Re Twenty-Seventh Android Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CORPORATIONS LIST

S ECI 2018 02334

IN THE MATTER of Twenty-Seventh Android Pty Ltd (ACN 006 146 667) (In Liquidation)

CHRISTOPHER JOHN MORGAN	Plaintiff
v
ANDREW WILLIAM POULTER (IN HIS CAPACITY AS FORMER LIQUIDATOR OF TWENTY-SEVENTH ANDROID PTY LTD (ACN 006 146 667)	Defendant

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JUDICIAL REGISTRAR	Matthews JR
WHERE HELD:	Melbourne
DATE OF HEARING:	29 April 2019
DATE OF RULING:	23 August 2019
CASE MAY BE CITED AS:	Re Twenty-Seventh Android Pty Ltd
MEDIUM NEUTRAL CITATION:	[2019] VSC 563

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CORPORATIONS – External administration – Winding up of company terminated – Application by director of company for review of remuneration of former liquidator approved by creditors prior to the termination of the winding up – Application by liquidator for approval of balance of remuneration – Insolvency Practice Schedule (Schedule 2 to the Corporations Act (2001) (Cth)), ss 60-10 and 60-11 apply – Remuneration approved in a reduced amount – Westpoint Corporation Pty Ltd (in liq) v Yeo [2018] VSC 705 – IMO Traditional Values Management Limited (in liq) [2012] VSC 650 – In the matter of Sakr Nominees Pty Limited [2017] NSWSC 668 – Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr [2017] NSWCA 38.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms B Slocum	SLF Lawyers
For the Defendant	Mr I Hristovski	Meerkin & Apel Lawyers

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Background......................................................................................................................................... 2

The Company................................................................................................................................ 2
The circumstances in which the Former Liquidator was appointed as liquidator of the Company 2
The termination of the liquidation of the Company................................................................ 3
Previous approval of the Former Liquidator’s remuneration............................................... 4

Applicable Law................................................................................................................................... 5

Statutory Provisions..................................................................................................................... 5
The Court’s approach when considering applications regarding an external administrator’s remuneration........................................................................................................................ 8
Principles in respect of the Court making a remuneration determination................. 8
Principles in respect of the Court reviewing a remuneration determination.......... 11

Former Liquidator’s evidence........................................................................................................ 13

The Remuneration Statement.................................................................................................... 13
Remuneration and disbursements........................................................................................... 14
Remuneration rates........................................................................................................... 14
Method of calculating remuneration.............................................................................. 14
Amount claimed................................................................................................................ 15
Disbursements................................................................................................................... 15

Work performed by the Former Liquidator........................................................................... 16
Description of work performed in the First Period...................................................... 16
Description of work to be performed for the balance of the liquidation, as set out in the Creditors Circular.................................................................................................. 17
Description of work performed in the Second Period................................................. 18
Description of work performed in the Third Period.................................................... 19
Description of work performed or to be performed in the Fourth Period............... 20

The Plaintiff’s evidence.................................................................................................................. 20

The Company’s role and financial position............................................................................ 20
The Company’s creditors........................................................................................................... 21
The passing of the Remuneration Resolution........................................................................ 23
Previous requests for further information regarding the claimed remuneration............. 24
The Plaintiff’s intention to have the liquidation of the Company terminated.................. 25

Submissions...................................................................................................................................... 25

The Plaintiff’s submissions........................................................................................................ 25
The Former Liquidator’s submissions..................................................................................... 29

Consideration.................................................................................................................................... 35

Should a review of the remuneration already approved by creditors be conducted?.... 35
Amount to be approved............................................................................................................. 36
Rates. 36
General matters.................................................................................................................. 36
Impact of the foreshadowed Termination Application on the work performed by the Former Liquidator............................................................................... 36
Complexity of the Liquidation........................................................................... 37
The Former Liquidator’s conduct of the Termination Application.............. 41
Remuneration for work done after the termination of the liquidation........ 42
Conclusion as to the approach the Court should take in this case............... 43

Remuneration for First Period......................................................................................... 44
Remuneration for Second Period.................................................................................... 46
Remuneration for Third Period....................................................................................... 49
Remuneration for Fourth Period..................................................................................... 50

Disbursements............................................................................................................................. 50

Conclusion......................................................................................................................................... 52

JUDICIAL REGISTRAR:

Introduction

By an interlocutory process filed on 20 February 2019, the Plaintiff (Christopher Morgan) seeks a review of the determination made by creditors of Twenty-Seventh Android Pty Ltd (‘Company’) of the remuneration of the defendant (Andrew Poulter) in his capacity as the former liquidator of the Company (‘Former Liquidator’), where that remuneration was incurred in his capacity as liquidator of the Company before the liquidation was terminated.

As will be explained in more detail below, this decision concerns both an application for review of the Former Liquidator’s remuneration as already approved by creditors, as well as an application by the Former Liquidator for approval of his remuneration. The total amount of remuneration sought by the Former Liquidator is $90,394 (plus GST).

The Plaintiff relies on three affidavits sworn by him on:

(a) 16 November 2018 (‘First Morgan Affidavit’);

(b) 3 December 2018 (‘Second Morgan Affidavit’); and

(c) 19 February 2019 (‘Third Morgan Affidavit’).

The Former Liquidator relies on three affidavits sworn by him on:

(a) 26 November 2018 (‘First Poulter Affidavit’);

(b) 10 December 2018 (‘Second Poulter Affidavit’); and

(c) 3 April 2019 (‘Third Poulter Affidavit’).

For the reasons set out below, I consider it appropriate to review the remuneration determination made by creditors of the Company. Further, I consider it appropriate to approve the Former Liquidator’s remuneration in the amount of $52,369 (plus GST).

Background
The Company

At all material times, the Plaintiff and his sister, Suzanne Marie Bennetts, have been the directors of the Company. Together with their mother, Shirley Morgan, they are the three shareholders of the Company.[1]
[1]First Morgan Affidavit, [1].

The Company began trading in 1983 and, according to the Plaintiff, its sole purpose was to hold a property in Beach Street Port Fairy, Victoria (‘Property’). The Plaintiff describes the Property as a beach house for himself, his wife and children, his mother, his sister and other members of his extended family.[2] From time to time, the Property was also available to be rented as short-term or holiday accommodation.[3]
[2]First Morgan Affidavit, [18].
[3]First Morgan Affidavit, [19].

The circumstances in which the Former Liquidator was appointed as liquidator of the Company

Following the Company’s failure to comply with a statutory demand dated 5 April 2018 (‘Statutory Demand’) served by the Commissioner for State Revenue (‘SRO’), the SRO made an application to this Court to wind up the Company. On 12 September 2018, I made orders winding up the Company and appointing the Former Liquidator as liquidator of the Company.[4] The Statutory Demand sought payment of outstanding land tax in the amount of $21,439.63 (‘SRO Debt’).[5]
[4]Third Poulter Affidavit, [6].
[5]First Morgan Affidavit, [25].

The Plaintiff’s evidence is that:

(a) he did not know about the Statutory Demand and it did not come to the Company’s attention, as it was sent by the SRO to the registered office of the Company, which was his previous residential address in Mount Waverley. He had moved out of that property in 2011 and had believed, erroneously, that the external accountants for the Company had updated the registered office with ASIC at that time;[6]
[6]First Morgan Affidavit, [21]-[25].

(b) had he known about the Statutory Demand, he would have caused the Company to comply with it or make an application within the requisite time for it to be set aside;[7]
[7]First Morgan Affidavit, [27].

(c) he did not know about the SRO Debt;[8]

(d) he also did not know about the winding-up application prior to it being determined by the Court. Had he known about it, he would have either attempted to negotiate with the SRO or paid the SRO Debt. The Company did not appear at the return of the winding-up application;[9] and

(e) he learned of the Statutory Demand and the winding up of the Company on about 15 September 2018, when he returned a call to the Former Liquidator.[10]

[8]First Morgan Affidavit, [27].

[9]First Morgan Affidavit, [30]-[32].

[10]First Morgan Affidavit, [33].

At the time the Former Liquidator was appointed, the Company owned the Property and the creditors were the SRO (for the SRO Debt), and Moyne Shire Council (‘MSC’).

The termination of the liquidation of the Company

On 19 November 2018, the Plaintiff commenced this proceeding, seeking orders for the termination of the liquidation of the Company (‘Termination Application’). The First and Second Morgan Affidavits were filed in support of the Termination Application; and the First and Second Poulter Affidavits were filed by the Former Liquidator in respect of it.

The Termination Application was heard and determined by Gardiner AsJ on 11 December 2018. In the ‘Other Matters’ section of the orders made on that day, Gardiner AsJ recorded the following:

The Plaintiff’s application was made on the basis that the Liquidator’s reasonable remuneration and disbursements be paid. The Plaintiff has indicated that he may seek a review by the Court of the Liquidator’s remuneration. The Plaintiff has provided an undertaking to the Court to pay the liquidator’s reasonable remuneration and disbursements (including the Liquidator’s costs of this proceeding) in an amount to be agreed between the parties or in the absence of an agreement to be determined by this Honourable Court upon an application by the Plaintiff for a review of the Liquidator’s remuneration and/or disbursements

On that day, the Court made orders, including the following (‘Termination Orders’):

(a) Terminating the liquidation of the Company in accordance with s 482 of the Corporations Act 2001 (Cth) (‘Act’);

(b) The Plaintiff to pay the Former Liquidator’s remuneration and disbursements, the quantum of such to be determined by agreement between the Plaintiff and the Liquidator, or further order of the Court;

(c) The Plaintiff to provide to the Former Liquidator, by 11 January 2019, a bank guarantee for $70,000 to be satisfied upon presentation to the bank of evidence of an agreement or order pursuant to paragraph (b); or evidence of $70,000 being paid into the trust account of the Plaintiff’s solicitors, to be held on trust pending an outcome pursuant to paragraph (b); and

(d) Setting a date for the Plaintiff to file any application for review of the Former Liquidator’s remuneration.

As I apprehend it, the Termination Orders were made as all creditors of the Company had been paid (or there was a mechanism in place for them to be paid by the Plaintiff), and the Court was satisfied that the Company was solvent as appropriate arrangements were in place to ensure it could meet its ongoing commitments.

Previous approval of the Former Liquidator’s remuneration

On 10 October 2018, the Former Liquidator circulated the initial information for creditors (‘Creditors Circular’), which included information regarding his remuneration and details of the hourly rates for each of the staff members of IRT Advisory, the Former Liquidator’s firm, who would be working on the matter.[11]
[11]Third Poulter Affidavit, [21].

