In the matter of Graziers Investment Company Limited (in Liquidation) (ACN 095 401 200) and GIC Holdings Pty Ltd (in Liquidation) (ACN 095 351 590) [2020] VSC 8 (29 January 2020)

CORPORATIONS - Supreme Court (Corporations) Rules 2013 - r 9.2(2) - Requirements for notice of remuneration application - Circumstances of liquidations render rule incapable of compliance - Direction under r 1.8 that notice requirements be dispensed with - Direction for application to be determined "on the papers".

1 By originating process filed on 22 October 2019, the plaintiffs Andrew Hewitt and Ahmed Bise ("the liquidators") apply pursuant to ss 60-10, 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations) ("the Practice Schedule") found at Schedule 2 of the Corporations Act 2001 (Cth) ("the Corporations Act") for approval of their remuneration as joint and several liquidators of Graziers' Investment Company Limited (in Liquidation) ("Graziers") and GIC Holdings Pty Ltd (in Liquidation) ("GIC") (collectively, "the Companies").

(a) the affidavit of Ahmed Bise sworn and filed on 22 October 2019, together with exhibits ("the initial affidavit material");

(b) the supplementary affidavit of Mr Bise sworn and filed on 26 November 2019, together with exhibits ("the supplementary affidavit material"); and

(c) written submissions dated 3 December 2019.

3 There are two periods of time for which the liquidators seek approval of their remuneration. The first is from the commencement of the respective windings up of the Companies until 2 October 2019 ("retrospective remuneration claims"). The second time period is from 3 October 2019 until the anticipated completion of the relevant liquidations ("prospective remuneration claims").

4 The liquidators initially sought a determination of their remuneration for the total sum of $147,926.50 (excluding GST) which was broken down as follows (all amounts exclusive of GST):

(a) retrospective remuneration claims in the amounts of $93,908 and $22,528.50 for Graziers and GIC, respectively; and

(b) prospective remuneration claims for a combined total of $31,490 for the Companies.[1]

5 However, during the course of this assessment, the liquidators conceded that, by reason of earlier remuneration determinations made by members of the Companies, the proper amounts the subject of the retrospective remuneration claims were actually $43,908 for Graziers and $15,028.50 for GIC (all exclusive of GST). The revised total for the retrospective remuneration claims is therefore $58,936.50 (exclusive of GST).

6 The prospective remuneration claims were also increased to $41,052.75 and $4,629.75 for Graziers and GIC, respectively (all exclusive of GST). This was as a consequence of, among other things, additional work being devoted to the remuneration applications, more time estimated to be spent on managing the final distribution of funds to members and an anticipated increase in other administrative tasks.

7 The revised total remuneration claimed for the Companies is therefore $104,619. Approval is also sought for some disbursements, along with the legal costs associated with the application. These matters are considered separately below.

8 The liquidators have requested, and the Court has agreed, that the remuneration determination be conducted in the absence of the public and without any attendance by or on behalf of the liquidators, substantially in accordance with the procedure contemplated by r 9.2(4)(b) of the Supreme Court (Corporations) Rules 2013 ("the Corporations Rules").

9 For the reasons set out below, orders will be made approving the liquidators' retrospective remuneration claim for Graziers in the sum of $34,166 (plus GST) and the prospective remuneration claim for Graziers in the sum of $37,153 (plus GST). Orders will also be made approving the liquidators' retrospective remuneration claim in respect of GIC in the sum of $15,028.50 (plus GST) and the prospective remuneration claim for GIC in the sum of $4,629.75 (plus GST). These sums are in addition to amounts already approved by members of the Companies and paid to the liquidators. Ancillary orders will also be made dispensing with certain notice requirements under the Corporations Rules and confirming the process for conducting the remuneration assessment "on the papers".

10 The liquidators were appointed by members of Graziers and GIC on 11 October 2017 and 1 November 2017, respectively. The Companies had ceased trading prior to the commencement of their voluntary windings up.

11 The affairs of the Companies are intertwined in the sense that Graziers is the sole shareholder of GIC. It is the liquidators' evidence that all work in the liquidations has been performed with the sole objective of making a distribution of funds currently held by GIC to its parent company Graziers. The liquidators will, in turn, make a distribution to Graziers' members, of which there are 36,617 according to the share registry.

12 A brief account of the corporate history of the Companies assists in an understanding of the nature of the work performed by the liquidators.

13 GIC was incorporated on 14 December 2000 and Graziers was registered slightly later on 1 January 2001. Initially, Graziers was styled "Australian Wool Services Ltd". It had as its objective, the improvement of wool production in Australia and the expansion of wool use globally. The members of Graziers are individual woolgrowers.

14 Graziers is the successor of the Australian Wool Research and Promotion Organisation ("AWRAP") which was established as a Commonwealth statutory authority funded by a wool tax and which shared the same objectives as Graziers. The predecessors of AWRAP were the Australian Wool Board and the International Wool Secretariat.

15 Initially, Graziers had two operating subsidiaries. The first was the Woolmark Company which had responsibility for administering the Woolmark certification and other intellectual property. The second subsidiary was Australian Wool Innovation Ltd ("Australian Wool Innovation"). This entity managed a wool grower research and development levy and other government contributions towards research and development in the Australian wool industry.

16 In 2002, Australian Wool Innovation effectively demerged from Graziers. This meant that Graziers ceased receiving government funding from wool levies and became a commercial enterprise. However the model did not appear to be sustainable as Graziers was unable to generate sufficient income to undertake wool marketing activities on behalf of the entire wool industry. Then, in 2007, the members of Graziers approved a motion for the sale of the Woolmark Company and its key assets to Australian Wool Innovation. Since that time, Graziers progressively wound down its activities until it ceased trading altogether.

