Corporations - Administrators and liquidators' costs - Application for review

Avery v Worldwide Testing Services Pty ltd (1990) 2 ACSR 834

Burns Philp Investments Pty Ltd v Dickens (1993) 11 ACLS 272

Commissioner for Corporate Affairs v Harvey [1980] VicRp 64; [1980] VR 669

Hagenvale Pty Ltd v Depala Pty Ltd (1995) 17 ACSR 139

Lens & Ors v Johnson & Anor, unreported judgment of Bredmeyer M; Library No 990011; 22 January 1999

Leon v York-o-Matic Ltd (1966) 1 WLR 1450

Magarditch v ANZ (1999) ACLC 424

Pownall v Conlan Management [1995] 12 WAR 370

Re: Burnells Pty Ltd (1979) 4 ACLR 213

Re: Glenvale Potteries Pty Ltd (in liq) (1977) ACLC 40 - 331

Re: Juson Pty Ltd [1992] 8 WAR 13

Re: Western National Earthmoving Corporation Pty Ltd (in liq); ex parte CONLAN unreported judgment of Sanderson M; Library No 980074; 24 February 1998

Sydlow Pty Ltd v T G Kofsalas Pty Ltd [1996] FCA 1384; (1996) 20 ACSR 47

Venetian Nominees v Conlan [1998] 20 WAR 96

Yeomans v Walker (1986) 5 NSWLR 378

1 MASTER BREDMEYER: This is an application by the plaintiff by way of originating process for an enquiry into and a review of the defendants' fees and disbursements in acting as administrators and the liquidators of Hansley Holdings Pty Ltd ("the company").

2 The plaintiff is a creditor of the company and brings this application in that capacity. The affidavit in support of the plaintiff's application is sworn by Brett Harley Price on 4 September 2000. Mr Price is a director and the shareholder of the plaintiff. He held five of the six shares of the company and was its managing director at the time it was placed into administration. His then wife was the other director and held the other share. It was the trustee for the GIS Unit Trust. GIS stands for "Goldfields Instrument Services".

3 He and his then wife appointed the defendants as administrators of the company on 7 January 1998. The administration of the company continued until a meeting of creditors held on 31 July 1998 when the company was placed into liquidation. The defendants, Messrs Melsom, Robson and Lopez, who had been the administrators, then became the liquidators. Various meetings of creditors and members were held during the period of liquidation which I will consider later. The final meeting was held on 27 October 1999. The company was deregistered on 1 February 2000. This application was brought on 5 September 2000.

4 On 18 October 2000 prior to the hearing the plaintiff filed an amended originating process. I propose to amend the application in terms of that document which reads:

"1. The Australian Securities and Investments Commission reinstate the registration of Hansley Holdings Pty Ltd.

2. Any property of Hansley Holdings Pty Ltd vested in the Australian Securities and Investments Commission revest in Hansley Holdings Pty Ltd.

3. There be an inquiry into and a review of the Defendants' fees and disbursements in acting as administrators and liquidators of Hansley Holdings Pty Ltd.

4. If it is found that the fees and disbursements of the Defendants were unauthorised or excessive the Defendants make restitution to Hansley Holdings Pty Ltd in the amount that is found to be unauthorised or excessive.

5. The amount of any restitution so ordered be available for those entitled in a winding up.

6. The Defendants pay the costs of this application."

5 The plaintiff complains about the high level of remuneration charged by the administrators and the liquidators and about the manner of approval of that remuneration at the various creditors meetings.

6 The company operated in two divisions: GIS Engineerings and GIS Communications. GIS Engineering was principally a service organisation providing contract labour for hire predominantly to the mining industry. It ran out of a Perth office. GIS Communications provided various other services to the mining industry, including communications, mine site maintenance, electrical maintenance and selected mechanical maintenance work. The company employed 160 people and operated out of six locations, Como, Fremantle, Kalgoorlie, Esperance, Murrin Murrin and Leinster. It had significant contracts with certain mines such as Western Mining Corporation, Fluor Daniel, BHP, Kalgoorlie Central Gold Mines and with the WA Water Authority.

7 As stated the defendants were appointed administrators on 7 January 1998. The first meeting of creditors was held on 14 January 1998. Prior to that meeting Mr Robson sent out a circular to the creditors advising them of the meeting. I quote from part of it:

"Due, however, to the nature of the records of the company, the geographical spread of the operation and particularly, the extent of the investigative process and difficulties in determining the extent and value of all company assets, there is serious concern that the time frame available to us may not allow presentation of an accurate Report as to Affairs.

More importantly, due to the company's staffing problems, serious deficiencies and, in some cases total absence of proper operation and management control systems, our task to assess the underlying profit potential, if any, and the necessary restructure to achieve that is most difficult.

Currently our ability to determine the best courses of action, leading hopefully to an acceptable proposal via a Deed of Company Arrangement is constrained by the emerging need to seriously consider buy-out proposals to provide funding alternatives.

The options are fairly stark as, subject to accurate verification of the net realisable value of assets, any process of liquidation either by way of a Bank appointed Receiver or a duly appointed Liquidator, recognising the Bank's priority charge, would provide no benefit for unsecured creditors.

As a consequence we are now engaged in courting interested parties with a view to mounting proposals acceptable both to the Bank and to the Administrators as a means of achieving some return value for creditors generally, however, that course of action by itself requires extensive investigation by the parties concerned and will take considerable time."

8 The meeting was attended by over 30 creditors. The meeting appointed a committee of creditors. The second meeting of creditors was held on 3 February 1998. Mr Price tabled at that second meeting a Report as to Affairs (signed by Mr Price) which, oddly enough, omitted the plaintiff as a creditor. It claims to be a creditor for an inter-company lien of $478,000. Mr Price said that omission was made by mistake. Nothing turns on that. It was not disputed before me that the plaintiff was a creditor of the company. The Report as to Affairs showed assets of $5.1 million with realisable assets of $4.2 million (I am using approximate figures only). It showed sundry debtors of $2.25 million, secured creditors - mainly the Commonwealth Bank $3.089 million, and unsecured creditors $1.619 million.

9 Mr Price was unable to attend the meeting due to the sudden death of his wife and co-director, Mrs Michelle Price. Mr Melsom recommended an adjournment of the meeting to another date so that concrete proposals could be put before the creditors and that was accepted.

10 The minutes of that meeting record what happened to the remuneration and I quote:

"Remuneration of administrators

Mr Melsom advised those present as to the basis upon which the fees and costs of the administrators were charged and of the intense work that had been carried out by his staff to date.

A statement of those costs and description of work was then circulated among those attending the meeting indicating a fee amount in the sum of $43,086.

Mr Melsom then stated that fees and charges of that sum required approval by the meeting and tabled a schedule of rates charged by his firm compared with the recommended rates of the Insolvency Practitioners Association of Australia indicating the significant reduction in rates applied by his firm.

The following resolution was then carried without dissent:-

Resolution

Moved Mr Manford

Seconded Mr Johnson

Resolved 'that the administrators remuneration to 2 February, 1998 be approved for payment in the amount of $43,086 together with all out of pocket expenses'."

11 I have not seen the statement of costs and description of work which was circulated at that meeting.

12 A circular dated 16 February 1998 was sent to creditors to inform the creditors of the outcome of the meeting of creditors held on 3 February. That circular includes the following statements on the progress of the voluntary administration:

"In the course of gaining control of the company operations and assessing its true financial position, we have been seriously impeded by the total lack of any proper management systems which would normally be in place to control accounting and management operations within a company structure of this size.

As reported at the second meeting of creditors, it became apparent that there were no meaningful management information systems, no operational budgets or expenditure control systems, no debtors or creditors control for accurate recording, no payroll reconciliation with prime source data and no computer backup arrangement, no proper training manuals for computer applications to ensure accurate data accumulation and no proper analysis of contract operations let alone accurate trading results overall.

Our specialist accounting team was therefore faced with the task of conducting detailed reconciliation of debtors, creditors and payroll which is continually highlighting deficiencies in the company's accounting systems, unfortunately understating creditors, inaccurately reflecting debtors and allowing for regular overpayment in respect to payroll.

Rationalisation of the company's overall operations is continuing, in respect to management and other staff, its motor vehicle fleet, which at the date of our appointment exceeded 50 vehicles, and other leased assets to determine surplus equipment to current needs.

We are now on line to assist more accurately profitability, but more importantly to determine its future profit potential as a basis for a remedy via a Deed of Company Arrangement."

13 The second meeting of creditors was adjourned to 4 June 1998. Notice of that meeting was given to the creditors and it was in the same form as the previous notice. It set out the purpose of the meeting in a series of points, one of which was:

Details of that remuneration were not given in the notice.

14 At that meeting Mr Melsom tabled his fee account, a document of three paes, for work undertaken to 31 May 1998 of $296,023. He advised the meeting that he and his staff were charging 70 - 75 per cent of the IPAA rate for Western Australia. He also reminded creditors of the very significant personal exposure faced by the administration as a consequence of the statutory liability for ongoing trading commitments undertaken by the company during the period of administration and commented that most creditors failed to appreciate the very real financial risk that the administrators were obliged to carry. A resolution for the payment of the recommended fees of $296,023 was moved and seconded. I should add that Mr Brickhill of counsel was present at the meeting representing the plaintiff and Mr Brett Price was also at the meeting representing himself. Mr Melsom called for comments on the fees:

"Whereupon Mr Brickhill suggested the summary detail on the account appeared to general and suggested the administrators should provide their timesheet computer printouts in support of the claims.

Mr Melsom confirmed he would happy to provide, however, due to the extensive quantum and detail those printouts, his staff had provided creditors a summary of events rather than a daily extract.

Following some humorous remarks Mr Clohessy, again supporting the administrators' fee account and with no further discussion forthcoming the resolution was carried unanimously.

RESOLVED

That the administrators' fee account to 31 May 1998 in the further amount of $296,023 together with all disbursements and out of pocket expenses, be now approved for payment.

Under GENERAL BUSINESS

Mr Brickhill requested if the administrator would still provide with computer printouts which the chairman promised to oblige..."

15 The fee document circulated at that meeting or the fees incurred to 31 May 1998 is dated 4 June 1998 and is found at p 49, p 50 and p 51 of Mr Price's affidavit. It summarises the work done in 32 sentences and I will quote the first five as examples:

"Discussions and meetings with the company's secured creditor concerning the financial position of the abovenamed company.

Continued assessment of the financial position of the company.

Discussions and correspondence with creditors and lease companies.

Preparation of notice of second meeting of creditors and advertising same.

Preparation and attendance to second meeting of creditors held on 3 February 1998."

16 Following those 30 sentences is a summary of the fees charged which I quote:

Plus all disbursements and out of pocket expenses including bank fees, fax, postage, telephone, photocopying and overheads."