The Creditors Circular proposed a resolution regarding the Former Liquidator’s remuneration, approving the Former Liquidator’s remuneration as follows (‘Remuneration Resolution’):[12]

(a) For the period 12 to 30 September 2018, a fixed sum of $21,140 (excluding GST); and

(b) Prospective fees up to a capped amount of $30,430 (excluding GST).

[12]Third Poulter Affidavit, [29].

The Creditors Circular was served on the Plaintiff on 12 October 2018 and he did not oppose the Remuneration Resolution.[13] The Remuneration Resolution was passed by way of a ‘proposal without a meeting’ as provided for under the Practice Schedule and the relevant rules on 2 November 2018 (‘Remuneration Determination’).[14] It is the Remuneration Determination which the Plaintiff seeks the Court to review. I will return to the circumstances in which the Plaintiff did not vote in respect of the Remuneration Resolution and its passing.
[13]Third Poulter Affidavit, [21], [36].
[14]Third Poulter Affidavit, [29].

Applicable Law
Statutory Provisions

To the extent that this application involves a determination of the Former Liquidation’s remuneration that has not previously been approved by creditors, then s 60-10 of the Practice Schedule applies. It relevantly provides as follows:

60-10 Remuneration determinations
(1)A determination, specifying remuneration that an external administrator of a company (other than an external administrator in a members’ voluntary winding up) is entitled to receive for necessary work properly performed by the external administrator in relation to the external administration, may be made:
(a) by resolution of the creditors; or
(b)if there is a committee of inspection and a determination is not made under paragraph (a) – by the committee of inspection; or
(c)if a determination is not made under paragraph (a) or (b) – by the Court.

…
(3)[Amount of remuneration] A determination under this section may specify remuneration that the external administrator is entitled to receive in either or both of the following ways:
(a) by specifying an amount of remuneration;
(b)by specifying a method for working out an amount of remuneration.

To the extent that this application involves a review of the Former Liquidation’s remuneration that has previously been approved by creditors, then s 60-11 of the Practice Schedule applies. It relevantly provides as follows:

60-11 Review of remuneration determinations
Review on application
(1)Any of the following may apply to the Court for a review of a remuneration determination for an external administrator of a company:
(a) ASIC;
(b)a person with a financial interest in the external administration of the company;

(c) an officer of the company.
(2)[Section 198G does not apply] Paragraph 1(c) has effect despite section 198G.
(3)[Court to review if it considers it appropriate] On application under subsection (1), the Court may, if it considers it appropriate to do so, review the remuneration determination.

Court must affirm, vary or set aside remuneration determination
(4) After reviewing the remuneration determination, the Court must:
(a)affirm the remuneration determination; or

(b) vary the remuneration determination; or
(c)set aside the remuneration determination and substitute another remuneration determination.

Exception
(f)Subsection (1) does not apply to a remuneration determination made by the Court.

In exercising the power to review or determine the Former Liquidator’s remuneration, s 60-12 of the Practice Schedule states that 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 by the external administrator was necessary and properly performed;
(b)the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;
(c)the period during which the work was, or is likely to be, performed by the external administrator;
(d)the quality of the work performed, or likely to be performed, by the external administrator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;
(f)the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h)the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;
(i)the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;
(j)if the remuneration is worked out wholly or partly on a time-cost basis – the time properly taken, or likely to be properly taken, by the external administrator in performing the work;
(k)whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;

(l) if:
(i)a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and
(ii)the matter is, or includes, remuneration of the external administrator;

the contents of the report on the review that relate to that matter;

(m) any other relevant matters.

While the criteria in s 60-12 of the Practice Schedule direct the Court to the factors that are to be taken into account, the ultimate question is whether the remuneration claimed by the Liquidator is reasonable.

The Court’s approach when considering applications regarding an external administrator’s remuneration
Principles in respect of the Court making a remuneration determination

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. These principles were developed when the previous statutory provisions applied. In the case of liquidators, these provisions were contained in s 473 of the Act. There was no disagreement between the parties as to the applicable principles.

The factors contained in s 60-12 of the Practice Schedule are materially the same as the factors which were set out in s 473(10) of the Act.[15]
[15]There are some minor changes to the language used: for example, s60-12 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’.

As the relevant provisions are relatively new, and as the factors to be taken into account are materially the same, the earlier authorities remain pertinent.

Gardiner AsJ summarised the relevant principles in IMO Traditional Values Management Limited (in liq)[16] (‘Traditional Values’) at paragraphs [18] to [25].
[16][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:[17]
[17](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.[18]

[18]Traditional Values [60], citing Thackray (2011) 85 ACSR 144, [63]-[64] (citations omitted).

Black J of the New South Wales Supreme Court also summarised the applicable principles in In the matter of Sakr Nominees Pty Limited.[19] In addition to the matters referred to above, his Honour stated the following propositions:

[T]he Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred[20].
Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the ‘value’ of a liquidator’s work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors.[21]

[19][2017] NSWSC 668 (‘Sakr’).

[20]Sakr, [23].

[21]Sakr, [23].

His Honour also canvassed a number of authorities regarding the method for calculating the remuneration, such as time costing or remuneration based on a percentage of realisations, concluding that:[22]

Most decisions … have applied time costing as at least the starting point for a calculation of remuneration, although those decisions also emphasise the need for proportionality between the costs of the work done and the value of the services provided.

[22]Sakr, [24].

On this point, his Honour concluded by referring to the New South Wales Court of Appeal decision in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr[23] which he said did not prefer any particular approach over another. Black J then stated:

Whether time-based remuneration or a percentage of recoveries is appropriate in a particular case will depend, in part, on the basis on which the liquidator puts his or her application for remuneration; and, in part, the view taken by the Court.[24]
[23][2017] NSWCA 38 (‘Sanderson’).
[24]Sakr, [25].

Principles in respect of the Court reviewing a remuneration determination

The written submission from the Plaintiff’s counsel helpfully summarised the applicable principles in respect of the Court reviewing a remuneration determination. There appeared to be common ground between the parties in this respect.

The Court’s power to review a remuneration determination is discretionary and involves a two stage process. That it is discretionary is evident from the wording of s 60-11(3) of the Practice Schedule, which states that the Court may, upon an application for review being made, review the remuneration determination if it considers it appropriate to do so.

Again, these provisions are relatively new but are very similar to the now repealed ss 473(5) and (6) of the Act in the case of liquidators and s 449E(2) of the Act in the case of administrators. Therefore, the approach followed by the Court when considering those provisions continue to be applicable.

First, the Court must decide whether it is just that a review be conducted. The applicant for review bears the onus in this respect. Second, the Court must consider whether the remuneration claimed is fair and reasonable in the circumstances. The Former Liquidator bears the onus in this respect.

Sloss J recently summarised the relevant principles in Westpoint Corporation Pty Ltd (in liq) v Yeo.[25] Describing the first of the two stage process, her Honour stated:
[25][2018] VSC 705 (‘Westpoint’).

[365] As Barrett J explained in Paul’s Retail Pty Ltd v Morgan in relation to an application for review under s 449E:[26]
[26](2009) 76 ACSR 26, at 46 [79].
When an application for review comes before it, the court must first decide whether, in the light of the statutory provisions, it is just that a review be conducted. Because the s 449E(2) power is obviously discretionary, there is a threshold question whether there is some demonstrated need to inquire into the appropriateness of the originally determined quantum. Only if some need is shown will the court actually proceed to a review.

[366]Further, […] when the court is considering the threshold question of whether it should embark on a review, the relevant test is that adopted by Brereton J in Cardinal Project Services Pty Ltd,[27] namely ‘whether there is some demonstrated need to inquire into the originally determined quantum’.[28] In discussing ‘demonstrated need’, his Honour explained that:[29]
[27]In the matter of Cardinal Project Services Pty Ltd [2017] NSWSC 920 (‘Cardinal’).
[28]Ibid, at [15]. As Barrett J noted in Kennards HirePty Ltd v RMGA Pty Ltd [2010] NSWSC 1387 at [75]:
. . . That is the way in which the question was posed in Paul’s Retail Pty Ltd v Morgan [2009] NSWSC 1222; (2009) 76 ACSR 26 at [79] in a passage not challenged by either party on appeal (Paul’s Retail Pty Ltd v Morgan [2010] NSWCA 217; (2010) 79 ACSR 580 at [54]–[56]).
[29]In the matter of Cardinal Project Services Pty Ltd [2017] NSWSC 920, at [27] (footnotes omitted).
. . . on the threshold question, there will generally be no occasion to come to firm conclusions, and the approach will be more impressionistic. The onus upon a person seeking to persuade the court to undertake a review is not a particularly heavy one, and it suffices if there is a well-based suspicion indicating a need for further investigation.

Further, his Honour said, if the Court determines to conduct such a review, ‘the ultimate test is whether the remuneration is in all the circumstances reasonable’.[30]
[30]Ibid, at [15], citing Paul’s Retail Pty Ltd v Morgan (2009) 76 ACSR 26, at 45-46 [76]-[78] (per Barrett J).
[367]In In the matter of Bestcare Foods Ltd (subject to a Deed of Company Arrangement)[31] Black J, in dealing with an application for an order for review of the remuneration of administrators under s 449E(2) that was brought several years after the remuneration had been approved, observed that:[32]
[31][2014] NSWSC 1630 (‘Re Bestcare Foods Ltd’).
[32]Ibid, at [55] and [57].
[55] . . . The discretion whether to order such a review must be exercised having regard to the information that was in fact provided to creditors . . . the period of time which has passed since the work undertaken, and the absence of complaint by Mr Goldring [the applicant], other contributories or creditors over that period. . . . the question initially to be addressed by the Court is whether a sufficient basis exists to order a review of the administrators’ or deed administrators’ remuneration, and it is not necessary for the administrators or deed administrators to justify that remuneration unless and until some basis for a review of it has been established.

. . .
[57]The approval of remuneration by the creditors and the passage of time are also of particular significance in this case. . . .

[368]Black J accepted that where the remuneration has been approved by creditors after inspecting documentation provided by the administrators, that approval did not operate as an absolute bar to review by the court. But his Honour indicated that where creditors had been informed about particular work after it had been undertaken, matters such as a failure on the part of the creditors to raise complaints or objections about that work in a timely way were matters to which the Court ought to have regard when exercising its discretion.[33]

[33]Re Bestcare Foods Ltd, at [57]-[59].

