First Plaintiff v Second Plaintiff

2 On 14 June 2011, Ferguson J (as her Honour then was) made comprehensive orders in respect of the remuneration and expenses of the Liquidators ('Orders'). The effect of those orders is summarised in an earlier judgment given by Gardiner AsJ in relation to the Liquidators' first application for their remuneration, and there is no need for me to repeat that here.[2]

3 Specifically, by this interlocutory process, the Liquidators seek the following relief ('Application'):

(a) an order that their Remuneration (as defined in the Orders) for the period between 1 April 2018 to 31 January 2020 ('Period') be assessed at $204,315.50 and that this be paid from the Scheme Assets (as defined in the Orders) in accordance with paragraph 2 of the Orders;

(b) an order pursuant to s 90-20 of Schedule 2 (Insolvency Practice Schedule)(Corporations) ('IPS') to the Corporations Act 2001 (Cth) ('Act') that:

(i) the Liquidators Remuneration for the Period be determined in the amount of $204,315.50; and

(ii) the Liquidators' internal disbursements ('Internal Disbursements') for the Period be determined in the amount of $11,883.20;

(c) leave pursuant to s 60-20(3)(b) of the IPS for the Liquidators to derive a profit or advantage from the external administration of TVM to the extent that the Internal Disbursements for the Period cause them to directly or indirectly derive a profit or advantage in breach of s 60-20(1) of the IPS;

(d) an order pursuant to s 90-20 of the IPS that the Remuneration and Disbursements be paid as follows:

(i) with respect to Remuneration and Internal Disbursements incurred in relation to the winding up of the Blue Diamond Deposits Trust No. 1 (ASRN 091 948 202) ('BDT'), from the Scheme Assets;

(ii) with respect to Remuneration and Internal Disbursements incurred in relation to the dual purpose of winding up BDT and TVM, from the Scheme Assets; and

(iii) with respect to Internal Disbursements incurred in relation to the winding up of TVM only, from the assets which TVM holds in its own right ('TVM Assets');

(e) an order that the Liquidators' remuneration, costs and expenses of this application be paid on an indemnity basis from the Scheme Assets and the TVM Assets in proportion to the total amount of Remuneration and Internal Disbursements to be paid from those assets in accordance with the order in paragraph (d) above.

4 In support of the Application, the Liquidators rely on the affidavits of:

(a) Mr Morgan, sworn 17 September 2020 ('Morgan Affidavit');

(b) Ariel Currie Borland, sworn 17 September 2020 ('First Borland Affidavit'). Ms Borland is a partner at Mills Oakley Lawyers ('Mills Oakley'), solicitors for the Liquidators;

(c) Meikah Johns, sworn 23 November 2020 ('Johns Affidavit'). Ms Johns is an administration assistant employed by Mills Oakley; and

(d) Ms Borland, sworn 23 November 2020 ('Second Borland Affidavit').

5 Following the hearing on 7 December 2020, the Application has been reviewed and determined by me on the papers.

6 For the reasons which follow, the Liquidators' remuneration will be approved in the amount of $191,231.50 and orders will be made in respect of the Internal Disbursements as sought.

Notification to ASIC and certain other persons of the intention to apply for Court approval of remuneration

7 Paragraph 6 of the Orders relevantly provides as follows:

(c) at least 21 days before filing the interlocutory process seeking the order, the Liquidators must serve on:

(i) each of the five largest unitholders in the Scheme (measured by the value of the interest they hold in the Scheme);

(ii) any representative party appointed by the Court pursuant to Order 7 below; and

(iii) the Australian Securities and Investments Commission;

(A) a notice in accordance with Form 16 of the Supreme Court (Corporations) Rules 2003 amended as necessary;

(B) a copy of the affidavit filed by the Liquidators in accordance with Order 6(b) above; and

(C) a copy of the Orders made on this application.

...

(e) within 21 days after the last service of the documents mentioned in Order 6(c), any interested person so served may give to the Liquidators a notice of objection to the remuneration which is claimed by the Liquidators to be Remuneration to be paid under Orders 2 and 3 above, stating the grounds of objection;

(f) if the Liquidators do not receive a notice of objection within the period mentioned in Order 6(e):

(i) the Liquidators may file an affidavit, made after the end of that period, in support of the interlocutory process seeing an order stating:

(A) the date, or dates, when the notice, affidavit and orders required to be served under Order 6(c) were served; and

(B) that the Liquidators have not received any notice of objection to the remuneration which is claimed by the Liquidators to be Remuneration to be paid under Orders 2 and 3 above within the period mentioned in Order 6(e);

8 Paragraph 7 of the Orders appointed Neil Campbell to represent himself and all unitholders in the Scheme ('Appointed Representative').

9 Ms Johns deposes that on 25 September 2020, she served a letter, a notice of intention to apply for remuneration, and copies of the Morgan Affidavit and the First Borland Affidavit ('Application Documents') on the following persons:[3]

(a) ASIC;

(b) Holiday Concepts Pty Ltd - Tamarind Sands; Resort Securities Pty Ltd; Holiday Concepts Pty Ltd - Resort Vacation; Holiday Concepts Pty Ltd - Mainland Resorts; Leisuretime Concepts Pty Ltd; and Resort Systems Pty Ltd;

(c) Woo Wah Pty Ltd ('Woo Wah');

(d) Mr Harold Bailey Thomas; and

(e) WHO Investments Pty Ltd ('Who Investments').

10 Ms Borland deposes that on 25 September 2020 she sent an email to Alysha Tuziak of K+L Gates, solicitors for the Appointed Representative, enclosing a secured link to the Application Documents.[4]

11 I understand that the persons served with the Application Documents as set out in paragraphs 9 and 10 above are those required to be served by paragraph 6(c) of the Orders.