17 More recently, Australian Wool Innovation lodged a proof of debt in the liquidation of GIC. In short, the proof of debt related to a potential liability of Australian Wool Innovation and another company formerly owned and controlled by Graziers and GIC to the taxation authorities in India. That matter is explored in further detail later in these reasons.

18 At present, GIC holds approximately $21 million in funds. There was over $20.26 million held by GIC as cash at bank at the time of the appointment of the liquidators. During the winding up of GIC, surplus monies have been invested by the liquidators in a term deposit with a major trading bank. This has resulted in additional investment income in the amount of $819,246.

19 Section 60-10 of the Practice Schedule relevantly states as follows:

...

(2) A determination, specifying remuneration that an external administrator of a company in a members' voluntary winding up is entitled to receive for necessary work properly performed by the external administrator in relation to the external administration, may be made:

(a) by resolution of the company at a general meeting; or

(b) if a determination is not made under paragraph (a)-by the Court.

Note: For determinations made by the Court, see also section 60-12 (matters to which the Court must have regard).

(3) A determination under this section may specify remuneration that the external administrator is entitled to receive in either or both of the following ways:

(a) by specifying an amount of remuneration;

(b) by specifying a method for working out an amount of remuneration.

Remuneration on a time-cost basis

(4) If a determination under this section specifies that the external administrator is entitled to receive remuneration worked out wholly or partly on a time-cost basis, the determination must include a cap on the amount of remuneration worked out on a time-cost basis that the external administrator is entitled to receive.

...

20 As this application involves a determination by the Court of remuneration not previously approved by members of the Companies, s 60-10(2)(b) of the Practice Schedule applies.

21 Section 60-12 of the Practice Schedule provides that in exercising its power to make a remuneration determination in accordance with s 60-10(2)(b), "the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters":

(a) the extent to which the work by the external administrator was necessary and properly performed;

(b) the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;

(c) the period during which the work was, or is likely to be, performed by the external administrator;

(d) the quality of the work performed, or likely to be performed, by the external administrator;

(e) the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;

(f) the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;

(g) the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

(h) the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;

(i) the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;

(j) if the remuneration is worked out wholly or partly on a time-cost basis - the time properly taken, or likely to be properly taken, by the external administrator in performing the work;

(k) whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;

(l) if:

(i) a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and

(ii) the matter is, or includes, remuneration of the external administrator;

the contents of the report on the review that relate to that matter;

22 The factors contained in s 60-12 are materially the same as those set out in its legislative predecessor; namely s 473(10) of the Corporations Act.[2] Accordingly, the authorities which discuss s 473(10) remain relevant for remuneration determinations in respect of which s 60-12 applies.

23 The language of s 60-12 makes clear that the ultimate question for the Court in making a remuneration determination is whether the amount claimed by a liquidator is reasonable.[3] Reasonableness is the touchstone of the provision.

24 The process for assessing a liquidator's claim for remuneration was set out by the Full Court of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd & Ors v Mark Anthony Conlan & Anor[4] and subsequently summarised and applied by Dodds-Streeton J in ACN 004 323 184 Pty Ltd v Spark[5] and in numerous other cases.[6] For convenience, I adopt Dodds-Streeton J's summary:

(a) The procedure for the determination is a summary one for fixing costs of an officer of the court as part of its supervisory function, in which strict observance of the rules of evidence is not ordinarily required.

(b) The onus is on the liquidator to establish that the remuneration claimed is fair and reasonable.

(c) The function of the court is to make an independent determination, based on the material proffered, of whether the remuneration claimed is fair and reasonable.

(d) If the liquidator establishes a prima facie case on the basis of the proffered material, which may include evidence which would not be admissible pursuant to strict observance of the rules of evidence, the court should then consider the validity of any objections.

(e) The mere listing of the persons who performed the work, the hours worked and the amounts claimed may be insufficient for the court to reach a determination. Ordinarily, the liquidator will provide...a statement of account reflecting in the appropriate itemised form, details of the work done, the identity of the persons who did the work, the time taken for doing the work, and the remuneration claimed accordingly ...

(f) the statement of account should be verified by affidavit.[7]

25 The overriding principle is that sufficient information must be provided to the Court to enable it to perform its function.[8] Whilst there is no absolute rule regarding the amount of detail required to support a remuneration claim, the evidence relied upon should be sufficient to enable potential objectors and the Court to consider the items claimed and to make an assessment of their reasonableness.[9] It follows that if there is inadequate evidence to support the claim, no order should be made.[10]

26 In Thackray, Davies J further explained the Court's function in this way:

The Court is looking for evidence of overcharging. Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the "reasonableness" of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account.[11]

27 More recently, the New South Wales Court of Appeal in Sanderson (as liquidator of Sakr Nominees Pty Ltd) (in liq) v Sakr[12] confirmed that the Court is required to consider the actual nature of the work undertaken by the liquidator, whether it was reasonably necessary to carry it out and the appropriateness of the amount charged for it.

28 The authorities make clear that a remuneration determination by the Court is not a "rubber stamping" exercise. Instead, the Court's function is to independently consider the nature and extent of the remuneration claim and to make an assessment of its reasonableness having regard to the work performed and the particular features of the external administration. The nature of the Court's role is the same regardless of whether the remuneration is determined following objections by interested parties at a formal hearing or whether the assessment is undertaken "on the papers" in the absence of the public and without attendance by the party making the claim. The claimant has the same burden of demonstrating that the remuneration sought is reasonable regardless of the procedure adopted.

