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[2017] VSC 683
General information, not legal advice.
Supreme Court of Victoria
2017-12-12
Kennedy J
Original judgment source is linked above.
Dennis Anthony Turner and Luke Christopher Targett (in their capacities as joint and several liquidators of Atwell & Co Pty Ltd (in liq)) v Atwell & Co Pty Ltd (in liq) (Unreported, Supreme Court of Victoria, Efthim AsJ, 14 December 2016)
APPEAL - Appeal from associate judge under Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 77.06 - Determination of liquidators' remuneration pursuant to (Cth) s 504 - Leave sought to file appeal out of time - Extension of time granted - Whether error in finding of facts - No error - Whether error in applying principle of proportionality - No error - Appeal dismissed
1 This is an appeal from a decision of Associate Justice Efthim made on 14 December 2016 (the Reasons) that the plaintiff liquidators, Mr Dennis Anthony Turner and Mr Luke Christopher Targett (Liquidators), are entitled to receive remuneration fixed in the sum of $252,000 for the period of liquidation of the defendant from 24 September 2015 to the completion of the liquidation.[1] In so saying, his Honour stated that he was satisfied that the Liquidators' claim was 'reasonable' for the purposes of s 504(2) of the Corporations Act 2001 (Cth) (the Act).[2] He did so on the basis of six affidavits filed by Mr Turner, which included detailed accounts of the time value of the work undertaken.
3 The first group of grounds (Grounds 2-5 and 7) do not directly challenge the determination that the Liquidators' claim was reasonable. Rather, they seek to attack various factual findings made by the associate judge concerning the work expended in relation to the rent roll, (in circumstances where complaint had been made that too much time had been spent in compiling this rent roll).
4 Ground 6 alleges that the associate judge erred in applying the principle of proportionality.
5 Accordingly, the issue is whether any of these grounds are sustained.
6 The Liquidators sought orders that their remuneration as the liquidators of Atwell & Co Pty Ltd (in liq) (the Company) be fixed in the sum of $280,000 for the period from 24 September 2015 to the completion of the liquidation. The sum of $280,000 was comprised of $50,000 for remuneration, which was approved at a meeting of the Company's creditors on 24 September 2015, and an additional amount of $230,000.
7 The Company operated as a real estate agent and managed a residential rent roll of approximately 190 properties in Melbourne. The Company also sold and received commission for the sale of 'off the plan' properties and was the owner of an investment property located at Lot 6, No. 6 Burrinjuck Lane, Dinner Plain, Victoria (Dinner Plain).
8 The application for remuneration was opposed by Mrs Atwell, who is the sole shareholder of the Company, and was a director of the Company between 22 October 2013 and 4 June 2015. She was also employed by the Company until 18 December 2015, at which time the business was sold with her employment terminated. Her spouse, Mr Michael Atwell, was a director of the Company between 8 June 2005 and 22 October 2013. Separate trustees in bankruptcy have been appointed to the bankrupt estates of both Mr Atwell and Mrs Atwell.
9 On 20 August 2015, Mr Turner and Mr Targett were appointed as joint and several administrators pursuant to s 436A of the Act by Mr David Packman, the stepfather of Mrs Atwell. Mr Packman had been appointed after Mrs Atwell resigned as a director in June 2015.
10 On 24 September 2015, at the second meeting of creditors, it was resolved that the Company be wound up and the Liquidators be appointed. The creditors also resolved to fix remuneration for the Liquidators in the amount of $50,000.
11 There followed a liquidation wherein the Company was run as a real estate business (by way of a permit issued to the Liquidators) pending sale of the business.
12 According to Mr Turner, the continued trading of the rent roll involved dealing with funds held on trust for landlords. Ms Margaret Lester, a manager in the Liquidators' office, was the person authorised to liaise with Macquarie Bank and to access and review the trust funds and maintain the records of the rent roll.
13 In September 2015, the Liquidators advertised the rent roll for sale. They received strong interest from 62 interested parties with a highest bid of $787,000.
14 In around November 2015, the highest bidder withdrew from the sale due to what Mr Turner believed was interference by the Atwells in the sale process. He produced an email of 10 November 2015 in support of this belief, which will be referred to below.