12 Ms Borland deposes that on or about 4 November 2020, she received via post the envelope enclosing the Application Documents addressed to Woo Wah. She says that she obtained a company search of Woo Wah from ASIC, which recorded Woo Wah's registered office as the address to which the Application Documents had been sent.[5]

13 Ms Borland deposes that other than the correspondence with the Appointed Representative, detailed below, she has not received any objections from any person or entity in relation to the Application, and she says she is informed by the Liquidators and believes that they have not received any objections either.[6]

Correspondence with the Appointed Representative regarding the foreshadowed application

14 Ms Borland deposes that prior to making the Application, on 28 April 2020 she sent an email K+L Gates, solicitors for the Appointed Representative. She attached to that email drafts of the interlocutory process, Mr Handberg's twelfth affidavit, and a draft remuneration report ('Draft Documents').[7] Counsel confirmed at the hearing on 7 December 2020 that the draft twelfth affidavit of Mr Handberg became, with relevant modifications, the Morgan Affidavit by the time of filing the Application. I am satisfied with this explanation and that the draft affidavit provided to the Appointed Representative was substantially similar to the Morgan Affidavit.

15 Ms Borland then deposes to the communications she had with K+L Gates regarding the Draft Documents. Relevantly:

(a) on 19 May 2020, she received a letter from K+L Gates, in which a number of queries were raised on behalf of the Appointed Representative. In particular, he queried the reasonableness of the remuneration claimed pursuant to Job Code 2 - "BDT/TVM Remuneration Application"[8];

(b) on 15 June 2020, Ms Borland sent a letter to K+L Gates responding to the Appointed Representative's queries[9]; and

(c) on 17 July 2020, Ms Borland received a letter from K+L Gates, confirming that the Appointed Representative did not intend to file any objective material in response to the forthcoming application, but requested that the Court be informed of his concerns regarding Job Code 2: "BDT/TVM Remuneration Application".[10]

16 On 14 October 2020, Ms Borland received an email from K+L Gates confirming that the Appointed Representative did not intend to file a notice of objection to the Application.[11]

Background regarding the external administration of TVM, including previous remuneration applications and remuneration paid

17 The background to the insolvency administration of TVM is contained in the First Remuneration Judgment.[12]

18 This is the fifth application made by the Liquidators in respect of their Remuneration, as they have periodically sought approval for their Remuneration. The previous four applications were granted by the Court on terms set out in orders dated 18 December 2012, 9 April 2015 and 15 July 2016 made by Gardiner AsJ and dated 10 May 2019 made by me.[13]

19 Mr Morgan deposes that on about 1 May 2018, he issued a report to the unitholders of BDT ('BDT Report'). Mr Morgan says that the BDT Report was also filed with ASIC and made available to the creditors of TVM upon request to the Liquidators.[14]

20 Mr Morgan deposes that the BDT Report sets out that the remuneration drawn for the following periods is:[15]

(a) $53,001.50 for TVM work only, for the period from 17 December 2009 to 30 June 2016;

(b) $178,634.82 for TVM and scheme related work for the period from 17 December 2009 to 2 February 2010;

(c) $1,519,886.50 for TVM and scheme related work for the period from 3 February 2010 to 8 July 2011;

(d) $1,546,124 for TVM and scheme related work for the period from 9 July 2011 to 31 December 2013; and

(e) $1,319,574.50 for TVM and scheme related work for the period from 1 January 2014 to 30 September 2015.

21 The amount in paragraph 20(e) above was approved by the Court and includes a disbursement approved by the Court for $60,000 relating to legal fees incurred and directly paid by the Liquidators under their professional indem[16]ty policy.16

22 In addition, Mr Morgan deposes that the Court approved the Liquidators' remuneration for the period from 1 October 2015 to 31 March 2018 in the sum of $319,713 plus internal disbursements for the period 1 August 2017 to 31 March 2018 in the amount of $3,921.[17]

23 Accordingly, the total remuneration drawn to date, including the disbursements referred to above, is $4,940,855.32.

24 The BDT Report also sets out that from the date of their appointment (3 February 2010) to 31 March 2018, the Liquidators had received a total of $18,764,706.93 and have paid total amounts of $17,537,280.27.[18] In addition, the Liquidators have received further amounts of $4,003,456.33 and have paid further amounts of $751,273.94 during the Period.[19]

25 As observed by Gardiner As J in the First Remuneration Judgment, the Application is not one where the Court is exercising the jurisdiction of determining and fixing the Liquidators' remuneration under the statutory provisions of the Act.[20] Rather,

the [Orders] involve the exercise of the inherent equitable powers of the Court. It will be seen by the definition of 'Remuneration' in [the Orders] that although my task is different to that which occurs under the exercise of the statutory powers, the criteria which I apply to the exercise of determining and fixing the Remuneration in this application is very much akin to that process.[21]

26 In the Third Remuneration Judgment, his Honour noted that he considered it appropriate in this series of applications to apply the statutory criteria prescribed by s 473(1) of the Act.[22]

27 The legal principles applicable to applications of this type were summarised by Gardiner AsJ in the First Remuneration Judgment and the Second Remuneration Judgment.[23] I have also summarised the statutory provisions and the legal principles in several judgments.[24] Other than what I have noted below, there is no need for these to be set out here. Since the earlier remuneration judgments in this liquidation, the IPS has been introduced and s 473 has been repealed.

28 As noted above, the Application is brought under s 90-20 of the IPS for orders pursuant to s 90-15, which includes orders relating to the remuneration of external administrators. Division 60 of the IPS applies to remuneration applications and in s 60-12 the matters to which the Court must have regard are set out. These are very similar to the matters which had been set out in s 473(10) of the Act. I have previously explained the operation of the transitional provisions for approval of remuneration,[25] and the approach to be taken by the Court is relevantly the same. For the same reasons as articulated by Gardiner As J for applying the criteria in s 473(10) of the Act, in my view the criteria now to be applied are those set out in s 60-12 of the IPS.

29 Section 60-12 of the IPS states that 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.

30 While the criteria in s 60-12 of the Practice Schedule direct the Court to the factors that are to be taken into account, the ultimate question is whether the remuneration claimed by the Liquidators is reasonable.

