Australian Securities and Investments Commission v Marco

Applicable principles

1. I now turn to the applicable principles in respect of the fixing of Mr Cook's remuneration as receiver and manager of the Trust property. Division 60 Subdivision B of the IPSC permits an external administrator to claim remuneration determined, inter alia, by the Court. In determining the amount of that remuneration, the Court must have regard to the matters specified in IPSC s 60-12, which overlap with the matters which have traditionally been taken into account in assessing an insolvency practitioner's remuneration, which I summarised in Re Sakr Nominees Pty Ltd [2017] NSWSC 668 at [23]ff. These factors include, importantly, the question of proportionality of the remuneration claimed to the work undertaken, and the Court will need to be satisfied that the remuneration sought is fair and reasonable in the relevant circumstances.
2. The Court will apply an independent mind to whether the remuneration sought by an external administrator relates to necessary work which is properly performed, having regard to considerations of proportionality, but it is not the Court's function to undertake a line by line review of the costs claimed, including by reference to narratives in time schedules, and the Court will review the evidence in a broad way to satisfy itself that the amount claimed is reasonable: Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540 at [48]; Knox v Nile [2022] NSWSC 638 at [35].
3. These principles have also been applied in assessing the remuneration of a Court appointed receiver, such as Mr Cook, in decisions including Ide v Ide (2004) 184 FLR 44; [2004] NSWSC 751 at [39]ff and Re Metal Storm Ltd [2015] NSWSC 1699 at [11], Re Wine National Pty Ltd [2016] NSWSC 4 at [13]; Re Banksia Securities Ltd (in liq) (recs and mgrs. apptd) [2018] NSWSC 229 at [5]ff. I note that Mr Cook does not here seek approval of disbursements, and such approval is not ordinarily required in the absence of a challenge to those disbursements.
4. Mr Cook has claimed remuneration in respect of the administration of trust assets. The evidence led in this application indicates that the Company was trading solely in its capacity as trustee for the Trust, and no question of apportionment of costs between those attributable to trustee and non-trust activities of the Company arises in this case. Earlier decisions of this Court have allowed remuneration for general work done by a liquidator appointed to a trustee company in respect of the administration of trust assets: Re Ferndale Holdings Pty Ltd (admins apptd) (recs and mgrs apptd) [2020] NSWSC 901 at [25]-[29]. In Australian Securities and Investments Commission v Marco (No 9) (2021) 399 ALR 735; 156 ACSR 56; [2021] FCA 1306, McKerracher J referred to that decision, without disapproval, and also undertook a comprehensive analysis of the circumstances in which remuneration may be available in respect of trust assets, in that case in respect of a claim for remuneration by a voluntary administrator appointed to a company which held assets on trust. His Honour there held that an administrator was not entitled to exercise a direct right of exoneration in respect of his remuneration for work done in respect of trust assets; that the trustee's right of indemnity and the associated proprietary interest was "property" for the purposes of the Corporations Act 2001 (Cth); and that s 60-5 of the IPSC itself confers a right of remuneration against assets that are legally owned by a company in administration, in respect of a remuneration determination made by the Court. That analysis, while more complex, seems to me to lead to the same result as earlier decisions of this Court, and I need not address it further in the circumstances of this case.