29 The liquidators have sought approval of their remuneration by the Court under s 60-10(2)(b) rather than by resolution of the company at a general meeting under s 60-10(2)(a) because the costs of serving the necessary notices upon all 36,617 members of Graziers would be unduly prohibitive. The liquidators estimate that the cost of obtaining member approval would be approximately $40,000 plus disbursements including around $41,000 (plus GST) for printing and posting costs.[13] Email notification is not viable given the liquidators only have email addresses for approximately 10% of the members of Graziers.[14] There is also some doubt as to whether the liquidators have current physical address details for more than 5,400 members of Graziers.[15]

30 The liquidators have also discussed the remuneration application with two of Graziers' officers and a representative of one of its shareholders. Those persons do not object to the making of this application and agree with the liquidators' assessment that the process of Court approval would be more cost-effective than to hold meetings of members of the Companies.[16]

31 Before considering the remuneration application in greater detail, it is necessary to deal with a number of preliminary matters, including the issue of notice to interested parties.

32 Rule 9.2 of the Corporations Rules sets out a number of steps concerning an application for a remuneration determination. The procedure is as follows:

(1) This Rule applies in relation to an application for a determination under section 60-10(1)(c) or (2)(b) of the Insolvency Practice Schedule (Corporations) specifying remuneration that an external administrator of a company is entitled to receive for necessary work properly performed by the external administrator in relation to the external administration.

...

(2) At least 21 days before filing an originating process, or interlocutory process, seeking the determination, the external administrator must serve a notice, in accordance with Form 16, of the external administrator's intention to apply for the determination, and a copy of any affidavit on which the external administrator intends to rely, on the following persons-

(a) each creditor who was present, in person or by proxy, at any meeting of creditors;

(b) each member of any committee of inspection;

(c) if there is no committee of inspection, and no meeting of creditors has been convened and held-each of the 5 largest (measured by amount of debt) creditors of the company;

(d) each member of the company whose shareholding represents at least 10% of the issued capital of the company.

(3) Within 21 days after the last service of the documents referred to in paragraph (2), any creditor or contributory may give to the external administrator a notice of objection to the remuneration claimed, stating the grounds of objection.

(4) If the external administrator does not receive a notice of objection within the period referred to in paragraph (3)-

(a) the external administrator may file an affidavit, made after the end of that period, in support of the originating process, or interlocutory process, seeking the determination stating-

(i) the date, or dates, when the notice and affidavit required to be served under paragraph (2) were served; and

(ii) that the external administrator has not received any notice of objection to the remuneration claimed within the period referred to in paragraph (3); and

(b) the external administrator may endorse the originating process, or interlocutory process, with a request that the application be dealt with in the absence of the public and without any attendance by, or on behalf of, the external administrator; and

(c) the application may be so dealt with.

(5) If the external administrator receives a notice of objection within the period referred to in paragraph (3), the external administrator must serve a copy of the originating process, or interlocutory process, seeking the determination on each creditor or contributory who has given a notice of objection.

(6) An affidavit in support of the originating process, or interlocutory process, seeking the determination must-

(a) include evidence of the matters referred to in section 60-12 of the Insolvency Practice Schedule (Corporations); and

(b) state the nature of the work performed or likely to be performed by the external administrator; and

(c) state the amount of remuneration claimed; and

(d) include a summary of the receipts taken and payments made by the external administrator; and

(e) state particulars of any objection of which the external administrator has received notice; and

(f) if the external administration is continuing-give details of any matters delaying the completion of the external administration.[17]

33 The initial affidavit material discloses that notice of the liquidators' remuneration application has not been provided to any person in accordance with rule 9.2(2) of the Corporations Rules. This is because there are no known creditors of the Companies and no committees of inspection.[18] Further, whilst GIC is wholly owned by Graziers, there is no member of Graziers with at least 10% of the issued capital of the company.[19]

34 In light of those matters, the liquidators submit that the notice requirements found in rule 9.2 are "not invoked".[20] In my view, the better characterisation is that given the features of the Companies and their respective liquidations, it is simply not possible for the liquidators to comply with the formal notice requirements.

35 The liquidators also submit that regardless of the application of rule 9.2, the application should nevertheless be dealt with in the absence of the public and without any attendance by the liquidators or their lawyers in accordance with the procedure envisaged by rule 9.2(4) of the Corporations Rules.[21]

36 Rule 1.8 of the Corporations Rules is apposite here. It provides that:

The Court may give directions in relation to the practice and procedure to be followed in a proceeding if it is satisfied, in the circumstances of the proceeding, that -

(a) the provisions of the Corporations Act, the ASIC Act, or the rules of this Court do not adequately provide for the practice and procedure to be followed in the proceeding; or

(b) a difficulty arises, or doubt exists, in relation to the practice and procedure to be followed in the proceeding.

37 Whilst rule 9.2 requires that proper notice of a remuneration application should be given to certain interested parties, the rule is silent on what procedure is to be adopted where there are no interested parties within the contemplation of the rule. In the circumstances, it is appropriate that a direction be made under rule 1.8 that the notice requirements in rule 9.2(2) need not be complied with.

38 Further, a direction will be made to the effect that despite the absence of notice, it is appropriate that the procedure envisaged by rule 9.2(4) be adopted and that the application be dealt with "on the papers" in the absence of the public and without the attendance of the liquidators or their lawyers.

39 As previously noted, in their originating process the liquidators initially sought retrospective remuneration claims in the amounts of $93,908 and $22,528.50 for Graziers and GIC, respectively.

