista informed Mr Yeo that all outstanding lodgements had been completed and that he had instructions from Mr Mosca to make the termination application, and sought information to facilitate that application.[28]
[28]First Yeo Affidavit, [23]; Exhibit ARY-13.
Mr Bradd of Pitcher Partners telephoned Mr Di Battista to discuss this on 15 December 2017 but was unable to speak with him and left a message.[29]
[29]First Yeo Affidavit, [24].
Mr Yeo then wrote to Mr Di Battista that same day, providing him with a summary of receipts and payments for the period ending 15 December 2017. Mr Yeo also stated that given his client’s request to limit the costs incurred in the conduct of the liquidation, he was yet to issue any correspondence to creditors and that he anticipated a report to creditors would be issued on or about 12 January 2018, that his costs to that date were approximately $42,000 plus GST and that his total costs to complete the liquidation would be approximately $56,000 plus GST.[30]
[30]First Yeo Affidavit, [25]; Exhibit ARY-14.
Mr Bradd attempted to speak to Mr Di Battista by telephone on 9 January 2018 to discuss the matter with him, but was unable to reach him and left a message.[31]
[31]First Yeo Affidavit, [26].
On 11 January 2018, Mr Bradd sent an email to Mr Di Battista advising that in order to support an application to terminate the winding up, the Liquidators would first need to provide a report to creditors and seek creditor approval of the remuneration, and that the Liquidators proposed to schedule a creditors’ meeting for that purpose for 1 February 2018.[32]
[32]First Yeo Affidavit, [27]; Exhibit ARY-15.
On 28 February 2018, Mr Leonard sent an email to Mr Yeo advising that he had been instructed to make an application to set aside the order winding up the Company.[33]
[33]First Yeo Affidavit, [36]; Exhibit ARY-23.
On 7 March 2018, Mr Yeo engaged new solicitors, Hunt & Hunt. On that day, Mary Nemeth of that firm wrote to Mr Leonard and informed him she had instructions to accept service on behalf of the Liquidators of proceedings to stay the liquidation. The following day, Mr Leonard telephoned Ms Nemeth and told her that he had instructed counsel to prepare the application to stay the winding up of the Company.[34]
[34]First Yeo Affidavit, [40]-[42]; Exhibit ARY-27.
Mr Yeo deposes that as at the date of swearing the First Yeo Affidavit, neither he nor his solicitors have received any such application.[35]
[35]First Yeo Affidavit, [43].
Attempts by the Liquidators to obtain creditor approval for their remuneration
In response to Mr Bradd’s 11 January 2018 email (see paragraph 33 above), Mr Di Battista sent a letter to Mr Yeo on 23 January 2018 seeking a detailed Work in Progress (‘WIP’) report so as to consider the Liquidators’ remuneration, and suggested that the creditors’ meeting be held on 22 February 2018 at 10.00am.[36]
[36]First Yeo Affidavit, [28]; Exhibit ARY-16.
On 1 February 2018, Mr Yeo provided Mr and Mrs Mosca with a copy of the report to creditors (‘Creditors Report’), which included notice of the creditors’ meeting for 22 February 2018 and his remuneration proposal.[37]
[37]First Yeo Affidavit, [29]; Exhibit ARY-17.
On 14 February 2018, Mr Bradd sent an email to Mr Di Battista enclosing a copy of a detailed WIP report for the period 19 April 2017 to 28 January 2018 (‘First WIP Report’). Mr Bradd telephoned Mr Di Battista two days later to discuss the report to creditors but was unable to speak with him and left a message. [38]
[38]First Yeo Affidavit, [30]-[31]; Exhibit ARY-18.
On 21 February 2018 at 6.13pm, which was the evening before the scheduled creditors’ meeting, Mr Di Battista sent Mr Yeo an email requesting an urgent telephone conference at 8.30am the next morning to discuss, among other things, the Liquidators’ remuneration.[39] The next morning at 9.15am, Mr Bradd received a telephone call from Mr Di Battista, Mr Leonard, and Dominic Papalia of Nexia Australia. Mr Papalia and Mr Leonard stated that the Liquidators’ fees were excessive and their clients would not be attending the creditors’ meeting that day.[40] The creditors’ meeting was held at the scheduled time on 22 February but, as no creditors were present, Mr Bradd as chairperson adjourned the meeting.[41]
[39]First Yeo Affidavit, [32], Exhibit ARY-19.