17 I note that no details of the disbursements were given. Clearly they are additional to the $296,023.

18 That second meeting of creditors was further adjourned to 31 July 1998 and notice of that meeting was given on 21 July. It was in the same form as the previous notices. It said that one of the purposes of the meeting was "to set the administrators' remuneration". Details of that remuneration were not given in the notice. A report to creditors was sent out with that notice or shortly after. It is two pages and is dated 10 July 1998. It reports on various matters, eg the sale of the GIS Communications Division as a going concern involving the transfer and redeployment of staff, and the sale for fair value of plant and equipment and stock. It also referred to the successful negotiation of assignment of various service contracts at most of the mining sites. The administrators did this with the objective of minimising costs and exposure to claims for breach of contract. "Unfortunately a sale of the Esperance operation could not be achieved and that operation was closed down with unavoidable termination of staff." I think three staff lost their jobs in that. The report considered the three options open to the company and recommended that the company be placed in liquidation. It noted inter alia that no deed of company arrangement had been offered.

19 At the meeting held on 31 July 1998 the creditors voted to put the company into liquidation and the three administrators became liquidators as from that date. As at 31 July the company had ceased trading at all but one site. The operations at this site, that is the WMC Kambalda Nickel Smelter, were expected to cease on 14 August 1998.

20 The minutes of the meeting held on 31 July record that Mr Brett Price was present representing himself. At that meeting Mr Melsom referred to his recommendation that the company should be wound up. He said that was clearly the only course of action because of the clear insolvency of the company, the fact that most of the business operations of the company had been shut down, and that the majority of the company's assets had been repossessed by finance companies or sold at an auction held earlier in that week in Kalgoorlie. Mr Melsom went on to advise that the majority of the company's contracts had either been concluded or transferred or assigned to other parties where they were willing to take on the company's employees, thus minimising the potential damage claims from customers for default on contracts. Mr Melsom stated that the ordinary unsecured creditors would unfortunately not receive any dividend in the winding up of the company and that the payment of the priority claims of employees compulsory superannuation entitlement was very much dependent on the company recovering in full from its outstanding debtors.

21 As at the previous meeting, Mr Melsom then tabled his fee account for work undertaken to 30 July 1998 and again pointed out that he and his staff were charging 70 - 75 per cent of the IPAA rate for Western Australia. He also reminded creditors of the significant personal risk faced by the administrators conducting an ongoing trading business. It was moved, seconded and resolved:

"That the administrators fee account for the two months to 30 July 1998 in the further amount of $174,053 together with all disbursements and out of pocket expenses, be now approved for payment."

22 The minutes do not record Mr Price as having voted against that. He said, in par 26 of his affidavit, that he never voted in favour of it.

23 That resolution dealt with the outstanding administrators' fees. The meeting also considered the liquidators' remuneration and I quote from the minutes:

"The chairman requested the meeting consider passing a resolution in respect of the drawing of fees and expenses by the liquidators. The chairman advised the meeting the basis upon which the remuneration was charged within the firm of Melsom Robson in matters of insolvency following which the following formal decision was passed without dissent."

24 Here I omit the names of the mover and seconder but the resolution passed was:

"That the liquidators may calculate their fees and those of their staff based upon time spent within the liquidation of Hansley Holdings Pty Ltd at such rates as are recommended by the Insolvency Practitioners Association Australia or as such lesser rate as the liquidators may from time to time charge to be drawn upon a monthly basis together with the [sic] all and [sic] out of pocket expenses, with the excess (if any) of amounts drawn over amounts which may otherwise be ultimately approved by creditors, becoming an amount refundable by the liquidators."

25 At the meeting held on 31 July the administrators tabled a three-page statement of their professional charges dated 30 July 1998. As before it consists of a series of sentences, 27 in all. I will quote from several of them at random to give the flavour:

"Preparation of notice of adjourned second meeting of creditors and advertising same.

Preparation and attendance to adjourn second meeting of creditors on 4 June 1998.

Monitor/authorise daily orders.

Numerous and ongoing telephone attendances to debtor/creditor enquiries.

Ongoing review of company's management practices, office systems and staffing needs.

Ongoing site visits and preparation for the clearing sale of the company's vehicle fleet and other assets held at Kalgoorlie on Wednesday 29 July 1998 -

Negotiations and organisation of site shutdowns at Leinster and Murrin Murrin including termination of employees.

Retention of title matters and reconciliation."

Plus all disbursements and out of pocket expenses including bank fees, fax, postage, telephone, photocopying and overheads."

27 As before there was no details or estimate of the out of pocket expenses.

28 At that meeting Mr Price moved for the appointment of a Committee of Inspection. Mr Melsom spoke against it. No seconder was found, so the motion failed.

29 The next meeting of creditors was held on 10 February 1999. Mr Price says that neither he nor the plaintiff were given notice of this meeting.

30 Mr Melsom, in his first affidavit of 4 October 2000, at 52, has annexed a copy of the notice of meeting sent to creditors and at 51 a copy of a circular which went out with the notice. In his second affidavit of 25 October 2000 at PMM 26 he has annexed a signed statement of a staff member, Mr Peter Harper, which I infer was taken from the file, signed by Harper of the notices of meeting which he sent out to creditors on 15 January 1999. Attached to the statement is the notice of meeting, the circular, both of which I have already mentioned and a print-out of the names and addresses of all the creditors. It is a long list and includes:

GIS Electrical

C/- PKF Pty Ltd

7th Floor

The Griffin Centre

PERTH WA 6000

31 That name and address, in that form, is taken from the proof of debt lodged on behalf of the plaintiff by Mr Price on 31 June 1998. It is found at "PMM15" of Mr Melsom's affidavit. The registered office of the plaintiff, GIS Electrical Pty Ltd is shown in the ASIC search as:

C/- Pannell Kerr Forster

"Griffin Centre"

Level 7, 28 The Esplanade

PERTH WA 6000

32 It will be seen that the liquidators took the plaintiff's address from the proof of debt. The address is not complete in that Pannell Kerr Forster is referred to as "PKF Pty Ltd" and the number and street "28 The Esplanade" are omitted from the address. Mr Harper has not sworn an affidavit but Mr Melsom has produced Mr Harper's signed statement of 19 January 1999, which I assume was taken from the file stating that:

"1. On the 15th day of January 1999 a notice to creditors in the form of the annexure marked 'A' was sent by pre-paid post to each creditor of the above company known to me.

2. The notices were addressed to the creditors according to their respective names and addresses appearing in the records of the company or to their last known addresses. A list of those creditors is attached and marked 'B'.

Signed on 19 January 1999

(sgd) P. Harper."

"Further five notices sent 19/1/99

NAB,

Bankwest,

Orix Custom Leasing,

AGC.

(sgd) P. Harper"

34 I note that the administrators' accounts show an expenditure of $180 for bulk postage on or about that day (Price's affidavit p 103).

35 Mr Price has deposed that he did not get the notice addressed to the plaintiff. How do I evaluate those two conflicting statements? I think both could be true. I think it likely that Mr Harper did send the notices out on the list. I would expect the liquidator's staff to carry out an every day task like that in a proper manner. At the same time, the notice may not have got to Mr Price. The address, as I have stated above, was a little incomplete. I think however that a mail sorter or a mail delivery man would know where the Griffin Centre is located in Perth as it is a well-known building. Nevertheless, the incomplete address might have delayed delivery a little. Also, it is possible that Pannell Kerr Forster did not send the notice on to Mr Price, or that it did, but he did not get it.

36 The notice of meeting refers to the agenda, as follows:

"1. To lay before the meeting the Liquidator's Account showing how the winding up is being conducted and how the company has been disposed of, and giving any explanations thereof.

2. To approve the Liquidator's remuneration.

3. Any other general business."

37 The minutes of that meeting "BPH 10" show three creditors present, plus Mr Melsom and Mr Peter Harper - one of the liquidator's staff. The resolutions passed on fees were as follows:

"Mr Melsom then tabled his fee account for work undertaken for the period of the liquidation namely from the 1st August 1998 to the 31st January, 1999 copies of which had been circulated to those attending the meeting.

The Chairman sought a proposer and seconder for a resolution in favour of the Liquidator's account which was forthcoming from Ms Bramham and Mr Sheath respectively.

As no further discussion ensued the Chairman put the vote which was carried with the Chairman abstaining.

RESOLVED

'That the Liquidator's fee account for the period 1st August 1998 to 31st January, 1999 in the amount of $217,053 together with all disbursements and out of pocket expenses be now approved for payment'.

Mr Melsom then referred to the residual balance of the Administrators' fees and expenses still to be approved as detailed in the Liquidator's report.

The Chairman then sought a proposer and seconder for a resolution in favour of the residual administrators' account which was forthcoming from Ms Bramham and Mr Sheath respectively.

As no further discussion ensued the Chairman put the vote which was carried with the Chairman abstaining.

RESOLVED

'That the Administrators' residual fee account including disbursements for the period to 31st July, 1998 in the further amount of $36,564 be now approved for payment'."

38 A copy of the fee account has not been produced to me.

39 The final meeting of the creditors was held on 27 October 1999. Notice of that meeting was given with a three page report to creditors "BHP 11". At that meeting four creditors were present and they included Mr Price, for himself, Mr T Brickhill of counsel for the plaintiff and a representative of the Commonwealth Bank. At that meeting a two page statement of professional charges was circulated covering the period 1 February 1999 to 30 September 1999. I quote the whole of that document:

"Ongoing discussions with and monthly reports to the company's secured creditor concerning the realisation of assets of the company and progress of the administration.

Consideration of priority claims and payment thereof involving correspondence with taxation authorities and lawyers together with review and examination of FBT, Payroll Tax and Superannuation Guarantee Levy records to determine the correctness of the company's records and reported debt in respect of such, and settlement of liabilities relative thereto.

Finalisation of the Liquidators Section 533 report to ASIC.

Discussions and meetings with ASIC relative to matters raised in the Liquidators Section 533 report.

Ongoing investigating and communicating with solicitors in respect of employee unfair dismissal claims against the company.

Ongoing investigation regarding the existence of lease agreements with a company related to the director and disputed rent increase for main premises of Kalgoorlie branch.

Site visits regarding finalisation of WMC account and Kalgoorlie Nickel Smelter contract.

Ongoing and substantial debtor recovery issues and consideration of legal actions appropriate thereto, involving correspondence/discussion with solicitors.

Ongoing correspondence and discussions with major debtor, WMC, relative to settlement of its account, including correspondence and meetings with independent adviser on contractural [sic] matters.

Ongoing review of records to separate current query data and those requiring storage and archive.