Affidavit evidence

1. Turning now to the affidavit evidence, Mr Cook reads his affidavit dated 19 May 2023 in support of the application. Mr Cook there sets out his background and experience and refers to the circumstances in which he was appointed as liquidator of the Company in a liquidation that commenced as a members voluntary winding up. He refers to the Company's business, which involved design and manufacture using specialist equipment, which was sold in the course of the liquidation and receivership and has generated a substantial part of the returns advanced in the liquidation and receivership. Mr Cook also refers to the establishment of the Trust, and notes that liabilities incurred by the Company had been incurred by the Company in its capacity as trustee, and he had concluded, based on his investigations, that there were no general creditors of the Company in terms of any non-trust activities.
2. Mr Cook sets out the manner in which time is recorded within his firm, and refers to the basis on which his and his staff's remuneration was charged in this matter, on a time charging basis. He refers to the steps which he took in order to review time charges made in respect of work done in the liquidation and the receivership, and to reduce the amounts charged where it seemed to him that the work charged or time spent was disproportionate, and otherwise to satisfy himself as to the accuracy of time records. Plainly, steps taken by a liquidator or receiver to satisfy himself or herself personally as to the propriety of time records are relevant in an application of this kind.
3. Mr Cook in turn addresses the amount of remuneration claimed, in the receivership, in respect of several categories of work, adopting the Australian Restructuring Insolvency and Turnaround Association ("ARITA") work categories, in respect of assets, creditors, dividend, employees, investigations and administration. The substantial part of the remuneration claimed in this matter relates to assets, with a lesser claim for remuneration in respect of creditors, and smaller claims again in respect of other items. Mr Cook also expresses the view that the work undertaken by him and his staff was necessary to properly undertake his role as a Court-appointed liquidator and as receiver and in order to realise the Trust assets. Evidence of that character by a liquidator or receiver is also relevant in an application of this kind, although it is plainly not determinative of that question, as to which the Court must form its own view. Mr Cook also outlines the way in which the work was distributed between members of his staff, and it is apparent that the use of intermediate and more junior staff here operated to average down the hourly rate at which remuneration is claimed, where a significant amount of the necessary work was undertaken by staff of lesser seniority whose work was undertaken at lesser hourly rates.
4. Mr Cook then outlines the work done in the several categories, in a narrative way, and an outline of that kind is again important in order to allow the Court to understand the nature of the work and why it was done. He addresses the work done, initially, in briefly exploring the possibility of sale of the business as a going concern, which did not proceed, and subsequently in realising plant and equipment through an auction process which generated substantial sale proceeds. Mr Cook also addresses the work which was done in order to deal with the position of assets which were subject to specific securities, and in order to address the position of the leased premises occupied by the Company, where the Company's occupancy of those premises continued to allow the auction of its other assets to proceed at those premises. Mr Cook also addresses the position in respect of work done in respect of debtors and other assets of the Company, and in dealing with the position in respect of the lease of the Company's premises, and in respect of a director loan.
5. Mr Cook outlines the work done in respect of the creditors work category, including the position in respect of a particular item of equipment to which one creditor claimed to have security, an issue which was addressed in the course of the liquidation and receivership. Mr Cook also outlines the work done in dealing with other, less time-consuming, aspects of the liquidation and receivership, including dealing with employees, and with the Commonwealth in light of the Fair Entitlements Guarantee scheme in respect of employees, and in relation to investigations and a residual category of administration, which included dealing with matters such as insurance arrangements.
6. Mr Cook's evidence is that, as I noted above, creditors have previously passed several resolutions approving his remuneration in respect of the liquidation, in an amount which is similar to the amount now claimed in respect of the receivership, and approving future remuneration in respect of the liquidation from 1 February 2023 to finalisation of the liquidation in a larger amount than is claimed for future remuneration in the receivership. It appears that there is a significant overlap between the amounts claimed in respect of the liquidation and the amounts claimed in respect of the receivership, although it is likely that the work claimed in those two categories is not identical. I accept that an application to the Court for approval of Mr Cook's remuneration as receiver and manager of Trust assets was likely necessary, notwithstanding that creditors had approved the amount of his remuneration as liquidator, and there is no suggestion that the approval of his remuneration in those categories will give rise to any increase in the total amount of remuneration that is payable. Mr Cook finally addresses a claim for future remuneration, in respect of the work which will be necessary to bring the receivership of Trust assets to an end.
7. Mr Cook also reads, in the application, two affidavits of service of Mr Strapp dated 2 June 2023 and 14 June 2023. Creditors have been given notice of the application, although less than the 21 days' notice that is required under rule 9.2 of the Supreme Court (Corporations) Rules 1999 (NSW). It appears that the Australian Securities and Investments Commission ("ASIC") was not given notice of the application but, in the particular circumstances, I will find below that that provides no reason not to fix the remuneration as sought in this application.