15 In the result, a further sale process was undertaken, following which a substantially reduced offer was received of $487,400 (plus GST). However, Mr Turner alleges there was further interference by the Atwells, who contacted clients to offer them services by their own entities. This was consistent with the fact that 42% of landlords were lost within one month of sale (compared to 2% with rent rolls that Mr Turner had previously sold).
16 The sale of the rent roll settled on 18 December 2015. However, the sale price was reduced further (given the retention amount was not received by reason of the high number of clients lost) to $416,566.
17 Mr Turner stated that further remuneration was proposed because of the additional work undertaken which had predominantly been necessary as a result of the conduct of Mrs Atwell, Mr Atwell and For Sale For Lease Pty Ltd (FSFL) (an associated company of the Atwells), which included their interference with the rent roll.
18 Mr Turner also stated that, as well as work relating to the sale of the rent roll, there was other work undertaken during the liquidation. This included the recovery of commissions; claims of unsecured creditors which included demands from FSFL (with whom disputes arose); claims by the trustee in bankruptcy of Mrs Atwell in relation to the sale of her property being used to pay Company liabilities;[5] employee disputes; and other investigations, including investigation of a loan account in the name of FSFL for $107,351.93. It also included work relating to the sale of Dinner Plain in circumstances where Mrs Atwell's mother (a Mrs Fraser) had placed a caveat over that property.
19 A preliminary matter was raised given the appeal was out of time.[6]
20 In the result, it was agreed that the application was only five days late, having regard to the vacation period.[7] I therefore granted leave to bring the application out of time pursuant to r 77.06.2(6) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) on the basis that:
(a) an explanation (which I accept) was provided in the affidavit of Mr James Gray of 8 August 2017 to the effect that, at the time of the decision, he was busy finalising other tasks prior to Christmas and, further, that he had mistakenly assumed that the relevant period was 28 days;
(c) the general lack of opposition by the Liquidators and/or lack of any evidence of prejudice.
21 An appeal from an associate judge is to be conducted by way of rehearing (rather than de novo). Accordingly, in the absence of further evidence or a change in the law, the appellant is ordinarily required to show 'error' on the part of the associate judge before appellate power may be exercised.[8]
22 In Robinson Helicopter Company Inc v McDermott,[9] the High Court stated that a court conducting an appeal by way of rehearing must conduct a 'real review' of both the evidence given at first instance and the judge's reasons to determine whether an error has been made in fact or law. If it is determined that the judge has made an error in fact, the court is required to make its own findings of fact and formulate its own reasoning based on those findings. However, the findings of fact from the first instance should not be interfered with unless they are 'demonstrated to be wrong by "incontrovertible facts or uncontested testimony", or they are "glaringly improbable" or "contrary to compelling inferences"'.[10]
23 The remuneration was sought pursuant to s 504 of the Act which provides:
504 Review of liquidator's remuneration
(1) Any member or creditor, or the liquidator, may at any time before the deregistration of the company apply to the Court to review the amount of the remuneration of the liquidator, and the decision of the Court is final and conclusive.
(2) In exercising its powers under subsection (1), 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.
24 In the recent decision of the NSW Court of Appeal in Sanderson (as liquidator of Sakr Nominees Pty Ltd) (in liq) v Sakr (Sanderson),[11] Bathurst CJ (who delivered the leading judgment) stated that the onus is on the liquidator to establish that the remuneration claimed is reasonable and it is the function of the Court to determine the remuneration by considering the material provided and to bring an independent mind to bear on relevant issues.[12]
25 In Venetian Nominees Pty Ltd v Conlan (Venetian Nominees),[13] the Full Court of Western Australia noted that a **'**summary procedure is involved, not unlike that applicable to the taxation of solicitors' costs, which is not necessarily subject to all the rules that would apply in an action'.[14] Further, that the rules of evidence are ordinarily not strictly observed in the taxation of solicitors' costs.[15] Their Honours also suggested that care should be taken to follow the admonition of Sir Robert Megarry VC in Computer Machinery Co Ltd v Drescher that: 'It would not be right to allow anything resembling a trial of the action to take place in the guise of an argument on costs'.[16]
26 The Reasons set out the relevant background in the matter before turning to three substantive areas of objection: (1) the sale of the rent roll; (2) the sale of Dinner Plain; and, (3) proportionality.
