Second Plaintiff v FLORIN BURHALA & ASSOCIATES PTY LTD

1 The plaintiffs, Con Kokkinos and Paul Andrew Burness, were appointed as joint and several liquidators of the defendant, Florin Burhala & Associates (in liquidation) ('Company') on 2 May 2013, pursuant to a special resolution of members of the Company. On 29 April 2016, a final meeting of the Company's members and creditors was held in accordance with s 509 of the Corporations Act 2001 (Cth) ('Act'), following which the plaintiffs ceased being the Company's liquidators.[1] In these reasons, I shall refer to the plaintiffs as the Former Liquidators.

2 On 3 August 2016, the Company was deregistered. The Company's registration was reinstated by orders made by the Supreme Court of Victoria on 27 July 2017, and Sam Kaso and Daniel Juratowitch were appointed as joint and several liquidators of the Company ('Current Liquidators').[2]

3 By originating process issued 6 July 2020, the Former Liquidators apply, under ss 90-15 and 60-10 of the Insolvency Practice Schedule (Corporations) (Schedule 2 of the Act) ('Practice Schedule') and r 9.2 of the Supreme Court (Corporations) Rules 2013 ('Rules'), for the approval of their remuneration in relation to their role as former liquidators of the Company.[3] The Former Liquidators seek the following orders:

(a) a determination that they are entitled to remuneration in the amount of $28,171.62 (GST inclusive) in respect of work performed in the liquidation of the Company for the period 24 October 2014 to 29 April 2016 (inclusive);

(b) a determination that they are entitled to remuneration in the amount of $11,157.88 (GST inclusive) in respect of work performed in the period 6 February 2020 to 11 May 2020 (inclusive) in preparing this application;

(c) pursuant to r 9.2(4)(b) of the Rules, the application be dealt with in the absence of the public and without any attendance by, or on behalf of, the Former Liquidators; and

(d) the Former Liquidators' costs of this proceeding be paid out of the property and assets of the Company.

(a) the Kokkinos Affidavit;

(b) affidavit sworn by Seamus Dominic Jones Ryan on 6 July 2020 ('Ryan Affidavit'). Mr Ryan is a solicitor employed by Rigby Cooke Lawyers ('Rigby Cooke'), solicitors for the Former Liquidators; and

(c) two affidavits of service sworn 3 and 30 July 2020 by Jesse Charles Gregorich (respectively, 'First Gregorich Affidavit' and 'Second Gregorich Affidavit'). Mr Gregorich is a mailroom clerk employed by Rigby Cooke.

5 The originating process contains a request of the type contemplated by r 9.2(4)(b) of the Rules that the Application be dealt with in the absence of the public and without attendance by or on behalf of the Former Liquidators.

6 Before making an application of this type, r 9.2 of the Rules requires the Former Liquidators to serve certain persons with a copy of the principal affidavit in support of the application and a notice in accordance with Form 16 of the Rules stating that it is the Former Liquidators' intention to apply to the Court for an order determining their remuneration.

7 Mr Kokkinos deposes that the creditors of the Company known to the Former Liquidators are:[4]

(a) Australian Taxation Office;

(b) BMA Lawyers Pty Ltd (in liquidation);

(c) Florin Burhala;

(d) Melbourne Stadiums Limited;

(e) Melbourne Victory Football Club;

(f) Mercedes-Benz Financial Services Pty Ltd; and

(g) MWB Accountants Pty Ltd.