Work performed by the Liquidators and their staff

31 In support of the Application, the Liquidators rely on a detailed remuneration report for the period 1 April 2018 to 31 January 2020 in respect of remuneration and for the same period in respect of internal disbursements ('Remuneration Report').[26]

32 Since their appointment, the Liquidators have categorised their work into the following three work categories ('Work Categories'):

(a) BDT Work - worn undertaken solely for the purpose of the proper administration of BDT;

(b) TVM Work - work undertaken solely for the purpose of the administration and then liquidation of TVM; and

(c) BDT/TVM Work - work undertaken for the dual purpose of both the administration and/or liquidation of TVM and for the purpose of the proper administration of BDT.

33 The Liquidators have not included their remuneration for the TVM Work in their claim for remuneration from the assets of BDT, as this falls outside the scope of the Orders.[27]

34 The Remuneration Report is divided into three sections:[28]

(a) An overview of the total remuneration and internal disbursements claimed ('Overview');

(b) Detailed summaries of the remuneration claimed under each of the following nine job codes ('Job Code Summaries'):

(i) BDT/TVM General Activities - remuneration and internal disbursements incurred in the winding up of TVM that relates to tasks that also needed to be undertaken as part of the proper administration and winding up of BDT;

(ii) BDT/TVM Remuneration Application - remuneration and internal disbursements incurred in the Liquidators' applications to this Court by originating process dated 25 March 2011 and for the Liquidators' remuneration for the period 1 October 2015 to 31 March 2018 ('Fourth Remuneration Application');

(iii) Personal Loan Assets - remuneration and internal disbursements incurred in the Liquidators' care, realisation and preservation of TVM's personal loan assets, which were personal loans to natural persons which were typically advanced to assist in the purchase of an interest in time share holiday units and apartments;

(iv) Spencer and Perovich - remuneration and internal disbursements incurred in the Liquidators' care, realisation and preservation of assets relating to funds loaned by TVM to Richard Spencer and Silvana Perovich;

(v) BDT General Activities - remuneration and internal disbursements incurred in the Liquidators' proper administration and winding up of BDT;

(vi) Alma Group - remuneration incurred in the Liquidators' care, realization and preservation of assets relating to funds loaned by TVM to Alma Securities Pty Ltd ('Alma'); and

(vii) TVM Work - Internal Disbursements - internal disbursements (not remuneration) incurred solely in relation to TVM Work for the Period.

(c) A breakdown of staff members' hourly rates from the date of the appointment and their various qualifications ('Rates and Qualifications Section'). This section also includes a profile of each of the Liquidators' staff members who has worked on this matter and a table comparing the hourly rates of other firms in comparison with the Liquidators' staff rates.

35 Each of the Job Code Summaries sets out a more detailed description of the work undertaken in respect of that Job Code and a table which sets out the time and costs charged, broken down by identification of the staff members concerned. Changes in rates for particular staff members over the period are reflected in the document. There is also a spreadsheet of individual entries containing the date the work was performed, the Job Code, the person who performed the task, the time occupied, the hourly rate charged, the charge for the task, and a narrative of the actual work involved. There is also a breakdown of the internal disbursements (for example, photocopying/printing, storage, phone calls) for each Job Code.

36 A summary of the work done under each Job Code during the relevant period is set out in the following paragraphs.

37 In respect of the BDT/TVM General Activities Job Code, the Liquidators have performed the following work:

(a) receiving and responding to queries and correspondence from TVM's creditors and/or their representatives;

(b) preparing and forwarding monthly reports to six secured creditors;

(c) lodging information with ASIC re BDT and TVM, and work in connection with attendances on ASIC and ASIC related matters;

(d) attending on ATO and ATO related matters - including preparing and lodging BAS statements;

(e) calculating payments to be made to secured creditors and corresponding with them regarding those payments;

(f) reconciling reports to secured creditors against reports obtained from Mission software;

(g) work in relation to attendances on ASIC Industry Funding Levy lodgements and payment of ASIC Industry Funding Levy invoices;

(h) reviewing historical employment records, preparing a superannuation guarantee charge calculation, submitting the superannuation guarantee charge calculation with the ATO and seeking a revised proof of debt from the ATO; and

(i) reviewing historical accounting records, determining the pre-appointment tax position for the purposes of completing any outstanding tax lodgements in order to obtain a clearance to pay a dividend to unsecured creditors.

38 In respect of the BDT/TVM Remuneration Application Job Code, which concerns the Fourth Remuneration Application, the Liquidators have performed the following work:

(a) liaising with solicitors regarding the application;

(b) compiling remuneration information;

(c) calculating remuneration and expenses;

(d) preparing supporting workings for the affidavits;

(e) transposing information relating to remuneration incurred by the Liquidators into an appropriate format for affidavits;

(f) preparing staff profiles and a comparison of charge out rates to be annexed to remuneration report;

(g) preparing and reviewing remarks reports;

(h) providing draft remuneration report to K+L Gates for review prior to filing;

(i) liaising with K+L Gates and responding to various queries raised in relation to remuneration claim;

(j) reviewing correspondence from stakeholders;

(k) preparing supporting documents for affidavits;

(l) swearing affidavits;

(m) attending Court hearing; and

(n) reconciling fees approved by creditors and by the Court and maintaining controls regarding fees approved by the Court and paid to Liquidators.

39 In respect of the Personal Loan Assets Job Code, the Liquidators have performed the following work:

(a) planning and implementing payments to secured creditors and preparation of monthly reports;

(b) managing and controlling the administration and collection of the personal loans, including recording collection data, reviewing and settling correspondence with personal loan debtors, attending to settlement of personal loans on final payout, including attending to the release of any security given for these loans;

(c) liaising with bankruptcy trustees in relation to pursuing bankrupt personal loan debtors;

(d) preparing daily reports for the personal loan assets, including collecting and recording daily receipts;

(e) liaising with individual borrowers and the Liquidators' solicitors to arrange for removal of caveats lodged by TVM;

(f) arranging for settlement of personal loans where those borrowers wish to pay their loans in full; and

(g) reviewing and paying expenses incurred with respect to the collection of timeshare loans.