27 As indicated already, the grounds of appeal are directed solely to certain findings in relation to the rent roll and proportionality, which will be set out below.
Ground 2 - Interference with the sale of the rent roll
29 The Reasons record the complaint of Mrs Atwell that the Liquidators spent a disproportionate amount of time on the sale of the rent roll.
30 In dealing with this, the Reasons note the evidence of Mr Turner in his fourth sworn affidavit that, at the time of the original advertisement, the Liquidators received strong interest. Despite this, the prospective purchaser subsequently withdrew due to what Mr Turner believed to be the interference in the sale process by the Atwells. As a result of this interference, the Liquidators had no practical option except to accept an offer on substantially reduced terms, as they did.
31 The relevant email from the prospective purchaser produced by Mr Turner was as follows:
Hi Margaret,
Further to our conversation I wanted to confirm that I had 2 conversations with Morag & Michael Atwell that have caused me great concern with proceeding with this rent roll.
This has left me feeling very uncomfortable and shows a lot about their character and integrity and I have serious concerns about proceeding any further.
32 The Reasons record that Mr Turner also deposed that a number of clients were lost following the sale of the rent roll, which was higher than might be expected by natural attrition. In his view, this was caused by the Atwells contacting the client base of the rent roll in order to offer them the services of FSFL and Atwell M Pty Ltd (being companies associated with the Atwells). This loss of clients meant that the Liquidators did not receive the retention amount, such that the sale price was effectively reduced (further) to $416,566 (excluding GST).
33 The associate judge then states (at paragraph 35):
The documentary evidence that is before the Court supports the Liquidators' evidence on oath that there has been interference with the process of selling the rent roll and would justify the price obtained by the Liquidators for the rent roll. It appears that due to the interference of Michael and Morag Atwell, a simple straightforward task has become complicated.
34 In written submissions, the appellant submitted that the email showed Mrs Atwell was merely 'engaging in commercial negotiation regarding her future employment'. Despite this, it was accepted that Mr Atwell 'may well have had a negative impact on the sale price'.
35 This was largely repeated in oral submissions, wherein it was suggested that the email did not amount to interference because all that Mrs Atwell had done was to negotiate future employment with a potential purchaser.
36 The submissions (both oral and written) otherwise appeared to be directed to a complaint that the alleged interference did not justify the significant increase in fees (which was alleged to be 90% of fees of $230,000).
37 In 'reply', however, Counsel cited evidence of Mrs Atwell in her second affidavit of 25 August 2016 wherein she stated that she has 'no knowledge' of interference as alleged. In relation to the email, she further states:
Again, I have no knowledge of this 'interference.' I did meet with Lauren Staley of Infolio, the Initial Prospective Purchaser, for the purpose of an interview on 05/11/15. We agreed at this meeting that her proposal to purchase the rent roll would work for us both but when she emailed me later that day with an employment proposal, the salary was well below what I would earn in the market as a Senior Property Manager with my experience. She also only offered me a six month contract which offered me no future stability so I declined the job.
38 Similarly, reference was made to the evidence of Mr Atwell (in his affidavit of 26 August 2017), who said that he did nothing to interfere with the sale of the rent roll and only had one (perhaps) 2-minute conversation with a potential purchaser, as follows:
I expressed the opinion to the potential purchaser that a significant number of the landlords would wish for Morag to continue managing the properties. I told her that two thirds of the landlords would stay loyal to Morag not the company so there was obvious risk in the purchase.
39 In written submissions, the respondents highlighted that the finding of interference was corroborated by documentary evidence (being the email). Further, that it was consistent with what had been reported to creditors in the Report of 9 March 2016.
40 In oral submissions, the respondents submitted that the email constituted clear evidence of interference.
41 Further, that there was also other evidence which included the fact that the purchaser pulled out, as well as the highly unusual attrition rate post sale.
42 Finally, that even if there was no interference by Mrs Atwell, that does not matter in a context wherein there was clear evidence of interference by Mr Atwell.