[40]First Yeo Affidavit, [33], Exhibit ARY-20.
[41]First Yeo Affidavit, [35]-[38]; Exhibits ARY-22 to ARY-25.
Mr Yeo sent a letter to Mr Di Battista on 26 February 2018 setting out the attempts he and his staff had made to progress and resolve the liquidation.[42] Two days later, he received an email from Mr Leonard to say that he had instructions to make an application to set aside the winding-up order and that the remuneration was excessive.[43] Mr Yeo responded the next day by email, requesting that Mr Leonard and Mr Di Battista provide specific objections to the remuneration by 4pm on 2 March 2018.[44] Mr Leonard responded by repeating his instructions as to the setting aside of the winding up order and said he would seek orders for judicial review of the Liquidators’ fees, but did not provide specific objections to the remuneration.[45]
[42]First Yeo Affidavit, [35], Exhibit ARY-22.
[43]First Yeo Affidavit, [36], Exhibit ARY-23.
[44]First Yeo Affidavit, [37], Exhibit ARY-24.
[45]First Yeo Affidavit, [38]; Exhibit ARY-25.
On 5 March 2018, the creditors’ meeting was held. Mr Di Battista attended, and held proxies for all creditors. Mr Yeo chaired the meeting and sought approval of the Liquidators’ remuneration. That resolution was not passed by the creditors.[46]
[46]First Yeo Affidavit, [39].
Hence, the Liquidators apply to the Court for the determination of their remuneration, pursuant to s 473(3)(b)(ii) of the Act.
Mr Yeo says that at the creditors’ meeting on 5 March 2018, he stated that the investigatory work was undertaken so as to ascertain the Company’s assets and liabilities, and that it ceased upon receiving confirmation of the assets and that the Company appeared solvent. After that time, only work which was absolutely necessary was undertaken by the Liquidators, with every effort made to minimise further costs, given the solvency of the Company.[47]
[47]First Yeo Affidavit, [39], Exhibit ARY-26.
Description of the work performed
In the First Yeo Affidavit, Mr Yeo describes the work done by him and his staff during the liquidation for the period 19 April 2017 to 28 January 2018. The description of the work performed is grouped according to work type and includes:[48]
[48]First Yeo Affidavit, [44].
(a) In relation to ‘Assets’, the work included:
(i) issuing correspondence and liaising with major financial institutions;
(ii) corresponding with VicRoads in relation to motor vehicle registrations;
(iii) identifying assets, property searches and planning diagrams;
(b) In relation to ‘Creditors’, the work included:
(i) conducting and reviewing PPSR searches;
(ii) conducting investigations into Equifax in attempting to ascertain creditors of the Company and liaise with creditors in regards to their claims;
(iii) corresponding with the SRO;
(iv)preparing report to creditors, remuneration report and DIRRI;
(c) In relation to ‘Investigations’, the work included:
(i) conducting and reviewing searches of the Company, property, shareholders and relevant third parties or associated entities;
(ii) attending the properties owned by or associated with the Company and its businesses;
(iii) corresponding and discussions with the tenant and property manager of one of the Company’s properties;
(iv)corresponding with Mr Di Battista regarding ownership of the Company’s property at Bayswater and outstanding taxation lodgements;
(v) corresponding with the SRO;
(vi)corresponding with Frenkel Partners for ongoing legal advice;
(d) In relation to ‘Administration’, the work included:
(i) document maintenance;
(ii) correspondence with insurance brokers;
(iii) preparing and lodging ASIC forms;
(iv)ATO and other statutory reporting.
The Appendix to the Creditors Report describes each of the above in greater detail.[49]
[49]Exhibit ARY-17 to the First Yeo Affidavit.
Mr Yeo also describes the work undertaken or to be undertaken by him and his staff for the period 28 January 2018 to the conclusion of the liquidation. This includes:[50]
[50]First Yeo Affidavit, [45].
(a) In relation to ‘Assets’, the work included or includes:
(v) renewal of insurance requirements for the Company’s property at Bayswater and the motor vehicle;
(b) In relation to ‘Creditors’, the work included or includes:
(i) preparing meeting notices, proxies and advertisements;
(ii) attending and conducting the creditors’ meeting;
(iii) preparing and lodging the minutes of the creditors’ meeting with ASIC;
(iv)dealing with proofs of debt;
(c) In relation to ‘Investigations’, the work included or includes:
(i) all correspondence, steps and procedures as required in the process of the reinstatement of the Company;
(d) In relation to ‘Administration’, the work included or includes:
(i) correspondence;
(ii) bank administration;
(iii) ASIC and other statutory reporting;
(iv)finalisation of the matter.
