Registrar General of the Australian Capital Territory v Inanna Incorporated
[2017] ACTSC 62
•28 March 2017
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Registrar General of the Australian Capital Territory v Inanna Incorporated |
Citation: | [2017] ACTSC 62 |
Hearing Date: | 28 February 2017 |
DecisionDate: Reasons Date: | 28 February 2017 28 March 2017 |
Before: | Refshauge J |
Decision: | 1. The Court is satisfied that there has been compliance with Rule 9.3 of the Corporations Rules (ACT). 2. The remuneration of the Joint and Several Provisional Liquidators for the period 5 October 2016 to 4 November 2016 be fixed in the amount of $106 831 plus GST. 3. The costs of the Application dated 17 January 2017 be part of the costs, charges and expenses of the winding up of the Association. |
Catchwords: | CORPORATIONS – WINDING UP – Liquidators – provisional liquidators – remuneration of Court appointed liquidator – assessment of costs – time costing – work reasonably necessary for the purposes of the provisional liquidator – remuneration sought approved – Associations Incorporation Act 1991 (ACT) – Schedule 6 of the Court Procedure Rules 2006 (ACT) – Corporations Rules |
Legislation Cited: | Associations Incorporation Act 1991 (ACT), ss 14, 91, Sch 2, Pt 7 Corporations Act 2001 (Cth), ss 473(2), 473(3), 473(10), 583, Pts 5.4B, 5.7 Court Procedure Rules 2006 (ACT), Div 2.17.3, Sch 6 – Corporations Rules, rr 9.3, 9.3(2), 9.3(3), 9.3(3)(c), 9.3(5), 9.3(7), 9.3(8) |
Cases Cited: | Adsett v Berlouis (1992) 37 FCR 201 Attalex Pty Ltd v Brian Cassidy Electrical Industries Pty Ltd (1984) 2 ACLC 654 |
Parties: | Registrar General of the Australian Capital Territory (Plaintiff) Inanna Inc (Defendant) Henry Joseph Kazar and Michael Edward Slaven (Provisional Liquidators) |
Representation: | Counsel No appearance (Plaintiff) No appearance (Defendant) Mr J Larkings (Provisional Liquidator) |
| Solicitors ACT Government Solicitor (Plaintiff) No appearance (Defendant) Bradley Allen Love (Provisional Liquidators) | |
File Number: | SC 416 of 2016 |
REFSHAUGE J:
On 5 October 2016, Michael Edward Slaven and Henry Joseph Kazar, registered liquidators, were appointed joint and several provisional liquidators of Inanna Incorporated, an association incorporated under the Associations Incorporation Act 1991 (ACT).
On 4 November 2016, the Association was wound up and Mr Slaven and Mr Kazar were appointed as official joint and several liquidators.
It would appear that, on the making of a winding up order and the appointment of a liquidator to a corporate body, including an incorporated association, the appointment of the provisional liquidator comes to an end. Curiously, the Corporations Act 2001 (Cth) makes no express reference to it. Nevertheless, that position, of course, must accord with principle for it would be quite inappropriate for two Court appointments of this type with overlapping and inconsistent authority to co-exist; it was so held in Shirlaw v Taylor (1991) 31 FCR 222 at 224. It is also consistent with the comment of McLelland J in Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (1986) 5 NSWLR 227 at 230.
As here, the provisional liquidators are often appointed as the liquidators and for good reason: Re Aid Retarded Persons NSW (1992) 10 ACLC 1,737 at 1,739; Re Nuhan Ltd and the Companies Act (1980) 5 ACLR 69 at 72. Such a reason may be that the provisional liquidator’s knowledge of the company’s affairs will be of benefit to the creditors: Attalex Pty Ltd v Brian Cassidy Electrical Industries Pty Ltd (1984) 2 ACLC 654 at 656. See also In the Matter of Bruton Pty Ltd (Unreported, Supreme Court of Western Australia, Master Ng, 21 June 1990). There may, of course, be good reason for that not being done, such as the risk of a conflict of interest: Re National Safety Council of Australia, Victorian Division [1990] VR 29 at 34-5. The prime factor in the appointment of a liquidator is always that the liquidator be and be seen to be independent: Re Allebart Pty Ltd [1971] 1 NSWLR 24; Re Stewden Nominees No 4 Pty Ltd (1975) 1 ACLR 185; Brian Cassidy Electrical Industry Pty Ltd v Attalex Pty Ltd [1984] 3 NSWLR 52.