43 Although there was evidence of denials, the evidence was self-serving and had to be weighed against the other evidence in the case, in circumstances where a summary procedure was appropriate.
44 I also consider that the email went further than suggesting that Mrs Atwell was only seeking to negotiate. In particular, the reference to the fact that she 'cautioned' the potential purchaser regarding the purchase was evidence of interference, as was the subsequent reference to the suggestion that 'they' (both Mr and Mrs Atwell) would not do anything to 'sabotage the sale' if certain conditions were met.
45 This objective evidence was also supported by the unchallenged evidence that the initial purchaser actually withdrew, and that the retention amount was depleted.
46 I am therefore unable to be satisfied that any error was made in making the factual finding that there had been 'interference with the process of selling the rent roll' (as alleged in ground 2(a)). Rather, the associate judge's finding was well supported by both the sworn evidence of Mr Turner, as well as the objective evidence in the case.
47 I am further not satisfied that his Honour 'ought to have found' that the appellant did not interfere with the sale of the rent roll pursuant to ground 2(b). Thus, the ground merely amounts to a bald assertion that a different factual finding ought be substituted.
48 I also accept the submission of the respondents that, even if there was no evidence of interference by Mrs Atwell, the finding of interference was in any event supported by reason of the evidence of interference by Mr Atwell (which was not challenged).
49 It is unnecessary in such circumstances to consider whether, and if so, what material effect such an error would have had. However, no attempt was made to establish that the work in relation to the rent roll constituted 90% of the fees of $230,000 in any event.
Ground 3 - Treatment relating to computer server
51 The ground relates to findings by the associate judge relating to the compiling of records in relation to the rent roll in circumstances where records related to the rent roll were maintained on a computer server located in premises leased by FSFL.
In his fourth affidavit, Mr Turner deposes that the work that was done did not constitute simple bookkeeping tasks, as is alleged by Morag Atwell. On the appointment of the Liquidators, Mr Turner, primarily with the assistance of Margaret Lester, successfully applied to the Business Licensing Authority for a permit to operate the business to keep the business going until the sale of the rent roll. Further work was required in tracing the rent roll because FSFL did not have its own trust account, but used the Company's trust account. It was necessary for his office to isolate and separate trust funds belonging to clients of FSFL. The key to the office located in Prahran was provided in or about December 2015. However, at no time did FSFL, Michael or Morag Atwell make the server available to the Liquidators' office in order for the Liquidators to collect the database for the rent roll.
53 In written submissions, the appellant cited evidence from the first affidavit of Mrs Atwell, sworn 16 August 2016, at paragraph 26(e), which reads as follows:
On 18 December 2015 the Liquidators representative Carl Messerschm was provided a key to the office located at 6/29-30 Grattan Street, Prahran. It was agreed that he or a representative from BDO would return to the office on 21 December 2015 to collect the database from the server (the hardware is property of For Sale For Lease Pty Ltd). I was advised by Anthony Barton who shared the office that no one from BDO attended that day.
On or around 5 January 2016, a letter was sent from our then Solicitor to BDO advising access would be given to the office on 10 January 2016 as I was away interstate until this date. No one from BDO attended on this date.
54 In oral submissions, Counsel for the appellant also highlighted evidence of Mr Atwell at paragraph 15(b) of his affidavit of 26 August 2016 as follows:
The electronic rent roll was always available to the liquidators at any time. I made 3 separate appointments for the liquidators to take the rent roll off the FSFL server in December 2015 and January 2016. The liquidators could have obtained a copy easily prior to selling the rent roll on 18 December 2016, either from FSFL or from RP Data Core Logic the software provider.
55 In reply, Counsel for the appellant emphasised that there was no written evidence of requests by the Liquidators.
56 By way of summary, it was submitted that therefore the finding that 'at no time did FSFL or the Atwells make the server available' was just wrong, given that Mr Turner did not deny the letter to BDO giving access on 10 January 2016. In any case, the Liquidators had full access to everything given that they had control of the Company.
