Deputy Commissioner of Taxation v Addwealth Financial Services Pty Ltd

BARKER J: 1 These reasons deal with the application of Giovanni Maurizio Carrello, the liquidator of Addwealth Financial Services Pty Ltd ACN 078 480 118 (in liquidation) (company) for the determination of his remuneration. 2 The application is made, on its face, pursuant to s 473(3)(b)(ii) of the Corporations Act 2001 (Cth). The liquidator submits the applicable provision is either: section 473(3)(b)(ii) of the Act, as it stood prior to the commencement of the Insolvency Law Reform Act 2016 (Cth); or section 60-10(1) of the Insolvency Practice Schedule (Corporations) which is Sch 2 to the Act, which are substantially similar. 3 The liquidator notes he was appointed on 9 December 2015, well before the commencement of the Insolvency Law Reform Act and that Sch 2, item 144 of the Insolvency Law Reform Act repealed s 473 of the Act and replaced it with a provision about the resignation of liquidators. 4 The liquidator further submits that under s 1581(1) of the Act, which was inserted by Sch 2, item 322 of the Insolvency Law Reform Act, the "old Act" (including the old s 473) continues to apply in relation to the remuneration of an external administrator of a company who is appointed before the "commencement day". 5 Under s 1551 of the Act, which was also inserted by Sch 2, item 322 of the Insolvency Law Reform Act, the "old Act" is defined as the Act as in force before the commencement day, and "commencement day" is defined as the day on which Sch 2, Pt 1 of the Insolvency Law Reform Act commenced, being 1 March 2017. 6 Schedule 13, item 5 of the Corporations Regulations 2001 (Cth), inserted by Sch 2 item 2 of the Corporations and Other Legislation Amendment (Insolvency Law Reform) Regulation 2016 (Cth), provided that the old s 473 also applied to an external administrator appointed, it would appear, prior to 1 March 2017. 7 Under s 1581(2) of the Act, if Div 75 of the Insolvency Practice Schedule (Corporations) applies to a meeting dealing with the remuneration of an external administrator, Div 75 applies to that meeting. Pursuant to s 1601(1) of the Act, Div 75 of the Insolvency Practice Schedule (Corporations) applies to a meeting irrespective of when the external administrator was appointed, but does not apply if the meeting was convened or held before the commencement day. In this matter, both meetings were convened and held after the commencement day. Consequently, Div 75 of the Insolvency Practice Schedule (Corporations) applies. 8 However, Div 75 of the Insolvency Practice Schedule (Corporations) says nothing about remuneration. It is about the meeting process. The division in the Insolvency Practice Schedule (Corporations) that deals with remuneration is Div 60. Under s 1580 of the Act, Div 60 applies in relation to an external administrator who was appointed after the commencement day. Consequently, it does not apply to the liquidator. 9 The liquidator finally submits that s 473 as it stood immediately prior to the commencement of the Insolvency Law Reform Act is the applicable provision. Division 75 of the Insolvency Practice Schedule (Corporations) applied to the meetings at which the liquidator sought approval of his remuneration, but only to prescribe the procedure for those meetings. 10 I proceed on the basis that the Court has or retains power to determine the liquidator's remuneration in this case, as the liquidator submits, either - and most probably - under s 473(3)(b)(ii) of the Act as it stood prior to the commencement of the Insolvency Law Reform Act; or under s 60-10(1) of the Insolvency Practice Schedule (Corporations) which is Sch 2 to the Act. 11 It is well understood that the reasonableness of remuneration cannot always be determined solely by reference to the time costing based on reasonable market rates, or because it represents a particular percentage of the return that creditors achieve. See Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38 at [57]. However, proportionality is relevant. Sanderson at [55]. 12 Ordinarily, if the liquidator can make out a prima facie case on the evidence, the remuneration will be proved. See, for example, Thackray & Ors v Gunns Plantations Ltd & Ors (2011) 85 ACSR 144; [2011] VSC 380 at [60] (Davies J). It is accepted that it would be unnecessarily burdensome for the Court to have to examine each task done and each unit of time spent on the winding up in making an assessment of what is reasonable. A more broadly adopted view than that may be appropriate in the circumstances of cases. 13 The liquidator applies for: (1) remuneration of $25,000 (plus GST and expenses) for the period from the commencement of the winding up to 12 September 2017; and (2) remuneration of $10,000 (plus GST and expenses) for the period from 13 September 2017 to the conclusion of the winding up. 14 The application is supported by two affidavits made by the liquidator dated 26 October 2017 and 6 December 2017. 