40 However, members of the Companies previously approved remuneration for work to be undertaken by the liquidators in the sums of $50,000 plus GST and $7,500 plus GST for Graziers and GIC, respectively.[22] The initial affidavit material suggested that these previously approved amounts had been billed.[23]

41 By email dated 4 November 2019, the Court queried whether the liquidators had already been paid these previously approved amounts, whether the amounts were intended to be included in the total remuneration claim and whether the liquidators' originating process should be amended to account for any previous approval and payment.

42 The supplementary affidavit material (filed on 26 November 2019) confirmed that the previously approved amounts had in fact been billed and paid but were nevertheless still included in the total remuneration claim. Proposed draft orders provided to the Court on 29 November 2019 also pressed for the approval of the total remuneration claim, including the previously approved amounts.

43 It is unclear why the Court was asked to approve these components of the remuneration claim. The inclusion of these amounts has led to uncertainty and unnecessary delay. In any event, it does not appear that the Court has power to separately approve under s 60-10(2)(b) of the Practice Schedule amounts already approved and paid pursuant to s 60-10(2)(a) following a resolution of members.

44 Accordingly, by email dated 4 December 2019, the Court indicated to the solicitors acting for the liquidators that it was my preliminary view that the total remuneration claim would need to be considered globally and then reduced by the amounts already approved and paid. The Court's orders would then specify the liquidators' entitlement to remuneration, exclusive of GST, in addition to the amounts already approved and paid.[24] The liquidators' solicitors confirmed their clients' agreement to this approach in an email dated 6 December 2019.

45 There have been other difficulties with the material relied upon by the liquidators. Various deficiencies in the initial affidavit material were identified in email correspondence from my Associate to the liquidators' lawyers.[25] Some of the matters the liquidators were invited to address included:

(a) the nature of the respective businesses of the Companies prior to entering into liquidation;

(b) the liquidators' understanding as to the reasons for and circumstances of the voluntary windings up of the Companies;

(c) the relative complexity of the liquidations;

(d) the circumstances in which GIC came to hold approximately $21 million in funds;

(e) further detail and explanation in relation to receipts in the liquidation of each of the Companies;

(f) further detail and explanation in relation to the claim brought by Australian Wool Innovation against GIC;

(g) clarification of the identity and relationship between various other entities referred to in the initial affidavit material;

(h) further detail and explanation regarding various tasks said to be performed by the liquidators, including work in respect of the tax position of the Companies;

(i) the provision of an A3 landscape version of the relevant timesheets relied upon;[26] and

(j) clarification of numerous shorthand references in the timesheets which were not clear on their face, together with a better explanation of the work performed and what necessitated it.

46 In short, the initial affidavit material did not properly address the factors in s 60-12 of the Practice Schedule. As such, it lacked sufficient information to enable the Court to perform its function of assessing the reasonableness of the remuneration claimed by the liquidators.

47 However, the supplementary affidavit is much better directed to the factors set out in s 60-12 of the Practice Schedule and has substantially addressed the Court's queries. In my view, the liquidators have ultimately established a prima facie entitlement to their claim for remuneration on the totality of the material relied upon. Given there are no objections to the application, I will proceed to consider the material in support of the remuneration claim in greater detail.

48 Set out below are a series of general rulings I have made in relation to the remuneration claim. These rulings have been made having regard to the principles and statutory provisions referred to earlier and following a review of the entirety of the material filed in support of the claim. I have considered the most relevant factors set out in s 60-12 of the Practice Schedule and grouped similar or overlapping factors for ease of reference.

Extent to which work was necessary and properly performed (s 60-12(a))

49 I am satisfied that most of the work undertaken by the liquidators has been done with the primary objective of making a distribution of the funds held by GIC to Graziers and, in turn, to the members of Graziers.

50 Much of the work performed by the liquidators relates to a claim made by Australian Wool Innovation against GIC. The historical background to that claim is as follows:

(a) IWS Nominee Company Limited ("IWS Nominee") was an entity in which GIC previously owned shares. Woolmark Services India Private Ltd ("WSIPL") operated in India as a "branch office" of IWS Nominee.[27]

(b) In 1973, IWS Nominee acquired an interest in a property in Mumbai as trustee for the International Wool Secretariat (the historical predecessor of Graziers). The Venkatesh Premises Co-operative Society Limited ("the Co-operative") was formed following completion of a building at the property and IWS Nominee was issued shares that permitted it to use the building.

(c) In 2002, the Reserve Bank of India permitted IWS Nominee to hold its interest in the Mumbai property as trustee for WSIPL and the International Wool Secretariat made a declaration confirming that arrangement. Later, that same year, IWS Nominee transferred its shares in the Co-operative to WSIPL ("the first transfer").

(d) In 2007, GIC sold its shares in IWS Nominee to Australian Wool Innovation (the former subsidiary of Graziers).

(e) In 2009, the Collector of Mumbai demanded that WSIPL make payment of AU$595,000 to the Indian government in connection with the first transfer. That demand was subsequently set aside by the High Court of Bombay.

(f) In 2010, WSIPL then sold its shares in the Co-operative to the Federal Republic of Germany ("the second transfer"). Under the sale agreement, WSIPL remained liable to pay the earlier demand by the Collector of Mumbai in respect of the first transfer. The Collector of Mumbai then issued WSIPL with a demand for monies payable in respect of the second transfer. WSIPL brought legal proceedings seeking to invalidate that demand. The legal challenge was still on foot at the time of the commencement of the winding up of GIC.

(g) In 2014, GIC and Australian Wool Innovation entered into a settlement deed under which GIC agreed to indemnify Australian Wool Innovation and WSIPL from any loss incurred by WSIPL in connection with the first transfer.

(h) On 9 February 2018, Australian Wool Innovation lodged a proof of debt in the liquidation of GIC for $550,000. It claimed that GIC's liability under the settlement deed extended to the second transfer. This was notwithstanding the second transfer occurred after GIC divested its shares in IWS Nominee (and presumably any interest in WSIPL).