I note that in Cardinal, Brereton J stated that the criterion in s 473(10) of the Act (the predecessor to s 60-12 of the Practice Schedule), namely whether the remuneration is reasonable, taking into account any or all of the enumerated matters, is relevant to both the threshold question whether or not to review as well as in exercising the power to review.[34] It was in that context that he gave the explanation cited in paragraph 366 of Sloss J’s summary in Westpoint, as set out above.
[34]Cardinal, [27].

Accordingly, the principles summarised in paragraphs 25 to 29 above apply in respect of reviews of remuneration determinations as well.

Former Liquidator’s evidence
The Remuneration Statement

The Former Liquidator deposes that on 3 April 2019 he prepared a remuneration statement for the purposes of this application which details the work he and his staff have undertaken in the liquidation of the Company and in the period since the termination of the liquidation (‘Remuneration Statement’). The total remuneration claimed, including an estimate for work to be undertaken from 1 to 29 April 2019, is $90,394 (plus GST of $9,039.40, giving a total of $99,433.40).[35] This comprises (all figures are exclusive of GST):[36]
[35]Third Poulter Affidavit, [32]. A copy of the Remuneration Statement is exhibit AWP-08 to the Third Poulter Affidavit.
[36]Third Poulter Affidavit, [45]; Schedule 2 to the Remuneration Statement.

(a) $21,140 for the liquidation period 12 September to 30 September 2018 (‘First Period’);

(b) $35,944 for the liquidation period 1 October to 11 December 2018 (‘Second Period’);

(c) $17,560 for the post-liquidation period 12 December 2018 to 31 March 2019 (‘Third Period’) and

(d) $15,750 for the post-liquidation period 1 April to 29 April 2019 (‘Fourth Period’).

The Remuneration Statement contains, at Schedule 2, a summary of work completed and expected to be completed in the winding up and post liquidation period, along with the time spent on that work and the remuneration claimed for it.

Remuneration and disbursements
Remuneration rates

Both the Creditors Circular and the Remuneration Statement contain a schedule of hourly rates for IRT Advisory staff members which were applicable to the liquidation of the Company.

Method of calculating remuneration

In the Creditors Circular, the Former Liquidator explained that he would be calculating his remuneration on a time based/hourly rates basis (‘time cost basis’). He said that this was because:

(a) It ensures creditors are only charged for work that is performed, with time recorded and charged in six-minute units;

(b) A number of tasks were required to be performed which do not relate to the realisation of assets, such as responding to creditors, reporting to ASIC and distributing funds;

(c) It was not possible to estimate with certainty the total amount of fees necessary to complete required tasks;

(d) A time cost basis for remuneration calculates fees by the time spent at the level appropriate to the work performed; and

(e) This method provides full accountability in the method of calculation.

In calculating remuneration on the time cost basis, the Former Liquidator and his staff allocated their time to specific task areas, being Creditors, Investigations, Administration (each, a ‘Task Area’).

The Creditors Circular contained a description of the work performed for the First Period along with the fees charged for that work. For the fees incurred for the First Period, the Creditors Circular also contained a breakdown of the total hours and total charges for each staff member, broken down into the Task Areas. It also contained a description of the future work to be done, the estimated fees for that work, and the contingencies which may affect that estimate.

The Remuneration Statement contains similar information, updated for actual fees incurred for each period. It also contains, for each period, additional schedules in the form of work-in-progress reports (‘WIP Reports’). For each task performed in the liquidation, these WIP Reports show the date, staff member, level, Task Area, task code, rate per hour, time spent, charge, and narration/description of the task performed.

Amount claimed

From Schedule 2 to the Remuneration Statement, it can be seen that the following amounts are claimed (excluding GST):

Task Area First Period Second Period Third Period Fourth Period Total

Creditors $2,480 $4,858 $5,151 0 $12,489

Investigations $14,822 $10,160 0 0 $24,982

Administration $3,838 $20,926 $12,409 $15,750 $52,923

Total $21,140 $35,944 $17,560 $15,750 $90,394

Task Area	First Period	Second Period	Third Period	Fourth Period	Total
Creditors	$2,480	$4,858	$5,151	0	$12,489
Investigations	$14,822	$10,160	0	0	$24,982
Administration	$3,838	$20,926	$12,409	$15,750	$52,923
Total	$21,140	$35,944	$17,560	$15,750	$90,394

There are also schedules to the Remuneration Statement which set out, for the First, Second and Third Periods, the staff members who worked on the matter, their level, hourly rate, total hours and total charge broken down by Task Area.

Disbursements

The Former Liquidator says that his solicitors, Meerkin & Apel, have advised him that their legal fees (inclusive of GST and disbursements, including counsel’s fees) are $61,346.79, comprised as follows:[37]
[37]Third Poulter Affidavit, [39].

(a) $30,544.25 for the First and Second Periods;

(b) $12,342.25 for the Third Period;

(c) $6,085.29 in disbursements (of which $4,840 is counsel’s fees) for the First, Second and Third Periods; and

(d) $12,375 for the Fourth Period.

In addition, the Former Liquidator has incurred $1,393.70 (including GST) in external disbursements (being an insurance premium of $1,147.74 plus search fees).[38]
[38]Third Poulter Affidavit, [41]-[44]; Remuneration Statement, part 6.

Work performed by the Former Liquidator
Description of work performed in the First Period

In the Creditors Circular, the Former Liquidator summarised the work performed in the First Period as follows:

(a) Notified ASIC of his appointment and advertised same;

(b) Advised various banks and the ATO of the Company’s liquidation;

(c) Requested the Company’s books and records from the Plaintiff and the external accountant;

(d) Held discussions with the directors and their advisors to discuss the Company’s affairs and circumstances;

(e) Corresponded with the Plaintiff and his advisor regarding an application to terminate the winding up of the Company;

(f) Engaged and corresponded with a solicitor to assist him with filing an application to terminate the winding up of the Company;

(g) Commenced investigations into the Company’s affairs;

(h) Conducted various searches with statutory authorities and public databases to establish if the Company holds any additional assets to those previously disclosed to him;

(i) Discussions with and requests for documents from the ATO;

(j) Contacted potential creditors to notify them of the appointment;

(k) Ongoing communications with creditors;

(l) Corresponded with the mortgagee relating to its security over the Property;[39]

(m)Liaised with local real estate agents regarding the Property; and

(n) Attended to all statutory and administrative matters associated with the winding up.

[39]The circumstances relating to the mortgage over the Property will be explained below.

As set out in paragraphs 16 and 17 above, the Former Liquidator sought approval from creditors, which was obtained, of his remuneration for this work in the fixed amount of $21,140 (excluding GST).

Description of work to be performed for the balance of the liquidation, as set out in the Creditors Circular

In the Creditors Circular, the Former Liquidator summarised the work he expected would need to be performed after 30 September 2018 until the conclusion of the liquidation, as follows:

(a) Preparation of the Creditors Circular, including the remuneration report;

(b) Further investigations into the affairs of the Company;

(c) Calling for and adjudicating formal proofs of debt from priority and ordinary unsecured creditors;

(d) Attending to various matters associated with seeking to have the winding up terminated;

(e) Attending to responses from creditors regarding proposed resolutions without a meeting;

(f) Completing and lodging statutory reports with ASIC, and attending to other statutory requirements;

(g) Ongoing review of general correspondence received; and

(h) Maintenance and update of administration checklist and file.

As set out in paragraphs 16 and 17 above, the Former Liquidator sought approval from creditors, which was obtained, of his remuneration for this estimated work in a capped amount of $30,000 (excluding GST).

The Former Liquidator indicated in the Creditors Circular that if the liquidation did not proceed as expected, he may seek approval of further remuneration and provide details of why it had changed. He stated that matters which may affect the progress and cost of the liquidation include:

(a) Further investigations into the affairs of the Company;

(b) Unexpected delays in the process of terminating the winding up;

(c) Funding and payment of all Company debts in full, including his remuneration and disbursements; and

(d) Application to terminate the winding up is not successful or is delayed.

Description of work performed in the Second Period

The Former Liquidator does not provide the same discursive description of work performed in the Second Period as that described above. Rather, the Third Poulter Affidavit describes the liquidation and various events, including the Termination Application, in a chronological fashion, which includes reference to the work performed. In addition, the material contained in Schedule 2 of the Remuneration Statement for the Second Period describes the work performed, and the WIP Report for that period sets that out in some detail.

From these materials, the work performed by the Former Liquidator and his staff in the Second Period included:

(a) The matters referred to in paragraph 50 above;

(b) Continued investigations in respect of the Property, including the payment of past rental from the Property;

(c) Liaising with the Plaintiff and his own solicitors in respect of the Termination Application; and

(d) Preparing two affidavits for the Termination Application, including reviewing and responding to the Plaintiff’s two affidavits.

Description of work performed in the Third Period

I make the same observations as I made in paragraph 53 above regarding the material in respect of the Third Period.

In summary, the work performed by the Former Liquidator and his staff in the Third Period included:

(a) Preparing and lodging ASIC forms in respect of the conclusion of the liquidation;

(b) Dealing with insurance matters;

(c) Preparing the Remuneration Statement;

(d) Preparing the Third Poulter Affidavit, including reviewing and responding to the Third Morgan Affidavit; and

(e) Liaising with his solicitors and the Plaintiff in respect of this application.

Description of work performed or to be performed in the Fourth Period

I make the same observations as I made in paragraph 53 above regarding the material in respect of the Fourth Period, except that there is no WIP Report for that period.

In summary, the work performed or to be performed by the Former Liquidator in the Fourth Period concerns the work done in connection with the Former Liquidator’s fees and this application, including:

(a) Management review of fee approval position, preparation of fee note, drawing remuneration;

(b) Internal meetings to discuss status of issues or proceedings, review of documents;

(c) Liaising with solicitors regarding legal or court proceedings;

(d) Assistance to solicitors with preparation of affidavits and other court documents; and

(e) Communication and negotiations with the Plaintiff, pre-hearing conferences, and appearances in Court.

The Plaintiff’s evidence
The Company’s role and financial position

As well as the evidence already referred to above from the Plaintiff, below I have summarised aspects of the Plaintiff’s evidence which are relevant to the remuneration question.

The Plaintiff says that the Company’s sole purpose was to hold the Property. He has been responsible for meeting the operational costs associated with the Property, and with the exception of the SRO Debt at the time, has met those expenses.[40]
[40]First Morgan Affidavit, [12-][13], [18].