8 Mr Kokkinos deposes that of these creditors, Florin Burhala was made bankrupt on 10 August 2016 and has not yet been discharged; and BMA Lawyers Pty Ltd was placed into liquidation on 7 January 2016.[5]

9 Mr Kokkinos deposes that he intends to serve the Kokkinos Affidavit and a notice in accordance with Form 16 (Notice of Intention to Apply for Remuneration) of the Rules ('Form 16 Notice') on the creditors listed in paragraph 7 above, other than Mr Burhala and BMA Lawyers; on Cor Cordis Chartered Accountants, being the office of the liquidators of BMA Lawyers Pty Ltd; Mr Burhala's trustees in bankruptcy, being Gess Michael Rambaldi and Andrew Reginald Yeo of Pitcher Partners; and the Current [6]iquidators.6

10 These are the parties identified by the Former Liquidators as persons who ought to be served with the Form 16 Notice and the Kokkinos Affidavit.[7]

11 Mr Ryan deposes that the basis upon which Melbourne Victory Football Club was said to be a creditor of the Company was that it was identified as such by a director of the Company in the amount of $50,000. Mr Ryan says that the basis of the alleged debt was not identified by the Former Liquidators, and the identity of any natural or corporate person using that name was not disclosed by the director, and no such creditor asserted any claim during the course of the liquidation, responded to correspondence relating to the alleged debt or attended creditor meetings. Nonetheless, a copy of the Form 16 Notice and Kokkinos Affidavit was sent to the address for Melbourne Victory Football Club to which previous correspondence relating to the liquidation had been sent.[8]

12 Mr Gregorich deposes to having served, by ordinary pre-paid post sent on 27 May 2020, a copy of the Form 16 Notice and the Kokkinos Affidavit on each of the persons identified in paragraph [9] above.9

13 Mr Ryan deposes that as at 6 July 2020, no response or notice of objection had been received in relation to the matter. Accordingly, the 21 day period prescribed by r 9.2(3) of the Rules has passed since the date that the creditors and members were served.

14 Rule 9.2(2)(d) provides that each member of the Company whose shareholding represents at least 10 per cent of the issued capital of the Company is also to be served with the Form 16 Notice and the Kokkinos Affidavit. The Former Liquidators filed a copy of a search of the records of the Australian Securities and Investments Commission ('ASIC'). That ASIC search reveals that Mr Burhala, who was also the sole director and secretary of the Company prior to it being placed into liquidation, is the sole shareholder of the Company. The persons served with the required documents by post includes Mr Burhala's trustees in bankruptcy.

15 The application was originally listed for 3 August 2020 before me. Prior to the hearing, Rigby Cooke served the persons identified in paragraph 9 above with a copy of the originating process, the Kokkinos Affidavit, the Ryan Affidavit and the First Gregorich Affidavit (all withou[10]exhibits).10 I held a brief hearing on 3 August 2020, where there was an appearance for the Former Liquidators and not by any other person, where I indicated that the hearing would be adjourned and the matter dealt with on the papers.

16 Having reviewed the material, I am satisfied that it is in order for me to proceed in the way contemplated by r 9.2(4)(c) of the Rules. The creditors and the shareholder have been served with the relevant documents and have not objected to the remuneration claimed by the Former Liquidators. Accordingly, I am satisfied that it is appropriate that I proceed to determine the applications in the absence of the public and without attendance by or on behalf of the Former Liquidators.

17 The Practice Schedule is relatively new, having been introduced with numerous amendments made to the provisions of the Corporations Act 2001 (Cth) ('the Act') relating to external administrators by the Insolvency Law Reform Act 2016 (Cth) ('ILRA'). Amongst other things, the ILRA repealed s 473 of the Act (which had provided for the determination of liquidators' remuneration) and introduced the Practice Schedule.

18 The commencement of the new provisions concerning remuneration in Division 60 of the Practice Schedule were deferred until 1 September 2017.[11] For external administrators appointed prior to that date, s 473 of the Act continues to apply, whereas the new provisions apply to external administrators appointed after that date.[12]

19 However, in this case, despite the fact that the Former Liquidators were appointed prior to 1 September 2017, the Practice Schedule applies, rather than s 473 of the Act. Section 473 of the Act applied to liquidators who had been appointed by the Court or in a winding up in insolvency, and not to liquidators appointed in a members' voluntary winding up. As I understand it, the latter applications for approval of remuneration were usually made pursuant to what was then s 511 of the Act, although the criteria in s 473(10) of the Act were usually applied by the Court when considering those applications. Since s 511 of the Act was repealed with the same suite of reforms, it is the Practice Schedule (ss 90-15 and 90-20, and Division 60) which applies.

