13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd

XIANG RONG (AUSTRALIA) CONSTRUCTION GROUP PTY LTD AS TRUSTEE FOR XIANG RONG MANAGEMENT TRUST (IN LIQ) ACN 109 083 445 Third Plaintiff

order made by: HALLEY J DATE OF ORDER: 26 October 2023

THE COURT DECLARES THAT:

1. From the date of liquidation, Xiang Rong (Australia) Construction Group Pty Ltd (Company) as the trustee of the Xiang Rong Management Trust constituted by the trust deed dated 4 March 2008 (Trust Deed) had power to sell shares pursuant to cl 17(m) of the Trust Deed.
2. The first and second plaintiffs, in their capacity as liquidators of the Company (liquidators), are entitled to be paid their costs, expenses and reasonable remuneration from the assets of the Xiang Rong Management Trust.

THE COURT ORDERS THAT:

1. Pursuant to s 1318 of the Corporations Act 2001 (Cth) (Act) and s 85 of the Trustee Act 1925 (NSW), the liquidators are relieved from any liability for dealing with the property of Xiang Rong Management Trust between the date of their appointment as liquidators of the Company and the date of this order.
2. Pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Act, but subject to Order 6, the liquidators' renumeration in respect of the winding up of the Company for the period between 8 April 2022 to 31 May 2023 be fixed in the amount of $15,058.50 plus GST.
3. Pursuant to s 60-10(1)(c) of the IPS, but subject to Order 6, the liquidators' costs, and remuneration in respect of this application be fixed in the amount of $15,227.50 plus GST and legal fees incurred by the liquidators be fixed in the amount of $41,079.68 plus GST being in total the sum of $56,307.18 plus GST and be paid from the assets of Xiang Rong Management Trust in priority to the creditors of Xiang Rong Management Trust.
4. The liquidators are to send a copy of the reasons for judgment and these orders to the following address, being the address of the directors of the third plaintiff as listed on the Australian Securities and Investment Commission search: 39 Stanhope Road, Killara, NSW, 2071.
5. In respect of Orders 2 and 3 only, any person demonstrating an interest in these Orders has liberty to apply to the Court to revoke or vary these Orders on three days' notice.
6. The liquidators must not pay any remuneration payable under Orders 2 and 3 for the period of 15 business days from the date of these Orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

A. Introduction 1 The plaintiffs seek various forms of relief, set out in the originating process filed on 30 June 2023, in relation to the sale of shares held by of Xiang Rong (Australia) Construction Group Pty Ltd (In Liq) (Company) on trust and for their remuneration. 2 The plaintiffs rely on the affidavit of Robert Scott Woods sworn on 30 June 2023 and the exhibit to that affidavit, RW-1. Mr Woods is a joint and several liquidator of the Company with David Mansfield (together, Liquidators). 3 For the reasons that follow, I am satisfied that declarations and orders substantively in the form sought by the plaintiffs should be made.

B. Background 4 The factual background to this proceeding, including the appointment of the Liquidators and the work that they performed, is set out by Mr Woods in his affidavit. For present purposes, it is sufficient to note the following matters. 5 On 14 May 2004, the Company was incorporated. Andrew Tsang, who was also known by a number of aliases, was the shareholder of its only issued share and its sole director and secretary.

B.1. First winding up of the Company 6 On 2 February 2015, the Company was wound up in insolvency by an order of the Supreme Court of New South Wales on the application of The Owners - Strata Plan No. 33531, as a result of unpaid strata levies (Strata Plan Winding Up Proceedings). 7 Nicholas James David Crouch of Crouch Amirbeaggi was appointed liquidator of the Company (Former Liquidator). Mr Tsang provided a Report as to Affairs (RATA) for the period up to 12 February 2015. The RATA disclosed that the Company had substantial assets, including real property, as well as substantial liabilities. 8 On 25 May 2015, the Supreme Court of New South Wales, on the application of Mr Tsang, terminated the Strata Plan Winding Up Proceedings with immediate effect. An amount of approximately $324,000 was paid by Mr Tsang to the Former Liquidator's office to facilitate the termination of the Strata Plan Winding Up Proceedings. The Former Liquidator paid $239,168.87 of the payment from Mr Tsang to participating unsecured creditors.