40 In respect of the Spencer and Perovich Job Code, the Liquidators have performed the following work:

(a) liaising with solicitors regarding the potential for recoveries under the Share Sale Agreement;

(b) attendances on Spencer and Perovich's trustees in bankruptcy, Mango and BMD in relation to the settlement of TVM's claims under the Share Sale Agreement and the Guarantees and seeking legal advice in relation to the validity and enforceability of TVM's claims under these agreements;

(c) meeting with parties to the Spencer and Perovich proceeding to discussion mediation;

(d) liaising with solicitors regarding litigation funding options;

(e) preparing and reviewing memorandum to commercial litigation funders;

(f) reviewing and considering the merits of the proposal submitted by the litigation funders;

(g) preparing and reviewing position papers with respect to the proposed mediation;

(h) preparing and reviewing a brief to barrister regarding the proposed mediation;

(i) considering the quantum of TVM's claim and the merits of counter-claims for the purposes of determining a commercially acceptable settlement amount;

(j) attending mediation and negotiating a settlement deed;

(k) reviewing and executing the settlement deed;

(l) instructing solicitors to prepare a Court application to obtain approval of the settlement;

(m) preparing a circular to creditors and unit holders regarding the settlement and Court application to obtain approval of the settlement;

(n) corresponding with creditors and unit holders regarding participation in the Court application;

(o) swearing affidavits with respect to the Court application;

(p) attending Court hearing for the settlement approval application;

(q) reviewing Court orders with respect to the settlement approval application;

(r) monitoring and recording the receipt of settlement funds;

(s) reviewing consent orders to vacate various proceedings; and

(t) monitoring and recording the refund of the security for costs monies.

41 In respect of the BDT General Activities Job Code, the Liquidators have performed the following work:

(a) reporting to BDT's unit holders on the position of BDT and the likely return to BDT unit holders;

(b) reviewing bank statements and reconciling the bank account for BDT and liaising with banks in relation to these accounts;

(c) depositing cheques/or cash into the Trust's bank account;

(d) reviewing liabilities incurred by the Trust;

(e) analysing and investing the Trust's funds into high interest bearing accounts;

(f) recording receipts and payments;

(g) monthly reconciliation of the Trust's receipts and payments;

(h) paying liabilities incurred by the Trust;

(i) corresponding with bank managers in respect to management of the Trust's bank accounts;

(j) corresponding with Advance Computing, who provides software support in respect of the MISSION database; concerning the preparation of books and records to assist the Liquidators in their investigations;

(k) maintaining a unit holders register to account for the transfer of units or change of unit holder particulars;

(l) corresponding with unit holders in relation to, inter alia, requests for the transfer of unit holdings;

(m) liaising with solicitors in relation to unit holdings transfer applications;

(n) processing transfer of unit holdings applications;

(o) preparing and adhering to statutory obligations and lodgements with respect to the Trust;

(p) analysing potential returns from legal recoveries for the purpose of preparing periodic reports to unit holders;

(q) calculating estimated net recoveries from Personal Loans for the purpose of preparing periodic reports to unit holders;

(r) calculating estimated recoveries from Commercial Loans for the purpose of preparing periodic reports to unit holders;

(s) calculating returns to unit holders;

(t) preparing periodic reports to unit holders;

(u) reviewing books and records;

(v) undertaking tasks associated with storage of books and records; and

(w) general filing.

42 In respect of the Alma Group Job Code, the Liquidators have performed the following work:

(a) liaising with interested parties and seeking formal offers for the sale of the Braidwood Plantation;

(b) retrieving and reviewing historical records relating to the Braidwood Plantation and the Alma Securities;

(c) engaging solicitors to review the ability to realise the Braidwood Plantation;

(d) liaising with Water NSW regarding the sale of the Braidwood Plantation and any rehabilitation requirements;

(e) seeking a formal valuation of the Braidwood Plantation and liaising with valuers regarding the methods of valuation and inspection of the Braidwood Plantation;

(f) liaising with solicitors regarding the Alma Securities and dealing with issues relating to rectifying TVM's security interest;

(g) briefing a barrister on issues relating to rectifying TVM's security interest;

(h) arranging insurance cover to protect the Liquidators' interest in the Braidwood Plantation;

(i) preparing and submitting an insurance claim upon the destruction of the Braidwood Plantation;

(j) liaising with the agent for the insurer regarding their investigation in the bushfire and the compensation payout;

(k) liaising with interested parties regarding any possible salvage operation; and

(l) reviewing and arranging payment of legal fees disbursements in relation to the Braidwood Plantation.

43 In respect of the TVM Work - Internal Disbursements Job Code, the Liquidators have incurred internal disbursements for telephone calls, photocopying/printing and storage.

44 Until the Fourth Remuneration Application, the Liquidators had not previously sought Court approval in respect of internal disbursements incurred with respect to the Work Categories. However, they did so in that application and they do so now in respect of the Internal Disbursements relating to each Job Code and for the Job Code 'TVM Work - Internal Disbursements', due to changes to the Act.[29] Accordingly, the Liquidators seek leave of the Court under s 60-20 of the IPS to derive profit or advantage in respect of the Internal Disbursements.

The Liquidators' rates and method for calculating remuneration

45 The Liquidators have calculated their remuneration using the time costing method, which is a suitable method, especially for a liquidation of this type, which is large, lengthy and complex.

46 The rates applied by Rodgers Reidy effective 1 January 2018 are set out in the Rates and Qualifications Section of the Remuneration Report.

47 The remuneration has then been calculated by taking the time spent on each task (calculated in 6 minute units) and applying the hourly rate for the applicable staff member to that.