51 During the period from February 2018 until June 2019, the liquidators of GIC negotiated a settlement of Australian Wool Innovation's claim. Lawyers were engaged for this purpose. The negotiations culminated in a deed of settlement dated 27 June 2019 between the liquidators, the Companies and Australian Wool Innovation by which Graziers agreed to pay Australian Wool Innovation $30,000 in settlement of the claim.

52 I am satisfied that the work performed by the liquidators in investigating, managing and resolving Australian Wool Innovation's claim was necessary and properly performed. Had time not been devoted to this issue, the claim may not have been resolved and GIC may have been liable for a much more significant sum.

53 Many other tasks carried out by the liquidators were essentially fundamental in nature and consistent with the liquidators' duties and obligations. These tasks included attending upon offices of the Companies, liaising with former directors and meeting reporting obligations to the Australian Securities and Investments Commission and the Australian Taxation Office ("ATO"). Following the lodgement of outstanding BAS and income tax returns for Graziers, income tax clearance was sought by the liquidators. This resulted in Graziers receiving a refund from the ATO of $286,489.

Extent to which work to be performed is likely to be necessary and properly performed (s 60-12(b))

54 In order to finalise the windings up of the Companies, the liquidators will be required to monitor the deregistration of another company styled "IWS India" which is owned by GIC. A director of GIC is managing the exercise and has engaged local agents to assist in that task. As part of the process, GIC has provided an indemnity to the officers of IWS India to meet any costs and liabilities that must be paid prior to deregistration.

55 Given the relationship of GIC to IWS India, I consider that it is appropriate and necessary for the liquidators to monitor the orderly closure of that entity. It is important for this issue to be finalised in order that the affairs of the Companies can be properly wound up.

56 Other work to still be performed includes various administrative and reporting tasks, preparing for the distribution of funds to members of Graziers and dealing with anticipated unclaimed distributions of between $3 million to $5 million in respect of members who are no longer contactable. I consider that this work is also necessary and will likely be properly performed.

Complexity of work performed, or likely to be performed, extraordinary issues and level of risk (s 60-12(e) (f) and (g))

57 I accept that the claim by Australian Wool Innovation against GIC involved some degree of complexity. As a consequence of the long historical background and the number of subsidiaries, foreign entities and cross-border legal issues arising, the claim also raised somewhat extraordinary issues.

58 The large number of members of Graziers has also given rise to a level of complexity. For example, the liquidators have managed numerous and regular queries from the members of Graziers.

59 Aside from these matters, I accept the liquidators' evidence that the work performed, and to be performed, has not otherwise entailed significant complexity or extraordinary issues.[28] I also note the liquidators submit they were not required to accept a higher level of risk or responsibility in the liquidations of GIC and Graziers.

Value and nature of property dealt with (s 60-12(h))

60 As previously noted, GIC holds approximately $21 million in funds. After deducting relevant costs, these funds will be transferred to Graziers and a surplus will then be distributed to Graziers' members. Although the liquidators were not responsible for recovering these funds (most of the funds were already in GIC's bank account), they have acted prudently in investing and augmenting the funds. They will also be expected to act professionally and diligently in ultimately distributing these funds to members.

61 In Sakr Nominees, the New South Wales Court of Appeal held that a time-based approach to determining a liquidator's remuneration is one of a number of methods available to a Court.[29]

62 The liquidators consider that a time-based calculation was the most appropriate in the circumstances because the nature and extent of the work required to be performed in both liquidations "could not have been anticipated and foreseen with any accuracy" at the date of their appointment.[30]

63 I am satisfied that a time-based method for determining the liquidators' remuneration is appropriate in this case, as distinct from an ad valoreum approach or any other method of calculation. In particular, I consider that the investigation, management and settlement of Australian Wool Innovation's claim made the process of predicting the work required inherently difficult and more amenable to time-based calculations. Further, a time-based method of charging more accurately reflects the time actually spent on each task. This is particularly important in the case of related companies, where time undertaken in respect of activities concerning more than one company can be apportioned across the liquidations of each company (as was the case here). By way of contrast, calculating the liquidators' remuneration by reference to a percentage or proportion of assets in these liquidations would produce a disproportionate result. Although the asset pool is large, the liquidators did not expend any significant work in getting in or protecting those assets.

64 In their material, the liquidators have provided summary tables setting out the name and title of each person within the liquidators' office who performed work the subject of the remuneration application.[31] The tables usefully identify the number of hours spent by each operator and the gross value of work undertaken (exclusive of GST). However, in the case of the retrospective remuneration claims, the summary tables do not explicitly show the hourly rates for those who performed the work.

65 Despite this shortcoming, it has been possible to discern the hourly rate of each person who performed the work using the information provided (noting that these rates were the subject of minor adjustments over time). Further, the rates are clear in the case of the prospective remuneration claims. I am satisfied that the rates charged, and to be charged, are within the range typically charged by insolvency practitioners, albeit at the higher end. I am also of the view that the rates are fair and reasonable given the nature and features of the liquidations in question.

66 The liquidators should be entitled to include GST in their remuneration claim because work has been undertaken and services provided in the liquidations which represent taxable supplies under s 9.5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).[32] However, for the sake of simplicity, I will assess the remuneration figures exclusive of the GST component and then note the final remuneration figure as allowed to be an amount "plus GST".[33]

67 The summary tables provided in the liquidators' material for the GIC retrospective remuneration claim reveal that:

(a) $22,528.50 was initially claimed;

(b) just over 66 hours were worked by 10 people across all levels of seniority; and

(c) of this total number of hours, almost 35 hours (or approximately 53%) were worked by Leanne Donaldson, a Recovery Administrator who was charged out at a rate of $205.00 per hour (plus GST), around 13 hours (or approximately 20%) were worked by Ahmed Bise as Principal, who was charged out at an average rate of $640.00 per hour (plus GST)[34] and almost 11 hours (almost 16%) were charged by Xavier Field, a Senior Associate, at a rate of around $405.00 per hour (plus GST).