B.2. The Bank of Queensland exercises its rights 9 On 24 November 2016, Richard Stone and Peter Marsden of RSM Australia Pty Ltd (RSM) were appointed receivers by the Bank of Queensland (BOQ) pursuant to a mortgage given by the Company in favour of the BOQ. 10 On 11 July 2017, Mr Stone and Mr Marsden were appointed receivers and managers pursuant to a circulating and non-circulating security interest in favour of the BOQ (Former Receivers and Managers). 11 The Former Receivers and Managers sold real property owned by the Company to discharge the amount owing to the BOQ. These sales resulted in surplus funds of $137,821.39 being made available to the Company.

B.3. Bankruptcy of Mr Tsang 12 On 5 March 2019, the then Federal Circuit Court of Australia made a sequestration order against Mr Tsang. Daniel Peter Juratowitch was appointed the trustee in bankruptcy (Trustee in Bankruptcy). Investigations carried out by the Trustee in Bankruptcy revealed that the Company held shares in the following listed companies: (a) 10,080,000 shares in Mindax Ltd (then trading at approximately $0.07 per share); and (b) 14,862,763 shares in Diatreme Resources Ltd (then trading at approximately $0.02 per share), (together, Shares).

B.4. Deregistration of the Company 13 On 14 October 2020, the Company was deregistered by the Australian Securities and Investments Commission under s 601AB of the Corporations Act 2001 (Cth) (Act).

B.5. Second winding up of the Company 14 On 28 July 2021, the Trustee in Bankruptcy filed an originating process in the Supreme Court of Victoria seeking orders for the reinstatement and winding up of the Company and the appointment of the Liquidators pursuant to s 472 of the Act. 15 On 6 August 2021, the Supreme Court of Victoria granted the relief sought.

B.6. Investigations 16 Following their appointment, the Liquidators carried out extensive investigations and sought, unsuccessfully, the cooperation of the directors of the Company. Various requests that the directors complete a Report on Company Activities and Property (ROCAP) and deliver the Company's books, records, and property, were not complied with. At that time, the Company's directors were Qinglong Zeng, Qingfeng Zeng and Qingyu Zeng. Mr Woods gives evidence that he understands the directors to be Mr Tsang's children. 17 Following review of documents including the Company's financial statements, documents provided by the Australian Taxation Office (ATO) and a solvency report dated 8 May 2015, the Liquidators concluded that the Company was the trustee of the Xiang Rong Management Trust (Trust) and that the Shares were listed as assets of the Company in its capacity as the trustee of the Trust and may be able to be realised to satisfy outstanding creditors of the Company. 18 As at 16 August 2021, the total value of the Shares was $885,134.60. 19 On 2 September 2021, the Liquidators sought advice from SLF Lawyers on realising the Shares and whether the Liquidators had a power of sale over the Trust assets or the steps that would need to be taken to appoint the Liquidators as receivers and managers over the Trust assets. 20 Further enquiries were also made of the Company's accountants, who provided an electronic copy of the Deed of Trust for the Trust dated 4 March 2008 (Trust Deed) and of the Company's former solicitors and the accountants, who were the settlors of the Trust. The enquiries did not reveal that there had been any amendments to the Trust Deed. 21 The ATO is a contingent creditor of the Company. The Company failed to file any tax returns in the period since 2015.

B.7. Sale of the shares 22 In the period between 14 December 2021 and 12 January 2022, the Liquidators sold the Shares which yielded a total amount of $666,584.92. Mr Woods gives evidence that the Shares were volatile and the Liquidators were concerned that waiting any longer would prejudice shareholders because of further diminutions in price.

C. Whether the Company had the power to sell the Shares

C.1. Declarations sought 23 The plaintiffs seek the following declaration in the originating process: 1 A declaration that, from the date of liquidation, the Company as Trustee of the Xiang Rong Management Trust constituted by the trust deed dated 4 March 2008 (Trust Deed) had power to sell shares pursuant to cl 17(m) of the Trust Deed. 24 The Court has power to make declarations under s 21 of the Federal Court Act 1976 (Cth), which provides: Declarations of right (1) The Court may, in civil proceedings in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed. (2) A suit is not open to objection on the ground that a declaratory order only is sought.

C.2. Relevant principles 25 In Re Crest Realty Pty. Ltd. (in liq.) and The Companies Act [1977] 1 NSWLR 664, Needham J considered whether a liquidator had power to administer trusts of which the company in liquidation was the trustee, by reference to the Companies Act 1961 (NSW). Needham J, relevantly, held that a liquidator has the duty to act responsibly in the administration of the trust in the name of the company and that these duties imposed by the trust on the liquidator will persist until new trustees are appointed: Re Crest at 664. 26 In Wells v Wily [2004] NSWSC 607, Austin J cited with approval the decision of Needham J in Re Crest by reference to s 477(2)(m) of the Act and stated at [27]: A liquidator, taking office in respect of a corporate trustee, is invested with the trustee's power to administer the trust: Crest Realty, at 668 per Needham J...[w]here the winding up is ordered by the court, it appears that the power derives from what is now s 477(2)(m), namely the power to "do all such other things as are necessary for winding up the affairs of the company and distributing its property": Crest Realty, at 668. 27 In Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) (2018) 260 FCR 310; [2018] FCAFC 40 the Full Court of this Court (Allsop CJ, Siopis and Farrell JJ) also cited Re Crest with approval and relevantly stated at [90]: …if the company to which the liquidator has been appointed remained a trustee "the affairs of the company" for the purposes of s 477(2)(m) would include administering the trust: Re Crest Realty Pty Ltd (in liq) (No 2) [1977] 1 NSWLR 664.

C.3. Consideration 28 The Trust Deed relevantly provides that: (a) Mr Tsang is the Nominator (cl 21(a) and Sch 7); (b) the Nominator will cease to hold office if sequestration orders are made against them, in which case the first named person in the Nominated Beneficiaries (Chunxiang Zeng, Mr Tsang's wife) is appointed as Nominator (cl 21(e)); and (c) the trustee of the Trust may from time to time, sell, vary and transpose the property of the Trust fund (cl 17(m)). 29 I am satisfied that it is appropriate to make the declaration sought in the originating process and that the Liquidators acted properly in realising the Shares, for the following reasons. 30 First, I am satisfied that the Company remained the trustee of the Trust notwithstanding the appointment of the Liquidators. The Trust Deed does not include any ipso facto clause that would cause the removal of the Company as trustee of the Trust in the event of its liquidation. 31 Second, I am also satisfied that the Company remained the trustee of the Trust, notwithstanding its deregistration and subsequent reinstatement. Section 601AH(5) of the Act provides that if a company is reinstated, it is "taken to have continued in existence as if it had not been deregistered". Upon reinstatement, a company resumes its position as a trustee of the assets of a trust unless a replacement trustee has been appointed or the trust deed provides otherwise: Brislane v Australian Securities and Investments Commission, in the matter of Chiswick Universal Pty Ltd (in liq) [2018] FCA 1095 at [24]-[25] (Gleeson J). The extensive enquiries undertaken by the Liquidators have not revealed that any replacement trustee has been appointed and I am satisfied that the Trust Deed does not provide that a deregistered trustee would not resume its position as a trustee of the Trust on its reinstatement. 32 Third, under cl 17(m) of the Trust Deed, the Company, as trustee of the Trust, retained the power to sell the Shares. 33 Fourth, in circumstances where the Company is the trustee of the Trust, the administration of the Trust, including selling the Shares, was an aspect of the "affairs of the company" for the purposes of s 477(2)(m) of the Act and, therefore, was within the power of the Liquidators: Wells at [27]; Killarne at [90].

D. Whether the Liquidators should be appointed as receivers of the property of the Trust 34 The plaintiffs submit that if the Court is not satisfied that the Company remains the trustee of the Trust or that the Trust Deed granted the Liquidators a power of sale, the Court should make orders, nunc pro tunc, that the Liquidators be appointed as receivers of the property of the Trust. 35 Given that I am satisfied that the Company remains the trustee of the Trust and the Trust Deed grants the Liquidators a power of sale, it is not necessary to consider this alternative claim.

E. Whether the liquidators should be paid their remuneration and expenses out of the Trust fund

E.1. Relevant principles 36 Generally, where a liquidator finds themselves in charge of a trust fund and administers it, the Court will normally exercise its discretion to allow the liquidator remuneration and expenses out of the trust fund: Re Maureen Michael Management Pty Ltd [2005] NSWSC 1044 at [28] (Young CJ in Eq); see also In the matter of Aberdeen All Farm Pty Ltd (in liquidation) [2020] NSWSC 770 at [17] (Black J); In the matter of J & Lee Property Investment Group Pty Limited (in liquidation) [2019] NSWSC 927 at [24] (Rees J); Owen, in the matter of RiverCity Motorway Pty Limited (Administrators Appointed) (Receivers and Managers Appointed) (2014) 225 FCR 541; [2014] FCA 1008 at [60] (Greenwood J). The Court's exercise of this discretion is to be assessed on a case by case basis, and will differ between cases where the liquidator is administering a trading trust and has a right of indemnity in equity over the trust assets and cases where there is no trading trust: Maureen at [29]; see also Olde and Anor Re Propestate Pty Ltd (In Liquidation) [2009] NSWSC 859 at [14] (Bryson AJ). The Court's discretion may also extend to allow remuneration not only to a trustee, but also to someone who is for practical purposes controlling a trustee: Application of Sutherland [2004] NSWSC 798 at [13]-[14] (Campbell J). 37 In Rolcross Pty Ltd (in liquidation) [2012] NSWSC 846, Black J considered an application for remuneration and expenses by a liquidator, who was the liquidator of a corporate trustee and stated at [16]: It is well established that a trustee has a right of indemnity out of trust assets for expenses or liabilities properly and reasonably incurred in the administration of the trust: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367. A liquidator appointed to a trustee of a trading trust may be paid his or her remuneration from trust assets, to the extent that that remuneration is incurred in relation to the trust: Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99; 7 ACLR 873; 1 ACLC 895; Re French Caledonia Travel Service Pty Ltd (in liq) [2003] NSWSC 1008; (2003) 59 NSWLR 361; 48 ACSR 97. On the other hand, where a company is trustee of a trading trust and also conducts other activities, a liquidator may be indemnified out of trust assets for his or her reasonable costs and expenses in identifying, recovering, realising, protecting, administering and distributing trust assets, but may not recover the costs of work which could not be fairly described as administering the trust from trust assets: Re GB Nathan & Co Pty Ltd (in liq) above at NSWLR 868-7; 13 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) [1999] FCA 144; (1999) 30 ACSR 377; 17 ACLC 500; Re French Caledonia Travel Service Pty Ltd (in liq) above at [206]-[210], [213]; Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd [2004] NSWSC 1224; (2004) 213 ALR 373; 52 ACSR 198. A liquidator who is appointed to a company which holds assets on trust must act responsibly with respect to the fund in order to be allowed his or her remuneration from the fund: Re Crest Realty Pty Ltd (in liq) and the Companies Act [1977] 1 NSWLR 664; (1977) 2 ACLR 502; Re Maureen Michael Management Pty Ltd [2005] NSWSC 1044; (2005) 55 ACSR 539; 24 ACLC 33. 38 In 13 Coromandel Place Pty Ltd v C L Custodians Pty Ltd (in liq) [1999] FCA 144, Finkelstein J relevantly stated at [35]: In the case of a company that has carried on the business of trustee it might be that much of the work involved in the liquidation is chargeable against trust assets if it can be shown that the liquidation is necessary for the proper administration of the trust. But it is unlikely that this will be so where the company did not act solely as trustee or at least did not act in that capacity to a significant extent. In that event, the liquidator will be required to estimate those of his costs that are attributable to the administration of trust property and only those costs will be charged against the trust assets. 39 In Re Greater West Insurance Brokers Pty Limited [2001] NSWSC 825, Young CJ in Eq permitted payment of the liquidator's costs and expenses from trust property, and observed at [20]: Some of the English cases have distinguished between the costs of the winding up in administering the trust assets and the cost of the winding up generally; see Re Eastern Capital Futures Limited (1989) 5 BCC 803. However, in New South Wales, it has been recognised that it is often impossible to make that segregation; see Re G B Nathan & Co Pty Limited at p 688, and indeed see also the earlier aspect of the English case of Re Eastern Capital Futures Limited [1989] BCLC 371, 375. The Federal Court seems to have taken a middle position; see 13 Coromandel Place Pty Limited v C L Custodians Pty Limited (1999) 30 ACSR 377, 385. The bulk of authority, however, favours the position taken in the Nathan case. 40 However, in respect of "non-trust work", where there is a deficit of non-trust assets against which the Liquidator's indemnity can be exercised, courts typically allow recourse to the trust assets for that component of the remuneration, provided the Liquidator has acted responsibly in their administration of the trust. 41 This issue was addressed by McLelland CJ in Eq in Re G B Nathan & Co Pty Limited (In Liq) (1991) 24 NSWLR 674, which has been cited repeatedly with approval. In relation to the situation where there was a deficiency of non-trust assets to cover non-trust work his Honour stated at 689C-D: Where work done by a liquidator in relation to trust assets may properly be considered as having been done for the purpose "winding up the affairs of the company", it is I think consistent with general principle that any remuneration and expenses attributable to that work be paid out of the (non-trust) property of the company in accordance with s 556 of the Corporations Law, to the extent that there is such property available. To the extent that there is not sufficient available property, bearing in mind that generally speaking "a liquidator is not liable to incur any expense in relation to the winding up of a company unless there is sufficient available property" (s 545), it would normally be appropriate to apply the principle referred to by Deputy Judge Nugee QC in the passage quoted earlier from Re Berkeley Applegate (Investment Consultants) Ltd (In Liq) and make an allowance to the liquidator out of trust assets. 42 His Honour's comments were, strictly, obiter because there was no evidence of a deficiency of non-trust assets in that case. However, a number of cases have permitted recourse to trust assets for non-trust work: see Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158 at 161-162 (McLelland J); Greater West Insurance at [18]-[23] (Young CJ in Eq); Propestate at [5]-[7], [21] (Bryson AJ).

E.2. Submissions 43 The plaintiffs submit that the Court should permit the Liquidators to have recourse to trust assets for the payment of their remuneration and expenses. They submit that any work done was done for the purpose of winding up the affairs of the Company and that this work necessarily included work done in relation to the Trust. 44 The plaintiffs submit that the relevant factors that the Court should have regard to include that (a) the only assets of the Company are trust assets, and (b) the Liquidators have acted responsibly and diligently.

E.3. Consideration 45 I accept that the Liquidators should have access to the assets of the Trust, being the proceeds of the realisation of the Shares, for the payment of their costs and expenses. 46 The potential issue of "trust assets" being used to meet "non-trust expenses" does not arise on the evidence before me. The Liquidators have not been able to identify any activity engaged in by the Company in addition to it acting as the trustee of the Trust. 47 In any event, given the Company was the trustee of the Trust, the work undertaken by the Liquidators was necessarily done for the purpose of winding up the affairs of the Company. The Company had no other assets. There were no "non-trust assets". As explained above, where there is a deficiency of "non-trust" assets to pay the remuneration, costs and expenses of a liquidator for work undertaken in relation to "non-trust" work, a liquidator who has acted responsibly and diligently, may recover the deficiency from trust assets: Nathan at 689C-D; Grime Carter at 161-162; Greater West Insurance at [18]-[23]; Propestate at [5]-[7], [21]. 48 Further, I am also satisfied that the Liquidators have acted responsibly and diligently. They have realised the Shares in a timely fashion to avoid any potential diminution in their value given the volatility that they observed in their trading. They have attempted on multiple occasions without success to secure the co-operation of Mr Tsang, Ms Zeng and the three directors of the Company. In addition, they have pursued other enquiries in order to locate a copy of the Trust Deed and have reviewed and had regard to extensive information provided to them by the Former Liquidator and the Bankruptcy Trustee.

F.1. Relevant principles 49 Pursuant to s 60-5 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Act, an external administrator of a company is entitled to receive remuneration for necessary work properly performed in relation to the external administration of a company, in accordance with a remuneration determination. 50 The Court is empowered to make a remuneration determination under s 60-10(1)(c) of the IPS and in doing so, must have regard to the following factors identified in s 60-12: 60-12 Matters to which the Court must have regard In making a remuneration determination under paragraph 60-10(1)(c) or (2)(b), or reviewing a remuneration determination under section 60-11, 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. 51 The onus is on the liquidator to establish that the remuneration claimed is reasonable and it is the Court's function to then determine the remuneration by considering the material provided and bringing an independent mind to bear on the relevant issues: Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38 at [54] (Bathurst CJ); Morgan, in the matter of Brighton Hall Securities Pty Ltd [2018] FCA 2029 at [17] (McKerracher J); Sallway, in the matter of Mossgreen Pty Ltd (in liq) (Remuneration of Liquidators) [2019] FCA 1771 at [9] (Perram J). 52 In the following passages from In the matter of Sakr Nominees Pty Limited [2017] NSWSC 668, Black J usefully summarised the principles relevant to a remuneration determination under the predecessor provision in s 473 of the Act: 23 A liquidator is entitled to reasonable remuneration for his or her services and the liquidator bears the onus of establishing that the amount of remuneration they seek is fair and reasonable and, in determining a liquidator's reasonable remuneration, the Court will have regard to the factors specified in s 473(10) of the Corporations Act, to which I refer further below. The Court must bring an independent mind to bear on the question whether the remuneration sought by a liquidator is fair and reasonable; the liquidator must lead evidence in sufficient detail that the Court can determine that question; and the 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 by the liquidator … 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 … 24 Most decisions in both State Supreme Courts and in the Federal Court of Australia 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 cost of the work done and the value of the services provided…There has been a degree of concern as to time-based remuneration, over a considerable period, although it must be accepted that remuneration on that basis is now more common…Several recent decisions, of which the previous decision of Brereton J in this case was one, have emphasised the significance of the percentage that a liquidator's remuneration bears to the level of asset realisations achieved, and applied percentages of recoveries where time-based calculations would have led to unreasonable results…A percentage of realisations can also be used as a test of whether remuneration claims brought by a liquidator on a time costing basis are reasonable… (Citations omitted.) 53 In Mossgreen, Perram J concluded at [12] that the relevant principles applicable to a remuneration determination, as summarised in Sakr and Sanderson and as proscribed by s 60-12 of the IPS, may be distilled into three categories: (1) the necessary and proper connection between the work performed and the external administration: s 60-12(a) and s 60-12(b); (2) the proportionality between the complexity of the external administration and the costs incurred: s 60-12(c) to s 60-12(i); and (3) the reasonableness of the billing method of the administrator: s 60-12(j). 54 The meaning of the phrase "necessary and properly performed" has been accepted as importing a requirement of reasonable necessity, in respect of which external administrators are given a "measure of discretion". In Mossgreen, Perram J stated at [15]: The First Plaintiffs submit that the expression 'necessary and properly performed' in s 60-12(a) of the IPSC should be construed in such a way as to give the external administrators a 'measure of discretion'. They rely on Young J's observation in Burns Philp Investment Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280 at 285 that the Court must give liquidators 'a fair degree of latitude where they have incurred expense as a result of the exercise of their commercial judgment even if there is a loss to the company by so doing'. Whilst that decision concerned liquidator's expenses, the First Plaintiffs submit that it is equally applicable to administrators and that, accordingly, the phrase in s 60-12(a) ought not be read as requiring that the work should have been absolutely necessary to the minimum discharge of an administrator's statutory duties. I accept that submission.