P.M. MELSOM

ADMINISTRATOR 38.7 hrs @ $240/$265 per hr $ 9,337.00

S.F. ROBSON

ADMINISTRATOR 5.5 hrs @ $240 per hr $ 1,320.00

G.A. LOPEZ

ADMINISTRATOR 1.1 hrs @ $240 per hr $ 264.00

OTHER INSOLVENCY

STAFF 497.3 hrs @ $80 - $155 per hr $56,413.00

TAXATION STAFF 1.5 hrs @ $125 per hr $187.50

ADMINISTRATION

AND TYPING 13.7 hrs @ $60 - $75 per hr $ 1,041.50

$ 68,563.00

ESTIMATE TO FINALISE $ 15,000.00

$ 83,563.00

LESS FEES DRAWN $ 68,563.00

FEES TO BE DRAWN $ 15,000.00

Plus all disbursements and out of pocket expenses including bank fees, fax, postage, telephone, photocopying and overheads."

"GENERAL BUSINESS: The Chairman invited questions from creditors.

Mr T Brickhill spoke of his previous request to the Liquidator for an itemisation of fees and queried why this was not provided. He stated that he had a concern with the high cost of consultants and legal fees.

Mr Melsom responded that the matter had been addressed at the time, and could still see no benefit in providing the details, particularly as all fees had been approved by creditors.

Mr T Brickhill against requested that an itemised account of legal fees and consultants fees for the period of Administration and Liquidation be made available to him.

Following further brief discussion Mr Melsom agreed to provide the requested information.

[Mr Brickhill says that these minutes are incorrect. In addition to legal fees and consultant fees, he asked for detailed itemisation of the administrators' and liquidators' fees to date.]

Mr P Ficko queried what the procedure would be for the one remaining Bank Guarantee that was due for cancellation in mid December, 1999.

Mr Harper responded that the company holding the guarantee, pending expiration of a defects liability period, would be contacted by the Liquidator to liaise directly with the Bank on this matter.

LIQUIDATOR'S FEES: Mr Melsom then tabled his fee account for work undertaken for the period from the 1st February, 1999 to the 30th September, 1999 and detailing the estimated cost to finalise the Liquidation, copies of which had been circulated to those attending the meeting.

The Chairman sought a proposer and seconder for a resolution in favour of the Liquidator's account which was forthcoming from Mr Gray and Mr Ficko respectively.

As no further discussion ensued the Chairman put the vote which was carried with the Chairman abstaining.

'That the Liquidator's fee account for the period 1st February, 1999 to 30th September, 1999 in the amount of $83,563 together with all disbursements and out of pocket expenses be now approved for payment'."

41 Mr Brickhill on behalf of the plaintiff had great difficulty in obtaining the detailed timesheets for the work of Melsom Robson. He initially wrote a letter to them requesting this on 7 September 1998. A reply was received on 10 September 1998. He wrote again on 3 December 1998. A reply was received from the liquidator's solicitors on 9 December 1998 advising that, as the fees had been approved at a meeting of the creditors, they considered the request to have lapsed. Mr Brickhill wrote again to the liquidator on 4 November 1999, after the meeting of 27 October 1999. He asked for the itemisations within seven days. That was not supplied. He wrote again on 18 November 1999. Melsom Robson agreed to supply the same in a fax dated 18 November, but required all reasonable costs for photocopying etc. In a letter dated 14 December 1999 Mr Brickhill objected to that. He said these itemisations were promised to creditors at creditors' meetings on 4 June 1998 and 27 October 1999 and said, unless they were provided, he would apply to the court and reserve the right to report the matter to ASIC and to the Insolvency Practitioners Association of Australia. That letter produced a conciliatory reply from Tottle Christensen on 17 December 1999. Discussions took place between the solicitors in February 2000. On 21 February 2000 Mr Brickhill detailed the nature of the documents which he sought and which he said he was promised. A favourable reply was received from Tottle Christensen on 23 February. The documents were promised shortly. Further correspondence ensued on 7 and 8 March. The documents requested were supplied on 29 March 2000, after the plaintiff met the payment of photocopying costs requested by the defendants.

42 The documents supplied include Account Inquiries for 1 January 1998 to 8 March 2000, which are Annexures "BHP 29 - 32" to Mr Price's affidavit of 4 September. The dates in the heading are misleading. The account details are from January 1998 to 28 October 1998. A handwritten note then records:

"The cheque register was subsequently transferred to internal manual record on closure of GIS office."

43 They are statements of expenditure divided into several parts:

Administrators' Fees and Charges

Fees and Charges

Legal Fees

Casual Personnel

44 Also supplied by the defendants at "BHP 33" was a 5-page handwritten list of cheques issued in the course of the liquidation from 1 December 1998 to 2 October 1999. It gives details of 150 cheques drawn by reference to date, cheque number, amount, payee and in most cases, a one or two-word description of the payment.

45 The total of the fees approved at the various creditors' meetings, were as follows:

"Administrators' fees

Meeting

3.2.1998 $ 43,086

4.6.1998 296,023

31.7.1998 174,053

Residual fees to

31.7.1998

approved at a

meeting of creditors

on 10.2.1999 36,564 $549,726

Liquidators Fees

10.2.1999 217,053

27.10.1999

Fees to 30.9.1999 83,563 300,616

TOTAL $850,142

I note that in addition to these quantified approved fees, each meeting approved disbursements in an unquantified way. As noted above, a common form was:

"Plus all disbursements and out of pocket expenses including bank fees, fax, postage, telephone, photocopying and overheads."

46 According to the print-out of fees supplied by Melsom Robson, which is a computer print-out for the period 1 December 1997 to 29 February 2000 and covers 97 pages ("BHP 35" to Mr Price's affidavit), the total fees charged were $759,527.25 plus disbursements of $23,466.99. That is found at 205 of Mr Price's affidavit. Mr Melsom, in his affidavit of 3 November 2000, says as follows:

"4. The totals in the said annexure are correct in that the time costing for the work was $759,527.25. The difference between the resolutions is that the resolution of the remuneration of $174,053 was incorrect as it was an estimate for the work done to that date and upon checking that after the resolution was obtained I discovered that the appropriate amount and the time costing was $137,825. The defendants have not drawn the difference. Further, the last resolution for fees included $15,000 approved for the finalisation of storage costs. These have not been fully drawn at this time. The figure on page 205 of Mr Price's affidavit shows that the fees paid are $758,502, together with disbursements such as facsimiles and couriers, as set out of $23,466.99."

47 In addition to these office-type disbursements of $23,466.99, larger disbursements for consultants' fees were also paid. I quote from the defendants' Summary of Legal Fees/Costs and Consultants Fees in the period January 1998 to October 1999, found at Annexure "BHP 34" of Mr Price's affidavit:

"LEGAL $

Tottle Christensen - 89,295

Preparation of documents, advices re varies

Corporations Law issues, applications to

Supreme Court and all attendances thereto,

Kiam & GCS legal proceedings, all matters

pertaining to and conduct of Public

Examinations of officers of the company and

others, and legal advice generally relevant to the

administrations

Hely Edgar - 7,770

Numerous debtor issues including MMI

Insurance, advising re Corporations Law

McCallum Donovan Sweeney - 13,378.26

Industrial Relations and Workers Compensation

issues and proceedings

Others 2,206

TOTAL $112,649.82

CONSULTANTS

$

Delpride Computing Services - 94,728

Systems implementation, programming, trouble

shooting and all attendances to the computer

requirements of the administrations

Billericay Investments Pty Ltd - 4,760

Provision of accounting and management

systems analysis

Colin Shurlock & Associates - 400

Advising re WMC Leinster contract

TOTAL $99,888"

48 That is not a complete list of all the consultants' fees paid. The administrators were running this large company between January and the end of July 1998 and engaged consultants from time to time. For example, "BHP 32" to Mr Price's affidavit which is part of the Account Inquiry provided by the defendants shows fees paid to Anson Consulting and Accountancy of many thousands of dollars. Also the fees of many thousands of dollars paid to Hayes Accountancy Personnel. Individually and together they far exceed the item "others ... $2,206" in "BHP 34".

49 I have not been provided with a breakdown as to the total value of the money paid to consultants in the administration period and the total sum paid to consultants in the liquidation period but they could be calculated from "BHP 29-33".

50 The plaintiff's application is made under s 447E, s 449E and s 536 of the Corporations Law. Section 447E, headed "Supervision of Administrator of Company or Deed", provides, and I summarise, that where the court is satisfied that the administrator of a company has managed the company's business, property or affairs in a way which is prejudicial to the interests of some or all of the creditors, or has done an act, or made an omission that is or would be prejudicial to such interests, then the court may make such order as it thinks just.

51 Section 449E provides for the remuneration of the administrator and provides, in effect, that the administrator of a company under administration is entitled to remuneration as is fixed by resolution of the company's creditors passed at a meeting duly convened under s 439A. If no remuneration is fixed at a meeting of creditors, then the administrator is entitled to such remuneration as the court fixes "on the application of the administrator". Subsection (2) provides that where the remuneration has been fixed by the creditors the court may, on the application of the administrator or on officer, member or creditor of a company, review the remuneration and confirm, increase or reduce it.

52 Those two sections apply to administrators. Section 536 is headed "Supervision of Liquidators" and provides that the court may require a liquidator to answer any inquiry in relation to the winding up and may examine the liquidator on oath concerning the winding up and may direct an investigation to be made of the books of the liquidator. An inquiry may be ordered where it appears to the court that the liquidator has not faithfully performed his duties. A complaint about that can be made to the court by any person, which clearly includes a creditor. The court may enquire into the matter and take such action as it thinks fit.

53 I am told that there are no cases on s 447E and s 449E and my own researches have not found any. However there is at least one case on a different section but relevant by analogy, namely Venetian Pty Ltd v Conlan (1998) 20 WAR 96. There are a number of cases on s 536.

54 Venetian (supra) was concerned with the remuneration sought by Mr Conlan who was successively provisional liquidator, administrator and then liquidator of one of the companies. He sought Court approval for his remuneration. The Full Court devoted special attention to his remuneration sought while provisional liquidator of the company. At 99 the court referred to s 473(2) which provides that a provisional liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined by the court. The court compared that to the provision for the remuneration of an administrator s 449E(1)(b) of the Corporations Law, which refers to "such remuneration as the court fixes". I quote from the joint judgment of Kennedy and Ipp JJ which was endorsed by the judgment of Wallwork J at 99:

"It was accepted by the parties that the relevant principles applicable to administrators are no different to those applicable to provisional liquidators and in these reasons no distinction is made between them."