48 The Overview in the Remuneration Report sets out the following amounts as comprising the remuneration claimed by the Liquidators for the Period:

49 The Overview also sets out the following amounts comprising the Internal Disbursements claimed for the period 1 August 2017 to 31 March 2018:

50 Based on all of the evidence provided, I am satisfied that the Liquidators have made out a prima facie case for payment of their remuneration, as described in Venetian Nominees Pty Ltd v Conlan_[30]_ and the other authorities referred to in Florin Burhala.[31] That is, they have made out a prima facie case that the remuneration is fair and reasonable, and there is sufficient information in the Remuneration Report to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken.

51 It is clear from the correspondence between Mills Oakley and K+L Gates regarding the Draft Documents that the Appointed Representative and his advisers reviewed the draft remuneration report in some detail, as the matters raised in the correspondence by them were by reference to specific items. In addition to Job Code 2, BDT/TVM Remuneration Application, the Appointed Representative raised a number of queries regarding some other Job Codes and the Internal Disbursements. The Liquidators responded to these and the Authorised Representative accepted the Liquidators' explanation, except in respect of Job Code 2.[32] This will be addressed below. The Court takes some comfort from the process engaged in by the Liquidators and the Appointed Representative in this respect. Nonetheless, the Court must still assess whether the remuneration claimed is reasonable in the circumstances.

52 Further, from my experience in matters associated with insolvency administrations, I know the hourly rates applied by the Liquidators as set out in the Rates and Qualifications Section of the Remuneration Report to be commensurate with the hourly rates typically charged by insolvency practitioners.

53 The comparison performed by the liquidators of their rates with that of the three other firms reveals that the Rodgers Reidy rates are roughly mid-way between, for similar levels, the rates of the most expensive and the least expensive of those three firms. There is no information or evidence as to how the three firms were chosen by the Liquidators to create this comparison. Therefore I do not know whether, for example, they are commensurate in size and operations with Rodgers Reidy. Given these limitations, I do not place a great deal of weight on the comparison table, although I do note that the rates contained in that table are typical of ones I often see attached to liquidators' consents to act as liquidators in winding up proceedings.

54 As noted in paragraph 28 above, I consider it appropriate to apply the criteria set out in s 60-12 of the IPS.

55 In the earlier remuneration judgments in respect of this liquidation, Gardiner As J stated that in his view:

The administration and liquidation of TVM were 'at the higher end of complexity and involve considerable responsibilities on the part of the liquidators'.[33]

56 I agreed with his Honour's conclusion in the Fourth Remuneration Judgment.[34] For the same reasons articulated by Gardiner As J and by reference to the work performed by the Liquidators as summarised in these reasons, I again agree with his Honour's conclusion.

57 Subject to paragraphs 78 to 82 below, I am satisfied that the statutory criteria have been met.

58 In respect of the remuneration claimed in respect of each Job Code, the Job Code Summaries set out the staff member, their classification, their hourly rate, the total hours and the total claimed in respect of that staff member for that Job Code. It is readily apparent from those tables that the bulk of the work has been performed by senior accountants, or senior accountants in conjunction with managers for the more complex Job Codes, with the work done at the appointee level minimal for most Job Codes except those where the situation warranted it (for example, the Spencer and Perovich Job Code and the Alma Group Job Code), such that there has been an appropriate level of delegation by the Liquidators, save in respect of the matters discussed in paragraphs 78 to 82 below.

59 I note that in relation to Job Code 1, the Appointed Representative had initially queried why some of the tasks carried out by Alexander Mendez at manager level with a charge out rate of $500 per hour was not assigned to an employee at a lower level with a lower charge out rate, such as Mr Lozankoski, a senior accountant with a charge out rate of $370 per hour, who is also very familiar with the matter.[35] In response, the Liquidators stated that allocating certain tasks to Mr Mendez was reasonable and appropriate given his familiarity with the file. They stated that while he has a higher charge out rate than other staff members working on the file, his level of familiarity with it means that over time it is more cost effective for Mr Mendez to complete them than have a more junior member of staff do so.[36] This explanation was accepted by the Appointed Representative.[37]

60 I have reviewed the detailed descriptions of the work performed in relation to each Job Code. I have also reviewed a random sample of the entries in each of the spreadsheets which form part of each Job Code Summary. From that review, in relation to Job Codes 1 and 3 to 6, I consider that the tasks performed were necessary, that the time taken to perform them was reasonable and that the task were performed by persons at the appropriate level of qualification and experience and charge out rates within Rodgers Reidy.

61 While there were some tasks undertaken, in addition to those raised by the Appointed Representative as referred to in paragraph 59 above, which likely could have been carried out by more junior staff members, there would likely have needed to be a higher level of supervision and correction of work by someone such as Mr Mendez, given his greater and their lesser familiarity with the file, such that any 'saving' is not likely to be significant. In relation to Job Codes 1 and 3 to 6, I do not consider it necessary to make any adjustment.

62 The BDT/TVM Remuneration Application, which is Job Code 2, needs to be specifically addressed given the correspondence between the Liquidators and the Appointed Representative.

63 The work performed by the Liquidators and their staff in respect of Job Code 2 is set out in paragraph 38 above.

64 The remuneration claimed in respect of Job Code 2 is $52,280. The following table from the Remuneration Report sets out the time cost for this Job Code by staff member:

65 The Appointed Representative raised a concern about the amount claimed in respect of Job Code 2. It was stated that by the time the Fourth Remuneration Application was being prepared, in particular the remuneration report supporting it ('Fourth Remuneration Report'), the liquidation had become significantly less complex with a number of matters having been resolved and the number of Job Codes had reduced from twelve to eight. The Appointed Representative stated that the preparation of the Fourth Remuneration Report would be expected to be a simpler and less costly exercise than the preparation of the previous reports, particularly when three previous remuneration reports and applications had been prepared which could have been utilised as precedents.[38]