68 The estimates provided for the GIC prospective claim show a similar pattern of delegation of work among the relevant operators.

69 On the basis of this information and a review of the supporting timesheets, I am satisfied that the relevant work has been, and will be, carried out at an appropriate level within the liquidators' firm. Generally speaking, it appears that more difficult tasks have been and will be undertaken by people having regard to their level of experience and the less complex tasks have been delegated to others down the line.

70 As regards the retrospective remuneration claim for Graziers, the summary tables show that:

(a) $93,908 was initially claimed;

(b) a total of just over 204 hours were worked by 13 people across all levels of seniority; and

(c) of this total number of hours, 112.5 hours (or approximately 55%) were worked by Ahmed Bise as Principal, who was charged out at an average rate of $640.00 per hour (plus GST),[35] around 39 hours (or approximately 19%) were worked by Xavier Field, a Senior Associate who was charged out at a rate of around $405.00 per hour (plus GST) and approximately 20 hours (or almost 10%) were charged by Hamish Stopp, an Associate with a rate of $285.00 per hour (plus GST); and

(d) only 6.4 hours (or just over 3%) were worked by Leanne Donaldson, a Recovery Administrator with an average rate of $205.00 per hour (plus GST).

71 Based on the information provided, I cannot be satisfied that the relevant work has been allocated according to the highest and best use of the person performing it. A sizeable portion of the moderately complex work undertaken by Mr Bise as Principal could have been readily delegated to experienced staff under his supervision, such as Xavier Field as a Senior Associate. Such work included responding to media and shareholder inquiries, liaising with former officers of Graziers and engaging with the ATO. Part of the work performed by Mr Bise in relation to the Australian Wool Innovation claim could also have been handled by a Senior Associate. Other tasks performed by Mr Bise and other senior staff ought to have been delegated to administrative staff such as Leanne Donaldson who, despite billing around 53% of the total time in GIC, was only responsible for billing approximately 3% of the time in Graziers. Administrative work that could have been delegated included filing, organising meetings, billing and updating shareholder details.

72 The difference in average charge out rates of Mr Bise as Principal and a Senior Associate was around $235 per hour or 58%. In apparent recognition of this inefficient allocation of resources, Mr Bise states that he has already reduced his total time charged in Graziers' by $10,000.[36] He also says that as a consequence of this discount, the Court should be satisfied there has been a cost-effective administration of the winding up.[37] In my view, this write-off of Mr Bise's time does not fully address the extent of the overcharging.

73 As regards the Graziers prospective remuneration claim, whilst most of the work will be appropriately allocated within the firm's hierarchy, there is still too much time proposed to be spent by Mr Bise on tasks that could be largely undertaken by others.

74 My review of the timesheets and summary tables provided suggests there are a number of items which should be disallowed either in part or in full on the basis that they were not reasonable having regard to the time spent. These include:

(a) a number of internal meetings between Mr Bise and other staff members, or between staff members throughout the relevant period;

(b) more than $9,000 being charged in the liquidation of Graziers by Mr Bise in connection with this remuneration application. Most of that work relates to the preparation of the supplementary affidavit material. The supplementary affidavit material was needed to remedy deficiencies in the initial affidavit material and in order to meet the requisite evidentiary standard. Some of that work would have been undertaken in any event, however, there has invariably been time wasted.

(c) some duplication or "double-handling" of work within the liquidators' office, particularly in relation to Mr Bise's review of and corrections to his case notes.

75 There are also a small number of items claimed in respect of which there is an insufficient level of detail to enable me to assess whether they are reasonable. In some instances, the level of description used is so generic as to offer little or no assistance or context. By way of example, there are numerous instances of discussions between Mr Bise and other staff members without identification of the subject matter, unspecified research undertaken by Mr Bise and work performed by Mr Bise referable to "[t]hrough documents" and "[t]hrough file".

76 Having regard to the above, it is both appropriate and efficient to apply a global discount of 19% (or approximately $19,742) in respect of the Graziers retrospective remuneration claim. The discount will be applied against the total amount of $103,908 recorded in the time sheets and summary table. Recognising the $10,000 write-off already made by the liquidators, a further discount of $9,742 is necessary. This results in a figure of $84,166. From this figure, the sum of $50,000 (plus GST) already approved by members and paid to the liquidators will then be deducted.

77 The retrospective remuneration claim for Graziers is therefore allowed in the sum of $34,166 (plus GST). To be clear, this is in addition to the amount of $50,000 (plus GST) already approved and paid.

78 Further, I will make a 9.5% adjustment to the Graziers prospective remuneration claim (the revised sum claimed by the liquidators is $41,052.75). The prospective remuneration claim for Graziers will therefore be allowed in the sum of $37,153 (plus GST).

79 The retrospective remuneration claim for GIC will be fixed in the sum of $15,028.50. This is in addition to the amount of $7,500 (plus GST) already approved and paid. The prospective remuneration claim for GIC is allowed in full in the sum of $4,629.75.