20 For the purposes of the Practice Schedule, an external administrator is defined as an administrator, an administrator under a deed of company arrangement, a liquidator, or a provisional liquidator, of the company.[13] A company is taken to be under external administration for the purposes of the Practice Schedule on the occurrence of certain events, being under administration, a deed of company arrangement has been entered into, a liquidator has been appointed, or a provisional liquidator has been appointed.[14]

21 Section 90-15 of the Practice Schedule relevantly provides as follows:

Court may make orders

(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;

(f) an order in relation remuneration, including an order requiring a person to repay to a company or the creditors of a company, remuneration paid to the person as external administrator of the company.

Matters that may be taken into account

(4) Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

(a) whether the liquidator has faithfully performed, or is faithfully performing, the liquidator's duties; and

(b) whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and

(c) whether an action or failure to act by the liquidator is in compliance with an order of the Court; and

(d) whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and

(e) the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.

Costs orders

(5) Without limiting subsection (1), an order mentioned in paragraph 3(d) in relation to the costs of an action may include an order that:

(a) the external administrator or another person is personally liable for some or all of those costs; and

(b) the external administrator or another person is not entitled to be reimbursed by the company or its creditors in relation to some or all of those costs.

22 Section 90-20 of the Practice Schedule relevantly provides that a person with a financial interest in the external administration of the Company or an officer of the Company may apply for an order under s 60-15 of the Practice Schedule.

Sections 60-10 and 60-12 of the Practice Schedule

23 Section 60-10 of the Practice Schedule applies to this application, and it relevantly provides as follows:

(2) [External administrator in a members' voluntary winding up] 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.

...

(3) [Amount of remuneration] 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.

24 In exercising the power to determine the Former Liquidators' remuneration, s 60-12 of the Practice Schedule states that 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;

25 While the criteria in s 60-12 of the Practice Schedule direct the Court to the factors that are to be taken into account, the ultimate question is whether the remuneration claimed by the Former Liquidators is reasonable.

The Court's approach when considering applications for approval of an external administrator's remuneration

26 The principles concerning applications for approval of the remuneration incurred by insolvency practitioners are well established and have been referred to in many decisions of this Court. These principles were developed when the previous statutory provisions applied, as I have set out above.

27 The factors contained in s 60-12 of the Practice Schedule are materially the same as the factors which were set out in s 473(10) of the Act.[15]

28 As the relevant provisions are relatively new, and as the factors to be taken into account are materially the same, the earlier authorities remain pertinent.

29 Gardiner AsJ summarised the relevant principles in IMO Traditional Values Management Limited (in liq)[16] ('Traditional Values') at paragraphs [18] to [25].

30 For convenience I adopt his Honour's summary, which referred to the principles identified by Davies J in Thackray v Gunns Plantations:[17]

At [60], her Honour summarised the principles to be applied by reference to the decision of the Full Court of the West Australian Supreme Court in Venetian Nominees v Conlan as follows:

(a) A summary procedure was involved, not unlike that applicable to the taxation of solicitor's costs, which is not necessarily subject to all the rules that would apply in an action.

(b) The initial task of the Court is to consider whether the liquidator has made out a prima facie case on the evidence before the Court that the remuneration claimed is fair and reasonable. The Court must make that assessment 'bringing an independent mind to bear on the relevant issues' even though at that point there is no objector.

(c) There is no absolute rule regarding the amount of detail required to support a remuneration claim. But the evidence relied on should be sufficient to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.

(d) If the liquidator establishes a prima facie case, the Court should allow for an objection procedure to enable objections to be made.

(e) If there are objectors to the claim or any part, the Court should then establish the validity of those objections.