None of these countervailing matters were relevant here; there was no conflict of interest.
Accordingly, the appointment of the provisional liquidators has now come to an end as a result of their appointment as liquidators, they have, as is appropriate, now sought to receive their remuneration.
Legislative regime
Part 7 of the Associations Incorporation Act applies to the winding up of an incorporated association. In particular, Pt 5.7 of the Corporations Act applies to the winding up by virtue of s 91 of the Associations Incorporation Act.
That Part, however, is subject to modifications set out in Sch 2 of the Associations Incorporation Act. Many of those modifications relate to obviously needed textual modifications whereby a reference to a company or a body in Pt 5.7 is made a reference to an incorporated association and so on.
There are, however, particular changes to s 583 of the Corporations Act and since those modifications are significant, it is appropriate to set out here the text of that section as amended by Sch 2 of the Associations Incorporation Act. The modified section is accordingly as follows:
583 Winding up Part 5.7 bodies
Subject to this Part, a Part 5.7 body may be wound up under this Chapter and this Chapter (excluding Parts 5.1, 5.2, 5.3, 5.4, 5.7A, 5.8 and 5.9) applies accordingly to a Part 5.7 body with such adaptations as are necessary, including the following adaptations:
(a) the principal place of business of a Part 5.7 body in this jurisdiction is taken, for all the purposes of the winding up, to be the registered office of the Part 5.7 body;
(c) the circumstances in which a Part 5.7 body may be wound up are as follows:
(i)if the Part 5.7 body is unable to pay its debts, has been dissolved or deregistered, has ceased to carry on business in this jurisdiction or has a place of business in this jurisdiction only for the purpose of winding up its affairs;
(ii) if the Court is of opinion that it is just and equitable that the Part 5.7 body should be wound up;
(d) in relation to a voluntary winding up – part 5.5 applies subject to the exclusion of the following provisions:
section 493 (2); division 3; sections 501 and 507.
(e) in relation to winding up generally – part 5.6 applies subject to the exclusion of the following provisions:
sections 532 (8), 544, 556 (1) (c), (d) and (j), 557, 565 (2) (a) (ii) and 572-579.
(f) in this chapter that apply in relation to the winding up of an incorporated association –
(i)a reference to a company or a body is a reference to an incorporated association; and
(ii)a reference to a contributory of a company is a reference to a member of an incorporated association; and
(iii)a reference to the registration of a company is a reference to the incorporation of an incorporated association; and
(iv)a reference to the articles of a company is a reference to the rules of an incorporated association; and
(v)a reference to the directors of a company is a reference to the members of the committee of an incorporated association; and
(vi)a reference to the secretary of a company is a reference to the public officer of an incorporated association; and
(vii)a reference to the registered office or to the principal place of business of a corporation is a reference –
(A)if an incorporated association has a registered office – to the current address of that office as notified to the registrar-general under the Act; or
(B)if an incorporated association does not have a registered office – to the current address of the public officer of the association as notified to the registrar-general under the Act;
(viii)a reference to a special resolution is a reference to a special resolution within the meaning of the Act; and
(ix)a reference to the commission is a reference to the registrar-general within the meaning of the Act.
Schedule 6 of the Court Procedures Rules 2006 (ACT) sets out the Corporations Rules. These are uniform rules made by all superior courts in Australia with jurisdiction under the Corporations Act. For obvious desirable commercial and efficiency purposes, the rules are uniform for all such courts and a committee of the Council of Chief Justices originally recommended their making and regularly monitors their operation, recommending, when necessary, any amendments which are then generally made by the relevant courts to maintain uniformity. In addition, prescribed forms have been made for those rules and they prescribe, in particular, separate forms of originating process, interlocutory process, notice of appearance and other forms for the purpose of proceedings under the Corporations Act.
The application
On 30 September 2016, Penfold J ordered that the Corporations Rules apply to this application and I see no occasion to vary that direction.
Accordingly, r 9.3 of the Corporations Rules applies to this application. That rule is as follows:
9.3 Remuneration of provisional liquidator (Corporations Act, s 473 (2))
(1) This rule applies to an application by a provisional liquidator of a company for an order under the Corporations Act, section 473 (2) determining the provisional liquidator’s remuneration.
