The background to the application presently before the Court is to be found in the judgment delivered on 13 February 2018, [1] in which inter alia the Court approved the second plaintiff's remuneration for the administration of the trust funds in the liquidator's control in the sum of $209,766.15 (GST inclusive) and, after authorising payment of that remuneration and disbursements from the various trust accounts pro rata in specified proportions, made directions that the liquidator notify each of the 416 identified clients of the company who might potentially be entitled the trust funds to make a claim within a specified time, and that otherwise the liquidator would seek advice that he would be justified in disregarding any claim not made within that time and in distributing funds according to such determination as he might reasonably make, having regard to such claims as had been made and the available evidence ("the February orders").
Pursuant to those orders, the liquidator on 10 April 2018 sent circulars to the 416 clients, by email to those for whom an email address was held and otherwise by ordinary mail. The Court has been informed that about 35 such circulars have been returned as unclaimed mail. That exercise resulted in some 12 clients making claims, 11 of them within the time specified and one belatedly. The liquidator ultimately considered all of the claims (including the late one) and accepted six in whole or in part totalling approximately $35,000, and rejecting the others, including a claim by Auto & General Services for $985,296, for reasons which the liquidator has explained. Notice of the liquidator's decision in respect of the various claims was communicated to the claimant clients on or about 5 October 2018, together with an invitation to contact the liquidator in the event of there being any queries about the contents of the letter. No further communication has been received from any of those claimant clients.
The liquidator's decisions on the claims which have been made appear logical and reasonable, on the basis of the limited evidence available to him, and there is no difficulty in concluding that the liquidator would be justified in acting on the basis of those determinations, all the more so where no client appears subsequently to have sought to dispute the liquidator's decision.
It has emerged that the February orders contained an error, in the specified proportions in which the burden of the remuneration and disbursements between the various trusts accounts on a pro rata basis, for two reasons. The first is that, in calculating the proportions, the so-called "administration trust account" was included as if it were a trust account, whereas it in fact contains commission earned by Arms Global, to which the company is beneficially entitled, and accordingly it should not have born any of the burden. The second is that an additional bank account with Westpac containing some $10,000 approximately has since been identified, and now paid into the IAG trust account, which increases the burden which that account should have borne. The consequences of those matters are that the sum of $37,766.52 was wrongly paid out of the administration trust account by way of contribution to the liquidator's remuneration and disbursements, and should now be restored from the other trust funds, and that the specified proportions in which further payments referable to the trust funds are to be borne by them pro rata will differ from those in the February orders.
After payment of the claims which the liquidator has determined to admit, and of the further remuneration referred to below, there will remain in the trust funds approximately $220,000 ("the residuary fund"). The liquidator again sought a direction for payment of that sum into Court to relieve him or to discharge him from the trusts. [2] As I have previously pointed out, [3] the consequence of that is likely to be that the moneys will thereafter languish indefinitely in Court. If claims have not been forthcoming in response to a notification by the liquidator to lodge claims - relatively simple and inexpensive process - it is still less likely that a claim would be brought to the Court for payment out, supported by the requisite evidence, at much greater expense. It seems vastly preferable, if possible, that the remaining funds be put to the benefit of those who are apparently entitled to them, rather than languishing in the Court.
In the earlier judgment I referred to the appearance that there may have been a mixing of the trust funds, in the sense that one client beneficiary may have been paid out of funds held in an account designated for another, and that in all likelihood the trust funds comprised a deficient mixed fund, with the consequence that all those who contributed to the deficient funds would be equitable tenants in common of the funds with claims against it rateable according to their contributions. [4] As I then indicated, where it is not possible to resolve such questions having regard to contributions, it may be possible to do so on a claims basis or on a contractual basis; [5] and where a liquidator knows nothing more than that the fund is held on trust and that there are a number of potential claimants whose merits cannot on any rational basis be distinguished between, it may be appropriate to direct that the liquidator would be justified in distributing the fund amongst the claimants proportionately to their claims. [6]
In the present case, each client having been afforded an opportunity to prove a claim and none having been able to do so beyond those which have already been allowed and satisfied, the liquidator knows that the remaining funds are held on trust, and that there are 416 potential claimants who are equitable tenants in common of the funds (being the clients who have at some stage contributed to the funds), and between whose claims there is nothing to enable the liquidator to distinguish.
In those circumstances, rather than payment of the residuary funds into Court, the preferable course is for them to be distributed equally amongst those 416 clients. I do not consider that those who have proved a claim should be excluded from sharing in the residuary pool, because what they have proved does not necessarily exhaust what they have contributed, and it would be unfair to exclude those who have proved a small claim (in one case, $90) from the larger dividend (in the order of $500) which they would receive out of the residuary fund. In other words, all 416 clients are, absent any better evidence, to be treated as having contributed equally to the remaining funds, over and above such entitlement as they have already proved and is to be satisfied out of the trust funds before division of the unclaimed residue.