At [63] and [64] of Thackray, her Honour stated:

.... the receivers accepted that the principles set out Venetian Nominees Pty Ltd v Conlan are persuasive and that they should put sufficient evidence before the Court to enable the Court to determine that the amounts claimed are fair and reasonable. That involved providing sufficient detail of the work that was done and the expenses claimed for the Court to assess the reasonableness of the remuneration claimed for that work and the reasonableness of the expenses incurred by the receivers. The reasonableness of remuneration may be adduced by evidence for example of an appropriate benchmark, such as the Insolvency Practitioners Association of Australia rates, for comparative work by persons with the relevant status and qualifications for that kind of work and justification of the hours spent. That amount can then be adjusted up or down to reflect other factors including:

(a) complexity above the norm for the kind of work involved;

(b) novelty and difficulty of the issues faced;

(c) the ultimate outcome obtained by the claimant.

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. What is needed is sufficient information for the Court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim.[18]

31 Black J of the New South Wales Supreme Court also summarised the applicable principles in In the matter of Sakr Nominees Pty Limited.[19] In addition to the matters referred to above, his Honour stated the following propositions:

[T]he Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred.[20]

Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the 'value' of a liquidator's work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors.[21]

32 His Honour also canvassed a number of authorities regarding the method for calculating the remuneration, such as time costing or remuneration based on a percentage of realisations, concluding that:[22]

Most decisions ... have applied time costing as at least the starting point for a calculation of remuneration, although those decisions also emphasise the need for proportionality between the costs of the work done and the value of the services provided.

33 On this point, his Honour concluded by referring to the New South Wales Court of Appeal decision in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr[23] which he said did not prefer any particular approach over another. Black J then stated:

Whether time-based remuneration or a percentage of recoveries is appropriate in a particular case will depend, in part, on the basis on which the liquidator puts his or her application for remuneration; and, in part, the view taken by the Court.[24]

34 The Company previously operated a business in the professional services industry, providing legal services from premises in Collins Street Melbourne. The Company's business was sold in December 2011 and the Company ceased trading at that time.[25]

35 The circumstances of the appointment of the Former Liquidators, their ceasing office, and the de-registration and reinstatement of the Company are set out above.

36 Mr Kokkinos deposes that the remuneration of the Former Liquidators and their staff has been calculated on a time-cost basis in accordance with the procedure detailed by the Australian Restructuring & Turnaround Association. They recorded details of the time expended using an electronic time recording function of the internal system known as Workbench, the system used by Worrells Solvency & Forensic Accountants ('Worrells'), the firm of which the Former Liquidators are partners. Relevant extracts from Workbench have been exhibited to the Kokkinos Affidavit and these set out:[26]

(a) a narration or explanation in respect of each task performed;

(b) the name of the person who performed each task and the role performed by that person;

(c) the date on which each task was performed; and

(d) the amount of time spent on each task and the associated fees incurred.

Remuneration approved and paid to the Former Liquidators

37 After their appointment, the Former Liquidators sent to the creditors of the Company a report to creditors dated 3 May 2013 ('May 2013 Report'). Amongst other things, the May 2013 Report included an agenda for the creditors' meeting scheduled for 14 May 2013 and stated that at the meeting, the Former Liquidators would propose a resolution for approval of remuneration incurred in the amount of $822 (excl GST) and a resolution to draw further interim remuneration capped at the amount of $21,900 (excl GST).[27] Resolutions to that effect were passed at the meeting of creditors held on 14 May 2013.[28]

38 At a meeting of creditors held on 18 March 2014, further resolutions in respect of the Former Liquidators' remuneration were passed. Additional remuneration in the amount of $2,052.24 (excl GST) was approved for the period up to 27 February 2014, and future remuneration from 27 February 2014 to the liquidation finalisation date capped at $18,900 (incl GST) was approved.[29]

39 Mr Kokkinos deposes that in respect of the $18,900 referred to above:[30]

(a) $5,186.44 (incl GST) was drawn from the Company by the Former Liquidators prior to the conclusion of their appointment. They were unable to draw further remuneration prior to the conclusion of their appointment as the Company did not have any further funds; and

(b) On 1 February 2019, the Current Liquidators transferred to the Former Liquidators from funds held by the Company the amount of $12,875.81. Mr Kokkinos says that his understanding is that those funds comprise some of the funds recovered on behalf of the Company by the Current Liquidators after their appointment.