57 The written submissions cited the evidence from Mr Turner in his fourth affidavit as cited by the associate judge. Counsel also cited evidence in Mr Turner's first affidavit, sworn 23 May 2016, wherein he stated:
Michael refused to provide access to the electronic copies of records relating to the rent roll on the basis that the computer hardware was not the property of the Company.
58 In oral submissions, it was highlighted that even if the key was made available, this did not constitute access to the server given that passwords (and so on) were involved.
59 Further, that there was circumstantial evidence in support of a finding that the server was not available. First, that it was plausible that the Company in dispute with the Liquidators would be uncooperative. Second, that the interference was consistent with an uncooperative stance. Third, that it was not plausible that someone would go to the trouble of manual reconstruction if it was not necessary. Finally, that the contents of the March 2016 report were consistent.
60 At paragraph 37, the associate judge recites the sworn evidence of Mr Turner (from his fourth affidavit, highlighted above) to the effect that at no time did FSFL, Mr Atwell, or Mrs Atwell make the server available despite repeated requests. He thereby appears to accept this evidence despite the evidence of the Atwells cited above.
61 However, the evidence of the Atwells was somewhat unclear given the evidence of Mrs Atwell in particular appeared to relate to access to the office rather than the actual server (this included the letter of 10 January 2016 which referred to access 'to the office'), in circumstances where Mr Turner had already acknowledged that he had been given a key to the office in about December 2015.
62 Moreover, the fact that the Liquidators were meant to have 'control of the company' does not advance matters given the data was on a server located at FSFL (with whom the Liquidators were in dispute).
63 Ultimately, at the highest for the appellant, there was some conflict in the evidence which the associate judge needed to resolve, in a summary way, as best as he could. Although there was a lack of objective evidence, there were also ongoing conflicts and difficulties with both FSFL and the Atwells which supported the likelihood of an uncooperative stance. In such circumstances, the associate judge was entitled to accept the sworn evidence of the Liquidators.
64 I am therefore not satisfied that his Honour erred in finding that the computer server was not made available (as per ground 3(a)). Nor am I satisfied that his Honour 'ought to have concluded' that it was made available instead pursuant to ground 3(b) (which is simply a statement that some different finding ought be made without identification of any error).
Ground 4 - Whether manual reconstruction necessary
Mr Turner deposes that it was necessary to reconstruct the rent roll from manual documents. Some electronic records were obtained from databases in or about December 2015, however the majority of manual construction had occurred by that time. In order to obtain the electronic records, it was necessary for the Liquidators to liaise with RP Data and to pay a fee for access to the electronic records.
67 It was submitted that there was an error in finding that the Liquidators were required to manually reconstruct the rent roll in circumstances where they could have got it earlier from RP Data or through Mrs Atwell before she was terminated on 18 December 2015.
68 This led to unnecessary expenditure of $230,000 in manually reconstructing the rent roll, which could have been obtained from RP Data (which was a third-party data provider).
69 The respondents made two submissions in response to the suggestion that the data could have been obtained from RP Data earlier.
70 First, that even if the data from RP Data had been obtained, the Liquidators still had to undertake a manual task of 'unscrambling' data given the trust affairs of FSFL had become mixed with that of the Company, in circumstances where FSFL did not have its own trust fund and also needed to be liaising with Macquarie Bank (which was facilitating the trust arrangement). Thus, as explained by Mr Turner, it was necessary for the Liquidators to isolate and separate the trust funds, working out which clients belonged to whom (with associated disputes along the way).
71 Second, that there was a fee to be paid to RP Data, which was to be avoided in circumstances where the server rightfully belonged to the Company.
72 It was also submitted that only Ms Lester had been given the authority to deal with the trust account, such that it was not appropriate for Mrs Atwell to deal with it.
73 As I have already found, the associate judge was justified in finding that the server had not been made available despite requests. In such circumstances, reference to assistance by Mrs Atwell lacks utility. Rather, the real complaint appeared to be that that manual construction would have been avoided if the Liquidators had gone to RP Data in the first place.
74 However, this is not the way the error is framed; the error alleged is that the associate judge erred in finding that the Liquidators were required to manually reconstruct the rent roll. No such error is established in circumstances where the unchallenged sworn evidence of Mr Turner was that it was necessary.