Submissions and determination

1. Ms Scott, who appears for Mr Cook in the application, refers in her submissions to the principles applicable to the remuneration of Court-appointed receivers, which I have addressed above. She refers to the evidence of notice of the application to creditors and shareholders, and acknowledges that ASIC has not been given notice of the application. Ordinarily, such notice will be required in respect of an application of this kind, although the Court may, in a proper case, deal with the application and then stay its orders to allow an opportunity for notice to be given to ASIC after the event, and before those orders take effect. The Court may also, in what may be a rare case, dispense with the requirement for notice of the application to ASIC and Ward CJ in Eq (as the President then was) made such an order in Re Mudgee Dolomite & Lime Pty Ltd [2021] NSWSC 984. I am satisfied that, in the circumstances of this case, which are similar to those which her Honour there addressed, the Court should similarly dispense with the requirement for notice of the application to ASIC in this case. Here, creditors have already approved Mr Cook's remuneration as liquidator in a substantially similar amount to that now claimed as also referable to the receivership of Trust assets. It is highly unlikely that, in those circumstances, ASIC would take a different view from that which creditors have taken, having regard to their own interests in respect of the liquidation.
2. Turning to the question of remuneration sought, Ms Scott addresses the calculation of Mr Cook's remuneration by reference to hourly rates, which is plainly a permissible, although not the only, basis on which remuneration may be calculated. She refers to Mr Cooks' evidence as to the staff members who worked on the liquidation, and the extent to which that has involved an averaging down of the hourly rate charged, by the use of more junior staff in respect of work appropriately done by such staff. She in turn summarises the work which was done by Mr Cook and his staff in respect of the receivership, to which I have referred in addressing his evidence above, and to the categories of work which were done.
3. I am satisfied, having regard to Mr Cook's evidence as to that work, and having regard to the attitude taken by creditors in approving the remuneration claimed in respect of the liquidation, that that remuneration claimed by Mr Cook is proportionate and reasonably incurred. I bear in mind, in that respect, that Ms Scott draws attention to a comparison between the remuneration incurred and the total realisations in the liquidation and receivership, which is ordinarily of assistance in indicating whether the work done may be disproportionate to the realisations achieved by it. There is no suggestion here of any such lack of proportionality arising from that calculation.
4. Mr Cook also seeks an order dealing with his future remuneration. I am satisfied that that order should properly be made, where the amount claimed is again proportionate to the work which is likely to be required to complete the receivership. The Court has often made such orders, where it can be satisfied of that matter, in order to avoid the additional costs of a further application for approval of a relatively small amount of remaining remuneration. The form of order sought by Mr Cook will provide for him to draw such remuneration only as and when it is properly incurred, and that sufficiently addresses any risk that remuneration would be paid under that approval where it is not properly incurred.

Orders

1. For these reasons, I make orders 1 - 6 in accordance with the short minutes of order initialled by me and placed in the file. I include in order 1, line 7, before the words "and receiver and manager" the additional words "(without prejudice to the existing approval of any or all of such remuneration by creditors)". That inclusion recognises the fact that this approval will overlap, to a substantial extent, with the approval already granted by creditors of the remuneration claimed by Mr Cook in his capacity as liquidator. I also include, in order 2, line 1, after the words "be approved", the additional words "(without prejudice to the existing approval by the creditors of such future remuneration)" for the same reason. I include in order 6 the additional words, at the end of the order "and in paragraph 2 as it is properly incurred," adopting the approach noted above. I have deleted from those orders the reference to a declaration concerning the disclaimer where, as I noted above that declaration was deferred.
2. As I noted above, Ms Scott indicated that Mr Cook sought to stand over the question of a declaration concerning the disclaimer dated 16 January 2023 for a further week, to confirm that there is no ongoing dispute in that regard. I make a further order 7 to stand over the application in respect of that disclaimer to the Corporations Motions List at 9.15am on 26 June 2023. I note that, if any application by Mr Cook for a declaration concerning the disclaimer is likely to proceed, then it may be necessary for Mr Cook to join the lessor of the relevant property as a respondent to the application.

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