By Interlocutory Process filed on 17 January 2019, Messrs Livingstone and Parbery apply, in their capacity as (now) joint and several liquidators of NR Wolli Creek Pty Ltd (recs and mgrs apptd) (in prov liq) ("Company"), for an order under s 60-16 of the Insolvency Practice Schedule (Corporations) of the Corporations Act 2001 (Cth) sch 2 approving their remuneration as joint and several provisional liquidators of the Company in the amount of $57,548 (as amended in the course of the application) in respect of the period 27 March 2018 to 13 May 2018. Section 60-16 of the Insolvency Practice Schedule (Corporations) provides that a provisional liquidator is entitled to receive such remuneration, by way of percentage or otherwise as determined, relevantly, by the Court. Rule 9.3 of the Supreme Court (Corporations) Rules 1999 (NSW) in turn provides for the process to be adopted in an application for approval of a provisional liquidator's remuneration, and for the evidence to be led in support of that application. The bulk of that evidence is led in Mr Livingstone's affidavits in support of this application, although a summary of receipts and payments made by the provisional liquidators was not included in that affidavit, and was then tendered separately.
Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2019] NSWSC 313 | Case summary | Zoe
Mr Livingstone relies on three affidavits in support of the application. His first affidavit, dated 16 November 2018, sets out the background to his appointment, which was an appointment made by the Court after a breakdown of relationships between shareholders in the Company, which had borrowed substantial funds in order to develop a property situated at Wolli Creek in New South Wales. Mr Livingstone there refers to the relevant financing facilities, which were complicated, and to claims which have been made on the Company arising from these financing arrangements, and several transactions in respect of them.
Mr Livingstone also refers to the fact that, on the provisional liquidators' appointment, they entered into a deed of indemnity with Mr Zhu, who had sought their appointment, to meet costs of conducting the provisional liquidation up to a specified amount. The amount of remuneration now sought, together with disbursements, primarily legal costs, in respect of the provisional liquidation will be within the amount of that indemnity. Mr Zhu, and other creditors, have been given notice of the application but have not indicated any opposition to the claim for remuneration.
Mr Livingstone refers to the steps which were taken to resource the provisional liquidation, and provides an outline, in relatively broad terms, of the categories of work that were undertaken. A significant amount of that work, not surprisingly in the circumstances, concerned preliminary investigations into the position of the Company, and subsequent investigations in respect of its dealings with secured creditors. Mr Livingstone expresses the view (Livingstone 16.11.18 [49]) that the work performed by the provisional liquidators was reasonably necessary to secure the best outcome for creditors, and to investigate matters relating to the claim by a secured creditor, which has now led to a sale of the property. Obviously, Mr Livingstone's expression of view as to that matter is not conclusive of that matter, but it is significant that he has given evidence of that character. Mr Livingstone also refers to the process adopted to maintain time sheets within his firm, to the manner in which work-in-progress is on occasion written off, and to a modest write-off of time in respect of this matter, and exhibits a detailed summary of the time spent by members of the team together with relevant charge-out rates to his affidavit. That exhibit in turn contains a detailed narrative of the work done, organised by category in accordance with ARITA's Code of Professional Practice. A review of those categories indicates, consistently with the affidavit, that much of the relevant work related to the categories of investigation, and it appears that work was concentrated between largely Mr Livingstone, as one of the appointed provisional liquidators, and a manager, Mr Treffiletti, although some work, particularly in respect of administration, was also done by other less senior staff. Mr Livingstone addresses that organisation of work in his affidavit, noting that a significant amount of work was required to be undertaken by staff with sufficient experience due to particular matters relating to the provisional liquidation. I accept that, in the relevant circumstances, the security arrangements and affairs of the Company were relatively complex and likely warranted that approach.
Mr Livingstone expresses the view that the amount claimed by way of remuneration is reasonable, and that again is not conclusive, but relevant evidence. That conclusion draws some support from the fact, as I noted above, notice of the application has been given to creditors, including creditors with significant stakes in the provisional liquidation, each of whom are legally represented, which have not opposed the application sought. Notice has also been given to the Australian Taxation Office and Office of State Revenue, which have also not opposed the application. Mr Livingstone's affidavit dated 16 January 2019 in turn evidences the giving of such notice. Mr Livingstone's further affidavit dated 4 February 2019 addresses a minor adjustment or a misallocation of time recorded, which has led to the amendment of the amount claimed by remuneration in the course of the application.
The Court will typically have regard, in dealing with an application for approval of remuneration by an external administrator, to factors of the kind that were formerly specified in s 473(10) of the Corporations Act, including, inter alia, whether the work performed was reasonably necessary; the period over which it was performed, which was in this case a relatively short period of reasonably intense work; the quality and complexity of the work; and whether the provisional liquidator was required to deal with extraordinary issues or accept a higher level of responsibility than was ordinarily the case. The value or nature of the property dealt with is also of relevance, although perhaps less relevant in a provisional liquidation, particularly here where the relevant property passed into the control of a receiver appointed by a secured creditor. I referred to the applicable principles as confirmed by the Court of Appeal's decision in Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 118 ACSR 333, in Re Sakr Nominees Pty Ltd [2017] NSWSC 668 at [23]-[25], and again in Re Plutus Payroll Australia Pty Ltd (in liq) [2018] NSWSC 1092 at [14]. The Court will have regard to issues of proportionality in an application of this kind, and the case law has now accepted that, at least in some circumstances, time costing may be an appropriate starting point for a calculation of remuneration, although the assessment of proportionality will be important in testing the reasonableness of time-based remuneration. There will be less room for remuneration by a percentage of asset realisations achieved in a provisional liquidation, particularly where, as here, the relevant assets are not under the provisional liquidators' control, and much of the work done will be devoted to investigations and statutory duties rather than to asset realisation.
I have regard to the evidence of the work done by the provisional liquidators and the structure of their team, and to the categories of work which have been done, and the detailed time records which have been produced in support of that work. The process adopted by the provisional liquidators corresponds, as I have noted, to the ARITA categories, and appears to conform to industry standards so far as it involves review at partner level of time charges, and detailed reporting of the work that was done. Although the amount of the remuneration claimed could not be described as small, it involves an appointment that had a degree of complexity about it, where work was required under significant time pressure, and involved investigation of relatively complex dealings with secured creditors. I am satisfied that, in those circumstances, the allocation of work to the provisional liquidator and a manager, with lesser support by more junior staff, was appropriate and that the remuneration claimed is proportionate to the complexities of the matter and the extent of the work done. I can more readily be satisfied of that matter where, as I have noted, those with an interest in the amount of remuneration claimed are on notice of the application and have not sought to raise any concern as to that claim.
The provisional liquidators seek an order that the costs of the application be costs in the provisional liquidation of the Company. I am satisfied that that order can properly be made where this application advances the conduct of the provisional liquidation.
For these reasons, I make orders in accordance with the short minutes of order initialled by me and placed in the file.
[3]
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Decision last updated: 24 March 2019
Parties
Applicant/Plaintiff:
Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq)