Anderson Group Pty Ltd; Mann v Anderson

Background

1. The company was wound up by order of the Supreme Court on 18 March 2019. The sole activity of the company was ownership of real property at Willoughby which has since been sold by the liquidators on 21 June 2019 for approximately $1,825,000. All creditors have been paid in full and it is anticipated by the liquidators, subject to approval of the present remuneration application, and any future remuneration approval for the period since 3 July 2020, that there will be a distribution to shareholders in an amount of approximately $35,781.97.
2. Following the determination of a preliminary question by Black J on 13 November 2020 (In the matter of Karim Pty Ltd (in liq) [2020] NSWSC 1603), the position of the contributories, being the persons affected by the relief sought by the liquidators is that Mr Edgar Francis, the first defendant, has not appeared but agrees to the order sought, and Mr Kevin Nol, the second defendant, appeared by his counsel, Mr J T Johnson, and did not oppose the order sought.
3. The evidence in support of this application includes detailed work-in-progress sheets maintained by the liquidators and their staff for the period 18 March 2019 to 29 May 2020 and from 30 May 2020 to 3 July 2020. The liquidators have also provided a detailed remuneration report dated 2 June 2020.
4. The remuneration report addresses the complexity of the issues arising in the winding up relating to proofs of debt concerning the initial financing of the company's acquisition of the Willoughby property which necessitated investigations by the liquidators. The investigative steps included: (a) a confidential submissions process by which each shareholder's legal advisers made written submissions for the consideration of the liquidators and submissions in reply; (b) public examination of the company's external accountant, Mr Frank Cutrone, over a period of two days; (c) the private interview of Ms Maria Frances, a book keeper engaged by the company in the presence of her legal advisers, the answers in that interview being transcribed and verified by statutory declaration; and (d) a detailed analysis of all of the material produced by those processes, as well as the books and records of the company and the files maintained by Mr Cutrone and by the company's solicitors, culminating in the liquidators' determination on the proofs of debt.
5. The written submissions of counsel for the liquidators helpfully provided a breakdown of the time and amount charged with respect to the tasks performed in four categories: assets ($1,494); creditors ($35,166); investigations ($29,078); administration ($10,753).
6. The liquidators' remuneration of $50,000 for the period from appointment to 7 June 2019 was previously approved by the creditors. That amount, together with the amount the subject of the present application, amounts to just over 8 per cent of the value of the assets realised.

Section 60-10(1)

1. The liquidators require determination by the Court under s 60-10(1)(c) of the IPS, given that approval is not able to be obtained by a resolution of creditors, who have been paid in full, and there is no committee of inspection in the winding up: s 60-10(1)(a) and (b).
2. When determining the question of the quantum of the liquidators' remuneration under s 60-10(1) of the IPS, the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the statutory criteria laid down in s 60-12.
3. The essential task of the Court, constituted by a judge, when asked to approve the remuneration of a liquidator is encapsulated in the following observation by Barrett J in Anderson Group Pty Ltd; Mann v Anderson [2002] NSWSC 764; (2002) 20 ACLC 1607 at [12]: 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.
4. More recently in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38, the Court of Appeal considered the proper approach to the determination by the Court of reasonable remuneration of a court-appointed liquidator. Three matters deserve emphasis.
5. First, the onus is on the liquidator to establish that the remuneration claimed is reasonable. It is the function of the Court under s 60-10(1) to determine the remuneration by considering the material provided and bringing an independent mind to bear on the relevant issues: Sakr at [54]. .
6. Second, the factors in s 60-12(d)-(e) and (g)-(h) can be seen to have as their unifying them the concept of proportionality. The question of proportionality in terms of work done as compared with the size of the property the subject of the insolvency administration or the benefit to be obtained from the work is an important consideration in determining reasonableness: Templeton v Australian Securities and Investments Commission (2015) FCAFC 137; 108 ACSR 545. The work done must be proportionate to the difficulty and importance of the task in the context in which it needs to be performed. As stated in Sakr at [55], this is what is encompassed in assessing the value of the services rendered.
7. Third, the mere fact that the work performed does not lead to augmentation of the funds available for distribution does not mean the liquidator is not entitled to be remunerated for it. Provided it was reasonable to carry out the work and the amount charged is reasonable, there is no reason a liquidator should not recover remuneration for undertaking the work: Sakr at [57]-[58].
8. The last matter is apposite here where having sold the company's property at Willoughby in June 2019, the main focus of the liquidation was investigating the proofs of debt which had been received.

Decision

1. I approach the matter on the basis that it is not the role of the Court, constituted by a judge, to undertake a line by line review of the relevant bill narratives of the insolvency practitioner, but I have reviewed them in a broad way and concluded that they support other evidence led in respect of the claim for remuneration: Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund and Others [2016] NSWSC 1292 at [58] (Black J).
2. I am satisfied that the liquidators have provided sufficient information for the Court to properly assess the claim for remuneration. Having considered the factors listed in s 60-12 of the IPS, I am satisfied that the work was performed properly in the due course of the winding up, it was reasonable to carry it out, and the liquidators' claim for remuneration is a fair and reasonable reward for the work.
3. The evidence establishes that the work was carried out by persons with the appropriate level of seniority, whose charge-out rate was proportional to the level of the complexity of the work that was performed. This was established by the work-in-progress sheets which show that the bulk of the work was done by a senior accountant with the consequence that the average charge-out rate was $340 p / hour across all of the liquidators' staff, including the liquidators themselves. On their face, the hourly rates charged by the liquidators and their staff members are reasonable and commercially competitive.
4. I accept that it is appropriate, in the circumstances of the present case, that the liquidators' remuneration be determined on a time-charging basis, rather than some other basis. Accepting that a percentage of realisations may provide a useful cross-check, as indicated, the remuneration claimed, together with the previous remuneration approved by creditors, is about 8 per cent of the realisations in the liquidation. Whilst this percentage may seem relatively high, it is explicable in the circumstances, given the nature of the work that was necessary to be undertaken by the liquidator in resolving the disputed proofs of debt. I am satisfied that the liquidators' remuneration is reasonable and should be determined in the amount of $76,491 (exclusive of GST).

Orders

1. The Court makes the following orders: 1. That the remuneration of the plaintiffs, as liquidators of Karim Pty Limited (in liq), for the period 8 June 2019 to 3 July 2020 is determined to be $76,491 (exclusive of GST). 2. That the plaintiffs' costs of this application (save for the costs dealt with in the costs order made by Black J on 13 November 2020) shall be costs in the winding up of the company.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 26 November 2020