55 Section 449E refers to "remuneration". The remuneration is normally fixed by a resolution of the company's creditors at a meeting of creditors, but, if not so fixed, is fixed by the court on the application of the administrator. Where the remuneration is fixed by the creditors at a meeting, that remuneration may be reviewed and confirmed, increased or reduced by the court. The word used is "remuneration". In Venetian (supra), above, the Full Court decided at 100 and following, that the word "remuneration" means payment for work done and excludes disbursements. I am bound by that decision and propose to follow it here. This means that the administrators' disbursements cannot be reviewed by the court under s 449E.

56 I should add that an administrator is liable for the debts he incurs in the performance of his functions: s 443A(1). He is entitled to be indemnified out of company property for those debts: s 443D. Likewise, a liquidator is entitled to be indemnified against all proper expenses incurred by him: see Burns Philp Investments Pty Ltd v Dickens [No 2] (1993) 31 NSWLR 280 at 283 per Young J.

1(a) The administrators' remuneration (ie fees) have been fixed by resolutions of the creditors. But they can be reviewed by the Court under s 449E.

(b) The administrators' disbursements are not regarded as remuneration and are not reviewable under s 449E. If, however, in managing the company's business, the administrator has acted in a way which is prejudicial to the interests of one or more of the creditors, then the court may make such order as it thinks just under s 447E. It could, for example, order the refund of some or all of those disbursements.

2(a) The liquidator's fees cannot be reviewed by the court under s 473, because that section only applies to a court-appointed liquidator. In this case the liquidators were appointed voluntarily. But the liquidators' fees could be made the subject of an inquiry under s 536. A liquidator is required to lodge accounts at six monthly intervals (s 539).

(b) The liquidator's disbursements: These can also be made the subject of an inquiry under s 536.

58 I turn now to consider the plaintiff's case for a review of the administrators' remuneration of $549,526 - approved by the creditors' meetings - under s 449E. At the same time, I will consider the plaintiff's application under s 447E that the administrator managed the company's business in a way that is prejudicial to the interests of some or all of the creditors. I will later consider the plaintiff's application for an order under s 447E in relation to the administrators' payment of disbursements during the administration period.

59 The first criticisms relate to the manner in which the fees were submitted to, and approved by the creditors' meetings held on 3 February, 4 June and 31 July 1998 with further residual fees being approved, after the administration period, on 10 February 1999. Firstly, although the creditors were given notice at each meeting that the administrators' remuneration was to be fixed, they were not given any notice of the amount of remuneration sought. That is a serious fault. If the remuneration is small, or appears to the creditor to be reasonable, a creditor might not bother attending the meeting. If, on the other hand, the sum sought is large, for example, at the second meeting $296,023, the creditor might decide to attend the meeting; he might speak to other creditors and lobby support for a questioning of the fees; or he might decide to vote against approval of those fees. I consider it unfair to the creditor not to stipulate the amount of remuneration sought. In Re Solfire Pty Ltd (No 2) [1998] NSWSC 596; (1998) 16 ACLC 1,156 at 1,157, Shepherdson J said that a liquidator seeking to have his or her remuneration determined at a creditors' meeting should provide the creditors with documentation containing sufficiently detailed information for them to decide on the reasonableness of the amount being claimed. This applies, by virtue of Venetian (supra), also to an administrator. As previously stated, no notice of the amount claimed was circulated prior to the meeting, nor was prior notice given of the work done to justify the amount. However, at each meeting a statement of fees sought, and a description of the work done, was circulated amongst the creditors attending, and I have no doubt that the creditors perused that document before voting on the resolution to fix the fees. The statement of fees which accompanied the first meeting held on 3 February 1998 has not been produced in these papers but the statements presented to the other meetings during the administration period have been produced. I have extracted sentences from those statements in my narrative of the factual background above. The statements give a reasonable idea of the nature of the work. The statement of 31 May 1998, for example, covers two and a half pages. It gives 32 statements, that is in 32 sentences, describing the type of work done. It is in general terms but, nevertheless, is comprehensive in scope. It then details the number of hours worked by each of the three administrators and the hourly rate, which in that example is stated to be within the range of $210 - $240 per hour. It does not list other insolvency staff by name, except to say:

"Other insolvency

Staff 1581.3 hours at $80 - $155 per hour $201,242.50

Administration

and typing 254.2 hours at $60 - $75 per hour $18,486.50"

60 Thus, it does not give the names and the precise hourly rates of the staff doing those tasks. All that information was available to the administrators, because it was held on computer but was not presented to the meeting nor, was it available at the meeting, should someone ask to see it.

61 At the first meeting of creditors held on 3 February 1998 no one present queried the fees, nor asked any questions about them. I point out that Mr Price was not present, as his wife had recently died and he was looking after the children.

62 At that meeting the minutes record that Mr Melsom tabled a schedule of rates charged by his firm, compared with the recommended rates of the Insolvency Practitioners Association of Australia indicating the significant reduction in rates applied by his firm. I have not seen those documents, nor is the rate of reduction deposed to in an affidavit. But it was stated at the second and later meetings, that the reduction rate was to 70 - 75 per cent of the IPAA rate for Western Australia.

63 The second meeting at which fees were approved, was that held on 4 June 1998 when fees of $296,023 were approved. Twenty-three creditors were either present or represented at that meeting. Mr Price was there, as was his solicitor, Mr Brickhill. At that meeting Mr Brickhill suggested that the summary of detail on the account was too general and suggested that the administrators should provide their timesheet computer print-outs in support of the claim. There was no motion to defer the meeting until those print outs were provided and the minutes record that the administrators' fees to 31 May 1998 of $296,023 were carried by resolution "unanimously". Immediately after that resolution, Mr Brickhill requested the administrator to provide him with computer print-outs which the chairman promised to oblige. I take it from that exchange that Mr Brickhill did not insist on them as a pre-condition to having the fees incurred to date passed at that meeting, but wanted them in good time for the next meeting as it were.

64 The third meeting at which the administrators' fees were approved, was that held on 31 July 1998 when fees of $174,053 were approved. As before, no notice of the specific sum sought for remuneration was given to the creditors prior to the meeting, but at the meeting a statement of professional charges was circulated of three pages which I have already described. It was in the same format as the earlier one and did describe the work undertaken. It did not list the number of hours worked by particular staff members, nor their hourly rate. Although, as this was provided at the first meeting, I would assume that the same rates applied. Mr Price was present at that meeting, but not Mr Brickhill. Mr Melsom addressed the meeting that he and his staff were charging 70 - 75 per cent of the IPAA rate for Western Australia. His fee account was passed by resolution. There was no debate and no dissent from anyone including Mr Price.

65 That was the meeting which appointed the administrators as liquidators and, immediately after the remuneration was approved by resolution, Mr Price asked the chairman to have the meeting consider appointing a committee of creditors. As previously mentioned in my narration above, Mr Melsom spoke against it. There was no seconder and the motion lapsed.

66 A committee of creditors was appointed at the initial meeting of creditors held on 14 January 1998 when the company was placed in administration. It consisted of a representative from five creditors; all unsecured: Standard Communications, Engineering and Technical Services, King Communications, Norsat (WA) Pty Ltd and Tubemakers. This committee met on 29 January 1998. The four page minutes of that first meeting have been produced - Melsom's affidavit, Annexure "PMM 11". The lengthy minutes and the discussion between the administrator Mr Melsom and these creditors show that they were being kept well informed of the progress of the administration. The meeting lasted two hours. A second meeting was held sometime after that and before 1 April. The minutes of that have not been made available to me. The third meeting of creditors was held on 1 April and lasted one hour. There are two-page minutes of that meeting. A fourth meeting of the creditors was held on 27 May and lasted one hour. The minutes of three and a half pages are annexed to Mr Melsom's affidavit. A fifth meeting of the creditors was held on 24 July and lasted an hour and a quarter. The three-page minutes of that meeting have been produced.

67 These meetings of the committee of creditors are significant because, although the number of creditors present at each meeting was small, nevertheless, the minutes indicated that the meetings were long and the creditors present were well informed of the progress of the administration and asked many questions about it. Matters such as the administrators' efforts to establish a new computer system and sell off the assets, to find a suitor who might inject capital into the company to sponsor a deed of company arrangement, the role of Mr Brett Price after his dismissal etc, were all discussed. In addition to these meetings with the committee of (unsecured) creditors, the administrator was in close touch with the Commonwealth Bank of Australia, a secured creditor for $3.2 million. He wrote detailed reports to the bank as it was necessary to ensure the bank's co-operation in allowing the administration to proceed. His letter of 4 March 1998 to the bank, Annexure "PMM 10" to his affidavit, covers nine pages. I quote from parts of that report, as it is relevant to matters which I will discuss in a moment:

"Since our appointment, it became immediately apparent that the prior involvement of a suitor company, Kiam Corporation Pty Ltd (Kiam) had wielded significant influence upon Mr Brett Price, the managing director of GIS and by assumption, Kiam had acquired the view that the administration process was for their benefit in acquiring GIS on terms appropriate to their needs and consequently a misunderstanding of the process that administration involved.

Indeed, in the very early stages of our administration, Kiam commenced interfering, seeking to impose their will not only upon the administrators, but upon staff of GIS and clients of GIS almost as a 'fait accompli' of their takeover.

Several discussions took place with executives of that firm at which the administrators' independent role was enunciated as a consequence of which, Kiam were invited to submit a formal proposal in respect to their interest.

Unfortunately, their submission was of little value and for your interest, I enclose a copy of their letter and my reply which provides more understanding of the issues.

It was apparent that an unhealthy culture existed within the organisation, principally due to a total lack of management control, personality differences between executives and staff with rapid turnover of office staff in the Como administration section which significantly incurred 16 staff changes over a period of some 12 months, thus the longest serving employee upon our appointment had accumulated only 4 months.

As a consequence, there were no training programs, no procedure manuals, no defined lines of authority and where they did exist, total lack of management skills.

It became apparent, particularly as a consequence of emerging events highlighting the total lack of management systems and management understanding of the problems, that company executives had poor ability and could provide no meaningful assistance to the administrators.

The following staff changes were progressively initiated as part of our rationalisation of highly paid executives and efficiency of function.

Those that were dismissed included:-

• General Manager, Mr Mark Sawyer with a salary package of $150,000 p.a. together with car, entertainment expenses (including yacht club fees etc ... ).

• Operations Manager, Mr Alan Pillinger with a salary package of $90,000 p.a., together with car ... . Mr Pillinger has been retained on a week by week basis to assist with some particular functions where his prior knowledge is of benefit and has willingly taken instruction.

• Consultant Financial Controller, Mr David Keeffe with a salary package of $2,500 per week on a weekly contract of employment.

• Site Manager Leinster, Mr John Price on an employment package of $7,800 per month plus expenses on a weekly employment contract.