75 In any event, the complaint misunderstands the manual reconstruction process. As highlighted in the associate judge's reasons (at paragraph 37), this process included the isolation and separation of trust funds (or 'unscrambling') which was necessary regardless of whether data was obtained from RP Data. It followed that the manual process was not avoided even if data from RP Data had been sought earlier.
76 I also accept the respondents' submission that the Liquidators acted appropriately in attempting to obtain the data in the first instance, without the payment of fees to a third party.
77 No error is established and certainly not ground 4(a) as framed. Ground 4(b) is also not sustained, which again seeks a different finding without particularising any error.
b. His Honour ought to have concluded the rent roll was readily and cheaply sold via an expert broker.
79 The associate judge cited evidence of a Mr Bruce Kenneth Simmons (an accountant and liquidator), who deposed that selling a rent roll requires little time because the correct way to go about it is to appoint a broker who arranges for the sale at some 3-5% of the sale price (at paragraph 27). His Honour also cited a report of Mr Paul Brooks from Real Estate Dynamics, who stated that, if Real Estate Dynamics were to be engaged to sell the rent roll, it would charge only 5% (plus GST) of the sale price (at paragraph 29).
80 The Reasons subsequently refer to the Liquidators' statements that there was no indication that Mr Brooks had been briefed with the details in context about the sale process, the attrition of customers, and the like. Further that there was no evidence that a broker would have achieved a better outcome.
The evidence of the Liquidators is plausible and there is a document to support the evidence of the Liquidators. I am prepared to accept the evidence of the Liquidators. As the Company was in liquidation, it is the responsibility of the Liquidators to have some involvement in the sale process. On the evidence before me, I am of the view that it would be wrong for the Liquidators to abdicate their responsibility entirely to a broker in this case.
82 The appellant submitted that the evidence of Mr Brooks was unchallenged. In such circumstances, the associate judge ought to have concluded that the Liquidators could have sold the rent roll for a fee of about $42,000.
83 Further, that there was no reason the Liquidators should not have retained a broker - just as it engaged a real estate agent with selling Dinner Plain - given it was obliged to minimise costs.
84 In written submissions, the respondent highlighted that Mr Brooks did not address the difficulties encountered in selling the rent roll in this case, but instead assumed it would be a simple task.
85 In oral submissions, particular difficulties were highlighted, including the collapse of the sale; the difficulties in obtaining data; the task of compiling the reconciliation of the trust accounts; as well as dealing with the interference issues.
86 Although it might have been the case that a broker could have effected the limited marketing and sale process at around 5% of the sale price (similar to an estate agent), the evidence before the associate judge was that the sale process was considerably more complicated in this case.
87 Ground 7 consists of a simple assertion that the Court 'ought' to have concluded that the Liquidators could have readily sold the rent roll for $42,000. No error in the reasoning of the associate judge is identified. Equally, ground 5(b) also fails given no error is established.
88 In any event, the associate judge was entitled to reject the proposition that the broker would have been cheaper. Although the report of Mr Brooks cites some of Mr Turner's affidavits, the simple price he quotes appears to be formulaic and takes no account of the complexities of this case (referring only to marketing, advertising and preparation of contracts costs).
89 Ground 5(a) alleges that his Honour erred in finding that it would have been wrong for a liquidator to sell the roll using a broker, labelling that 'abdicating responsibility'.
90 In fact, his Honour found that it would be wrong for the Liquidators to abdicate their responsibility 'entirely', a matter which was not properly the subject of any challenge. In any event, the finding that it was the responsibility of the Liquidators to have some involvement in the sale process was appropriate given the issues that arose, in particular the issues of interference and mixing of trust funds.
93 The associate judge cites the submission of Mrs Atwell that the remuneration ought not be assessed solely by application of time taken in circumstances where all that was required was the sale of a rent roll and a property.