In his first affidavit, the Plaintiff stated that the Company has four mortgage facilities secured over the Property and that the Company is up to date on payments due for all four facilities. He refers to an email dated 20 September 2018 from the mortgagee, the Commonwealth Bank of Australia (‘CBA’) stating that despite the Company being in liquidation, the CBA has no intention to call on its security at this stage. The Plaintiff exhibits a copy of this email and a copy of CBA bank statements for what he describes as the four mortgage facilities over the Property, showing an outstanding mortgage balance as at 11 October 2018 of approximately $614,530.30.[41] He says that to the best of his knowledge, regular payments have been made by him and the other shareholders from their respective personal accounts, for the life of each facility, and at all relevant times each facility has not been in arrears.[42]
[41]First Morgan Affidavit, [7]-[8].
[42]First Morgan Affidavit, [9].

I have reviewed the email and bank statements referred to in the previous paragraph,[43] along with the certificate of title for the Property,[44] and it seems to me that the Plaintiff’s description is not quite accurate. The Company is not the borrower under the four CBA facilities: the Plaintiff is in respect of three of them, and the borrower for the fourth facility is TT Marquet Pty Ltd. It seems to me that the borrowers are the Plaintiff or entities associated with him, and that the facilities are secured by a mortgage to CBA over the Property.
[43]Exhibits CJM-3 and CJM-4 to the First Morgan Affidavit.
[44]Exhibit CJM-2 to the First Morgan Affidavit.

The Plaintiff also says that an appraisal of the Property dated 31 October 2018 indicated the value of the Property as $2,300,000, such that there is approximately $1.685m in equity in the Property.[45]
[45]First Morgan Affidavit, [11].

The Company’s creditors

At the time of the Former Liquidator’s appointment, the Company’s outstanding creditors were:

(a) the SRO;

(b) MSC;

(c) possibly, the CBA, in the amount of $614,530.30; and

(d) possibly, the Plaintiff, in the amount of around $400,000, for contributions he has made by paying the operational costs of the Property since its purchase, such as MSC rates, water rates and charges, maintenance and general expenses.[46]

[46]First Morgan Affidavit, [12].

The Plaintiff deposes that on 23 October 2018, he made enquiries of the SRO to ascertain the Company’s outstanding liability and then on that day he paid the SRO Debt in full, inclusive of the SRO’s further costs incurred as petitioning creditor, in the amount of $27,319.63.

The situation in respect of MSC is somewhat confusing. The Plaintiff said in his first affidavit that the only debt known to him as at the date of that affidavit was the SRO Debt, and that rates to MSC in the amount of $4,224 are due on 30 June 2019.[47] In his third affidavit, the Plaintiff says that prior to the Remuneration Determination, he had paid what he understood to be the Company’s liability to MSC.[48]
[47]First Morgan Affidavit, [13], [15].
[48]Third Morgan Affidavit, [18(h)].

MSC submitted a proof of debt to the Former Liquidator dated 4 October 2018. That proof of debt claimed rates in the amount of $4,231.21, being the balance including arrears and interest.[49] There is also a copy of a rates notice from MSC which is undated but refers to a due date for payment of 30 September 2018.[50] From what I can deduce, $8,896.71 was the total due, with $5,728.71 due as an instalment amount payable by 30 September 2018. This appears to have included an amount for arrears, plus an amount by way of one of the instalment payments for the current year, with remaining instalments of $1,056 each due on 30 November 2018 and 28 February and 31 May 2019.
[49]Exhibit CJM-7 to the Third Morgan Affidavit.
[50]Exhibit CJM-7 to the Third Morgan Affidavit.

As best as I can ascertain, therefore, while the Plaintiff paid what he thought was the amount due to MSC prior to the Remuneration Determination, that was not the totality of what was owed.

In light of the mortgage to CBA over the Property which secures facilities provided by the CBA to the Plaintiff or entities associated with him, it seems to me that one could possibly describe the CBA as a contingent creditor of the Company, or as the Company having a contingent liability to the CBA in that the CBA could, in certain circumstances, enforce its mortgage against the Property. However, as noted above, primary liability to the CBA rests with the borrowers under the CBA facilities, not with the Company.

In relation to the amounts possibly owing to the Plaintiff by the Company, the Plaintiff says that he wrote to the Former Liquidator on 25 September 2018 and stated that he had no intention of being included as a creditor of the Company and would not assert a claim against the Company.[51]
[51]First Morgan Affidavit, [14].

The passing of the Remuneration Resolution

The Plaintiff says that he did not claim as a creditor in the liquidation of the Company or vote on the Remuneration Resolution as he believed that he was the only creditor of the Company and that the Termination Application would be more straightforward if he did not do so. He says that he believed he was the only creditor at the time as he had paid the SRO Debt and believed he had paid what was owing to MSC.[52]
[52]Third Morgan Affidavit, [18(h)].

The Plaintiff also says that had he been properly informed at the time by the MSC as to the balance of the Company’s account and had he then paid that amount, MSC would not have been entitled to vote on the Remuneration Resolution.[53] Further, he points out that if that had been the case, then the Former Liquidator would have been required to seek approval of his remuneration from the Court,[54] presumably as there would have been no creditors voting on the Remuneration Resolution.
[53]Third Morgan Affidavit, [18(h)].
[54]Third Morgan Affidavit, [18(i)].

Previous requests for further information regarding the claimed remuneration

The Plaintiff referred to the following matters in terms of his requests for further information regarding the Former Liquidator’s claimed remuneration:

(a) On 22 October 2018, in the context of the foreshadowed application to terminate the winding up, his solicitors wrote to the Former Liquidator requesting a remuneration report so that he could consider whether he agreed with the quantum of the remuneration;[55]
[55]First Morgan Affidavit, [42].

(b) On 31 October and 7 November 2018, his solicitors sent emails to the Former Liquidator’s office requesting a WIP report so that he could consider the quantum of the remuneration;[56]
[56]First Morgan Affidavit, [44].

(c) That request was repeated by his solicitors by letter to Mr Fuller on 30 November 2018;[57]
[57]Third Morgan Affidavit, [13].

(d) On 12 December 2018, the Former Liquidator’s solicitors sent a letter to his solicitor, stating that the Former Liquidator would be able to establish the reasonableness of his fees;

(e) On 8 January 2019, his solicitors again requested a WIP or remuneration report; and

(f) On 18 January 2019, the Former Liquidator’s sent a number of documents to his solicitors, including a copy of a remuneration statement dated 18 January 2019.[58] I note that this does not contain a WIP report, although it does contain a description of the work performed for the period from 12 October to 11 December 2018.

[58]Third Morgan Affidavit, [16].

The Plaintiff’s intention to have the liquidation of the Company terminated

The Plaintiff says that the following notice was given to the Former Liquidator of the intention to apply to the Court for the termination of the winding up of the Company:

(a) On 18 September 2018, he informed one of the Former Liquidator’s employees (John Fuller) of this intention and that he had engaged Ben Verney (of Grey House Partners) to assist him;[59]
[59]First Morgan Affidavit, [35].

(b) On the same day, Mr Verney sent an email to Mr Fuller in respect of the foreshadowed application and requested that the Former Liquidator undertake the relevant steps to make the application;[60]
[60]First Morgan Affidavit, [36].

(c) Around one week later, on 25 September 2019, Mr Verney sent an email to the Former Liquidator stating that his remuneration and costs should be minimised pending the commencement of the application;[61]

(d) On 12 October 2018, he sent an email to Mr Fuller requesting that the Former Liquidator put all further action on hold so that he may seek legal advice;[62] and

(e) On 22 October 2018, his solicitors wrote to the Former Liquidator, referring to the foreshadowed application and asking whether he would consent to the relief sought.[63]

[61]First Morgan Affidavit, [38].

[62]First Morgan Affidavit, [40].

[63]First Morgan Affidavit, [42].

Submissions
The Plaintiff’s submissions

The Plaintiff submits that the remuneration claimed by the Former Liquidator is unreasonable. I have summarised the main submissions and the basis upon which it is said to be unreasonable below:

(a) The period for the liquidation was very short (s 60-12(c) of the Practice Schedule). The liquidation of the Company took a total of 3 months, and the Former Liquidator was on notice from 18 September 2018 that the Plaintiff intended to make an application for the termination of the liquidation;

(b) The value and nature of the property of the Company was very straightforward (s 60-12(h) of the Practice Schedule): there was only one asset, the Property, and the Company had no bank account, no ABN and no tax file number;

(c) Only two creditors sought to prove in the liquidation (s 60-12(i) of the Practice Schedule): the SRO in respect of the SRO Debt and the petitioning creditor’s costs; and MSC in the amount of $4,231.21. Both of these creditors were repaid by the Plaintiff prior to the termination of the liquidation;

(d) The Former Liquidator was not required to take any steps to, and did not realise any property of the Company such that the extent of the substantive work undertaken by the Former Liquidator may be summarised as (s 60-12(e), (f) and (g) of the Practice Schedule):

(i) Statutory attendances including in relation to approval of remuneration;

(ii) Steps to identify and protect assets of the Company, steps to identify potential creditors of the Company, and to form a view of the Company’s solvency;

(iii) Attendances in relation to the proposed termination of the liquidation; and

(iv)Attendances in relation to the subsequent review of the Former Liquidator’s remuneration.

(e) The Remuneration Determination was approved by a single creditor, admitted in the sum of $4,231. While the SRO had voted in favour of the Remuneration Resolution, as the SRO Debt had been paid by that time, it was not eligible to vote. The Plaintiff could have voted in relation to the Remuneration Resolution, but did not, for the reasons set out in paragraph 71 above.

As a consequence, the Plaintiff says that the Former Liquidator has not established that the claimed remuneration is fair and reasonable remuneration, as:

(a) The Former Liquidator’s proposed costs are not proportionate (ss 60-12(c), (e), (f), (h) and (i) of the Practice Schedule);

(b) Unnecessary attendances have been undertaken by the Former Liquidator in circumstances where the Plaintiff gave early notice that he intended to apply to terminate the liquidation and promptly paid all of the Company’s creditors (ss 60-12(a) and (b) of the Practice Schedule);

(c) The Former Liquidator’s opposition to the Termination Application was unreasonable in circumstances where there was no real basis to question the Company’s solvency and the Plaintiff had paid all of the Company’s debts and agreed to pay any future debts. This caused significant additional fees and legal costs to be incurred;

(d) The Former Liquidator seeks payment for:

(v) 53 hours of ‘Administration’ after the termination of his appointment, fees in respect of which he has no right to payment pursuant to statute or the undertaking given as part of the Termination Orders;

(vi)50.8 hours of ‘Administration’ prior to the Termination; and

(vii) 49.7 hours of ‘Investigations’ in relation to a company whose sole asset was a beach house, which never traded, and which does not have an ABN, tax file number or bank account;

(e) The Plaintiff and the Former Liquidator, did not, in this application, seek a review or approval of disbursements for legal fees. However, the Plaintiff says that the Former Liquidator’s claimed remuneration needs to be considered in light of the legal fees, which are substantial, and which suggest that quite a proportion of the work done in respect of the Termination Application and the remuneration application was performed by the lawyers.