15 In his first affidavit, the liquidator sets out some details concerning his 24 years' experience in dealing with insolvency matters. 16 He notes that the company operated a financial planning and advisory business until it ceased to trade in March 2013, but that it still receives trailing commissions of approximately $600 per month, which are diminishing; and is a defendant in two on-going actions in the Supreme Court of Western Australia. 17 He also notes that the company only has two unsecured creditors, being the Australian Taxation Office (ATO) and Telstra Corporation Ltd. 18 The liquidator notes that while the company is a party to two actions in the Supreme Court of Western Australia, it is not an active party and indeed has not entered an appearance. He has produced a letter from a solicitor stating the position of the plaintiff in the two actions against the company. It seems that it does not intend to take any further action against the company. 19 The liquidator also deals with the question of a report to creditors and details of the work done in relation to the assets of the company and in relation to the creditors, as well as investigating the affairs of the company. 20 He says that based on his extensive experience as an external administrator he believes that at least the vast majority, if not all of the tasks done were reasonably necessary to the winding up of the company. 21 In relation to a creditors' meeting in October 2017, he notes that the ATO lodged a proxy but Telstra did not and because they did not attend, there was no quorum. Further, despite efforts made to obtain a quorum at the adjourned creditors' meeting in October 2017, Telstra did not attend once again or lodge a proxy. 22 The liquidator also notes the substantial discount to fees which he has applied in seeking a remuneration order. 23 He notes no objection to the remuneration sought has been received by him. 24 In his second affidavit, the liquidator advises that in October 2017 notices of intention to apply for remuneration and a copy of his first affidavit were posted to Telstra, the Deputy Commissioner of Taxation and Addwealth Pty Ltd (in liquidation), one of the two contributories of the company. Additionally, he caused a copy of the notice of intention to be sent to Mr Eugene de la Rouviere in South Africa. He also attached a copy of an email from Mr de la Rouviere confirming that he had received the notice and affidavit in the post. He holds 10 of 100 issued shares in the company. 25 The liquidator adds that Mr de la Rouviere would not receive any money from the winding up, even if he were not paid remuneration. 26 Having considered the liquidator's evidence, my view is that the work claimed was reasonably necessary and proportional in the circumstances. It is not necessary for me to inquire into every detail of it. 27 The fact that there has been no objection received to the remuneration sought is also relevant. 28 I also take into account there has been a sizeable discount of the remuneration sought as against what the standard rates for time spent might otherwise have justified. While the first period covers work actually done and the second period includes work through to the conclusion of the liquidation, I am satisfied it is appropriate to provide remuneration in respect of the latter sum as well. See Re HIH Services Pty Ltd (In Liq); Re HIH New Zealand Pty Ltd (In Liq); Re HIH Australia Pty Ltd (In Liq); Re Mariners on the Water Pty Ltd (In Liq); Re FAI Property (Qld) Pty Ltd (In Liq); Re FAI Property Services Pty Ltd (In Liq); Re Sailport Pty Ltd (In Liq); Re Bingaton Pty Ltd (In Liq); Re Worldwide Weather Underwriting Agencies (Australia) Pty Limited (In Liq) [2012] NSWSC 1188 at [7] (Brereton J). 29 I should add that none of the other factors set out in the former s 473(10) (which appears no longer to exist, but may be considered relevant factors in any event) suggests the remuneration sought should not be allowed. 30 I should finally note that I would waive the requirement for the liquidator to serve Mr de la Rouviere. 31 As a contributory, Mr de la Rouviere would not receive any money from the winding up, even if the liquidator were to be paid no remuneration. 32 As it transpires, the liquidator sent and Mr de la Rouviere apparently received the notice of intention to claim remuneration and the first of his affidavits. 33 While the liquidator suggests that in the circumstances that R 10.44 of the Federal Court Rules 2011 (Cth) was not engaged because they were not filed before they were served and they did not need to be filed, I am content in the circumstances simply to waive any requirement under the Rules for service. 34 For these reasons, I would make the orders sought in the interlocutory application. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.