66 The Appointed Representative then set out a table comparing the amount claimed in remuneration reports and the work in progress ('WIP') claimed for preparing those reports, showing that the WIP claimed to prepare the Fourth Remuneration Report as a percentage of the remuneration claimed was proportionately much higher than the other two instances cited. That table is reproduced below:

Total remuneration claimed in remuneration report

WIP to prepare remuneration report as % of total remuneration claimed

67 The Appointed Representative also observes that in the preparation of this Application, significantly more time was spent by senior staff in preparation of the Fourth Remuneration Report than was historically the case, making the same observations about less complexity as set out above. In particular, the Appointed Representative noted that:

(a) in this Application, 150 hours have been spent on this Job Code, with over 80% of the time recorded by senior staff: 52% by a Senior Accountant (Mr Lozankoski) with a rate ranging from $320 to $370 per hour, and approximately 30% by a Supervisor or Manager (Mr Mendez) whose rate varied between $400 and $500 per hour. The average hourly rate for this Job Code was $349;

(b) in the Fourth Remuneration Application, 175 hours were spent on this Job Code, with the bulk of the time spent by staff at the rank of Senior Accountant 3 ($240 per hour) and below. Only 21 of the 175 hours were recorded by more senior staff. The average hourly rate for this Job Code was $251; and

(c) in the Third Remuneration Application, 366 hours were spent on this Job Code. Approximately 30% of the time was recorded by Senior Accountants with rates varying between $230 and $305 per hour. A further 40% of time was recorded by a Supervisor with rates varying between $315 and $330. The bulk of the remaining time was recorded by more junior staff. The average hourly rate for this Job Code was $269.

68 The Appointed Representative asked the Liquidators whether there were reasons why senior staff were needed to prepare the Fourth Remuneration Report.

69 The Appointed Representative then raised a specific query about one aspect of preparing the Fourth Remuneration Report and the remuneration charged for it. This relates to the amount of time, and the staff members used, to deal with the WIP entries, as explained below.

70 It was said that Mr Mendez spent 16.3 hours in April and May 2018 drafting the 'bones' of the Fourth Remuneration Report, at the time when his rate was $400 per hour (so that the cost of this aspect was $6,520), before meeting with Mr Lozankoski and Mr Nguyen on 23 May 2018 and instructing them to assume responsibility for preparing the report. After that, Mr Lozankoski and Mr Nguyen spent in excess of 50 hours correcting and editing WIP entries by expanding abbreviations, correcting spelling and grammar, inserting references which had been omitted and reallocating entries to the correct Job Code.

71 The Appointed Representative says that given the nature of this liquidation, he expects the Liquidators' staff to be aware that a remuneration application will be required and that due care and attention should be exercised when recording their WIP entries to avoid unnecessary work later on. He accepted that the WIP reports would still require review when preparing the remuneration report and that some corrections would be necessary, but that the time spent in this instance appears manifestly excessive. The Appointed Representative then set out a table listing the dates, time and cost for Mr Lozankoski and Mr Nguyen to undertake that work. A total of 39.3 hours at a cost of $12,576 was spent by Mr Lozankoski, and a total of 12.1 hours at a cost of $2,904 was spent by Mr Nguyen. This was a total amount of time of 51.4 hours at a cost of $15,480.

72 The Appointed Representative asked the Liquidators for an explanation as to why over 50 hours were needed to correct WIP entries, particularly given that the total number of hours for which remuneration was being claimed was only 175.

73 In response, the Liquidators stated that there is a certain amount of work which must at a minimum be performed in preparing the report. The Fourth Remuneration Report related to a period of time in which a number of matters in the Liquidation were active, and the costs were not unreasonable when regard is had to the matters the report was required to cover. The Liquidators explained that the format of remuneration reports provided to the Court in these remuneration applications do not match seamlessly with the software used for recording time by Rodgers Reidy, which is industry standard software. The Liquidators said that they have proper time recording systems in place, but that due to compatibility considerations, some degree of reworking of WIP entries is required to ensure that these can be presented in an appropriate format for the Court.[39]

74 In respect of the review of WIP entries referred to in paragraphs 69 to 72 above, the Liquidators stated that this issue had been previously raised by K+L Gates in response to previous remuneration applications. They said that they had previously stated that the review of WIP entries encompasses a review both of the relevant descriptions but also of the rates of remuneration to confirm the correct rates have been charged and to the correct Job Codes, and that the WIP claimed was otherwise reasonabl[40]and properly incurred.40

75 In reply, the Appointed Representative stated that he remained unconvinced of the reasonableness of the remuneration claimed under Job Code 2. He accepted that some time needs to be spent reviewing the WIP entries, checking that the correct rates and Job Codes have been applied, and changing the format of the data to suit the format of the remuneration report, but considered that the 50 hours spent on this was manifestly excessive.[41]

76 The letter dated 17 July 2020 from K+L Gates then went on to say:[42]

However, recognising that the costs of filing an objection to this remuneration claim would likely exceed the remuneration claim itself, our client does not consider it prudent to proceed with a formal objection. Our client requests that your client bring his concerns to the Court's attention and direct the Court's attention to [the matters summarised in paragraphs 69 to 72 above]. Our client will then accept the decision of the Court on the reasonableness or otherwise of this claim.

77 The Liquidators have clearly done as requested by the Appointed Representative in terms of bringing this issue to the Court's attention. The approach taken by the Appointed Representative in respect of not proceeding with a formal objection was pragmatic and sensible, for the reasons K+L Gates articulated.

78 In my view, the matters raised by the Appointed Representative have merit. The proportion of costs spent on the Fourth Remuneration Report is disproportionate to both the costs spent on the second report and to the amount of remuneration claimed. I accept that the relationship between the remuneration claimed and the amount spent on preparing the remuneration report is not linear. For example, the Liquidators are correct that a certain amount of work is necessary irrespective of the amount claimed. However, this does not explain or justify this lack of proportion. Rather, this may be a product of a greater proportion of the work being carried out at the senior rather than junior level.