As a consequence of attitude, particularly in his failure to accept any responsibility for past events and indeed his obstruction and objection to the administrators' fundamental aim, a more recent dismissal has been:

• Managing Director, Mr Brett Price on a salary package of $120,000 p.a., with car expenses and entertainment allowances together with his car for his wife (recently deceased) on a two week termination contract.

• Ms Corry Chappel (de facto of Brett Price) on a salary of $40,000 plus expenses on a four week termination contract.

It is interesting to note that prior to our appointment, Mr Price was in receipt of a taxable salary of only $60,000 p.a., but through the expenses system of the office paid himself a further $2,000 per week which was not disclosed in any wages or other payroll arrangements thus achieving tax free benefits of sum $104,000 p.a. as a consequence."

68 In considering a review of the administrators' remuneration under s 449E(2), the plaintiff relies heavily on Venetian (supra), and on Re Solfire Pty Ltd (supra), I agree that those cases set out the relevant principles which need to be applied with some adaptation to this present case. In Venetian (supra), at 99, it was said that the principles to be applied in assessing the remuneration of administrators are the same as those which apply when assessing the remuneration of provisional liquidators. I accept that general statement. That was a case in which the provisional liquidator applied to the court for the fixing of his remuneration and the Full Court said, at 102, that the onus is on the provisional liquidator to establish that the remuneration claimed is fair and reasonable. It also said that the function of the court is to determine the remuneration by considering the material proffered and bringing an independent mind to bear on the relevant issues. The factual context is not quite the same in the present case. This is not an application by the administrator to the court to have his fees fixed. The administrators' fees were approved by the various creditors' meetings and this is an application by a creditor to have the remuneration reviewed. The onus of proof is surely on the plaintiff to establish that the remuneration claimed, and approved by the creditors, was not fair and reasonable.

69 Solfire (supra), above, was like this case in that it was an application for review of provisional liquidator's fees which had been fixed by a meeting of creditors. It differed from this case, however, in that the applicants for review were shareholders, not creditors. They were not present at the meeting of creditors which approved the fees. In that case, Shepherdson J said that a liquidator seeking to have his remuneration determined at a creditors' meeting should provide the creditors with documentation containing sufficiently detailed information for them to decide on the reasonableness of the amount being claimed. He said, at 1164, and I quote:

"In my view, where a provisional liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in taxable form provided by a solicitor to his client (see O 91 r 47). He should identify the person or persons and the grade or grades of the person or persons engaged in the particular task concerning the provisional liquidation, he should identify that task and dates on which time was spent on it, the amount of time spent on it and he should identify the relevant rate, according to the grade of the person or persons performing the work. We also consider that he should require the person performing the work to keep reasonably detailed diary notes and time sheets which documents should be open to inspection by persons entitled to see them.

In my view a court armed with that information should be able to determine the remuneration for the provisional liquidator."

70 The Full Court in Venetian (supra) at 103, commenting on that passage from Shepherdson J, said:

"In our opinion, however, it is, with respect, unnecessary to lay down an absolute rule, in such detailed terms, concerning the statement of account to be provided by a provisional liquidator. It may well be that in a particular case information particularised as suggested by Shepherdson J would be appropriate. In other cases less detailed information may be required. Every case depends on its own circumstances. But the overriding principle remains: sufficient information must be provided to the court to enable it to perform its function under s 473(2)."

71 Translating those principles to the facts of the present case and to this application for a review of remuneration under s 449E(2), I make the following points. The information on the administrators' work supplied to the creditors' meetings was more detailed than the one-page summary given to the creditors in Solfire (supra). There was a report to creditors sent out with the notice of each meeting. In addition, a Statement of Professional Charges was handed out to each creditor attending the meeting. In each case these statements gave two or three pages of sentences describing in general terms the work done. The hours worked by the different officers were totalled and the hourly rates were given. In some cases the names of the individual officers were not given. Their work was a heading, for example: "Administration and typing 13.7 hours @ $60 - $75 per hour = $1041.50".

72 I remind myself of the different context of the plaintiff seeking a review in this case and the plaintiffs seeking a review, for example, in Solfire (supra). In this case the plaintiff is an unsecured creditor and, even if this review succeeds, the plaintiff is unlikely to get anything. Any money ordered to be refunded from the administrators' remuneration will go to the secured creditor, the Commonwealth Bank of Australia. The Commonwealth Bank is owed more than $2 million. The Bank does not support this application. The Bank voted at the various creditors meetings to approve the administrators' fees. In Solfire (supra), the two plaintiff shareholders, who sought the review, were the ones who were going to pay the fees. They undertook to pay the fees as reviewed by the court and the debt which pushed the company into liquidation and then asked that the winding up be terminated or permanently stayed. In this case, no such offer is made by the plaintiff. The present exercise is academic. This plaintiff has not paid the administrators' fees. They have been paid, in effect, by the Bank. This plaintiff will not gain if the administrators' fees are reduced by the court. It would have been better if the notice sent out to creditors by the administrator had mentioned the sum of fees claimed, and if the administrator had circulated in advance his statement of account setting out the fees claimed and the work done for the fees claimed. It would have been better if his statements of account had been more detailed. It also would have been preferable if the administrator had brought along to the creditors' meetings his hourly charge sheets so that they could have been inspected by any interested creditors - particularly when the plaintiff requested to see those records. Nevertheless, when I weigh up all these factors together with the others which I have mentioned, I am not persuaded that the information supplied to creditors was so inadequate that they were unable to make a properly informed decision on the reasonableness, or otherwise of the remuneration.

73 The creditors were notified by the notice of meeting that one of the purposes of the meeting was to fix the administrators' fees. At the meeting they were given a two or three page statement of professional charge giving a description of the work done, the hours worked, the hourly rates and the sum of fees claimed. They were also told that the fees charged were 70-75 per cent of the IPAA rate which is a significant reduction. Moreover, a committee of creditors was appointed. It met regularly and received detailed accounts on the work done by the administrators. It raised no objections. Also, the major creditor, the Commonwealth Bank, although not a member of that committee, received separate detailed reports of the progress of the administration. It voted at each meeting of creditors in favour of the remuneration sought by the administrators.

74 The company had a turnover of $24 million per year in the year ended 30 June 1996, and an estimated turnover of $30 million in the year ended 30 June 1997 (for which accounts were not prepared) and employed 160 staff. Its accounts were in great disarray. The administrators ran the company for seven months before they were appointed liquidators. Although the administrators and their staff charged high hourly rates, they replaced some highly paid staff. I have set out, above, some of the salaries earned by the senior staff who were dismissed by the administrators.

75 I am not persuaded that the information offered to creditors during the administration period was inadequate so that I should review it, or that the fees are so inordinately high that I should consider them unfair or unreasonable. Before making a final conclusion on that matter however, I wish to consider several other matters. The first is the plaintiff's allegation that an excessive sum was spent by the liquidator on installing an MYOB accounts package when it was unnecessary. Mr Price's evidence on this, is that the company's accounting package was the CBA accounting package which had cost approximately $50,000 to install. Within 10 days of the Administrators' appointment they sacked the company's contracted accountant, Mr David Keeffe and the general manager Mr Ken Roxborough.

76 Mr Price said the MYOB package is suitable for a small business only. He has the MYOB package on his home computer which cost $500 - $1,000. He says it is totally inappropriate for a company with operations and annual turnover of approximately $24 million. He said the CBA accounting package was suitable and the company had expended a considerable sum of money and resources over and above the original purchase of it, to implement it. The MYOB accounting system was implemented by Mr Geoff Peach of Delpride Computing Services which was paid $94,728 for the task. The argument was put to me that it was a complete waste of time to spend $94,728 on a new accounting package for a company which was going to be wound up.

77 Mr David Keeffe has sworn an affidavit on 16 October 2000. He has been an accountant for 18 years. He was engaged by Mr Price in October 1997 to advise on the accounting system. His report, written after three days is dated 12 October 1997. His report began:

"The recent turnover of staff has resulted in financial and management reports not being completed and inaccurate reporting stemming from new untrained staff and in some instances staff with unsuitable experience.

In order to resolve these problems attention needs to be given by management to retaining adequately performing staff and replacing those not suitable.

A considerable portion of the staff instability also comes from the problems associated with the lack of moneys to pay outstanding creditors. The following is a precis of the respective functional areas."

I quote from extracts from his report on the payroll:

"The payroll function appears to be operating effectively, although there are reports of errors occasionally being made. These errors are probably the result of too many manual systems being used and source data being re-keyed several times from various locations.

...

In the meantime Pam and Jo should be requested to document the issues relating to the deficiencies of the Pronto payroll compared to Micro-Pay.

This would not only document the deficiencies and strengths of the respective systems but allow them the opportunity to provide input and may alleviate some of their concerns.

Staff levels appear currently adequate in this area given the current systems and there does not appear to be any backlog of work. This excludes the issue of re-keying the payroll timesheets data onto the CBA job costing system which at this stage is probably not worthwhile re-implementing given the conversion to the Pronto system."

I quote from his comments on the management/financial accounting:

"Management has expressed considerable concern at the lack of suitable and accurate accounting information.

I have not yet had sufficient time to investigate the status of the accounting reports however this is difficult given the lack of records and backup information in the ex financial controller's office and the difficulty in understanding Shan.

Further, the accountant undertaking this role should be a key player in the implementation and operation of the Pronto Accounting System hence again good communication skills are required to liaise with Cory, Pronto's Suppliers and staff for resultant training and support."

I quote from part of the report on the heading "System Administration/IT":

"At present the company does not have anyone with sufficient IT skills at the Como head office.

... The implementation of the new Pronto Accounting System is currently being handled by Cory who appears to have a good understanding of the system and requirements for the implementation."

I also quote from his report on "Accounting Systems":

"CBA/Pronto

There appears no doubt that the CBA System needs to be replaced.

The only issue regarding the CBA System is to ensure there is someone who is able to operate the system to complete the financial accounts to 30 June 1997 and management accounts for July, August and September. The issue to focus on is how to get the Pronto system up and running as soon as possible.

The initial deadline to consider is that of November 9 by which time it has to be decided whether to continue with the system or not.

I consider that adequate resources need to be employed to ensure that the system commences operation during October with live data.

This is essential due to,

- the inability to produce accurate and reliable data from the CBA system.

- ...

78 Mr Keeffe, in his affidavit, states that that report was written after only three days overseeing the company's operating systems. His initial recommendation concerning the scrapping of the CBA accounting system was based on information he had been provided by the people working within the company accounts department, rather than from any detailed analysis of the CBA accounting package he had undertaken. After that initial report, he considered the CBA accounting package worked properly and the problems associated with it were caused by the processing of the information, that is, its inputting and reconciling, rather than the accounting package itself. Within three weeks of commencing his review, he said that the company's bank statements were being reconciled with the CBA accounting system. He discovered that there had been dual inputting of creditors' information into the accounting system from both the Perth and Kalgoorlie operations of the company.