(2) The application must be made by interlocutory process in the winding-up proceeding.
(3) At least 21 days before filing the interlocutory process seeking the order, the provisional liquidator must serve a notice of the provisional liquidator’s intention to apply for the order, and a copy of any affidavit on which the provisional liquidator intends to rely, on the following:
Note See approved form 16 (Notice of intention to apply for remuneration) AF2007-144.
(a) any liquidator (except the provisional liquidator) of the company;
(b) each member of any committee of inspection or, if there is no committee of inspection, each of the 5 largest (measured by amount of debt) creditors of the company;
(c) each member of the company whose shareholding represents at least 10 % of the issued capital of the company.
(4) Within 21 days after the last service of the documents mentioned in subrule (3), the liquidator, or any creditor or contributory, may give to the provisional liquidator a notice of objection to the remuneration claimed, stating the grounds of objection.
(5) If the provisional liquidator does not receive a notice of objection within the period mentioned in subrule (4) –
(a) the provisional liquidator may file an affidavit, made after the end of that period, in support of the interlocutory process seeking the order stating –
(i) the date, or dates, when the notice and affidavit required to be served under subrule (3) were served; and
(i) that the provisional liquidator has not received any notice of objection to the remuneration claimed within the period mentioned in subrule (4); and
(b) the provisional liquidator may endorse the interlocutory process with a request that the application be dealt with in the absence of the public and without any attendance by, or on behalf of, the provisional liquidator; and
(c) the application may be so dealt with.
(6) If the provisional liquidator receives a notice of objection within the period mentioned in subrule (4), the provisional liquidator must serve a copy of the interlocutory process seeking the order –
(a) on each creditor or contributory who has given a notice of objection; and
(b) on the liquidator (if any).
(7) An affidavit in support of the interlocutory process seeking the order must –
(a) state the nature of the work performed or likely to be performed by the provisional liquidator; and
(b) state the amount of remuneration claimed; and
(c) include a summary of the receipts taken and payments made by the provisional liquidator; and
(d) state particulars of any objection of which the provisional liquidator has received notice; and
(e) if the winding-up proceeding has not been completed – give details of –
(i) any reasons known to the provisional liquidator why the winding-up proceeding has not been completed; and
(ii) any reasons why the provisional liquidator’s remuneration should be determined before the completion of the winding-up proceeding.
(8) The affidavit must also provide evidence of the matters mentioned in the Corporations Act, section 473 (10) –
(a) to the extent that they may be relevant to a provisional liquidator; and
(b) as if a reference in that subsection to liquidator were a reference to provisional liquidator.
Reference to rules in these reasons are to the Corporations Rules unless otherwise specified. Rule 9.3(2) requires the application to be made by interlocutory process and such a process in the prescribed form was filed.
Rule 9.3(3) requires that at least 21 days before the filing of the interlocutory process, the provisional liquidator must serve a notice of the provisional liquidator’s intention to apply for the order approving the claimed remuneration and a copy of any affidavit on which the provisional liquidator intends to rely on:
(a) any liquidator of the company;
(b) each member of any committee of inspection or if there is no committee of creditors, each of the five largest (measured by amount of debt) creditors of the company; and
(c) each member of the company whose shareholding represents at least 10% of the issued capital of the company.
As noted above (at [2]), Mr Slaven and Mr Kazar were appointed liquidators. Accordingly, they, being the provisional liquidators, are obviously not required to serve a copy of the application on themselves.
In this case, there is no committee of inspection or of creditors. Each of the five largest creditors, measured by the amount of debt, has been served and I had an affidavit of service showing the service of the prescribed notice on them.
The requirement to serve each member of the company whose shareholding represents at least 10 per cent of the issued capital of the company is, in the context of an incorporated association, a curious one. While the amendments to the Corporations Act set out in paragraph 583(f) convert many of the terms appropriate to companies into terms appropriate to an incorporated association, this requirement is not addressed.
Section 14 of the Associations Incorporation Act effectively prohibits an incorporated association from having shareholders. Accordingly, there is no requirement for service on any person as a result of this obligation. The requirement under r 9.3(3)(c) should also probably be omitted by Schedule 2 or by an amendment to the Court Procedures Rules.