94 The associate judge then cites passages from the judgment of Black J in the decision of Re Idylic Solutions Pty Ltd (as trustee for Super Save Superannuation Fund), including that 'a claim for remuneration based on hourly rates should at least be tested by reference to a percentage of realisations and possibly, in an appropriate case, displaced by remuneration on that basis or by a mixed approach'.[17]
95 His Honour states that proportionality should be applied but only in an appropriate case. Further, that Black J makes it clear that time-based charging can be tested by reference to the percentage of realisations and in an appropriate case displaced by remuneration on that basis, or by a mixed approach. His Honour notes that Black J recognised that there is no rule that proportionality will be applied in all cases, with each case depending on its circumstances (at paragraph 49).
96 The Reasons then continue (at paragraphs 50-51):
Here, proportionality is a difficult concept because of the interference of both Michael and Morag Atwell, which has [led] to a considerable amount of work needed to be undertaken by the Liquidators. There has not been recovery of assets as expected, but Morag and Michael Atwell appear to have been the cause of this. I will reduce the remuneration by ten per cent, to $252,000.00 ($280,000.00 - $28,000.00).
I am satisfied that the Liquidators' claim is reasonable and has met the 'criteria' contained in s 504(2) of the Act. It appears to be reasonable. There is no reason to reduce the remuneration further.
97 In written submissions, the appellant submitted that to the extent that the Court took into consideration the 'interference' by Mrs Atwell as significantly increasing the fees of the Liquidators, it was in error.
98 In oral submissions, it was said that the associate judge confused interference and proportionality. Further, that after considering the relatively small value of the Company's two major assets of around $500,000 (a rent roll of $416,000 and a property of around $300,000 with a net equity of only $75,000), an appropriate figure for remuneration would be somewhere between $10,000 and $50,000.
99 It was further submitted that there was expert evidence from Mr Simmons who opined that the remuneration was excessive given there were only two assets and three small creditors.
100 In written submissions, the respondent submitted that the suggestion that the interference with the sale of the rent roll had a negligible effect is contradicted by, inter alia, the fact that the original sale collapsed, and that there was substantial work in addition to the sale of the rent roll. Further, that his Honour's approach was entirely consistent with legal principles and no error was shown. Finally, it was correct to identify that proportionality was difficult to apply given the interference.
101 In oral submissions, Counsel highlighted the decision of the NSW Court of Appeal in Sanderson,[18] and submitted that ultimately the test is to be determined according to the statutory test. Thus, work may be reasonable, even if it does not necessarily 'produce fruit'.
102 It was also suggested that, given the interference, the true value of the assets has been depleted at the same time as the amount of necessary work has increased. In such circumstances a strict proportionate approach would produce a skewed analysis given that it would mean there would be a higher amount of costs as a percentage of realisations than there would otherwise be.
103 To this end, Mr Turner had provided an estimate of the value of the assets of the Company at approximately $759,400.90 to $789,400.90 where those assets included recoveries of commissions and earnings on trading the rent roll as well as the Dinner Plain property and the rent roll. Counsel however highlighted that this was based on the reduced value of the rent roll actually received on the sale following the interference, but that if the business had been sold at the original price the realisations would be approximately $1.16 million.
104 As well as the interference leading to sale collapse (which required further negotiations, ongoing work, and efforts to retain the client base), there were other complexities which were not acknowledged by Mr Simmons and which included the caveats over Dinner Plain; legal disputes with FSFL; work to prepare trust accounts; and dealings with claims of subrogated creditors.
105 Finally, the associate judge clearly took into account proportionality, given he provided a substantive discount of $28,000.
106 In Sanderson, Bathurst CJ stated that the question of proportionality is a well-recognised factor in considering the question of reasonableness.[19] This includes proportionality in terms of work done as compared to the size of the property and proportionality in terms of whether the work done is proportionate to the difficulty and importance of the task in the context in which it needs to be performed.
107 His Honour also stated that the mere fact that the work performed does not lead to augmentation of the funds does not mean the liquidators are not entitled to be remunerated. It is relevant to consider whether the work was necessary to be done.[20] Ultimately, it also remains the responsibility of the court to fix 'reasonable remuneration' on the evidence before it.[21]
108 There was nothing raised to suggest that the associate judge 'erred in applying the principle of proportionality ... due to alleged interference'. The associate judge merely observed that proportionality was difficult to apply because of such interference.
109 The finding that there was interference was sound for the reasons given already. It was also appropriate to highlight that interference could skew the figures as highlighted by the respondents (by increasing hours and decreasing the proceeds).