The remaining issue is that of the liquidator's remuneration for administering the trusts payable out of the trust moneys. The February order for remuneration was not expressed to be in respect of any particular period of the administration, consistent with my view that ultimately the Court allows remuneration for an administration as a whole and not for particular periods of it, notwithstanding that a practice has evolved of authorising interim remuneration on a periodic basis. Thus what the liquidator now seeks is essentially additional remuneration over and above that previously approved for work not covered by the previous application.
The liquidator claims approximately $60,000 inclusive of GST, of which roughly half is attributable to the period leading up to the last hearing and preparation of evidence for it, and the balance is largely associated with the exercise of notifying clients to make claims and then adjudicating those claims. I have scrutinised the Work in Progress ("WIP") Schedule produced by the liquidators and the work done appears to have been reasonably necessary and the rates charged for it not unreasonable. On the last occasion, although the claim was calculated and propounded on a time-cost basis, I observed that the total claim was in the order of 5 per cent of recoveries, and on that basis reasonable and proportionate. The present claim would represent approximately an additional 1.75 per cent of recoveries.
It seems to me that it is proper that there should be some additional remuneration, because the February orders admittedly necessitated additional work, which would not have been necessary had the Court acceded to the liquidator's application to pay the funds into Court. In addition, I will incorporate a small further provision for the work that will be associated with distributing the residue to the clients. Noting that the average hourly rate that can be derived from the WIP Schedule appears to be $435 per hour, and that the remaining work to be done is, as was submitted, more likely to be administrative, if not menial, rather than highly intellectual, it seems to me that a total allowance of additional remuneration of $65,000 (GST inclusive) should amply cover the further work to be done.
The liquidator also seeks a direction that he would be justified in recouping his disbursements out of the trust fund. They appear unexceptional and that direction will be made.
The Court orders that:
1. The second plaintiff would be justified in paying to the following entities the following sums from the trust accounts identified in paragraph 6 below:
1.1 Queensland Office of Fair Trading $15,771.55
1.2 Office of State Revenue of Western Australia $10,098.52
1.3 Metro Tyres $ 2,343.50
1.4 Dr Ian Jones $ 853.00
1.5 St Francis Catholic Primary School $ 90.00
1.6 Electricity Networks Corporation $ 4,996.75
1. The further remuneration of the second plaintiff additional to that provided for in the orders of 13 February 2018 for and in respect of identifying, receiving, preserving, identifying, reconciling and/or allocating the trusts accounts identified in paragraph 6 below is approved in the sum of $65,000 (GST inclusive).
2. The second plaintiff would be justified in paying to himself the remuneration approved in paragraph 2, together with his disbursements of $14,213.10 and any further disbursements incurred in respect of the distribution of the residual trust funds, from the trust accounts identified in paragraph 6 below.
3. The second plaintiff would be justified in paying to the administration trust account the sum of $37,766.52 from the trust accounts identified in paragraph 6 below.
4. The fees, costs and expenses of this application on an indemnity basis be paid out of the trust accounts identified in paragraph 6 below.
5. The second plaintiff would be justified in paying the sums referred to in paragraphs 1, 2, 3, 4 and 5 above from the following trust accounts in the following proportions:
6.1 IAG Trust Account 32.7 per cent
6.2 Global Trust Account 33.08 per cent
6.3 Cosmos Trust Account 0.19 per cent
6.4 Purchase Debt Trust Account 4.14 per cent
6.5 Bpay Trust Account 28.85 per cent
6.6 CGU Trust Account 0.22 per cent
6.7 Westpac Trust Account 0.82 per cent
1. The second plaintiff would be justified, upon the expiration of 28 days after the publication date referred to in paragraph 8 below, but subject to any application which may be made under paragraph 9 below, in consolidating the balances remaining in the trust accounts referred to in paragraph 6 above after having made the payments referred to in paragraphs 1, 2, 3, 4 and 5 above, and distributing the consolidated balance equally among the 416 identified clients of the company.
2. The second plaintiff publish a copy of these orders, the affidavit evidence in support of them and these reasons on the second plaintiff's web site at www.corcordis.com.au/creditors, including the date of publication ("publication date").
3. Any person affected has liberty to apply to vary or set aside these orders by interlocutory process filed and served on the second plaintiff within 28 days of the publication date.
[3]
Endnotes
In the Matter of The Arms Global Group Ltd [2018] NSWSC 512.
This was discussed in the previous judgment: see [2018] NSWSC 512 at [13]-[15].
See [2018] NSWSC 512 at [14].
[2018] NSWSC 512 at [7].
[2018] NSWSC 512 at [8], referring to Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [103] to [180]; (2012) 267 FLR 27; and Re Lehman Brothers International (Europe) (in admin) [2012] UKSC 6; [2012] 3 All ER 1.
Re French Caledonia Travel Services Pty Ltd (2002) 59 NSWLR 361 at 420 [186].
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Decision last updated: 13 December 2018