In addition, for good order, the provisional liquidators served the Registrar-General of the Australian Capital Territory who became the plaintiff seeking the winding up order. While that was not necessary, the provisional liquidators cannot be criticised for doing so and it may be a desirable practice, especially where such a regulatory official is involved. See, for example, Re Nuhan Ltd and the Companies Act
The provisional liquidators have received no notice of any objection to the remuneration they have claimed.
The provisional liquidators then filed a further affidavit in accordance with r 9.3(5) setting out details of the service of the notice to the creditors and that there was no notice of objection received. The provisional liquidator also requested that the application be dealt with in the absence of the public and without any attendance by or on behalf of the provisional liquidator. That effectively amounts to a request that the application be dealt with in chambers. See The Owners of Units Plan No 932 v Marhaba [2017] ACTSC 13 at [37]-[41].
In the event, however, the matter was listed in open court before me. The provisional liquidator was represented. That proved helpful as there were some questions with which counsel was able to assist me. No other party appeared.
The law
The remuneration of a provisional liquidator is regulated by s 473(2) of the Corporations Act which appears in Pt 5.4B, and so, by s 583 amended by the Associations Incorporation Act, applies. That subsection provides:
A provisional liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by the Court.
A liquidator may receive remuneration determined by other bodies instead of the Court (s 473(3)) but the method is the same, namely “by way of percentage or otherwise”. The difference is that the creditors have no potential statutory role in relation to the provisional liquidator’s remuneration.
Sub-rules 9.3(7) and (8) set out the evidence required of the provisional liquidator to be filed in support of the application for remuneration. Those sub-rules are as follows:
(7) An affidavit in support of the interlocutory process seeking the order must –
(a)state the nature of the work performed or likely to be performed by the provisional liquidator; and
(b)state the amount of remuneration claimed; and
(c)include a summary of the receipts taken and payments made by the provisional liquidator; and
(d)state particulars of any objection of which the provisional liquidator has received notice; and
(e)if the winding up proceeding has not been determined – give details of:
(i)any reasons known to the provisional liquidator why the winding-up proceeding has not been completed; and
(ii)any reasons why the provisional liquidator's remuneration should be determined before the determination of the winding-up proceeding.
(8)The affidavit must also provide evidence of the matters mentioned in the Corporations Act; section 473(10) –
(a) to the extent that they may be relevant to a provisional liquidator; and
(b)as if a reference in that subsection to liquidator were a reference to provisional liquidator.
The reference to s 473(10) of the Corporations Act is a reference to the following provision:
In exercising its powers under subsection (3), (5) and (6), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a)the extent to which the work performed by the liquidator was reasonably necessary;
(b)the extent to which the work likely to be performed by the liquidator is likely to be reasonably necessary;
(c)the period during which the work was, or is likely to be, performed by the liquidator;
(d)the quality of the work performed, or likely to be performed, by the liquidator;
(e)the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator;
(f)the extent (if any) to which the liquidator was, or is likely to be, required to deal with extraordinary issues;
(g)the extent (if any) to which the liquidator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h)the value and nature of any property dealt with, or likely to be dealt with, by the liquidator;
(i)whether the liquidator was, or is likely to be, required to deal with:
(i) one or more receivers; or
(ii) one or more receivers and managers;
(j)the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;
(k)if the remuneration is ascertained, in whole or in part, on a time basis:
(i)the time properly taken, or likely to be properly taken, by the liquidator in performing the work; and
(ii)whether the total remuneration payable to the liquidator is capped;
(l)any other relevant matters.
Clearly, a liquidator is entitled to reasonable remuneration: Re William Rose & Co (1897) 3 ALR (CN) 65. That must equally apply to a provisional liquidator. The Court also recognises that a provisional liquidator is entitled to some protection for her or his remuneration. Indeed, a portion of the remuneration and expenses of a provisional liquidator, especially that which relates to the caring for and preserving or realising of assets which are subject to security, is entitled to rank in priority to the rights of a secured creditor in relation to those assets: Re Universal Distributing Co Ltd (1933) 48 CLR 171 at 174. Further, a provisional liquidator has an equitable lien over the assets under her or his administration to secure payment of her or his remuneration expenses: Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd at 230-1. That lien applies even if the provisional liquidator is not subsequently appointed as the liquidator: Shirlaw v Taylor at 232.