110 Insofar as Mr Simmons was concerned, his evidence is premised on the fact that the Liquidators only had to sell two assets and pay creditors. This, however, was contradicted by the sworn direct evidence of Mr Turner cited already as to the range of tasks needed to be performed. Mr Simmons also asserts that selling a rent roll requires little time or effort which again ignores the sworn evidence of Mr Turner as to the interference and failed sale as highlighted already (and which was accepted by the associate judge).
111 There is otherwise nothing to suggest that his Honour erred in his application of the principles. To the contrary, he cites appropriate authority and correctly notes that there is no rule that it will be applied in all cases. Despite this, the associate judge was prepared to apply a discount, while still having regard to the relevant statutory criteria. This was also in a context where there was no finding that any of the Liquidators' work was unnecessary. To the contrary, the associate judge had explicitly accepted the evidence of Mr Turner that it was necessary to isolate trust funds and manually reconstruct the rent roll.
112 No error is thereby demonstrated (as per ground 6(a)) and there is therefore no basis to substitute some other reduced figure as sought by the appellant (as per ground 6(b)).
113 Subject to hearing from the parties on the question of costs, the appropriate orders are:
(a) The time for bringing this appeal is extended until 23 January 2017.
(c) The appellant is to pay the respondents' costs of the proceeding to be taxed on a standard basis in default of agreement.
[1] Dennis Anthony Turner and Luke Christopher Targett (in their capacities as joint and several liquidators of Atwell & Co Pty Ltd (in liq)) v Atwell & Co Pty Ltd (in liq) (Unreported, Supreme Court of Victoria, Efthim AsJ, 14 December 2016).
[2] Note that s 504 of the Corporations Act was repealed by Sch 2 Pt 2 s 165 of the Insolvency Law Reform Act 2016 (Cth) and replaced by the Insolvency Practice Schedule (Corporations) (Sch 2 of the Corporations Act), commencing 1 March 2017. However, both Counsel accepted that s 504 remained applicable in this case. This is correct given that, pursuant to Sch 2 Pt 3 s 1581 of the Insolvency Law Reform Act 2016 (Cth), the old provisions continue to apply in relation to the remuneration of external administrators appointed before the commencement day (1 March 2017).
[3] No point was taken as to the status of the bankrupt in circumstances where the trustee in bankruptcy had been informed, and on the basis that a personal right only was being pursued by Mrs Atwell.
[4] Transcript of Proceedings (10 November 2017) 38, 95.
[5] On 3 May 2016, the trustee of the appellant's bankrupt estate formally made a subrogated claim in the amount of $999,603.64 against the Company.
[6] Pursuant to 77.06.2 of the Supreme Court (General Civil Procedure) Rules 2015, appeals from an associate
judge are to be served within 14 days after the day the judgment or order of the associate judge was
[7] Which took account of r 3.04 of the Supreme Court (General Civil Procedure) Rules 2015 providing for the vacation period.
[8] Oswal v Carson [2013] VSC 355, [11] citing Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; (2000) 203 CLR 194, 203-4 [14].
[9] [2016] HCA 22; (2016) 331 ALR 550, 558-9 [43].
[13] (1998) 20 WAR 96. Although Venetian Nominees concerned predecessor provisions to those applicable in this case, the principles discussed therein remain applicable: see, eg, Sanderson [2017] NSWCA 38; (2017) 93 NSWLR 459, 470 [54].
[14] Venetian Nominees (1998) 20 WAR 96, 102.
[16] Ibid 104 quoting Computer Machinery Co Ltd v Drescher [1983] 1 WLR 1379, 1386.
[17] (2016) 115 ACSR 591, 598 [50]; also cited in Sanderson [2017] NSWCA 38; (2017) 93 NSWLR 459, 471 [56].
Dennis Anthony Turner and Luke Christopher Targett (in their capacities as joint and several liquidators of Atwell & Co Pty Ltd (in liq))
Atwell & Co Pty Ltd
(2000) 203 CLR 194
(2016) 331 ALR 550
(2017) 93 NSWLR 459
(1998) 20 WAR 96