79 When the administrators were appointed they began using the Excel package for Excel spreadsheets to record the company's purchase orders. In February 1998 Mr Keeffe reported to the administrators that the company was a complex operation and that Excel was not a suitable accounting system, given the level of data transactions which he outlined in his report. He informed the administrators that the CBA accounting package worked properly. He said in his 18 years experience as an accountant he considered the MYOB accounting package was inappropriate for the company. With proper effort it would have been clear that the CBA accounting did operate and that the problems with it were the result of control mechanisms that had not been implemented. He said the MYOB system was not a high level, job-costing system and is not suitable for a high number of users and site locations required for the company's operations. In his opinion, it would take approximately four to five months to fully implement a new accounting package into a business such as that operated by the company. During his time in the company's office he had discussions with Mr Peach of Delpride Computing Services. He said that Mr Peach was not an accountant, but was from an information technology background and "had limited knowledge of accounting concepts and packages".

80 Mr Melsom, who is an experienced liquidator and accountant, says at par 11 of his affidavit of 25 October, and I summarise, that the CBA accounting software was only part of the company's accounting software. Fifty per cent of the accounting was done on Excel spreadsheets which were used exclusively at the Leinster, Murrin Murrin, and Esperance sites and for some of the Kalgoorlie accounting. The payroll system was "Micro Pay System" which dealt with in excess of 150 employees and the company's average monthly wages bill was $1 million during the administration and then progressively less as employees left as contracts came to an end. The payroll system was not interfaced with either the CBA or Excel systems, this being an essential element in properly allocating costs to particular jobs. The Leinster site, upon Melsom's appointment, represented approximately 40 per cent of the company's revenue. The MYOB programme was not used for job costing. Mr Keeffe was not involved in the affairs of the company at the time that MYOB software was finally implemented. Notwithstanding the change in other software programmes, the Excel spreadsheet software was maintained by the company during the course of the defendant's appointment and integrated with the replacement software for job costing and accounting. The final package which the administrators installed produced information which was far more accurate and timely than that which was in place at the time of their appointment. The final package took approximately three months to instal from the time of their appointment (which was January 1998). Firstly, MYOB was installed to allow the administrators to have a better control of debtors and creditors and that took about a month. Secondly, the purchase order system required refinement to allow purchase orders to be electronically issued which took a further three weeks. Finally, the software had to be written to integrate and interface the job costing from all the sites and all the various programmes which was finalised in the third month from the time of the defendants' appointment.

81 I note from the Account Inquiry ("BHP 32" to Mr Price's affidavit of 4 September 2000) that $92,089 of the $94,728 paid to Delpride Computing Services was paid for work done during the seven-month administration period.

82 Mr Melsom, at par 8 of his first affidavit of 4 October 2000, states, and I summarise, that on his appointment as administrator, the company was in the process of replacing the CBA software with Proton software and had paid at least one instalment to acquire the Proton software. However, subsequent to his appointment, the supplier refused to take any further steps because it had not been paid. The contract for the support from the supplier of the CBA software was in arrears as at the time of his appointment and the licence to operate the software had been terminated. Among other things, there were problems with the server for the CBA software which were detected upon his appointment and other problems which led to making the data it produced unreliable. The supplier of the CBA software was not providing any support and, because of the problems associated with this software, another system was purchased. He says that MYOB software has a large number of versions and can be used for the company's circumstances. The CBA software job costing component was kept operating while other alternatives were sought and was ultimately replaced by a Microsoft system which was integrated with the MYOB software and the payroll system. The company turned over $24 million in the financial year ending 30 June 1996. The accounts for the company for the year ending 30 June 1997 were never completed. In October 1997 the company stood down approximately 30 per cent of its workforce and closed its Perth workshop.

83 I note that the company ceased trading by 31 July 1998, at all of its branches, except that at WMC Kambalda nickel smelter where operations were to cease on 14 August 1998. The new accounting systems had been put in place during the administration period and, nearly all of the computing costs charged by Delpride Computing Services were incurred within that period.

84 Mr Peach of Delpride Computing Services reported to the administrators on the computer system on 3 March 1998 ("PMM 106"). I quote from parts of that report:

"When we arrived at GIS we found that the systems were in disarray. There were no systems procedures, manuals and a general lack of knowledge in regard to the day-to-day maintenance of any system. Users were trained by other users and my understanding is that due to many personality conflicts in the organisation, there was a turnover of 16 accounts staff in the 12 months prior to our appointment. As there were no written procedures, the training of staff lacked somewhat.

The Accounting system provides for a standard General Ledger structure with a ledger and sub-ledgers for debtors and creditors. This means that "one-sided" journals are an acceptable practice. It also means that without constant trial balances, the system does not necessarily balance with itself. (NOTE: These balances were not being carried out regularly). Profit and Loss statements also include the movement in "Work in Progress" which seems to be 'pulled out of the air'.

During the years of use of the CBA system, many duplicate debtor and creditor accounts have been created due to user error and the balances in these accounts cannot be reconciled with any level of confidence. This is often due to a liability being accrued in one customer account and paid for in another or a debtor payment being credited to the wrong account or the wrong period (the future) which causes an incorrect balance for the period being reconciled.

The payroll system utilizes a piece of software called 'Micro-pay' and as this software is not dynamically linked to the accounting system it means that at the end of a pay period, the accrued Prescribed Payment accounts are manually re-keyed into the CBA accounting system. There is a flaw in the accounting system which means that if anyone happened to be in the accounts payable area whilst the payroll was being batched through, a simple press of the key can wipe out all pending creditors or make then appear as paid in the future.

It is also feasible to manually alter the database to remove certain transactions. The debtor's database does not contain a current balance field for each customer and summing the debtor transactions generates a customers debt owing. This would be acceptable, however the system also allows for a transaction set to be removed once the debt has been paid. This was common practice before we arrived and certainly opens the possibility of fraud being committed against the company (or contra set-offs) by anyone who knew this.

Invoices are only generated monthly which reduces the company's cashflow position. There also seems to have been no reconciliation of the timesheets to the payroll system, which means that there is no guarantee that all costs are being recovered in the operation.

As timesheets were being transcribed manually onto spreadsheets, we have seen many transcription errors as well as overlap in dates and times worked.

There was no system backup for any data created in the personal computer environment and no security within the office for confidential documentation. All drives on PC's were shared to all others. There are also many pirate copies of software being used in the office.

CHANGES SINCE ADMINISTRATION

To resolve some of these issues, we have made many alterations to the systems in the office. Our brief was to make the systems stable and provide reliable information, create system backups and security, standardise whatever method of operation we could, at minimal possible cost.

To do this we did the following:

A Software audit was started to determine the depth of Software piracy and to resolve this issue by buying or removing the software for/from the PC's.

We stabilised the existing PC and terminal environment to allow continued operation by the staff at the site.

We assessed the needs of the Administration in relation to information and wrote extract procedures to retrieve data from the existing Accounting system.

A file server (using existing hardware and software) was created in the Como office and backup and security groups were created to maintain a level of security of data in the organisation. Data from all available machines was consolidated and a daily backup is now performed and stored off-site (The same methodology is now being adopted at Kalgoorlie office).

M.Y.O.B. was installed, initially as a stand-alone piece of software to capture the purchase orders for the administration and subsequently we networked it on a multi-user version to do the billing at Como and Kalgoorlie. As a result, billing can now be done daily to increase cashflow. (We recognise that the software being used does not provide a long or medium solution to the systems needs at GIS, but they do offer a cheap short-term solution).

Data transfer is now occurring on a daily basis to ensure that we can provide a daily P&L position. (NOTE: This is an incremental process and will need time to complete).

85 As previously mentioned, some $92,000 of the $94,000 (I am using rounded figures) for computer accounting work was occurred in the administration period. It seems to me, that the accounts system was in a mess and needed fixing. Although its deficiencies were being addressed by Mr Keeffe, they had not been remedied totally by the time the administrators were appointed. I am not persuaded that the appointment of Mr Peach and his company Delpride Pty Ltd ("Delpride"), in replacement of Mr Keeffe, and payment of $94,000 to that company for work on the accounts system, is so prejudicial to the interests of one or more of the creditors that I should make some order disallowing the sum, or calling for an inquiry under s 447E. I say that for various reasons. Firstly, it cost a lot of money to change the computer system but it may have produced some savings. For example, in reducing or eliminating the manual entry of data, it undoubtedly saved the time of accounts staff. In reducing or eliminating errors caused by duplicate debtor and creditor accounts, and the manual compilation of spreadsheets, it probably saved staff time in locating and fixing accounting errors. Delpride was engaged at $92,000 spent over a seven-month period. It replaced Mr Keeffe who was being paid a salary of $2,500 a week. It would be a big exercise to calculate the nett cost, ie costs less savings, of the Delpride computer exercise.

86 Mr Brickhill, for the plaintiff, has argued that it is not necessary for me to reach a conclusion on this question because the plaintiff only needs to raise a complaint in relation to these computer costs to justify the Court ordering an inquiry. I do not agree with that submission in relation to Delpride's computer charges. As stated above, they are almost entirely incurred in the administration period. It is s 536 that permits a complaint to be made about the conduct of a liquidator which can lead to the Court making an order calling upon the liquidator to answer the complaint, ie, calling for an inquiry. That section relates only to liquidators. It is headed "Supervision of Liquidators". The computer charges in question where incurred in the administration period. They are consultant's fees so they are not part of the administrators' remuneration as it has been defined by case law, so they fall outside the ambit of s 449E. The complaint about these fees falls for consideration under s 447E. On the plaintiff's case, these computer charges were unnecessary. Is the payment of these charges prejudicial to the interests of some or all of the creditors? Yes, obviously, if the complaint is made out, there is less money available to pay creditors. Which creditors are so affected? Only the Commonwealth Bank. If this $92,000 expense was totally unnecessary, and did not produce any contrary savings to the company, then the Bank has been prejudiced by the sum of $92,000. Yet it has made no complaint. It received the administrators' accounts and evidently does not support the application. It attended most creditors' meetings and received regular separate reports, as the secured creditor, on the progress of the administration. If I made an order refunding this $92,000 or part of it, the only creditor who would benefit would by the Commonwealth Bank. It still has more than $2 million owing to it. In these circumstances, I am not prepared to say that the computing fees paid by the administrators are prejudicial to the interests of any relevant creditor so that I need consider making an order about them.