40 The amount referred to in paragraph 39(a) above relates to work performed by Worrells between 27 February and 4 April 2014 (inclusive).

41 The amount referred to in paragraph 39(b) above relates to work performed by Worrells between 4 April and 30 September 2014 (inclusive).

42 Therefore, having regard to paragraph 39 above, the Former Liquidators have been paid $18,062.25 in remuneration pursuant to the second of the resolutions referred to in paragraph 38 above, meaning that they have approval to draw a further $837.75 pursuant to that resolution. Mr Kokkinos deposes that instead of seeking that the amount of $837.75 be transferred to the Former Liquidators by the Current Liquidators, they now seek a determination for remuneration in the amount of $28,171.62 (incl GST) ('Further Remuneration') on the basis set out below.

Remuneration for the period from 24 October 2014 to 29 April 2016

43 Mr Kokkinos deposes that in the period from 24 October 2014 to 29 April 2016 ('Further Period'), he and his staff incurred the Further Remuneration. He says that minimal work was performed between 29 April 2016 and the de-registration of the Company on 3 August 2016 and the Former Liquidators do not claim remuneration for that period.[31]

44 The work performed in the Further Period is described by reference to categories of tasks, being 'creditors', 'investigations', and 'administration'.

45 Mr Kokkinos deposes that the Further Remuneration exceeds the approved capped amount of $18,900 by $28,171.62 because, at the time the resolution approving the capped amount was passed on 18 March 2014, the Former Liquidators did not foresee that it would be necessary to perform the vast majority of the investigative work and associated tasks as explained below.[32]

46 In the Further Period, the Former Liquidators and their staff spent 2 hours and 30 minutes resulting in fees of $983.19 in the 'creditors' category. Those fees relate to following up and addressing enquiries from creditors; preparing advice and reports to creditors; and registering and filing proofs of debt, including corresponding with the Australian Taxation Office ('ATO').[33]

47 In the Further Period, the Former Liquidators and their staff spent 5 hours and 36 minutes resulting in fees of $2,185.55 in the 'administration' category. Those fees relate to:[34]

(a) filing documents, including with the ATO and ASIC, and related correspondence;

(b) Maintaining and monitoring the bank accounts relating to the Company's funds, including conducting regular reconciliations and corresponding with the bank;

(c) preparing and lodging business activity statements;

(d) at the conclusion of the Former Liquidators' appointment, cancelling the Australian Business Number registration, GST registration and PAYG registration; and

(e) at the conclusion of the Former Liquidators' appointment, arranging the storing and archiving of files.

48 In the Further Period, the Former Liquidators and their staff spent 54 hours and 57 minutes resulting in fees of $25,002.87 in the 'investigations' category. Those fees relate to:[35]

(a) collecting books and records of the Company which had not been made available to the Former Liquidators before 24 October 2014;

(b) corresponding with former clients of the Company and their legal representatives, and corresponding with a solicitor who had purchased the business of the Company regarding collection of the Company's clients' files to which he was entitled;

(c) reviewing all transactions from the books and records referred to in subparagraph (a) above, including liaising with the director of the Company and other parties to transactions with the Company to establish the nature of those transactions, and whether any of those transactions may constitute a voidable transaction or relate to any other claims which may have been pursued on behalf of the Company by the Former Liquidators;

(d) as part of that review, in particular reviewing the following for the purposes of liaising with the ATO in respect of the matters detailed in sub-paragraph (f) below:

(i) transactions which may have constituted unfair preference payments, or other voidable transactions, and analysing whether those transactions satisfied the relevant statutory tests. Specifically:

