In the matter of ACN 104 635 369 Pty Ltd [2020] NSWSC 242

What happened

This is an ex tempore judgment (Emmett AJA) concerning an application by two former liquidators, Graeme Beattie and Christopher Darin (the Liquidators), in relation to a deregistered company, ACN 104 635 369 Pty Ltd (the Company). The Liquidators sought orders to:

• reinstate the Company under s 601AH(2) of the Corporations Act 2001 (Cth),
• be appointed as joint and several liquidators upon reinstatement under s 601AH(3),
• have their remuneration fixed under Schedule 2 (Insolvency Practice Schedule) s 90-15(1) and paid out of the liquidation funds,
• have their costs of and incidental to the application fixed as costs of the winding up and paid from the liquidation funds, and
• have the balance of funds paid to AJ Azzopardi Industries Pty Ltd (Azzopardi) in partial repayment of funding it had provided during the liquidation.

ASIC (the Commission) did not oppose the reinstatement provided formal ordering conditions were satisfied; the Court was satisfied those conditions would be met [Introduction para 1]. Azzopardi opposed the Liquidators' claim for additional remuneration and costs, but did not oppose reinstatement, reappointment of liquidators, or payment of the remaining funds to it.

The background is a protracted winding up with multiple liquidators, recoveries (notably a $600,000 recovery by settlement), and prior Federal Court orders affecting appointments, approval of retainer agreements and fixing of remuneration (orders made by Farrell J in October 2013 and by Gleeson J in December 2014 and November 2015). After various steps, including a creditors' meeting and the lodging of a return under s 509, the Company was deregistered in October 2018 pursuant to prior orders. The Liquidators assert that deregistration was overlooked due to administrative failings in their firm and only noticed in August 2019.

The Liquidators produced time records and ledger extracts showing work carried out between 1 July 2015 and 31 October 2018 (68 hours 59 minutes; $33,370.50) and work post-deregistration which they did not claim. They conceded $10,000 against the former sum and accounted for legal costs and remaining tasks, arriving at a claimed figure of $27,917.34; the Court credited the earlier $7,500 allowed by Gleeson J and fixed the net sum to be paid out of liquidation funds as $20,417.34. The Court also fixed gross costs for the application at $20,000 inclusive of GST, to be paid from liquidation funds, and ordered the remaining balance to be paid to Azzopardi.

Why the court decided this way

Statutory powers and practical evidence drove the decision:

1. Reinstatement and reappointment: The Court relied on s 601AH of the Corporations Act. ASIC's stated non-opposition, subject to formal order wording, removed any regulatory objection to reinstatement. The Court was satisfied the formal conditions could be met and exercised its power to reinstate the Company and to appoint the Liquidators on reinstatement [Introduction para 1; Orders].

2. Remuneration: The controlling statutory provision for fixing remuneration in a liquidation context is Schedule 2 s 90-15(1) (Insolvency Practice Schedule). The Court accepted the Liquidators' contemporaneous time records and ledger extracts as sufficient evidence of work done. The Court rejected the contention that the prior Federal Court fixation (particularly the $7,500 allowance for completing the winding up ordered by Gleeson J on 13 November 2015) absolutely precluded any additional remuneration. Instead, the Court treated the prior allowance as a credit and assessed whether additional remuneration was justified on the evidence. The judge expressly accepted the Liquidators' evidence as justifying additional remuneration and performed the arithmetic: claimed total less agreed credit for the prior allowance produced the figure fixed [$20,417.34] [Liquidators' Remuneration paras 3-6].

3. Costs: Given the factual history (administrative oversight leading to deregistration, Azzopardi's earlier opposition and its role as funder, and interlocutory hearings), the Court exercised its discretion to fix a gross sum for the Liquidators' costs rather than require taxation. The parties arrived at a proposed gross sum ($20,000 inclusive of GST), and the Court adopted that approach as pragmatic and proportionate in the circumstances [Costs of this Application paras 1-3].

4. Distribution to Azzopardi: The Court ordered the remainder of the liquidation funds paid to Azzopardi, in partial repayment of funding provided to successive liquidators. The historical context included Azzopardi's funding of investigations and litigation (figures contested), prior court approvals of funding arrangements and retainer agreements, and references in earlier Federal Court orders to the priority and potential for s 564 applications. Given the parties' positions and the Court's view of the evidence, it ordered the balance paid to Azzopardi subject to the payments of remuneration and costs.

The central evidentiary judgment the Court made was to accept the Liquidators' time records as adequate justification for additional remuneration, and to offset the earlier court-approved $7,500 sum against the claimed amount. That approach ensures that prior court orders are respected as credits while recognising that subsequent work may merit further remuneration where supported.

Before and after state of the law

Before: The statutory framework was clear. Reinstatement of deregistered companies is governed by s 601AH; appointment of liquidators upon reinstatement is within s 601AH(3); fixing of remuneration is governed by the Insolvency Practice Schedule Sch 2 s 90-15(1); the Federal Court previously exercised those powers in the liquidation (e.g. appointing liquidators, approving retainers, fixing remuneration). Prior court-ordered remuneration would typically be treated as determinative of that period and purpose.