87 Further complaints are made about the defendant's fees and disbursements and I will set them out in summary form as they appear at par 19 of the plaintiff's written submissions:

"(b) The assertions that the administration would be a short period and implicitly at a low cost (paragraphs 41, 42 and 43 Price's affidavit);

(c) considerable periods when little or no work was undertaken during the liquidation and administration (paragraph 47 Price's affidavit);

(d) a failure in the important first three weeks of the administration to attend and oversee the company's operation (paragraph 8 Price's affidavit);

(e) decisions being made on an ad hoc basis (paragraph 9 Price's affidavit);

(f) in dismissing all staff who had a detailed knowledge of the company's operations and replacing them with people who were unfamiliar with the company's affairs or accounting operations (par 3 Price's affidavit in reply); and

(g) any cost savings if the company could be sold as a going concern (paragraph 45 Price's affidavit)."

88 Each of these six assertions is hotly contested by the defendants and much material has been presented on their answer to these points. I do not propose to go into any of these allegations at length because I do not think it necessary to do so in view of my main point, which I made in relation to the computer fees and which I repeat here. It is that the only relevant creditor prejudiced by these allegations, if they are all proved, is the Commonwealth Bank. Yet, with good knowledge of the administrators' actions, it has chosen not to join in or support this application. That is a complete answer. However, by way of an example I will say something about the allegation in (g). The defendants have produced answering documents on this. When Mr Price and his wife appointed administrators to this company it was in serious financial difficulties. It was insolvent. Mr Price spoke with Mr Robson prior to the appointment of administrations about the prospects of an administration and it was obvious that he had a deed of company arrangement in mind. He hoped that a rescuer could be found which would inject some money into the company which could provide some payment to the creditors and that the company would be allowed to continue to trade under a deed of company arrangement. That much is clear from letters at the time. Mr Price saw Kiam Pty Ltd as the proposed rescuer and at the time of the appointment of the administrators, and immediately afterwards, kept in close contact with persons associated with Kiam Pty Ltd, such as Peter Anderton. Mr Anderton thought that the company could possibly be jointly administered by him and the administrators. Mr Anderton in turn took an active interest in the running of the company. In a faxed memo to Mr Robson of 14 January 1998, he gave his views on the staff members who should be terminated and relocated. He gave detailed views on Mr Brett Price, who he said should be relocated to Kalgoorlie immediately, to continue as director of GIS's Kalgoorlie operations and he gave detailed suggestions as to the placement, sacking or relocation of another 12 staff members. He said that input on the company from himself and Mr Stedman and Mr Andrew Ellison would be at the expense of Kiam Pty Ltd. Mr Melsom has given detailed account of why Kiam Pty Ltd was not to be the rescuer. It ultimately did not offer any rescue package. In May 1998 he prepared a summary of the activities of the company and of its finances, which was publicised to see if any other company might be interested in putting up a sum of money to fund the deed of company arrangement but there were not takers. I accept his evidence entirely that proper and genuine efforts were made to find a rescuer. Discussions were held with six interested parties, including Kiam (Melsom p 144) including detailed discussion with Kiam's staff, but it was not to be. No offer was made by Kiam or by anyone else. He was thus unable to recommend a deed. He recommended the winding up of the company and this was accepted by the creditors.

89 The six points raised above as examples of the unreasonableness of the defendants' fees and disbursements and which, according to the plaintiff requires further investigation, all relate to the administration period. I do not regard those allegations prejudicial to the most relevant creditor - namely the Commonwealth Bank - that I should make any order under s 447E. Because they are assertions relating to the conduct of the administration and not to the liquidator's conduct in the process of liquidation, they do not fall to be considered as justifying an inquiry under s 536.

90 I turn now to the complaints about the level of fees and disbursements charged by the liquidators during the liquidation period 31 July 1998 to approximately 27 October 1999. As previously stated, the liquidators' fees approved at a meeting of creditors held on 10 February 1999, were $217,053 and approved at a meeting held on 27 October 1999 $83,563, a total of $300,616. As previously discussed, the plaintiff through Mr Price says it was not notified of the meeting held on 10 February 1999. I consider, on balance, that it was probably notified of the meeting at the somewhat inadequately recorded address of PKF Pty Ltd and it may not have been the fault of the liquidators that the notification was not better. The plaintiff, through Mr Price and Mr Brickhill, were present at the meeting held on 27 October 1999 and, as previously discussed, they queried the fees and they say they voted against them. At the time of that meeting they did not have the benefit of a computer print-out of the work done by the liquidators and staff, although they had requested those documents from June 1998 onwards. At those two meetings unspecified disbursements were also approved. I will refer to them later.

91 In examining the level of liquidators' fees, I need to say something of the magnitude of the task and, because the accounts are inter-twined, need also to refer to the administration period. Shortly after the appointment of the administrators in January 1998, Mr Price, as the managing director, signed a Report as to Affairs which is "PMM 3" to Mr Melsom's affidavit. That report shows the following matters:

"Interest in land Nil

Sundry debtors $2,251,208

Cash on hand 500

Cash at bank Refer schedule

Stock as detailed in

annexed inventory 316,309

Work in progress as

detailed annexed inventory 560,711

Plant and equipment as

detailed in annexed inventory 1,387,740

Other assets as detailed in

Schedule C 588,761

Sub total $5,105,429"

92 The Report as to Affairs in Schedule F reports that the secured creditor, the Commonwealth Bank of Australia, was owed debts totalling $3,089,854.36. The administrators carried on the business of the company for a period of seven months and during that time, received an income from contracts and paid wages and expenses. A summary of the payments made during the administration period and during the liquidation period is found in the liquidators' report, to which I have already referred, found at p 67 of Mr Price's affidavit. The payments include:

"Administration creditors $503,891

Administrators' fees and expenses 237,591

Commonwealth Bank part payment

under charge 973,726

Superannuation (pre-administration) 269,014

Administrators' taxation liabilities 295,201

Superannuation (part-administration) 62,499

Wages - contract 138,265

...

Legal fees 28,489

...

Specialist consultants/contractors 9,802

Liquidators' fees and expenses

Approved 217,053

To be approved 70,581 287,634

3,045,582

Balance of funds 51,990

3,097,572"

93 The liquidators' report shows that it was fairly successful in recovering $2,365,913 from the sundry debtors and other sums from other sources totalling $3,097,572. The liquidators paid $973,726 to the Commonwealth Bank. As stated in the report as to affairs, its debt at the commencement of the administration was $3,089,854.36. Of course, interest was running on that but it can be seen at a glance that it suffered an overall shortfall of over $2 million.

94 Other creditors which ranked ahead of the Bank in priority were paid:

Employee superannuation $331,513

Employee entitlements

(annual leave etc) $1,333

96 Details of the liquidators' work in the liquidation period is given in the reports to the meetings of creditors held on 10 February and 27 October 1999. Those reports are found, inter alia, at Melsom's affidavit p 48-50 and p 55-56. Further details are given in the Statement of Professional Charges circulated at those meetings. I have quoted above the whole of the Statement of Professional Charges submitted to the creditors at the October 1999 meeting. Further evidence of the work done by the liquidators in the form of a list of payments made is found in the Account Inquires "BHP 29 - 33". Approximately 220 cheques were drawn by the liquidators. A perusal of those cheques shows that the disbursements in this period were not particularly high. As previously stated, only approximately $2,000 of the $94,000 paid to Delpride for computing services was paid in the liquidation period. Likewise, only a small part of the total fees paid to the three firms of solicitors employed by the liquidators - each to tackle different tasks - were paid in this period.

97 In addition to this various material on the work of the liquidators, Mr Melsom has supplied a summary of legal fees and consultants' fees paid at "BHP 34", which I have quoted in full above. He has also supplied to the plaintiff and to the Court at "BHP 35" a 97-page computer print-out of the charges raised by the liquidators and their staff members. These give details of the number of six minute periods worked and of the hourly charge, and in most cases some details of the nature of the work. Mr Melsom states in par 9 of his large affidavit that Mr Robson and a Mr Geoff Fuller were unable to properly use this computer system. "PMM 18" is a summary of the work done in terms of six minute units by Mr Robson. The fees charged by him are $20,256 covering both the administration and liquidation period. Of that sum, $4,608 was earned in the liquidation period (Price p 182). I have arrived at this by addition of certain figures found at p 290 of that affidavit. Mr Robson has provided approximately 144-page copy of Mr Fuller's diary showing the periods when he worked on the administration and liquidation of the company's affairs. It contains the same level of detail as the computer print-outs. It is divided into six-minute slots and gives brief descriptions of the work done on the company's affairs. He was not a high fee earner. The total fees earned by him in both the administration and liquidation periods were $7,929.50, see "BHP 36". I have not bothered to try and extract from this figure the precise sum charged by him in the liquidation period.

98 The plaintiff's general submission in relation to the liquidators' charges is that, on the authority of Solfire (supra), the information supplied is not sufficient. The information should be as detailed as in a bill of costs. Mr Brickhill says that the computer print-out of the work done does not enable a creditor to ascertain if the appropriate level of person was used for a particular task. For example, at "BHP 35" at p 108, the first staff member mentioned is Mr Colin Sharp and during the liquidation period he did fifty-three units of work at a cost of $662.50. His charge out rate was $125 per hour. Some details of his work are given. For example, on 16 September 1998 he did twenty-one units of work at a cost of $262.50 described as "super contributions and FB tax matters". I do not know Mr Sharp's qualifications or his level of experience. Nor do I know the details of the work he did on the super contributions and the FB tax matters. I think it matters not. The liquidators are officers of the Court. They are normally highly experienced. I know that Mr Melsom and Mr Robson are experienced liquidators. I have seen their work on other occasions. I am not familiar with the work of Mr Lopez. Given that the amount of information supplied is fairly detailed, I am not disposed to require further information on the role of Mr Colin Sharp. The criticism made of the lack of detail about his work does not persuade me that I should call for an inquiry. This computer print out "BHP 35" of ninety-seven pages is inadequate according to the plaintiff but there must be a limit to the amount of detail that can legitimately be required. As previously stated, the Full Court of this Court did not endorse completely the view of Shepherdson J in Solfire (supra) on this matter. I note from the summary of fee earners at "BHP 36", that twenty-five staff members were engaged by the defendants as both liquidators and administrators and Mr Colin Sharp was not a significant fee earner. That summary does not differentiate between the fees earned by the various earners in the administration and the liquidation periods but in the combined periods the fees earned by the three defendants were as follows:

99 Of the other staff, the highest fee earners were:

100 Mr Davis was Mr Melsom's senior assistant and Mr Harper was a further assistant (Melsom p 117).

101 I mention two other minor fees earners here and I will comment on them later:

102 A second criticism made by Mr Brickhill, by way of example, on the inadequacy of the fees print-out is that of staff member Frances O'Regan at p 108 to p 113 of the affidavit. Her position is not given but I learn something of the nature of her work from the following entries:

"Re notice of meeting, phone calls

Supplier call

Re Yellow Pages ad

Re debtors notices, call GME and sent fax

Re bank state, cred calls

Calls and disk re bank statements - cash book

Re PMM phone call and debtors

Re bank stat rev

Re hours worked

Disk KD pl/eq, prep and sent fax, looked for sec file

Phone call KD, fax

Re cash book, bank stat, vouchers sol 6

Sol 6 entry

Facsimile to Deloitts

Sol 6 entry, re bank rec"

103 Her charge out rate was $11 per unit or $110 per hour. I do not know her position. No prior notice was given of this criticism so counsel for the defendants was not able to reply. Thus I was not told what "sol 6" meant.