The appointment of a provisional liquidator is, of course, to a somewhat limited role and so the remuneration sought must, of course, be limited to that applicable to the work done for the purposes of the authorised activities and there can be no payment for work outside this scope: Re Reiter Brothers Exploratory Drilling Pty Ltd (1994) 12 ACLC 430 at 434. This work may, however, include necessary work done after the termination of the appointment.
Given the nature of the appointment, perhaps confirmed by the reference in r 9.3(8) to s 473(10) of the Corporations Act, a reference to a liquidator includes a provisional liquidator. The general approach to the determination of the remuneration of a provisional liquidator is the same as that of a liquidator and many of the same principles apply. The provisional liquidator is, after all, like a liquidator, an officer of the Court.
It is likely to be inevitable that a provisional liquidator will, as with a liquidator, be a member of a firm of accountants, usually if not invariably, a partner or director. She or he will be assisted by employees of the firm and the costs of the work done by these employees will form part of the remuneration to which the provisional liquidator is entitled: Re Trustees Executors & Agency Co Ltd (Receivers and Managers Appointed) (1984) 9 ACLR 497.
The actual principles to be applied have been said to be “in some respects obscure”: Burns Philp Investments Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280 at 288. On the other hand, the process has been likened to the taxation of a solicitor’s costs which proceeds in a relatively summary way as explained by Balcombe LJ in Symphony Group plc v Hodgson [1994] QB 179 at 193. Indeed, it has been pointed out that the process of taxation of solicitor’s costs can provide useful guidance for the assessment of a provisional liquidator’s remuneration: Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 102. While the process is the same in this jurisdiction, I note that the term used in the Court Procedures Rules is “assessment” rather than “taxation” of solicitor’s costs: Div 2.17.3.
Clearly the provisional liquidator must discharge an onus by evidence that the remuneration sought is fair and reasonable. It is sometimes suggested that there is an appropriate analogy to the remuneration of trustees and, to, in particular, the trustee in bankruptcy. Thus, in Adsett v Berlouis (1992) 37 FCR 201 at 212, the Full Court of the Federal Court of Australia summarised that position as follows:
the trustee’s right to remuneration is limited to work properly undertaken. In this context, ‘properly’ means work reasonably and bona fide undertaken for the purpose of administering the estate or performing any public duty imposed by the Act, conformably with the trustee’s duty to perform the work with reasonable care and skill and in an efficient and economical way.
The practice
In In the Matter of F Basile & Associates Pty Ltd (In liquidation) [2016] VSC 690 at [30], Hetyey JR said:
The process for assessing a liquidator’s claim for remuneration was set out by the Full Court of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd & Ors v Mark Anthony Conlan & Anor (1998) 20 WAR 96 and subsequently applied by Dodds-Streeton J in ACN 004 323 184 Pty Ltd v Spark [2002] VSC 353 at [31] and in other cases such as Barbo Group Pty Ltd (t/as Alice Roof Tiles) v Investment and Construction Enterprise Pty Ltd [2012] VSC 71 at [14]. That procedure is summarised below:
· the process is a summary one in which strict observance of the rules of evidence is not ordinarily required;
· the onus is on the liquidator to establish that the remuneration claimed is fair and reasonable;
· the function of the court is to make an independent determination, based on the material proffered, of whether the remuneration claimed is fair and reasonable;
· if the liquidator establishes a prima facie case on the basis of the submitted material, the court should then consider the validity of any objections;
· ordinarily, the liquidator will provide a statement of account reflecting in the appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly;
· the statement of account should be verified by affidavit;
· more or less particularised statements may be appropriate in different cases and every case depends on its own circumstances; and
· the overriding principle is that sufficient information be provided to the court to enable it to perform its function.
I note that an elaboration of the contents of the statements of account, was addressed by the High Court of New Zealand in Re Medforce Healthcare Services Ltd (In liq) [2001] 3 NZLR 145 at 155; [34], in a passage referred to with approval by Finkelstein J in Re Korda; in the matter of Stockford Ltd [2004] FCA 1682; 140 FCR 424 at 442-3 [48], namely:
As a minimum it seems to us that what is required is a statement of the work undertaken during the course of the liquidation, together with an expenditure account sufficiently itemised to enable the charges to be made related to the work done. The detail would have to be sufficient to enable the judicial officer to determine whether the personnel involved in the liquidation and their respective charge-out rates were appropriate to the nature of the work undertaken. This information may in some cases raise concerns as to whether there has been overservicing and overcharging. If there are suggestions of this in the information provided, the Court can request further information.