80 As previously mentioned, the liquidators have also sought approval of certain disbursements. One such expense is an invoice for taxation advice and assistance in obtaining a tax clearance. It is for a modest sum of $1,447 (exclusive of GST). In addition, the liquidators anticipate future expenses fixed in the sum of $1,000 to finalise the liquidation of Graziers.[38]

81 The Court's power to approve such expenses is circumscribed by the legislation. In Deputy Commissioner of Taxation v Starpicket Pty Ltd (No. 2),[39] Gordon J (as her Honour then was) explained the position in the context of the former s 473(3) of the Corporations Act; the predecessor to s 60-10 of the Practice Schedule:

Pursuant to s 473(3)(b)(ii) of the Corporations Act, the Court has jurisdiction to review and fix the Liquidator's "remuneration". Notwithstanding the approach taken in previous cases such as Re Solfire Pty Ltd (in liq) (No 2) (1998) 16 ACLC 1156, it is now accepted that a Liquidator's "remuneration" does not include disbursements: see Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 100; Re Korda; in the matter of Stockford Ltd [2004] FCA 1682; (2004) 140 FCR 424 at [50]; and Huxtable, in the matter of Timeshare Resort Club Ltd ACN 009 085 358 (in liq) [2010] FCA 673; (2010) 187 FCR 13 at [36]- [37]. The same cases are also authority for the proposition that the Court's jurisdiction under s 473(3)(b)(ii) of the Corporations Act does not extend to legal fees incurred by the Liquidator, which fall under the head of disbursements and not remuneration.

Accordingly, the Court does not have power under s 473(3)(b)(ii) of the Corporations Act to review and approve the Liquidator's disbursements.

A liquidator who is entitled to remuneration normally has an equitable lien over the assets under his administration to secure payment of that entitlement as well as his disbursements: see Re Biposo Pty Ltd (No 2) (1995) 124 FLR 385; Prendergast v Rolcross (in liq) [2008] NSWSC 146 at [39]. Being of the equitable variety, a liquidator's lien is not dependant on possession and, as such, survives termination of the liquidator's appointment: see Nationwide News Pty Ltd v Samalot Enterprises (1986) 5 NSWLR 227 at 230-231; Shirlaw v Taylor [1991] FCA 415; (1991) 31 FCR 222 at 231. [40]

82 Similarly, s 60-10 of the Practice Schedule does not confer jurisdiction upon the Court to approve a liquidator's expenses and disbursements.[41] However, there may be available some alternative source of power to approve a liquidator's expenses, such as the inherent jurisdiction of the Court[42] or s 90-15 of the Practice Schedule which relevantly provides:

(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.

Orders on own initiative or on application

(2) The Court may exercise the power under subsection (1):

(a) on its own initiative, during proceedings before the Court; or

(b) on application under section 90- 20.

Examples of orders that may be made

(3) Without limiting subsection (1), those orders may include any one or more of the following:

(a) an order determining any question arising in the external administration of the company;

...

(d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company

83 Whilst the liquidators will likely have an equitable lien over the assets of the Companies to secure payment of the disbursements incurred and do not strictly need the benefit of an order of the Court, for the avoidance of any doubt, I am prepared to make an order pursuant to s 95-15 approving the sundry expenses in Graziers which are claimed as part of this remuneration application.[43] Those expenses are fixed in the total sum of $2,447. However, in the likely event the liquidators are registered for GST, the GST component of those expenses will not be allowed because the liquidators will be entitled to claim input tax credits in any event.[44]

84 Lastly, the liquidators seek an order that the costs of this remuneration application be fixed in the sum of $20,020.78 (inclusive of GST) and are treated as costs in the winding up of Graziers and GIC, as to one half each.

85 Generally speaking, because legal costs incurred in an external administration are disbursements, there is no power to approve them under s 60-10 of the Practice Schedule. However, as the legal costs in question concern the remuneration application itself, the Court has a general discretion to determine those costs under s 24 of the Supreme Court Act 1986 (Vic) and order 63 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ("the Rules"). Section 90-15 of the Practice Schedule also allows the Court to make a costs order in the present circumstances. It is appropriate for the Court to do so.

86 At the same time, to minimise cost and expense and to avoid delay, I will make a gross sum costs order in accordance with r 63.07(2)(c) of the Rules rather than an order that the liquidators' legal costs be taxed. Given the deficiencies associated with the initial affidavit material and the need for the supplementary affidavit material (which was extensive), there have invariably been costs thrown away in the process. There have also been unnecessary costs incurred as a result of correspondence between the Court and the liquidators' lawyers concerning the proper treatment of the remuneration amounts already approved by members and paid to the liquidators. As previously mentioned, it remains unclear why those pre-approved amounts were included as part of this remuneration application.

87 In the event, I will fix the costs of this remuneration application in the sum of $17,000. Such costs are to be treated as costs in the windings up of Graziers and GIC, as to one half each. As is the case with the other disbursements, the GST component of these legal costs will not be allowed in the event the liquidators are registered for GST purposes.

88 I will ask the liquidators to prepare a form of order to reflect these reasons.

[1] The summary table for the prospective remuneration claims at exhibit AB-9 to the affidavit of Ahmed Bise sworn 22 October 2019 claimed a combined total sum of $31,490 (excluding GST) for the Companies, although the Originating Process filed 22 October 2019 claimed $16,250 (excluding GST) for each of GIC and Graziers.

[2] However, some minor changes to the language of the provision have occurred. For example, under s 60-12(a), the Court may take into account the extent to which the work was "necessary and properly performed", whereas under the analogue s 473(10)(a), the sub-section speaks of the extent to which the work performed was "reasonably necessary". Section 473(10) was repealed with effect from 1 September 2017 when s 60-12 came into operation. For an explanation of the commencement machinery and transitional provisions concerning this change see In the matter of Allston Homes (in liquidation) [2017] VSC 500 ("Allston Homes"), [8]-[11].