Liquidators’ calculation of their remuneration
The amount for which Mr Yeo seeks approval was updated in the Second Yeo Affidavit. He seeks approval of the Liquidators remuneration and costs (excluding legal costs) in the sum of $83,174.28 plus GST, comprising:[51]
[51]Second Yeo Affidavit, [6].
(a) $54,279 plus GST for costs incurred in the liquidation for the period 19 April 2017 to 28 January 2018;
(b) $170.28 plus GST for internal disbursements incurred in the liquidation for the period 19 April 2017 to 28 January 2018;
(c) $17,431 plus GST for costs incurred in the liquidation for the period 29 January 2018 to 11 March 2018;
(d) $294 plus GST for costs incurred in the liquidation for the period 12 March 2018 to 25 March 2018;
(e) $10,000 plus GST for future costs; and
(f) $1,000 plus GST for future disbursements.
In the Creditors Report, the Liquidators explain that they have calculated their fees on the time based/hourly rates method. They provided a schedule of the hourly rates for the Pitcher Partners Business Recovery & Insolvency Division as at 27 February 2017. These were:
Title Hourly Rate (excl GST) Partner/Appointee $670 Client Director $590 Senior Manager $580 Manager 2 $520 Manager 1 $470 Assistant Manager 2 $380 Assistant Manager 1 $360 Senior Analyst 2 $340 Senior Analyst 1 $310 Supervisor $290 Analyst 3 $260 Analyst 2 $240 Analyst 1 $220 Insolvency Clerk $220 Secretary $190 Vacationer $110 Clerk $110
The Creditors Report also contained a summary of the fees charged for the period 19 April 2017 to 28 January 2018, showing the division of work across levels of employees at Pitcher Partners. This is as follows:
Classification $ per hour (excl GST) Total actual hours Total $ Appointee 1 670 12.30 8,241.00 Appointee 2 670 2.20 1,474.00 Partner 670 0.70 469.00 Senior Manager 580 0.60 348.00 Manager 1 470 20.30 9,541.00 Assistant Manager 2 380 42.50 16,150.00 Supervisor 290 0.60 174.00 Insolvency Clerk 220 25.70 5,654.00 Analyst 1 220 51.10 11,242.00 Secretary/WP Operator 190 2.70 513.00 Filing Clerk 110 4.30 473.00 Total (excl GST) 163.00 54,279.00
The First WIP Report covers the period 19 April 2017 to 28 January 2018. It is a spreadsheet listing individual narrations for tasks done, along with the level of employee performing the task, their name and hourly rate, the time spent on the task, and the dollar value for the task. With the Second Yeo Affidavit, Mr Yeo provided a WIP report for the period 29 January 2018 to 25 March 2018 (‘Second WIP Report’).[52] The Second WIP Report is in very similar form to the First WIP Report as described above and contains the same level of detail.
[52]Exhibit ARY-1 to the Second Yeo Affidavit.
Consideration
Liquidators’ prima facie case for approval
Based on all of the evidence provided, I am satisfied that the Liquidators have made out a prima facie case for payment of their remuneration and expenses, within the meaning referred to in paragraph 25 above. That is, the Liquidators have made out a prima facie case that the remuneration claimed is fair and reasonable, and there is sufficient information to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken.
From my experience in matters associated with insolvency administrations, I know the hourly rates specified by the Liquidators for them and their staff to be commensurate with the hourly rates typically charged by insolvency practitioners.
Although no objection has been taken to the remuneration claimed by the Liquidators, the Court is still required to review the claimed remuneration, taking the matters identified in s 473(10) of the Act into account.
Amount of remuneration to be approved
As noted in paragraph 48 above, the Liquidators seek approval for their remuneration and disbursements in the amount of $83,174.28 plus GST.