104 Mr Brickhill criticised the inadequacy of an entry relating to the work of Mr George Lopez, one of the defendants, on 24 March 1998, when he spent four units of time costing $96, on "discussion W/KWD". That presumably refers to discussing some matter connected with the administration with KWD who is probably a reference to Kelvin Davis, who was the defendants' largest fee earner. Mr Brickhill says the note of the work done is inadequate to disclose what was discussed with KWD. The criticism relates to an entry in the administration period but similar entries can be found in the liquidation period. For example, on 6 August 1998 Mr Lopez spent eight units of time costing $192 "discussing KWD's letters and review". Mr Brickhill asks, what was discussed? Was it relevant? Was the time spent on it reasonable or an overcharge? He says the entry should contain this level of detail, for example:

"Discussion with Kelvin Davis concerning the acceptances of proofs of debt in relation to A, B and C."

105 At p 114 to p 118 are entries relating to the work done by Mr Geoff Fuller. I am concerned with his work in the liquidation period only. There are practically no notes as to the nature of his work. I quote from some of the entries where he has given a note of the work done:

"Paying accounts

Payment account

Entries to trust account

Accounts payable

Accounts payable inc from trust

T/calls 2 draw chq

Accounts payable

Accounts payable

Rec & deposit chq to trust account

Draw cheques 2 on trust account

Banking at CBA at Mt Lawley

Pay account from trust funds

Arrange furniture for collection."

106 The many blanks against work done and charged is inadequate. As previously stated, Mr Melsom has deposed that Mr Fuller could not operate the computer recording of work done properly - I do not know the reason for that but Mr Fuller's 144 pages of diary notes supply further details. I take an example. On 13 August 1998, Mr Fuller spent four units of time engaged on some unspecified task at a charge of $38. The entry reads two units "T/C to Peter H discuss with Peter H" and in the afternoon two units "Accounts payable". The entry on the next day which is for one unit reads "T/C from P Melsom". I assume "T/C" is a reference to "telephone call".

107 There are a number of entries in Mr Fuller's diary for:

"Admin various

Admin wages

Admin collect stationery"

108 Mr Brickhill criticised the inadequacy of detail given here. His point is not a good one. These various references to "Admin" do not relate to work on the affairs of the company. That refers to work on some other matter, I suspect on Melsom Robson's general office administration. When he has charged work to the company, (i.e. Hansley Holdings Pty Ltd) it is labelled GISENG meaning "GIS Engineering". This is made clear from a comparison of the diary notes with the computer print-out "BHP 35" p 114 to p 118.

109 There are numerous entries on p 118 to p 124 against Ms Julie Dunn and the description of the work given is "TYP", which I understand is a reference to typing. The entries for typing are almost daily and the units and time involved vary. For example, in the first few days of the liquidation period the number of units spent per day were 4, 2, 3, 6, 4, 5. Mr Brickhill says these entries are inadequate. He says an entry should read, for example, "typing letter to creditors dated 10 August 1998".

110 At p 147 to p 149, there are a number of entries relating to Mrs Lexley Larter and in each case the description of the work done is given as "courier or couriers". For example, the first entry in the liquidation period of 6 August 1998 is for three units of time costing $16.50 for "couriers". Mr Brickhill says this is inadequate. The entry should give some detail as to what was couriered, and where, so that a creditor could make an assessment as to whether the charges were reasonably incurred.

111 It was noticed above that Mr Melsom, of the three administrators and liquidators, was the one principally involved with the affairs of this company and charged fees of $198,345.50. In the computer print-out his work is detailed at p 170 to p 179 of Mr Price's major affidavit. I will given examples of the details given of the work done by him during the liquidation period:

"17.8.1998 30 units $720 Review with KD accounts, queries etc.

18.8.1998 43 units $1,032 Admin issues, accounts, correspondence, dictation etc

19.8.1998 30 units $720 Drafting correspondence. Admin. Accounts

21.8.1998 Admin matters, correspondence, accounts"

112 Mr Brickhill says that these notes are far too general. For example, where he says "admin matters, correspondence", for example, how much time was spent on each? What is meant by "administration matters"? Mr Brickhill says a creditor cannot ascertain from these notes what work was done on that day or whether the time spent on it was reasonable.

113 One of the minor fee earners was Mr Richard M Melsom whose work is listed over thirty-six entries on p 180 and p181. In total he did 391 units of work for a total charge of $2,602. His charge out rate was $66.50 per hour. Mr Richard Melsom is the son of the defendant Mr Peter Melsom. Details of his work are given opposite each entry and Mr Brickhill criticises the following entries:

"21.1.1998 37.5 units $243.75 Flight

22.1.1998 37.5 units $243.75 Flight

...

28.1.1999 4 units $28 'Drive PMM into city'"

114 The first two entries relating to "Flight" occurred in the administration period. The latter entry "Drive PMM into city" occurred in the liquidation period.

115 Following criticism of those entries first in argument, I received an affidavit from Mr Peter Melsom sworn 3 November 2000 and I propose to give leave for the late filing of this affidavit occasioned by the matters raised in argument. Mr Peter Melsom deposes that:

"In relation to the entries referred to 'flight' of Richard Melsom, shortly after the defendant's appointment I formed the view that it was essential that the insolvency manager, Kelvin Davis, and the IT Manager, Richard Melsom, should visit each of the company's sites in Esperance, Kalgoorlie, Murrin Murrin and Leinster for the purpose of putting initial systems in place to track purchases made by the defendants, the conduct of staff and to examine all of the software and computer systems. Kelvin Davis and Richard Melsom would perform these roles. The defendants also required to obtain listings of all the plant and equipment and valuations and engage John Gregson to undertake these tasks and together with his assistant were parties on the flight at the same time. Quotes were obtained for the cost of chartering a plane and pilot. Richard Melsom is a qualified commercial pilot and for Richard to undertake the above work as well as undertaking the role of pilot was cheaper than chartering the plane with another pilot. The trip took approximately 2 1/2 days all told."

116 In relation to the other matter, Mr Peter Melsom deposes:

"In relation to the entry of Richard Melsom that records him driving me to a meeting, the only time I recall that occurring was when I used Richard to drive me to an urgent meeting and during the course of that driving we discussed various matters pertinent to the affairs of the company. It is the practice of Melsom Robson to use taxis."

118 The computer print-out at p 187 to p 189 contains numerous entries for overheads. Overheads were charged in both the administration and the liquidation period. The charges was not high. I give some examples in the liquidation period:

"8.7.1998 Overheads $14.63

17.7.1998 Overheads 21.38

31.7.1998 Overheads 12.38

8.8.1998 Overheads 21.13

15.8.1998 Overheads 15.75"

119 I share Mr Brickhill's criticism of this item. No details are given there or in the affidavit material. It is a concern when high hourly rates are charged for staff and specific disbursements such as fax, photocopying, postage, couriers, hire of meeting room, telephone, stationery are charged, why there should be a separate charge for overheads?

120 In Venetian (supra) at 104 and 105, in the joint judgment of Kennedy and Ipp JJ, their Honours give examples of similar entries in the liquidators' accounts in that case and criticised them. They said:

"Many of the tasks were described in such a way that it was impossible to discern why they were necessary, what precisely was involved in performing them and what level of complexity or responsibility attached to them. The descriptions tendered more to conceal this kind of detail rather than reveal information essential to the Court's function of determining whether the remuneration charges was fair and reasonable. Typical examples of the descriptions were the following...

The amounts claimed for remuneration were not insubstantial and in our view the respondent could not discharge the onus that was on him by simply proving that he and several other members of his staff spent a certain number of hours in performing work described in very broad terms. As regards disbursements, the difficulties were compounded..."

121 The plaintiff relies heavily on this analysis as being directly applicable to the documentation provided by the liquidators justifying the fees in this case. He says it certainly raises a prima facie case for an inquiry to be ordered by the Court so that on a later occasion, possibly before a Registrar, the liquidators can be examined as to the various criticisms.

122 The call for an inquiry into the liquidators' fees under s 536 is put on two bases. The first that there was insufficient material put before the creditors for them to make an informed decision and for this proposition the plaintiff relies on Solfire (supra). I reject that submission. Although, as I have said above in relation to the administrators' fees, it would have been better if the notice of meeting had informed the creditors of the sum of fees being sought, and it would have been better if the Memorandum of Professional Charges had gone out with the notice of meeting, nevertheless, I consider the information given to the creditors reasonably adequate. They were notified that the liquidators' remuneration was to be voted on at the meeting. They were given, in each case, a creditors' report on the progress of the liquidation to date. Those creditors who attended were also given a Memorandum of Professional Charges giving some details of the work done and stating the fees claimed.

123 The second basis for an inquiry offered by the plaintiff is that its various criticisms of the charges claimed in the computer print-outs raises a prima facie case for an inquiry. The plaintiff has made numerous criticisms of the lack of detail and the inadequate detail provided in the computer print-outs as to the fees charged and in some cases the disbursements, such as "overheads". I think on the authority of Venetian (supra), that the plaintiff has made out a sufficient case to justify an inquiry into the liquidators' fees but for one significant matter. I consider that it would not be just in the circumstances of this case to act on the plaintiff's application and order an inquiry. I repeat here the same point that I made in connection with the administrators' fees and disbursements. An inquiry into the liquidators' fees and disbursements at the insistence of this plaintiff, would be a hypothetical and sterile exercise. That is because this plaintiff stands to gain nothing financially from such an inquiry. At the conclusion of the liquidation, the shortfall to the secured creditor, the Commonwealth Bank, was over $2 million. So, if as the result of a Court-appointed inquiry, the Court was to refund all the liquidators' fees and disbursements, there would be no financial benefit to the plaintiff. I say that because the liquidators' fees charged were $300,616. I have not calculated the liquidators' disbursements but they can be calculated from the papers before me and they are relatively small. The bulk of the disbursements were incurred during the administration period. I consider it is only the secured creditor, the Commonwealth Bank, which can legitimately ask for an inquiry in this case. It is not an applicant, it does not join in the application, and is, apparently, unconcerned about the level of fees charged. In these circumstances, I propose to decline to order an inquiry under s 536.

124 For the above reasons, I propose to dismiss the amended originating process.