• assessing whether the sale of the Company's business may constitute a voidable transaction;
• assessing whether the disposal of the Company's motor vehicle asset may constitute a voidable transaction;
• reviewing the relationship between the Company and various entities, as to whether there is a bona fide basis for the Company repeatedly receiving and remitting large sums of funds between offshore accounts and the director's personal bank account; and

(ii) assessing a potential insolvent trading claim;

(e) liaising with the Former Liquidators' solicitors in respect of the costs to pursue the voidable transaction claims which may be available to be pursued on behalf of the Company; and

(f) liaising with the ATO regarding:

(i) claims set out in sub-paragraph (d) above, that may have been pursued by the Company which, if successful, may have resulted in funds being received by the ATO;

(ii) the Former Liquidators' view that there was a need to conduct public examinations to establish a proper basis for pursuing the claims referred to in the preceding paragraph; and

(iii) the Former Liquidators' commercial position that due to the Company's lack of funds, in order for them to pursue claims of the type referred to, the ATO would need to indemnify them in respect of any costs incurred to undertake public examinations of relevant parties and if appropriate the costs of pursuing those claims.

Unsuccessful attempt to have the Further Remuneration approved

49 A meeting of creditors was held on 5 December 2018 by the Current Liquidators. At that meeting, one of the items on the agenda was a proposed resolution that the Further Remuneration of the Former Liquidators for the Further Period be approved. The minutes of that meeting state that the resolution was lost on the voices, and that the general proxy for the Deputy Commissioner of Taxation voted against the resolution on the basis that it would be reconsidered in the event that "further information is provided in relation to same (timesheets, details of work performed etc)".[36]

50 During the period of their appointment, the Former Liquidators received $34,675.96 on behalf of the Company and made payments on behalf of the Company of that amount.[37]

51 Mr Kokkinos deposes that in the period 6 February 2020 to 11 May 2020 (inclusive), he and his staff spent 21 hours, resulting in fees of $11,157.88, in respect of preparing this application. Those fees relate to:[38]

(a) engaging in correspondence with Rigby Cook in respect of preparing and reviewing the application;

(b) providing background information to Rigby Cooke as to work undertaken during the appointment; and

(c) preparing several of the documents exhibited to the Kokkinos Affidavit, in particular the Workbench extracts.

52 Mr Kokkinos deposes that he believes that the remuneration sought in this application, being the Further Remuneration and the remuneration for preparing this application, is reasonable having regard to the tasks which he and his staff completed, which in his opinion, was necessary.[39] He says that he believes he and his staff took an appropriate amount of time in performing the work.[40]

53 He deposes that the work performed was of the necessary quality and involved dealing with complex issues, particularly in circumstances where the Former Liquidators:[41]

(a) were required to analyse books and records of the Company which were incomplete and needed to be reconstructed to identify potentially voidable transactions;

(b) prepared significant quotes and cost estimates for the ATO to consider with regard to the indemnity request application referred to above;

(c) engaged and instructed a solicitor to determine whether they would be prepared to act on the claims set out above, in the event indemnity funding was received; and

(d) engaged in extensive discussions and meetings with the ATO, in order to prepare the indemnity request application, which was not ultimately agreed between the ATO and the Former Liquidators.

Former Liquidators' prima facie case for approval

54 Based on all of the evidence provided, I am satisfied that the Former Liquidators have made out a prima facie case for payment of their remuneration for the Further Period and for the preparation of this application, within the meaning referred to in paragraph 30 above. That is, the Former Liquidators have made out a prima facie case that the remuneration claimed is fair and reasonable, and there is sufficient information to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken.

55 From my experience in matters associated with insolvency administrations, I know the hourly rates specified by the Former Liquidators to be commensurate with the hourly rates typically charged by insolvency practitioners.[42]

56 Although no objection has been taken to the remuneration claimed by the Administrator, the Court is still required to review the claimed remuneration, taking the matters identified in s 60-12 of the Practice Schedule into account.