The Plaintiff says that although the work done by the Former Liquidator is relevant, so too is the question of whether it was reasonable to carry it out, and the appropriateness of the amount charged. For the reasons summarised in paragraph 76 above, the Plaintiff says that the Former Liquidator’s claimed remuneration is not reasonable, necessary or proportionate.

The Plaintiff referred to the Creditors Circular where, in October 2018, the Former Liquidator estimated that his total remuneration for the liquidation would be between $40,000 and $51,570 (excluding GST) and foreshadowed the Termination Application. The Creditors Circular stated:

The above estimate is based on matters and issues that are reasonably foreseeable in the current circumstances of the winding up. It is possible that unforeseen issues may arise during the winding up and in particular to the process of seeking to terminate the winding up. In which case, I may write to creditors again seeking approval for further remuneration.
It is also possible that issues relating to the winding up and the application to terminate the winding up are not as complex as presently contemplated, or I am able to complete the necessary tasks in a more time effective manner. In this scenario, my time costs may be less than the above estimate. Accordingly, I may only draw remuneration that has been properly incurred, and not the full amount which creditors may approve.

The Plaintiff submits that nothing unforeseen subsequently arose, the simplicity of the liquidation ultimately revealed itself, and the liquidation was ultimately not as complex as contemplated at the time of the Creditors Circular. The Plaintiff says that the subsequent doubling of the Former Liquidator’s remuneration remains unexplained.

Further, the Plaintiff points to the Former Liquidator’s evidence that the ‘vast majority of fees and disbursements incurred after 19 November 2018 related to the proceeding itself and in particular to the issue of solvency’.[64] The Plaintiff submits that it is not clear how the Former Liquidator’s fees are reasonable and necessary, given:
[64]Third Poulter Affidavit, [31].

(a) The ultimate simplicity of the issue of solvency;

(b) The relatively limited volume of affidavit material filed by the Former Liquidator in this proceeding; and

(c) The fact that the Former Liquidator instructed solicitors to act on his behalf in the proceeding.

The Plaintiff acknowledged that it was necessary for the Former Liquidator to form a view of the Company’s solvency for the purposes of the Termination Application and that to a very limited degree some additional complexity would have been caused in the liquidation by the absence of books and records of the Company and confusion regarding income from the Property and the payment of taxation to the ATO.

Finally, the Plaintiff complains that his solicitors requested substantive details of the Former Liquidator’s claimed remuneration and work completed on numerous occasions between 22 October 2018 and 8 January 2019, yet it was not until 18 January 2019[65] that the Plaintiff received sufficient information to enable him to form a view that this application was necessary.
[65]Third Morgan Affidavit, [9]-[16].

The Former Liquidator’s submissions

The Former Liquidator submits that it is relevant to consider the work that was necessary to be done. If it was necessary, then there is no reason why the Former Liquidator should not be remunerated for that work. Moreover, provided it was reasonable for the work to be carried out and the amount charged was reasonable, then he should recover his remuneration.[66]
[66]Sanderson, [57]-[58].

The Former Liquidator submits that the work undertaken by him and his staff was necessary and reasonable in performing his duties and statutory obligations. This included the usual searches and investigations into the assets of the Company and its liabilities.

The Former Liquidator relies on an early suggestion from the Plaintiff that he would be proposing a deed of company arrangement (‘DOCA’) to support his contention that there was some complexity to the liquidation and that certain investigations were required. He says that meetings were held on the issue of the proposed DOCA/termination between the Plaintiff and his solicitors and the Former Liquidator and his solicitors. He says that it required ‘legal guidelines’ and it was appropriate that solicitors were involved in the discussions. The discussions, he says, resulted in the DOCA proposal being abandoned.

Any DOCA proposal would require the Former Liquidator to report to creditors and make a recommendation in respect of it. He would need to be appraised of the actual assets and liabilities of the Company, so that he could form an opinion as to whether any proposed DOCA presented a better return to creditors than the continuation of the winding up.

If, instead of a DOCA, there was to be a termination of the winding up, then the Former Liquidator says that he would be required to report his views on the solvency of the Company to the Court, as solvency is a central question in such an application. Either way, it was appropriate and necessary for him to continue in his task of identifying the creditors of the Company as that would be critical to the question of solvency and return to creditors.

The Former Liquidator expresses, in his second affidavit, that he was concerned by a number of inconsistencies in respect of the financial position of the Company and the information provided to him by the Plaintiff.[67] He says that:
[67]Second Poulter Affidavit, [3]-[39].

(a) the Plaintiff had told him that the Company had never traded and the Property was used by the Company’s directors and their extended family, but he ascertained from a local real estate agent who he had contacted to discuss the local property market and to verify information supplied by the Plaintiff that the real estate agent had previously managed the Property as short term rental accommodation, from around 1996 to 2012. He contacted the ATO to ascertain the income earned from the short term rental declared in the Company’s tax returns, but was informed that no tax returns had been lodged (he had earlier been told by the Plaintiff that financial accounts for the Company had been prepared and the most recent tax return was lodged). The Plaintiff said in his first affidavit that there was an agreement by the Company’s directors for the income from the short term rental be paid directly to him and for him to declare that income in his personal tax returns, and there was an inconsistency between the First Morgan Affidavit and the Second Morgan Affidavit in that the agreement was first said to have been made in 2006 but later said to have been made in 2002. Further, there were inconsistencies between the two affidavits as to the amount of gross rental income from the Property;

(b) he ascertained from the ATO and the Company’s accountant that no tax returns for the Company were ever prepared or lodged, which was not what the Plaintiff had told him. The ATO informed the Former Liquidator that if rental income had been received by the Company then tax returns were required;

(c) in the Second Morgan Affidavit, the Plaintiff referred to his ‘other company, TT Marquet’. The Former Liquidator conducted a search and discovered that he is a director of 5 companies and previously a director of at least 10 other companies;

(d) in his first Affidavit, the Plaintiff said that he had personally paid all other operational costs associated with the Property, however in the Second Morgan Affidavit he said that with the exception of the purchase price, all operational costs were paid by him or TT Marquet;

(e) in the Report As To Affairs (‘RATA’) which the Plaintiff submitted to the Former Liquidator,[68] he said that he was an unsecured creditor in the amount of $1,618,656. In correspondence that followed, the Plaintiff said that he had information to support this but he would not make a call for payment at this stage. The Former Liquidator asked him to amend the RATA to reflect this, but he did not do so. In the First Morgan Affidavit, the Plaintiff said he did not intend to be a creditor and would not assert any claim against the Company, and in the Second Morgan Affidavit he said he was not expecting the Company to repay him except if the Property was sold to satisfy the outstanding mortgage balance;

(f) in the RATA, the Plaintiff included information about the CBA facilities and said that as at 19 September 2018, $364,344 was owing under two security interests. The Former Liquidator made further enquiries with the CBA and was informed that as at 15 October 2018, the debt was $640,088.60 and was for four facilities secured against the Property. In the First Morgan Affidavit, the Plaintiff said the outstanding balance as at 11 October 2018 was approximately $614,530.30, whereas in the Second Morgan Affidavit, the Plaintiff said the total outstanding was $364,344 against two facilities;

(g) the RATA disclosed that apart from debts to the Plaintiff, the SRO and the CBA, there were no other debts of the Company. However, the Former Liquidator made enquiries with the local municipality and water authorities regarding any other statutory debts, and was advised by MSC that outstanding rates amounted to $9,919.69 as at the date of his appointment. Wannon Region Water Corporation advised him that the Company had an outstanding account of $576.59 as at the date of his appointment, which had been referred to a debt collector due to the length of time the account had been in arrears.

[68]Exhibit AWP-02 to the Third Poulter Affidavit is a copy of the RATA dated 19 September 2018, which the Former Liquidator deposes that he received on 19 September 2018: Third Poulter Affidavit, [3].

The Former Liquidator submits that it was necessary for him to undertake investigations and the work described earlier in these reasons so as to satisfy himself about these inconsistencies as they were relevant to his views about the solvency of the Company and the Termination Application.

The Former Liquidator submits that the Third Morgan Affidavit seeks to minimise the issues which he was required to deal with in the liquidation and complains that the remuneration was not reasonable given the number of assets and creditors which the Company had. He says that the Plaintiff does not point to any work which the Former Liquidator should not have undertaken. In particular, the Former Liquidator says that the Plaintiff:

(a) does not say that the Former Liquidator should not have obtained legal advice or that he should not have been represented at the hearing of the Termination Application;

(b) does not say that the Former Liquidator should not have reported his views as to solvency to the Court;

(c) ignores the fact that a lot of the work undertaken by the Former Liquidator related to his proposals for a DOCA or alternatively a termination application;

(d) ignores the investigations conducted by the Former Liquidator to ascertain whether the creditors as reported by the Plaintiff were correct;

(e) claims that the Company only had two creditors, completely ignoring the amount owed to the CBA and the debt to the Plaintiff as recorded in the RATA; and

(f) does not explain why the Former Liquidator should not have investigated the basis on which all of the income from the Company was paid to him personally.

The Former Liquidator rejects what he describes as an inference in the Third Morgan Affidavit that as soon as he was advised that there was likely to be a DOCA or termination of the winding up, he should have stopped all work and not undertaken any investigations as to the affairs of the Company, instead taking the Plaintiff’s word for the Company’s financial position. He says that this is inconsistent with his duties and obligations, particularly when he needed to form a view as to the Company’s solvency (in the event of a termination) or the return to creditors (in the event of a DOCA), and where Company income was being paid to the Plaintiff instead of the Company.

By reference to Deputy Commissioner of Taxation v Starpicket Pty Ltd (No. 2),[69] the Former Liquidator submits that liquidators have fundamental tasks and duties which are required to be carried out, notwithstanding assertions that an application will be made to terminate the winding up. He says that in that context, assertions that tasks performed were unnecessary or premature rely on the luxury of hindsight.
[69][2013] FCA 699 (‘Starpicket’), [17].