After: This decision clarifies, in practical terms, that a prior court-fixed remuneration figure does not absolutely bar further remuneration for legitimately subsequent work. The Court will credit earlier amounts but may fix additional remuneration where a liquidator produces satisfactory evidence of time expended and work performed after the earlier fixation. The decision also demonstrates the Court's pragmatic approach to costs in insolvency matters, favouring a gross fixed costs order to avoid assessment where that is in the interests of expedition and preservation of estate funds.

Doctrinally, nothing novel was invented: the decision applies statutory powers already in place. What is emphasised is the evidentiary threshold the Court expects (contemporaneous time records, ledgers, description of tasks) when asked to fix additional remuneration after an earlier court fixation.

Key passages with plain-English translation

1. "I am satisfied from Mr Beattie's evidence that the justification for the work is evidenced by the material presently before the Court." [Liquidators' Remuneration para 6]

   Plain English: The judge found the liquidator's timesheets, ledger summaries and affidavits were enough to prove the liquidators actually did the additional work they now claim payment for.

2. "The figure that I consider to be appropriate to be paid out of the funds held in the liquidation is the sum of $20,417.34, being the sum of $27,917.34 referred to above, less the sum of $7,500 previously allowed by Gleeson J." [Liquidators' Remuneration para 6]

   Plain English: The court accepted the liquidators' total claimed work cost, but deducted the $7,500 already allowed by an earlier court order, resulting in a net sum the court ordered to be paid from the company funds.

3. "In all of the circumstances I consider that it is appropriate that the Liquidators be entitled to an order for payment of costs in the gross sum of $20,000 be paid out of the funds presently available in the winding up." [Costs para 3]

   Plain English: Rather than making the parties go through a detailed cost assessment, the court fixed a single lump sum for the liquidators' legal costs of the application and ordered that it be paid from the company's money.

4. "The Commission indicated that it would not oppose the application for reinstatement of the Company, provided certain conditions have been satisfied relating to formal requirements of the orders. I am satisfied that those conditions will be satisfied." [Introduction para 1]

   Plain English: ASIC would not resist the application if the orders were properly drafted, and the judge believed the required formalities could be dealt with, so reinstatement could proceed.

What fact patterns trigger this precedent

This decision will be instructive in circumstances where:

• A company has been deregistered during but before completion of a liquidation and the liquidator must seek reinstatement to finalise distributions.
• There are competing claims as to funds advanced by a creditor/funder (who may assert priority or entitlement to reimbursement) and the liquidators need court directions on distribution.
• Liquidators seek additional remuneration after a prior court order fixed a smaller sum for future work; they can rely on contemporaneous time records and explanation of work to persuade a court to fix further remuneration, with the prior allowance credited against the new fixation.
• The estate is small and the parties seek a pragmatic resolution to costs, where a gross-fixed costs order avoids the time and expense of taxation.

The critical triggers are (a) demonstrable post-fixation work by liquidators supported by records, and (b) competing funding/priority issues where the court's discretion to order payment from available funds is central.

How later courts have treated it

This is a single-instance ex tempore decision of the NSW Supreme Court; it applies statutory powers and engages with earlier Federal Court orders in the same matter. It does not create a binding doctrine beyond the established statutory framework. Later courts reviewing similar questions will likely regard this decision as a reasoned application of statutory powers, especially for the practical approach to evidence of work and to costs. The decision is most useful as a practical example of the evidentiary standard expected when liquidators seek additional remuneration after earlier court determinations, and as an example of when a court will fix gross costs.

Practitioners should treat this judgment as persuasive on the following points: the court will accept contemporary records as proof of work; prior court allowances will be treated as credits; and courts retain a discretion to fix gross costs in insolvency litigation.

Still-open questions

1. Evidential sufficiency threshold: The decision accepts the Liquidators' ledger extracts and summaries. The precise minimum level of detail (task descriptions, time increments, personnel rates, supporting invoices) that a court will require in other fact patterns remains unspecified. Liquidators should assume a robust contemporaneous record will be necessary.

2. Priority disputes and s 564 mechanics: Although the history refers to s 564 and earlier directions about applications under s 564, this judgment addresses distribution by direct order to Azzopardi rather than resolving an exhaustive accounting of all advances. When a funder claims priority under indemnities or retainer agreements, later courts may require fuller evidentiary proofs, and this decision does not fully delimit those requirements.

3. Allocation where multiple funders or competing proofs exist: This matter had one principal funder. Where multiple third-party funders each claim priority, the Court's approach to fixing net distributions, and the timing and mechanics of s 564 relief, remain to be further developed.

4. Interaction with regulatory expectations: ASIC's practice of conditioning non-opposition on formal order wording is affirmed practically here. However, the decision does not explore the limits of ASIC's practical non-opposition and what additional matters might cause ASIC to oppose reinstatement.

5. Repercussions for liquidator administration standards: The judge observed administrative oversight caused deregistration. Future courts may be called upon to consider professional discipline or more explicit standards where liquidation files lapse and deregistration occurs through error. This judgment treats the oversight as a factual explanation rather than a legal sanction.

Conclusion: Emmett AJA's judgment applies established statutory powers pragmatically. It underlines that courts will scrutinise evidence of work by liquidators, respect prior court orders by crediting earlier allowances, and exercise equitable discretion in allocating limited estate funds to remuneration, costs and funder reimbursement. Practitioners should ensure contemporaneous records and clear documentation of third-party funding to support similar applications.