Similarly, Davies J said in Thackray v Gunns Plantations Ltd [2011] VSC 380; 85 ACSR 144 at 162; [60], by reference to the principles established by the Western Australian Court of Appeal in Conlan v Adams [2008] WASCA 61; 65 ACSR 521 at 529-30; [28]-[33]:
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 ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.
The information provided does not need to be voluminous. As Gardiner AsJ said in Barbo Group Pty Ltd (trading as Alice Roof Tiles) v Investment & Construction Enterprises Pty Ltd [2012] VSC 71 at [21]:
I consider that there is a balance to be struck in the level of the detail given in the narration describing the tasks and other details on the one hand and the cost and utility of providing such material on the other. The spreadsheets prepared include details as to the date the identified tasks were performed, the person who performed them, the hourly rate at which that person’s time was charged, and a description of the task.
[footnote omitted]
In this case, the statement of the provisional liquidator was prepared using time costing. There has, in the authorities, been some unease about the use by a liquidator, including a provisional liquidator, of time costing as a method of calculating the remuneration of insolvency practitioners, but the present position seems to be that time costing may be an appropriate way to proceed: In the matter of Primespace Property Investments Ltd (in liq) [2016] NSWSC 1821 at [32]-[33]. It is, however, necessary for the Court to ensure that the amount claimed is reasonably proportionate to the size of the task to be carried out, especially to the assets of the corporation and the likely return to creditors, so as to avoid any problem of overservicing that can be a result of time costing: In the matter of Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund [2016] NSWSC 1292 at [34], [48].
The ultimate test is really as expressed by Barrett J in Re Anderson Group Pty Ltd [2002] NSWSC 764 at [12], as follows:
In the ordinary course, the process of determination comes down essentially to ensuring that the work upon which the claim was based was work undertaken in the due course of administration and that the amount claimed for having done that work is a fair and reasonable reward for it.
The evidence
Henry Joseph Kazar, one of the joint provisional liquidators, made an affidavit which I have read. It is the affidavit, a copy of which was served in accordance with r 9.3(3). It complied with the requirements of r 9.3(7).
In the affidavit, Mr Kazar helpfully summarised the work carried out by himself, Michael Edward Slaven, the other joint provisional liquidator, and his staff as follows:
a.attending handover with formerly appointed Statutory Manager;
b.securing the Association’s premises at Mitchell ACT and Narrabundah ACT;
c.attending to initial notification of appointment to creditors, employees, members and statutory compliance;
d.securing electronic and hard copy records, and securely archiving same;
e.liaising with former employees, including the termination of employees, calculation of outstanding employee entitlements, separation certificates, reviewing award and employment agreements, and preparing circulars to former employees;
f.attending premises, securing motor vehicles, equipment and cash at bank, liaising with representative regarding sale of assets, realising of debtors, finalising claims submitted through National Disability Insurance Scheme, providing access to the landlord, and receiving asset sale proceeds;
g.liaising with solicitors regarding numerous legal claims involving the Association, seeking advice and providing instructions regarding same;
h.attending meetings with former employees, financial members and others regarding future of the Association and its financial position;
i.investigating circumstances leading to appointment of Provisional Liquidators, including review of electronic and hard copy records;
j.preparing affidavit and report to the Court setting out our findings as Provisional Liquidators;
k.liaising with former employees and the Department of Employment regarding employees’ Fair Entitlement Guarantee claims;
l.completing of periodic bank account reconciliations for the Association; and
m.complying with statutory obligations as Provisional Liquidators.
Attached to the affidavit, as an annexure, was a document which listed all work performed in table form, showing the date of each item of work carried out with the name of the employee, the rank (see below at [47]), the hours worked, the nature of the work according to categories, and a short description of the work actually performed.
The categories of work were: administration, assets, creditors, employees and investigation. A further table summarised the hours spent in work under each of these categories. I found that helpful in assessing whether there was overservicing having regard to the nature of the business of the Association and its operation.