The Former Liquidator points out that the liquidation of the Company was on foot for approximately 14 weeks and that the application to terminate the winding up was made in week 9 of the liquidation.

The Former Liquidator submits that he is entitled to be awarded remuneration for work necessarily done in complying with the law subsequent to the termination of his appointment, and that work done in preparing a claim for remuneration forms part of an award for remuneration.[70]
[70]Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd [2012] VSC 71, [36], [28].

He says that since the termination of the winding up, he has undertaken statutory tasks and prepared for this application, including the application for review. Since this work has arisen out of the liquidation, it should form part of the remuneration and disbursements of the liquidation.

Finally, the Former Liquidator submits that the word undertaken is set out in detail in his affidavits and the Remuneration Statement, that it was necessary to perform that work and the time spent and amount charged were reasonable. He says that there are no questions as to the quality of the work performed and it was appropriately delegated and supervised. It was appropriate for him to undertake investigations and satisfy himself as to issues such as solvency and the creditors of the Company, and that work and his involvement in the Termination Application were of assistance to the Court.

Consideration
Should a review of the remuneration already approved by creditors be conducted?

I am satisfied that it is appropriate and just that a review of the Remuneration Determination be conducted.

The Remuneration Determination was made, with effectively only one creditor (i.e. MSC) voting to approve the Remuneration Resolution (since by then, the SRO Debt had been paid such that the SRO was no longer eligible to vote).

The Plaintiff chose not to lodge a proof of debt in the administration or to vote in respect of the Remuneration Resolution, and he has explained why he took that approach. While his rationale may, in part at least, have proved erroneous, the circumstances in which the Remuneration Determination was made tend in favour of a review of the Remuneration Determination being conducted.

The terms of the Termination Orders are such that it is the Plaintiff who is liable to pay the Former Liquidator’s remuneration, the quantum of which was to be determined by agreement between the Plaintiff and the Former Liquidator or further order of the Court. There is no distinction made in the Termination Orders between remuneration which had already been approved and further remuneration, and the orders contemplated the Plaintiff making an application for review.

In circumstances where the Plaintiff is liable to pay, where the Plaintiff did not participate in the approval of the Remuneration Resolution, and where the Court has an express role, including by virtue of the Termination Orders, it is just that the Court conduct a review.

Further, I am satisfied that in all the circumstances (including my reasons as set out below), there is a well-based suspicion that the quantum of the Remuneration Determination is not reasonable, such that a review ought be conducted.

Amount to be approved
Rates

There has not been any criticism of the hourly rates charged by IRT Advisory or that the Former Liquidator calculated his remuneration on a time-cost basis. I am satisfied that it was appropriate for the remuneration to be calculated on a time-cost basis, and I am also satisfied that IRT Advisory’s rates were within the range typically charged by insolvency practitioners.

General matters
Impact of the foreshadowed Termination Application on the work performed by the Former Liquidator

The Plaintiff places a great deal of emphasis on his early notification (6 days after appointment) of his intention to apply for the termination of the winding up, which intention was repeated a number of times, to contend that much of the work carried out by the Former Liquidator was unnecessary and unreasonable.

However, the situation is not as straightforward as the Plaintiff submits. In Starpicket, Gordon J (as her Honour then was) dealt with a remuneration application where the liquidation of the subject company had, like this case, been terminated by the Court. Her Honour stated:[71]

… 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.

[71]Starpicket, [42]–[43].

There has been no explanation given as to why the Plaintiff, having given very early notice of his intention to apply for the termination of the winding up, waited until some 9 weeks after the commencement of the winding up to make that application. Although, from some of the correspondence between the Former Liquidator and the Plaintiff or his solicitors, it is apparent that the parties were working on what the Former Liquidator said he required before he would be in a position to say whether he supported the application.[72] In any event, the Former Liquidator cannot be expected to not perform the usual duties and obligations of a liquidator just because a director of the Company has signalled an intention to have the winding up terminated.
[72]For example, see the letter from the Former Liquidator to the Plaintiff’s solicitor dated 25 October 2018, being Exhibit AWP-06 to the Third Poulter Affidavit.

I accept the Former Liquidator’s submission that certain investigations were warranted and that he needed to form a view as to the Company’s solvency, that question being relevant to the Termination Application. I also accept his submission that he had an obligation to ascertain the Company’s financial position for himself and that he could not simply accept the Plaintiff’s word for it, particularly in light of the inconsistencies which he had identified. It was not as simple as the Plaintiff now portrays it, particularly as it took a period of time and some investigation for the position of the Company vis-à-vis the CBA to emerge and for the Company’s potential tax liabilities to be clarified (primarily by reason of the income from short term rental of the Property).

Complexity of the Liquidation

For the reasons set out in the previous paragraph, I accept that the liquidation of the Company was not as simple as the Plaintiff would have it.

However, I also consider that the liquidation was not as complex as the Former Liquidator submits.

Much emphasis was made in the Former Liquidator’s submissions of the possibility of a DOCA proposal and the need for investigations to be conducted and for legal advice to be obtained in respect of it.

I do not accept that the possibility of a DOCA required much investigation or legal advice, as it ought to have been readily apparent that it was not likely to be an appropriate course. Further, it appears to have been mentioned only once in the correspondence, being in the letter written by the Plaintiff personally to the Former Liquidator dated 18 September 2018. In that letter, the Plaintiff provided some background about the Company and the Property, including that it did not trade and its purpose was to hold the Property, and that apart from some related party loans the principal creditor was the SRO, with the remaining creditors being current service and supply creditors on normal terms. The Plaintiff wrote that he proposed:[73]
[73]Exhibit CJM-10 to the First Morgan Affidavit.

i.the Liquidator advise me as to the Commissioner’s claim and costs to date;

ii. what costs have been incurred in the liquidation to date;
iii.what costs are estimated to be necessary to indemnify the liquidator through to the termination of the winding up order;
iv.I will have our lawyers prepare a [DOCA] for your consideration; and should the Liquidator approve
v.I would ask the Liquidator to make an application to the Supreme Court to terminate the winding up on the basis that it is just and equitable to do so (I understand that the Company will be liable for the costs of such an application).

It seems tolerably clear to me that the notion of both entering into a DOCA and terminating the winding up would have been an unusual course.

In any event, just over an hour later Mr Verney sent an email to Mr Fuller, stating that the Company is solvent and has sufficient funds to pay the SRO and the Former Liquidator’s fees to date.[74] Importantly in this context, he asked that the Former Liquidator make an urgent application to the Court for the termination of the winding up under s 482(1) of the Act, and asked for information about the SRO Debt, the SRO’s costs, the Former Liquidator’s fees and disbursements to date and for the completion of the termination application, the steps the Former Liquidator needed to perform to lodge the application, and what information he needed from the Plaintiff for that application. He also indicated that their intention was to lodge the application that week and asked for confirmation that it was possible.
[74]Exhibit CJM-12 to the First Morgan Affidavit.

So far as I have been able to ascertain, the initial 18 September letter from the Plaintiff is the only time the prospect of a DOCA is mentioned. It is swiftly followed by the email from Mr Verney which did not mention a DOCA. After that, all of the correspondence concerned queries from the Former Liquidator about the Company’s financial position and the proposed termination application.

In the Third Poulter Affidavit, the Former Liquidator refers to Mr Verney’s email of 18 September asking him to make the Termination Application that week and says that despite this email, on the same day he received the 18 September letter from the Plaintiff which referred to the DOCA. He says that he assumed from that letter that the Plaintiff was considering different options.[75] The Third Poulter Affidavit suggests, but does not state as such, that the letter followed the email from Mr Verney, but it is apparent from the exhibits to the First Morgan Affidavit that this was not the case.
[75]Third Poulter Affidavit, [14]-[15].

In my view, the emphasis placed on the possibility of a DOCA in the Former Liquidator’s submissions was misplaced and to the extent that it is relied upon to make the liquidation appear complex, it is rejected.

Nonetheless, I accept the Former Liquidator’s submission that the solvency of the Company would be a central issue in the Termination Application and that the Court would likely look to him for a view about that. That would be the case, whether the Former Liquidator made the application (as appears to have been originally envisioned) or whether it would be the Plaintiff who would do so. However, the Former Liquidator’s remuneration and legal costs if making the application himself would likely be greater than if the Plaintiff was to do it.

The question then becomes whether, in order to form a view as to the solvency of the Company and whether he supported the Termination Application, it was necessary or reasonable for the Former Liquidator to undertake all of the work that he did. I accept, as does the Plaintiff (see paragraph 81 above), that it was necessary for the Former Liquidator to form a view of the Company’s solvency and that some additional complexity was caused by the absence of books and records of the Company and confusion regarding income from the Property and the taxation position of the Company.

However, once it became tolerably clear that the CBA was not enforcing its mortgage, had no intention of doing so, and that repayments on the facilities were up to date; that the only creditors were the SRO and MSC; that the Plaintiff had no intention of claiming the moneys said to be owed to him by the Company; and that the equity in the Property far exceeded the total of all debts (including contingent liabilities), then the Company’s solvency ought have been readily apparent. I do not see how it was necessary or reasonable for the Former Liquidator to continue to perform work in relation to the Company’s solvency after that point. Further, even if there was some potential taxation liability in respect of the short term rental income, the calculations made by the Former Liquidator[76] were sufficient to reveal that this could have been readily dealt with, without jeopardising the solvency position of the Company. Further, there were assurances from the Plaintiff that he could and would continue to support the operational costs of the Company as he had done in the past.
[76]Second Poulter Affidavit, [16].

From my review of the materials, it appears that by:

(a) 20 September 2018, the Plaintiff had received confirmation from the CBA that it was not enforcing its mortgage, had no intention of doing so, and that repayments on the facilities were up to date. There is no evidence, however, of whether this was provided to the Former Liquidator prior to it being referred to in the First Morgan Affidavit;

(b) 25 September 2018, the Plaintiff had confirmed in writing that he had no intention of being included as a creditor and would not assert a claim against the Company;[77]
[77]First Morgan Affidavit, [14]; exhibit CJM-6 to the First Morgan Affidavit.

(c) 8 October 2018, a local real estate agent had advised the Former Liquidator that he expected $2m would be cleared from a sale of the Property;[78]
[78]Exhibit AWP-03 to the Third Poulter Affidavit.