79 Further, I do not accept that it was reasonable for the Liquidators' staff to spend some 50 hours correcting WIP entries, even if that did involve more than correcting spelling and grammar. While the Court is assisted by WIP reports containing consistent and clear entries, able to be understood on their face in light of the general description of the work as set out in other parts of the report,[43] the amount of time spent on this task does seem excessive.

80 Nor is it apparent to me why roughly 75%[44] of this work was carried out by a Senior Accountant at the rate of $320 per hour (Mr Lozankoski), rather than the bulk of this aspect of the work being carried out by someone at a lower level, such as Mr Nguyen at the Intermediate level of $240 per hour, whose time made up the rest of this 51.4 hours. It is not apparent to me why the proportions for this task were not in the reverse, such that Mr Nguyen performed 75% of it with Mr Lozankoski the rest.

81 Accordingly, I consider that an adjustment should be made here, both in respect of the division of the work between Mr Lozankoski and Mr Nguyen and in respect of the total amount of time spent on this task overall. 39.3 hours of Mr Nguyen's time is $9,432, and 12.1 hours of Mr Lozankoski's time is $3,872, giving a total of $13,304 rather than $15,480. The amount of $13,304 should be further reduced for the excessive amount of time spent on this task overall. In my view, allowing 70% of this amount seems a reasonable amount for the task, which is $9,312.80. This is a reduction of $6,167.20 from the $15,480 claimed in this regard.

82 That process leads to an amount of $46,112.80 in respect of Job Code 2. For the reasons set out in paragraph 78 above, I consider that this amount should be further reduced, by 15%. The adjustments made in the preceding paragraph are not sufficient to deal with a much greater proportion of work being carried out at the senior level than was previously the case, even in light of the matters discussed in paragraph 59 above in respect of Job Code 1. Accordingly, the remuneration approved in respect of Job Code 2 is $39,196 (rounded), which is a reduction of $13,084 from the total amount claimed in respect of Job Code 2.

83 As noted in paragraphs 3(c) and 44 above, the Liquidators seek the Court's leave pursuant to s 60-20(3)(b) of the IPS for them to derive a profit or advantage from the external administration of TVM to the extent that the Internal Disbursements for the Period cause them to directly or indirectly derive a profit or advantage in breach of s 60-20(1) of the IPS.

84 In their letter to the Liquidators dated 19 May 2020, K+L Gates raised the case of Elkerton as Joint and Several Provisional Liquidators v Bonny Glen Fruits Pty Ltd,[45] which I discuss further below, and stated that they were not aware of any other case whether a court had granted leave under s 60-20 of the IPS for internal disbursements and provided detailed reasons for doing so.[46]

85 On behalf of the Appointed Representative, K+L Gates went on to raise a number of queries about the Internal Disbursements, including about whether there is any profit element in respect of each disbursement type.[47] There is no need for me to set out the details of the queries here. In response, Mills Oakley answered the various queries in this regard, stating that in respect of the cost of folders, storage and phone calls, there is no profit received, and in the case of photocopying and printing charges, they are in line with industry standards.[48] In reply, K+L Gates accepted the explanation and stated that the Appointed Representative agreed that the rate charged per page for photocopying and printing was not unreasonable. They also said that if the amount charged for that did contain a profit element, then the Appointed Representative had no objection to the granting of leave under s 60-20 of the IPS.[49]

86 In the Fourth Remuneration Judgment, I granted such leave. I acknowledge, as was pointed out by Black J in Bonny Glen that I did not there set out a "detailed consideration of the basis on which that order should be made".[50]

87 In that case, his Honour was dealing with an application by the provisional liquidators for approval of their remuneration, along with an application in respect of internal disbursements similar to the one made in this Application. His Honour made the following comments:[51]

... it seems to me that the provisional liquidators' application under s 60-20 of the Insolvency Practice Schedule (Corporations) in respect of disbursements potentially raises several significant questions, which I have not struck in a previous application before this Court. The first question is whether it is appropriate for the Court to approve disbursements structured with a profit element, where the Insolvency Practice Schedule (Corporations) appears to adopt a starting point that a profit or advantage should not generally be obtained by an insolvency practitioner. To put that question another way, what is the criteria for approving such a profit or advantage, by way of disbursements, and what is the point of prohibiting them if the Court will then regularly grant leave for them? Second, on what principled basis should the Court grant such leave? In particular, should it grant such leave for a mark-up of 10%, 50%, or 100% on disbursements, and should that depend upon whether the disbursements are photocopying, telephone charges or other disbursements, such that different mark-ups are appropriate for different charges? Or, on one view, should the Court leave the insolvency market now to move in the direction that at least some large law firms have moved, where disbursements are charged at cost, so that the users of insolvency services know that the disbursements charged are not a separate profit centre to the insolvency practitioners? I express no view as to these questions, beyond noting that they seem to me to raise relatively complex issues, and that I would not have made an order under s 60-20 without more detailed consideration of why it was appropriate, and at what level. It does not seem to me that a profit component in such disbursements should be approved, merely because it exists, as distinct from on the basis of some principled view that charges structured in that way are necessary or appropriate in the relevant circumstances.

I should emphasise that these observations are not critical of the provisional liquidators, and their disbursement structure may well be characteristic of the industry generally. Those observations are instead intended to identify a wider question which may now arise following the changes made by the Insolvency Practice Schedule (Corporations). It may well be appropriate that there be wider industry consideration of that issue, and I will reserve liberty to the provisional liquidators to bring a further application in that regard, if they ultimately consider it is appropriate to do so, either in respect of this particular matter, or because they think it desirable to have that issue resolved in a manner that may guide other practitioners in applications in this Court relating to disbursements.

88 In the subsequent case of Re Karim Pty Ltd (in liq),[52] Black J referred to Bonny Glen, and said that he subsequently considered the operation of s 60-20(3) of the IPS in Re JPD Media & Design Pty Ltd (subject to deed of company arrangement),[53] where his Honour followed the decision of Williams J in Lucantonio v Benscrape Pty Ltd (No 2)__[54] "in giving leave to an administrator and deed administrator to recover internal disbursements which were modest in amount and of the kind that were likely to be incurred in the course of the external administration."[55] I note that Karim, JPD Media and Benscrape were all decided after the conclusion of the correspondence between Mills Oakley and K+L Gates in respect of this issue.