[3] See In the matter of Twenty-Seventh Android Pty Ltd [2019] VSC 563 ("Twenty Seventh Android") at [21] (Matthews JR).

[4] (1998) 20 WAR 96.

[5] [2002] VSC 353 ("ACN 004 323 184") at [31].

[6] See Thackray v Gunns Plantations [2011] VSC 380; (2011) 85 ACSR 144 ("Thackray") at [60], 162 (Davies J); Barbo Group Pty Ltd t/as Alice Roof Tiles v Investment and Construction Enterprise Pty Ltd [2012] VSC 71 (Gardiner AsJ) at [14]; In the matter of Traditional Values Management Limited (in liq) [2012] VSC 650 at [18]- [25] (Gardiner AsJ); In the matter of F. Basile & Associates Pty Ltd (in liq) [2016] VSC 690 ("Basile") at [30] (Hetyey JR); Re Upmarket Services Australia Pty Ltd (in liq) [2019] VSC 523 ("Re Upmarket") at [39]-[40] (Matthews JR).

[9] Thackray at [60], 162 (Davies J).

[12] [2017] NSWCA 38; (2017) 118 ACSR 333 ("Sakr Nominees") at 344 (Bathurst CJ).

[13] Affidavit of Ahmed Bise sworn 22 October 2019, para [13].

[18] Affidavit of Ahmed Bise sworn 22 October 2019, para [10].

[19] Ibid. The member with the largest shareholdings in Graziers holds only approximately .21% of the shares.

[20] Liquidators' written submissions dated 3 December 2019, para [5].

[21] On 23 October 2019, the solicitors for the liquidators first advised the Court that the liquidators wished for the matter to be decided "on the papers".

[22] Members of Graziers approved this remuneration at a general meeting on 11 October 2017 and the sole member of GIC (Graziers) approved this remuneration by resolution in lieu of meeting on 1 November 2017 (see exhibits AB-2 and AB-3 to the affidavit of Ahmed Bise sworn 22 October 2019).

[23] See exhibits AB-6 and AB-7 to the affidavit of Ahmed Bise sworn 22 October 2019.

[24] This was the approach taken by Matthews JR in Re Upmarket (n 6).

[25] Emails were sent by the Court to the liquidators' lawyers on 4, 7 and 8 November 2019.

[26] The timesheets found at exhibits AB-6 and AB-7 to the affidavit of Ahmed Bise sworn 22 October 2019 were presented in A4 portrait format and comprised hundreds of entries in small type set spanning more than 30 pages. To compound the difficulty, the entries were not strictly set out chronologically, but rather grouped according worked performed by each operator.

[27] It is unclear whether WSIPL was also a subsidiary of IWS Nominee.

[28] See supplementary affidavit of Ahmed Bise sworn and filed on 26 November 2019, [15].

[29] Sakr Nominees (n 12) at 343. See also In the Matter of Banksia Securities Ltd (in liquidation) (receivers and managers appointed) [2017] NSWSC 540 at [55].

[30] See supplementary affidavit of Ahmed Bise sworn and filed on 26 November 2019, [41].

[31] The summary tables are found at exhibits AB-6 and AB-7 to the affidavit of Ahmed Bise sworn 22 October 2019 and exhibit AB-12 to the supplementary affidavit of Ahmed Bise sworn on 26 November 2019 (which is a revised summary table in respect of the prospective remuneration claims).

[32] Basile (n 6) at [59]; Allston Homes (n 2) at [29].

[33] See AAA Financial Intelligence Ltd (in liquidation) ACN 093 616 445 (No 2) [2014] NSWSC 1270, in which Brereton J allowed liquidators' remuneration for an amount expressed as being "(plus GST)".

[34] Mr Bise's rate increased from $630 per hour in the 2017/2018 and 2018/2019 financial years to $650 in the 2019/2020 financial year (all rates exclusive of GST).

[36] Affidavit of Ahmed Bise sworn 22 October 2019, [23]. The $93,908 initially sought for the retrospective remuneration claim incorporates this discount, whilst the timesheets and summary table at exhibit AB-7 show the higher amount of $103,908 before the $10,000 write-down.

[38] See supplementary affidavit of Ahmed Bise sworn and filed on 26 November 2019, [52].

[39] [2013] FCA 699.

[41] Twenty-Seventh Android (n 3) at [157] (Matthews JR).

[43] A referral order was made by Sifris J on 23 January 2020 pursuant to rule 84.03 of the Supreme Court (General Civil Procedure) Rules 2015 and rule 16B.2(3) of the Supreme Court (Corporations) Rules 2013 to ensure I had power to deal with the totality of the liquidators' application including the granting of relief under s 90-15 of the Practice Schedule.

[44] Basile (n 6) at [88]-[89], applying Merringtons Pty Ltd v Luxottica Retail Pty Ltd & Anor [2006] VSC 525 ("Merringtons") in which Master Wood (as he then was) considered the application of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) to the taxation of costs. The Master explained that if a party "is registered for GST purposes and is able to recover the GST component of any disbursement by way of an input tax credit, then to allow the GST component to remain as part of the disbursement would be to allow 'double dipping'" (at [34]). Master Wood went on to hold that where a party is able to claim an input tax credit, the GST component of any disbursements ought to be deducted by the Taxing Master prior to the consideration of the appropriateness or otherwise of the disbursement (at [41]). The reasoning in Merringtons has since been applied more broadly: see, for example, Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691 and Fulton Hogan Construction Pty Ltd v Grenadier Manufacturing Pty Ltd (in liq) [2012] VSC 358, cases which applied this reasoning in the context of the assessment of damages.