(d) 9 October 2018, the Former Liquidator’s staff communicated with each of MSC and Wannon Water to confirm that the outstanding amounts for council rates and water rates were paid;[79]

(e) 11 October 2018, the Plaintiff had bank statements showing that the amount secured against the Property was approximately $614,530.30.[80] Again, there is no evidence of whether this was provided to the Former Liquidator prior to it being referred to in the First Morgan Affidavit. As noted above, the RATA stated that this amount was $364,344 and the Former Liquidator’s own inquiries revealed that it was $640,088.60.[81] Regardless of the inconsistencies in the amounts deposed to in the First and Second Morgan Affidavits,[82] the Former Liquidator knew, by 17 October 2018 at the latest, what the position was with the CBA;[83] and

(f) 23 October 2018, the Plaintiff paid the SRO Debt and the SRO’s costs as petitioning creditor.

[79]Third Poulter Affidavit, [20].

[80]First Morgan Affidavit, [8]; Exhibit CJM-4 to the First Morgan Affidavit.

[81]See paragraph 88(f) above.

[82]See paragraph 88(f) above.

[83]Third Poulter Affidavit, [23].

There is no evidence as to when the position in relation to the potential taxation liability became clear to the Former Liquidator. Despite this, it ought to have been readily apparent by no later than 17 October 2018 that the Company was solvent and that further investigations were not necessary.

The Former Liquidator’s conduct of the Termination Application

In his second affidavit, the Former Liquidator emphasised the inconsistencies which I have summarised in paragraph 88 above. Several of the inconsistencies identified by the Former Liquidator do not seem particularly relevant to the question of solvency (for example, the number of companies of which the Plaintiff was or had been a director).

The Second Poulter Affidavit contains the Former Liquidator’s view about the solvency of the Company. He deposed that the solvency of the Company depends on whether: continued financial support is provided by the Plaintiff and his related parties; the Plaintiff and his related entities agree to forgive or not pursue their claim against the Company; a claim is made against the Company by the ATO; the amount that will ultimately be owed to CBA and whether it will ever be called up by CBA; and there are any other creditors of the Company or the Trust which have not already been disclosed.[84]
[84]Second Poulter Affidavit, [40].

He went on to say that given all the inconsistencies, he did not ‘feel that I can form a conclusive view as to the solvency of the Company at this time’.[85]
[85]Second Poulter Affidavit, [41].

In light of the matters referred to in paragraphs 119 to 121 above, it is unclear to me why the Former Liquidator took the position that he did in relation to the Termination Application.

Remuneration for work done after the termination of the liquidation

The Plaintiff says that the Former Liquidator has no entitlement to the fees claimed for ‘Administration’ after the termination of the liquidation. In Starpicket, Gordon J stated that:[86]

The Liquidator is entitled to reasonable remuneration for work performed after the winding up was set aside, to the extent that such work was performed in accordance with his duties and the law. This entitlement encompasses not only the filing of the requisite forms with the Australian Securities and Investments Commission (ASIC), but also those acts required of the Liquidator to transfer control of Starpicket back to its directors. It also includes preparation of the Liquidator’s application for remuneration currently before the Court. As stated by Zeeman J in Re Reiter Brothers Exploratory Drilling Pty Ltd (1994) 12 ACLC 430 at 441:
[T]he applicant is entitled to be remunerated for work necessarily done by him by way of complying with the law subsequent to the termination of his appointment. …
In my view, work properly done by the applicant by way of preparing his claim for remuneration falls to be dealt with as part of his remuneration.

[86]Starpicket, [54]. Counsel stated that this reasoning was followed in ACN 104 635 369 Pty Ltd (in liq) (formerly Total Plant Services Pty Ltd) v Hamilton (2015) FCA 1219 (13 November 2015) [53].

Therefore, the Former Liquidator is entitled to reasonable remuneration for the period after the termination of the liquidation. It remains to be considered whether the remuneration claimed in respect of the Third and Fourth Periods is reasonable, which I will do below.

Conclusion as to the approach the Court should take in this case

Counsel for the Former Liquidator observed that despite numerous complaints that WIP Reports had not been provided earlier when asked for by the Plaintiff, none of the Plaintiff’s materials or submissions, including oral submissions, made any criticism of the WIP Reports or objected to particular items in those WIP Reports. Counsel for the Plaintiff submitted that given the matters summarised in paragraph 77 above, it was not necessary to go through each item in the WIP Report, but she would mention some of them. I will deal with those, where relevant, below.

Given the matters referred to in paragraphs 104 to 127 above, I do not consider it appropriate to calculate reasonable remuneration merely by reference to the work done, as described in the Former Liquidator’s material (including his affidavits and the Remuneration Statement), and to the details set out in the WIP Reports (except as identified below). To do so is to accept that all of the work done was reasonably necessary, and I do not accept that, as set out above. I accept the Plaintiff’s submissions in this regard, as summarised in paragraph 77 above.

That means that there is no precise mathematical method available to me for calculating what I think is appropriate remuneration for the Former Liquidator. Rather, I am in the position of having to make adjustments to the amounts claimed by reference to the matters I have described above and to what I consider to be reasonable remuneration for the work which I have indicated as being reasonable to undertake.

As previously mentioned, the Former Liquidator’s claimed remuneration is $90,394 (excluding GST).

Remuneration for First Period

The Former Liquidator’s claimed remuneration for the First Period (12 to 30 September 2018) is $21,140.

Many of my earlier comments do not apply specifically to the First Period. From my review of the WIP Report, much of the work undertaken in that period appears to be standard work for the beginning of any liquidation and it could not be said that at this stage the Former Liquidator ought not to have undertaken it. Those areas of work which do not fall within this description mostly concern liaising with the Plaintiff or Mr Verney as to the termination of the liquidation or seeking advice from Meerkin & Apel as to what is required of the Former Liquidator in this respect. I do not consider it unreasonable for the Former Liquidator to have undertaken that work.

For these reasons, it is appropriate to review the remuneration for this period by reference mainly to the WIP Report, informed by descriptions in the other materials as to the nature of the work performed.

There are, however, some individual items on the WIP Report for the First Period which ought not be allowed:

(a) the fourth entry for the Former Liquidator on 13 September 2018 is for 1.3 hours at a cost of $806 where the description is ‘initial documents to directors, discussions with staff, investigations’. There are two other entries on that day for the Former Liquidator for ‘initial investigations, discussions with and instructions to staff’ which are sufficient, and there is no explanation given as to why the Former Liquidator would be preparing the initial documents to directors, when it is apparent that other staff were preparing director packs at the same time; and

(b) the entry for Mr Fuller of 27 September 2018 with the narration ‘ABN look-up search for Morgan Family Trust’ at a cost of $46 appears to be a duplicate of an entry for 25 September 2018.

There are also many instances where the individual tasks appear to have been carried out by Mr Fuller (a Manager level employee) or Mr Cusworth (a Supervisor level employee) when these could have been carried out by a more junior employee. With the exception of 1 entry for A. Adamson, an Accountant 1 employee (hourly rate of $300), for $60, the rest of the work for this period was carried out by the Former Liquidator (hourly rate of $620), Mr Fuller (hourly rate of $420) or Mr Cusworth (hourly rate of $420).

(a) many of the entries which I have identified in this category are preparation of standard/template correspondence or documents, such as the usual enquiries of statutory bodies, or routine searches, such as property searches and ASIC searches, which do not require someone at Manager level to undertake. Similarly, it appears that Mr Fuller prepared the Creditors Circular and the remuneration report which formed part of it. It seems to me that the much of the early drafting of these documents could have been carried out at the Accountant 1 level, as parts of them would be drawn from templates; and

(b) similarly, the enquiries of local real estate agents and insurance could be performed at a level below that of Mr Fuller.

Roughly 50% of the work performed by Mr Fuller ought to have been performed at a lower level of employee. He performed 25.1 hours of work in the First Period at a cost of $11,546. I would therefore reduce the amount claimed for this period by $2,000, which is roughly the difference between Mr Fuller performing that 12.55 hours of work or Mr Adamson performing it instead. It is not appropriate to deduct 50% of Mr Fuller’s fees without allowing for the work to be performed by someone else, so long as it was reasonable for someone to perform that work, which I consider it was.

Accordingly, the remuneration for the First Period should be $18,288.

Remuneration for Second Period

The Former Liquidator’s claimed remuneration for the Second Period (1 October to 11 December 2018) is $35,944.

Looking first at particular areas of work or items in the WIP Report which ought be adjusted:

(a) The claimed remuneration includes 2.4 hours at a cost of $1,488 for the Former Liquidator and 1.9 hours at a cost of $874 for Mr Fuller in respect of attending Court for the hearing on 11 December 2018 of the Termination Application, including pre- and post-hearing conferences with solicitor and counsel. In my view, it was reasonable and necessary for someone from the Former Liquidator’s office to attend Court and the conferences on 11 December 2018. I do not consider it reasonable or necessary for two senior people to attend, and so I would allow the time and cost for the Former Liquidator but not that for Mr Fuller;

(b) There is $1,610 claimed for 3.6 hours of work performed by Mr Fuller on 4 December 2018 in respect of a WIP review and providing information to Meerkin & Apel in respect of costs. I propose to remove this amount from the Second Period and consider it with the Third and Fourth Periods, where I will discuss aspects to do with the approval of the remuneration claimed;

(c) On 8, 9 and 10 October, Mr Fuller spent a total of 4.8 hours at a cost of $2,208 preparing a letter to the Plaintiff, which letter was also extensively reviewed (according to the narrations) by the Former Liquidator. I do not consider the amount of time spent on this to be reasonable and would therefore reduce it to $1,000;

(d) Roughly 20% of the Former Liquidator’s work for this period and 30% of the work performed by Mr Fuller for this period ought to have been performed at a lower level of employee. The Former Liquidator recorded 12.5 hours work at a total of $7,750 for this period, and Mr Fuller recorded 57 hours of work at a cost of $26,220. Taking a similar approach to that followed in paragraph 137 above, I would reduce the amount claimed for this period by $3,226, which is roughly the difference between the Former Liquidator and Mr Fuller doing the work and a lower level employee performing it instead.

Of the amount claimed for the Second Period, $14,908 is claimed for the period 1 to 17 October 2018 inclusive, which is the date by when I have concluded it ought to have been readily apparent that the Company was solvent and that further investigations or analysis as to solvency were not necessary.[87] It is clear from the WIP Reports that some of the analysis regarding solvency has been recorded under ‘Administration’, not ‘Investigations’, and so it is not possible for me to properly analyse the remuneration or adjust it based on those Task Areas. I also do not consider it necessary to have conducted all of the investigations which were conducted up to that point, for the reasons articulated earlier.
[87]See paragraph 121 above.