89 I share the concerns expressed by Black J in Bonny Glen as set out above. However, in light of the fact that it appears from the correspondence between Mills Oakley and K+L Gates that there may be little or no profit derived by the Liquidators from the Internal Disbursements, the appropriate course for me in this instance is to follow the approach taken by Black J in JPD Media and by Williams J in Benscrape. The amounts in respect of the Internal Disbursements are modest in amount and of the kind likely to be incurred in the course of this complex liquidation, and therefore leave pursuant to s 60-20 of the IPS should be granted. This course is both warranted and pragmatic in the circumstances. A fuller consideration of the issues raised in Bonny Glen should await a more appropriate vehicle.

90 For these reasons, the remuneration claimed by the Liquidators is in large part reasonable, as it was largely necessary and properly performed. The remuneration claimed should be allowed, with a reduction of $13,084.[56] Therefore the approved amount in respect of remuneration for the Period is $191,231.50.

91 In addition, leave will be granted pursuant to s 60-20 of the IPS in respect of the Internal Disbursements.

92 Accordingly, there will be orders made as follows:

(a) The Liquidators' Remuneration for the Period be determined in the amount of $191,231.50; and

(b) The Liquidators' Internal Disbursements for the Period be determined in the amount of $11,883.20;

(c) Leave is granted to the Liquidators pursuant to s 60-20(3)(b) of the IPS to derive a profit or advantage from the external administration of TVM to the extent that the Internal Disbursements for the Period cause them to directly or indirectly derive a profit or advantage in breach of s 60-20(1) of the IPS;

(d) Pursuant to s 90-20 of the IPS that the Remuneration and Disbursements be paid as follows:

(i) With respect to Remuneration and Internal Disbursements incurred in relation to the winding up of the Blue Diamond Deposits Trust No. 1 (ASRN 091 948 202) ('BDT'), from the Scheme Assets;

(ii) With respect to Remuneration and Internal Disbursements incurred in relation to the dual purpose of winding up BDT and TVM, from the Scheme Assets; and

(iii) With respect to Internal Disbursements incurred in relation to the winding up of TVM only, from the assets which TVM holds in its own right ('TVM Assets');

(e) The Liquidators' remuneration, costs and expenses of this application be paid on an indemnity basis from the Scheme Assets and the TVM Assets in proportion to the total amount of Remuneration and Internal Disbursements to be paid from those assets in accordance with the order in paragraph (d) above.

[1] By orders made on the Court's own motion, the interlocutory process has been referred to me for hearing and determination, pursuant to r 84.04 of the Supreme Court (General Civil Procedure) Rules 2015.

[2] IMO Traditional Values Management Ltd (in liq) [2012] VSC 650, [1]-[5] ('First Remuneration Judgment').

[5] Second Borland Affidavit, [7] - [8].

[8] First Borland Affidavit, [5] - [6]; Exhibit ACB-3.

[9] First Borland Affidavit, [8]; Exhibit ACB-5.

[10] First Borland Affidavit, [11] - [12]; Exhibit ACB-8.

[13] Gardiner AsJ also published reasons for those orders, being: the First Remuneration Judgment; Re Traditional Values Management Ltd (In Liq) (No 2) [2015] VSC 126 ('Second Remuneration Judgment'); and Re Traditional Values Management Ltd (In Liq) (No 3) [2016] VSC 475 ('Third Remuneration Judgment'). Reasons for the orders made by me were published in Re Traditional Values Management Pty Ltd (in liq) (No 5) [2019] VSC 281 ('Fourth Remuneration Judgment), (together, the 'Remuneration Judgments').

[14] Morgan Affidavit, [6]. A copy of the BDT report was exhibited to the affidavit of Jennifer Claire O'Farrell, affirmed 22 January 2019 at Exhibit JCD-4: Fourth Remuneration Judgment [15] and Footnote 9 to that Judgment.

[16] First Morgan Affidavit, [7]. See also the Third Remuneration Judgment, [44].

[17] Morgan Affidavit [8]; Fourth Remuneration Judgment.

[20] Such as s 473(3) of the Act for liquidators appointed before 1 September 2017 or the IPS after that date.

[21] First Remuneration Judgment, [9].

[22] Third Remuneration Judgment, [23].

[23] First Remuneration Judgment, [18]-[25], [40], [63]-[69]; Second Remuneration Judgment, [18], [20]-[21], [43]-[44], [48], [66].

[24] For example, see, Re Florin Burhala & Associates Pty Ltd (in liq) [2020] VSC 559, [26]-[33] ('Florin Burhala').

[25] For example, see Re Tuscan Property Development Pty Ltd [2018] VSC 511, [22].

[26] A copy of the Remuneration Report is Exhibit BLM-7 to the Morgan Affidavit.

[28] Morgan Affidavit, [13]; Remuneration Report 1.4

[29] See Fourth Remuneration Judgment, [45], for an explanation of this.

[30] (1998) 20 WAR 96.

[33] First Remuneration Judgment, [64]; Second Remuneration Judgment, [66]; Third Remuneration Judgment, [23].

[38] The description of the Appointed Representative's queries, in this and the following seven paragraphs, is taken from Exhibit ACB-3.

[43] See paragraph 38 above.

[44] This percentage was arrived at by taking Mr Lovankoski's time of 39.3 hours for this task as a proportion of the total time for this task, being 51.4 hours.

[45] [2019] NSWSC 1784 ('Bonny Glen').

[52] [2020] NSWSC 1603 ('Karim').

[53] [2020] NSWSC 1311 ('JPD Media').

[54] [2020] NSWSC 1114 ('Benscrape').

[56] See paragraphs 81-82 above.