In terms of the matters identified in s 473(10) of the Act, I am satisfied that:
(a) the work performed or to be performed by the Liquidators was or is reasonably necessary;
(b) the Liquidators were not required to perform any complex work or deal with any extraordinary issues;
(c) the Liquidators were not required to accept a higher level of risk or responsibility than was usually the case, or to deal with property of any significant value; and
(d) the remuneration was calculated on a time basis, and the time taken for each task and the level of employee performing that task is set out in sufficient detail, by reference to the First and Second WIP Reports.
I have reviewed the First and Second WIP Reports and the description of work given in both of the Mr Yeo’s affidavits. It contains sufficient detail for me to be satisfied as to the amounts claimed. In particular, I am satisfied that:
(a) there was an appropriate degree of delegation of the work to be performed, in that the matters which could be adequately handled by junior staff were dealt with at a suitable level of seniority, experience and charge out rate;
(b) the tasks described are reasonable to have been performed, and the time taken to perform them (and therefore the amounts charged for them) were reasonable;
(c) there is no evidence of duplication, or unnecessary duplication, of work;
(d) the estimates provided for the future work are reasonable and it is reasonably necessary for the Liquidators to undertake that work; and
(e) the inclusion of the Liquidators’ fees associated with preparing the First and Second WIP Reports and seeking approval of their remuneration, whether by creditors or the Court, is permissible and consistent with the authorities.[53]
[53]Deputy Commissioner of Taxation v Starpicket Pty Ltd (No 2) [2013] FCA 699, [54] (‘Starpicket’).
Further, I am satisfied that the work performed by the Liquidators was reasonably necessary, even though Mr and Mrs Mosca had, at various stages, communicated through Mr Di Battista and/or Mr Leonard that they intended to apply for the termination of the winding-up.
In Starpicket, Gordon J (as her Honour then was) dealt with an application for the approval of the liquidator’s remuneration in the context of the winding up of the company having been terminated. Relevantly, her Honour stated:[54]
… there is no basis for the suggestion that the Liquidator should have ceased performing his duties as Liquidator of Starpicket by reason of his being put on notice of Starpicket’s intention to apply for orders setting aside his appointment. On the contrary, it would have been inappropriate and impermissible for him to do so. The Liquidator had been appointed by order of this Court and had an obligation to continue to perform his duties accordingly.
Nevertheless, as the Liquidator was aware of Starpicket’s application, he could not simply continue to act without regard to the possibility that his appointment might be terminated. The Liquidator was required to exercise his professional judgment as to what work was reasonable and necessary prior to the hearing and determination of Starpicket’s application.
[54]Starpicket [2013] FCA 699, [42]-[43].
For these reasons, while it was prudent for the Liquidators to avoid performing unnecessary work once they were satisfied that the Company appeared solvent, as they did,[55] the Liquidators were under no obligation to ‘down tools’ upon being informed that Mr and Mrs Mosca intended to apply for the termination of the winding-up. As was said in Starpicket, it would have been ‘inappropriate and impermissible’ for them to do so. The time for that would have been after having been put on notice that such an application had been made. Indeed, the facts in this case illustrate why that ought be the case: making an application to terminate the winding-up had been mooted as early as 6 July 2017, but as at the time he made the First Yeo Affidavit, Mr Yeo had still to be served with any such application.
[55]See paragraph 45 above.
It is also apparent that the Liquidators had extensive dealings with Mr and Mrs Mosca’s representatives over a prolonged period, which added to the costs of the liquidation.
Conclusion
Accordingly, I will approve the Liquidators’ remuneration and disbursements[56] in the amount of $83,174.28 plus GST, comprised as follows:
[56]This does not include disbursements for legal costs, which were not part of the remuneration application.
(a) $72,004 plus GST for the costs of the liquidation in the period 19 April 2017 to 25 March 2018;
(b) $170.28 plus GST for disbursements in the period 19 April 2017 to 28 January 2018;
(c) $10,000 plus GST for future costs; and
(d) $1,000 plus GST for future disbursements.
The Liquidators also seek orders that their costs of the Application be costs in the liquidation of the Company. As creditors were given the opportunity at the meeting of creditors held on 5 March 2018 to approve the Liquidators’ remuneration but did not do so, it was necessary for the Liquidators to make the Application. I see no reason why their costs of doing so should not be costs in the liquidation of the Company, it is consistent with the authorities, and it is appropriate that such orders be made.
Once the parties have had an opportunity to consider these reasons, the Court requests that the Liquidators’ solicitor provide a draft form of order to my Associate.
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