Approximately $21,036 is claimed for work performed after 17 October 2018 during the Second Period. Of that amount, on my review of the WIP Report, only $1,744 is not referable to the Termination Application, investigations, solvency analysis, or remuneration. Taking into account what I have said in paragraph 140(b) above, this means that approximately $17,682 is referable to the Termination Application, investigations, and solvency analysis.

A substantial portion of that amount concerns the Termination Application, including tasks such as reviewing the First and Second Morgan Affidavits, preparing the First and Second Poulter Affidavits and conferring with solicitors. Given my comments in paragraphs 122 to 125 above, I do not consider the amount of time spent on these tasks to be reasonable and therefore I do not consider the amount charged to be reasonable.

Doing the best that I can, then, and taking care not to deduct amounts twice, I would allow $17,333 in respect of the Second Period. I have arrived at this figure by:

(a) Taking the figure of $14,908 for the period 1 to 17 October 2018, and:

(viii) Deducting $1,322, which is the rough proportion attributable to this timeframe of the amount identified in paragraph 140(d) above;

(ix) Deducting $1,108, which is the amount identified in paragraph 140(c) above;

(x) This produces a figure of $12,478, which I consider it appropriate to discount by 30% for the reasons I have earlier stated, namely that some of the work in this time connected with the termination application (or the consideration of a DOCA), investigations and solvency analysis was not necessary as it was not so complex as to warrant the level of investigation and analysis carried out, producing an amount of $8,734.60;

(b) Taking the figure of $21,036 for the period after 17 October 2018 up to and including 11 December 2018, and:

(i) Deducting $1,610 from the amount claimed on account of the matter identified in paragraph 140(b) above;

(ii) Deducting $874 on account of the matter identified in paragraph 140(a) above;

(iii) Deducting $1,904, which is the rough proportion attributable to this timeframe of the amount identified in paragraph 140(d) above;

(iv)This produces a figure of $16,648;

(v) Of this, allow $1,488 on account of the matter identified in paragraph 140(a) above and $1,744 for the work not connected with the Termination Application, investigations, solvency analysis, or remuneration;

(vi)This leaves a figure of $13,416, which I consider it appropriate to discount by 60% for the reasons I have earlier stated, namely that much of the work connected with the Termination Application, investigations and solvency analysis after that date was not necessary, producing an amount of $5,366.40;

(vii) This then produces a figure of $8,598.40 for the period after 17 October 2018 up to and including 11 December 2018. This comprises $1,488 plus $1,744 and $5,366.40.

Remuneration for Third Period

The Former Liquidator’s claimed remuneration for the Third Period (12 December 2018 to 31 March 2019) is $17,560.

From my review of the WIP Reports, approximately $1,726 is referable to work performed by the Former Liquidator and his staff pursuant to their statutory obligations consequent to the termination of the winding up and in respect of the late provision of the bank guarantee referred to in the Termination Orders. I consider this to be a reasonable amount.

The balance of the amount claimed, being $15,834, is referable to the Former Liquidator’s remuneration claim and to the review initiated by the Plaintiff. The remuneration claimed is either in respect of the Court proceedings and documents, or in respect of preparing remuneration reports and WIP Reports. The amount of $1,610, referred to in paragraph 140(b) above, needs to be added back in here, giving an amount for the remuneration claim/review of $17,444.

I do not consider that amount to be reasonable, given that part of what the Former Liquidator was doing here was defending fees which were not reasonable to have charged. Further, I do not consider it to be proportional, given the amounts involved once the unreasonableness of some of the earlier fees are taken into account.

I would therefore allow $10,448 in respect of the Third Period, comprising $1,726 plus 50% of the $17,444 referable to the remuneration claim/Court proceeding in respect of fees.

Remuneration for Fourth Period

The Former Liquidator’s claimed remuneration for the Fourth Period (1 to 29 April 2019) is $15,750.

All of the remuneration claimed for the Fourth Period concerns the remuneration application/review, as described in paragraph 58 above. As the amount claimed for the Fourth Period is an estimate, there is no WIP Report for this period.

I make the same comments here as I made in paragraph 148 above in respect of this.

I would apply a higher discount here than I did for the Third Period, as I do not have the detailed breakdown of a WIP Report in considering the reasonableness of the amount claimed. The discount I would apply here is 60%, so that I would allow $6,300 for the Fourth Period.

Disbursements

Leaving aside the question of legal fees, the disbursements which the Former Liquidator sought approval for were $1,393.70 (incl GST) in relation to insurance in the amount of $1,147.74 plus search fees. The Plaintiff did not dispute this, and given that it is a modest amount and there is no utility in deferring that to another day, in my view it should be approved. These were necessary expenses incurred by the Former Liquidator and the insurance premium was notified to the Plaintiff as one which would have to be incurred if the Plaintiff did not pay it himself.

It appeared to be common ground between the parties that the Court did not have power to approve the Former Liquidators’ Disbursements (primarily legal fees). However, the situation is not as simple as that.

The issue of the Court’s powers in this respect, in relation to the provisions of the Act as they then were, was dealt with by Gordon J (as her Honour then was) in Starpicket as follows:[88]

The Liquidator’s claim for $98,042.43 includes fees for the work performed by the Liquidator and his staff and his disbursements (referred to as “out of pocket expenses”). It is necessary to address the question of whether s 473 of the Corporations Act empowers the Court to determine the Liquidator’s claim for his disbursements or whether some alternative basis is required to assess that claim.
Pursuant to s 473(3)(b)(ii) of the Corporations Act, the Court has jurisdiction to review and fix the Liquidator’s “remuneration”. Notwithstanding the approach taken in previous cases such as Re Solfire Pty Ltd (in liq) (No 2) (1998) 16 ACLC 1156, it is now accepted that a Liquidator’s “remuneration” does not include disbursements: see Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 100; Re Korda; in the matter of Stockford Ltd (2004) 140 FCR 424 at [50]; and Huxtable, in the matter of Timeshare Resort Club Ltd ACN 009 085 358 (in liq) (2010) 187 FCR 13 at [36]-[37]. The same cases are also authority for the proposition that the Court’s jurisdiction under s 473(3)(b)(ii) of the Corporations Act does not extend to legal fees incurred by the Liquidator, which fall under the head of disbursements and not remuneration.
Accordingly, the Court does not have power under s 473(3)(b)(ii) of the Corporations Act to review and approve the Liquidator’s disbursements.
A liquidator who is entitled to remuneration normally has an equitable lien over the assets under his administration to secure payment of that entitlement as well as his disbursements: see Re Biposo Pty Ltd (No 2) (1995) 124 FLR 385; Prendergast v Rolcross (in liq) [2008] NSWSC 146 at [39]. Being of the equitable variety, a liquidator’s lien is not dependant on possession and, as such, survives termination of the liquidator’s appointment: see Nationwide News Pty Ltd v Samalot Enterprises (1986) 5 NSWLR 227 at 230-231; Shirlaw v Taylor (1991) 31 FCR 222 at 231.
….
Section 1321 is of greater relevance. Pursuant to s 1321, a person “aggrieved” by an act, omission or decision of a liquidator may appeal to the Court in respect of that act, omission or decision and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit. Neither Starpicket nor the Scotts have expressly sought relief under s 1321. However, that does not preclude an order being made in relation to the Liquidator’s disbursements under that section. Both Starpicket and the Scotts take issue with the Liquidator’s claim, not only in respect of the Liquidator’s fees, but also with the disbursements the Liquidator incurred shortly before the 31 October 2012 Orders. Finally, if it be necessary, the Court retains an inherent power to make an order giving directions to a court-appointed liquidator as an officer of the Court: see Re JW Murphy & PC Allen; Re BPTC Ltd (in liq) (1996) 19 ACSR 569; BL & GY International Co Ltd. Accordingly, I am satisfied that the Court has the power to review and determine the Liquidator’s claim for disbursements.

[88]Starpicket, [15]-[21].

Accordingly, the Court did not have power pursuant to s 473(3) of the Act to review and approve the Former Liquidators’ disbursements. In my view, the same analysis applies to ss 60-10 and 60-11 of the Practice Schedule, such that those provisions do not confer power to review.

Whether or not some other power, such as the inherent jurisdiction of the Court in respect of a court-appointed liquidator, can be called in aid here was not addressed by the parties. Importantly, neither party addressed me on the question of whether the terms of the Termination Orders mean that the Court has power to determine the Former Liquidator’s disbursements in this case. The Termination Orders relevantly stated, at paragraph 2, that (emphasis added):

The Plaintiff shall pay the [Former Liquidator’s] remuneration and disbursements, the quantum of such to be determined by agreement between the Plaintiff and the [Former Liquidator], or further order of this Court

In the absence of detailed evidence or submissions on the question of power or of the quantum of the disbursements in respect of legal fees, I will defer consideration of those matters for the time being.

Conclusion

It is not uncommon for the work performed and the amount claimed in respect of it to vary, sometimes substantially, from the amount estimated in the early period of the liquidation. Here, the amount estimated for the period after 30 September 2018 was $30,430. The actual amount claimed for that period (being the Second, Third and Fourth Periods), is $69,254. Nearly half of this is in respect of the remuneration application/review, which is something the Former Liquidator may not have anticipated or included in his estimate. I note for completeness that it is purely coincidental that the amount I have approved is very close to the total approved by creditors in the Remuneration Determination. I say that it is coincidental because I have arrived at the amount by the process set out above and not by reference to the earlier estimates or the Remuneration Determination.

For these reasons, orders will be made approving the Former Liquidator’s remuneration in the amount of $52,369 (plus GST):

(a) $18,288 for the First Period;

(b) $17,333 for the Second Period;

(c) $10,448 for the Third Period; and

(d) $6,300 for the Fourth Period.

I will also approve the Former Liquidator’s disbursements for insurance and search fees in the amount sought, of $1,393.70 (incl GST).

I will give the parties an opportunity to address the issue raised regarding disbursements in paragraphs 155 to 159 above, before making orders in respect of that matter. The parties are requested to contact my Associate to arrange a date for the proceeding to be listed so as to deal with that issue (including for any additional evidence, if the parties are so minded). At that time, I will also hear from the parties as to the appropriate form of orders generally. If there is consent between the parties as to these matters, then they may communicate the agreed view to my Associate so that it can be determined whether a hearing is required.

[2019] VSC 563

23 August 2019