The use of such categories appears to be a common approach. See In the matter of Koori Employment Enterprises Co-operative Ltd (In liq); Sutherland as liquidator of Koori Employment Enterprises Co-operative Ltd (In liq) [2016] VSC 245 (Koori Employment) at [43]; Macks v Maka [2015] SASC 200 at [22].
I could then cross-check to the document which listed the work performed in table form to get an idea of the work performed to discharge the comparative obligations.
It was relevant that there were some challenges in this administration. There were concerns at the fate of the Association and a number of employees were keen to see whether it could be resuscitated. I directed them to the provisional liquidator who had discussions with them. I note, also, that there was an employee’s claim and other claims which would have required attention. The operation was a significant one with a diverse range of assets and funding issues.
Thus, while the matter was not especially complex, it was by no means merely a simple or straightforward one.
The affidavit also annexed a document setting out the title of each employee’s rank when working on the provisional liquidation with a description of the level of skill, experience and responsibility, and the hourly rates at which these services were charged by the provisional liquidators. These rates were said, in the affidavit, to be prepared “in accordance with the requirements set out by the Australian Restructuring Insolvency and Turnaround Association (ARITA) in its Code of Conduct.”
It is within the discretion of the Court to accept such an approach: Cape v Redarb Pty Ltd (1991) 32 FCR 407 at 415. In the absence of direct experience by the Court (as was available in Koori Employment at [45]), such rates can provide valuable assistance: Macks v Maka at [23]. This Court does not hear enough such applications to have the expertise shown in some authorities to be possessed by some courts. I note, too, that the Code of Conduct is one which appears to have the support of courts which deal regularly with insolvency and reconstruction matters. See, for example, In the matter of Idylic Solutions as trustee for the Super Save Superannuation Fund at [23], [26]. I further note that the scale used provided somewhat lesser fees than the scale referred to by Gardiner AsJ in In the Matter of Traditional Values Management Ltd (in liq) (Special Purpose Liquidator Appointed); Hewitt as special purpose liquidator of Traditional Values Management Ltd (in liq) (special purposes liquidator appointed) [2015] VSC 338 at [27] and which his Honour described at [28] as:
at the higher end of the rates charged by liquidators in Melbourne according to the fee schedules I sight which are appended to consents to act filed by liquidators in winding up applications in this Court. Despite such high rates, they are still within the range of what I would describe as the ‘market’.
The statement of receipts and payments annexed to the affidavit shows total receipts of $899 128.10. Disbursements paid have been $36 109.50, leaving net receipts of
$869 738.60.
According to the Report dated 1 November 2016, prepared by the provisional liquidators, the total assets were between $928 515 and $982 407 and the then known liabilities were between $1 351 800 and $2 444 298. The provisional liquidator did consider that there were a significant number of contingent liabilities arising from legal claims against the Association so that its financial position may be significantly worse.
I also had an affidavit of an executive assistant employed by the solicitors for the provisional liquidators in which she deposed to serving the required Notice of Intention to Apply for Remuneration, and the affidavit of Mr Kazar, to what were said by Mr Kazar to be the five largest creditors.
Mr Kazar deposed also that a copy of the Notice was sent to the plaintiff through his solicitor.
Consideration
I had regard to the principles and procedures as I have outlined them above.
In the first place, I was satisfied that proper service as required under r 9.3 has been effected. I note that no objections were received by the provisional liquidator and also that, when the matter was called, no other party appeared.
In my view, the work that the provisional liquidators have performed was all work that was reasonably necessary for the purposes of the provisional liquidation.
I was satisfied that the rates charged were fair and reasonable having regard to the work to be done and the level of complexity of the provisional liquidation.
I accept, too, that the charge is proportionate to the value of the assets protected of the Association and the likely return to creditors. See Macks v Maka at [52].
Accordingly, I approved the remuneration sought by the provisional liquidator. These are my reasons for doing so.
I note that no request was made to approve the expenses or disbursements already paid from the assets of the Association. That seems to accord with authority. See Onefone Australia Pty Ltd v One.Tel Ltd [2008] NSWSC 1335; 69 ACSR 290 at 300-2; [46]-[52]. See also Smith, in the matter of Oceanic Asset Management Pty Ltd [2016] FCA 644 at [19]-[21].
| I certify that the preceding fifty-nine [59] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Refshauge. Associate: Date: 28 March 2017 |
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