F.2. Submissions 55 The plaintiffs submit that even if the Court considers the principles relevant to remuneration of trustees, rather than liquidators, apply, and the Court exercises its inherent power rather than statutory power, the Court can apply considerations arising under the Act by analogy. 56 The plaintiffs rely on Mr Woods' evidence as to the manner in which the work was carried out, the use of team members of different levels of experience, different charge-out rates, and the billing method. The plaintiffs submit that: (a) the timesheets in evidence establish that the work bore a reasonably necessary and proper connection to the liquidation; (b) the Liquidators were required to consider a substantial amount of material provided by the Former Liquidator in relation to the Strata Fees Winding Up and by the Trustee in Bankruptcy; and (c) issues which further complicated the administration included repeatedly unsuccessful attempts to contact and seek cooperation from various persons associated with the Company, including Mr Tsang, Ms Zeng and the three directors, the attempts to locate the Trust Deed and ascertain any amendments and the proper treatment of the previous forbearance of overseas creditors. 57 The plaintiffs also submit that the Liquidators' claim for remuneration and expenses is proportionate to the work that was performed, as set out in Mr Woods' affidavit. They submit that the work bears the character of reasonable necessity, taking into account the discretion accorded to external administrators. Whilst proportionality is not expressly used as a term in the relevant IPS provisions, the plaintiffs submit that certain IPS provisions have been construed as importing that requirement: Mossgreen at [12]. 58 The plaintiffs had originally sought approval from the Court for their remuneration, costs and expense in the following specific amounts: (a) $15,058.50 plus GST for the period 8 April 2022 to 31 May 2023 (First Period); (b) $15,227.50 plus GST with respect to this application to the Court in the period between 16 December 2021 to 30 June 2023 (Second Period); (c) $60,195.00 plus GST for the period from 1 June 2023 to the end of the liquidation (Third Period); (d) $30,556.35 plus GST for the period from 2 September 2021 to 30 June 2023 for legal advice provided by the Liquidators' legal advisers; (e) $10,523.33 for counsel for services provided during the Second Period; (f) $12,188.00 for further work required to be undertaken by the Liquidators' legal advisers; and (g) $12,000.00 for further work required to be undertaken by counsel, during the Third Period. 59 In the course of the hearing, Ms Castle of counsel, who appeared for the plaintiffs, acknowledged that the remuneration, costs and expenses claimed for the Third Period was for work anticipated to be performed and, therefore, not supported by invoices and timesheets. Following an exchange with the Court, Ms Castle confirmed that the Liquidators were no longer pressing for approval on this application for the remuneration, costs and expenses that they had sought for the Third Period.

F.3. Consideration 60 I am satisfied that the work undertaken by the Liquidators was work that was reasonably necessary and bore a proper connection to the liquidation. The only asset of the Company was the Shares that it held pursuant to the terms of the Trust. The enquiries that the Liquidators sought to pursue with Mr Tsang, Ms Zeng and the three directors were necessary and appropriate, as were the attempts to locate the Trust Deed and any amendments to it and reviewing the extensive material provided by the Former Liquidator and the Trustee in Bankruptcy. The absence of any ROCAP or any other co-operation from the directors magnified the complexity and difficulty of realising the Shares and progressing the liquidation of the Company. 61 I am also satisfied that the manner in which the work was undertaken was appropriate given the billing method and the use of team members with different levels of experience and charge-out rates, as disclosed in the timesheets in evidence. 62 For these reasons, I am satisfied that proportionality is present in the Liquidator's claim for remuneration and expenses. 63 It is not necessary, given these findings, to express any concluded view in response to the submissions made by Ms Castle that proportionality was "not a straight-line equation" when used in the context of an application by a liquidator for their costs. Further, in the absence of a contradictor, it would be undesirable to seek to express any definitive views on the subject. For present purposes, I am content to record that there does appear to be merit in the propositions advanced by Ms Castle that: (a) proportionality is not as simple as comparing the costs of work undertaken with the value of the recovery achieved; (b) proportionality should focus on the "nature of the response to the work that is reasonably required"; (c) in many, but not all cases, there may be what could be described as "linear proportionality" (which I understood is achieved if there is a direct relationship between the likely benefit to creditors if work is undertaken by a liquidator and the likely costs and expenses incurred in performing that work); (d) what work is reasonably required is to be determined having regard to the particular facts of a matter and to the specific obligations imposed on a liquidator, by force of statute and the general law; and (e) proportionality assumes meaning from its context and does not, by way of example, excuse work from being done to satisfy a statutory requirement, in order to achieve "linear proportionality".

G. Disposition 64 Orders and declarations will be made substantially in the form sought by the plaintiffs in the originating process. I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Halley.