57 As noted above, the Former Liquidators seek approval for their remuneration in the amount of $28,171.62 (including GST) for the Further Period and $11,157.88 (including GST) for the preparation of this application.

58 In terms of the matters identified in s60-12 of the Practice Schedule, I am satisfied that:

(a) the work performed by the Former Liquidators was necessary and properly performed;

(b) as set out above, some of the work required of the Former Liquidators was complex;

(c) the Former Liquidators were not required to accept a higher level of risk or responsibility than was usually the case or to deal with extraordinary issues; and

(d) the remuneration was calculated on a time basis, and the time taken for each task and the level of employee performing that task is set out in sufficient detail, by reference to the Workbench extracts.

59 I am satisfied with the explanation given by Mr Kokkinos as to why the remuneration incurred for work performed by the Former Liquidators during their appointment exceeded the amount previously estimated and provided for in earlier resolutions of creditors.[43]

60 I have reviewed the material provided by Worrells (via the Current Liquidators) to the creditors meeting held on 5 December 2018, at which the Further Remuneration was not approved. The level of detail provided with the application, in particular the Workbench extract for the Further Period, includes timesheets and the details of work performed. Although the ATO voted against the Further Remuneration at that meeting, it was subsequently provided with the Form 16 Notice and the Kokkinos Affidavit, and did not notify any objection to it. The ATO was also provided with this application and all affidavits in support, and did not participate in the application.

61 The Former Liquidators are entitled to their reasonable remuneration incurred in the preparation and conduct of this application. In Deputy Commissioner of Taxation v Starpicket Pty Ltd (No 2) Gordon J (as her Honour then was) stated that:[44]

The Liquidator is entitled to reasonable remuneration for work performed after the winding up was set aside, to the extent that such work was performed in accordance with his duties and the law. This entitlement encompasses not only the filing of the requisite forms with the Australian Securities and Investments Commission (ASIC), but also those acts required of the Liquidator to transfer control of Starpicket back to its directors. It also includes preparation of the Liquidator's application for remuneration currently before the Court. As stated by Zeeman J in Re Reiter Brothers Exploratory Drilling Pty Ltd [1994] TASSC 42; (1994) 12 ACLC 430 at 441:

[T]he applicant is entitled to be remunerated for work necessarily done by him by way of complying with the law subsequent to the termination of his appointment. ...

In my view, work properly done by the applicant by way of preparing his claim for remuneration falls to be dealt with as part of his remuneration.

62 While this situation is not analogous, in terms of how the Former Liquidators ceased to be liquidators of the Company, I see no reason why the same principles ought not apply.

63 Given that creditors or members did not, either at a creditors' meeting or in general meeting, approve the Further Remuneration or the remuneration in respect of this application, the Former Liquidators had no option other than making an application to the Court.

64 I have reviewed the Workbench extracts,[45] the reports to creditors[46] and the description of work given in the Kokkinos Affidavit. These contain sufficient detail for me to be generally satisfied (apart from the matters referred to in paragraph 65 below) as to the amounts claimed. In particular, I am satisfied that:

(a) there was an appropriate degree of delegation of the work to be performed, in that the matters which were of a more routine nature were performed by more junior employees and charged at lower hourly rates;

(b) the tasks described are reasonable and necessary to have been performed, and the time taken to perform them (and therefore the amounts charged for them) were reasonable; and

(c) there is no evidence of duplication, or unnecessary duplication, of work.

65 Upon reviewing the Workbench extracts for the remuneration in relation to this application, I noted five different people from Worrells who were involved in reviewing, editing and adding to the draft of the Kokkinos Affidavit. I calculated that a total of $5,385.06 of the amount claimed is referable to this. I do not consider that there has been an adequate explanation for the amount of time (and therefore money) spent on this task, and nor is there sufficient information in each narration for me to be satisfied that all of this was necessary. In this instance there had already been a significant (but appropriate) amount of time spent on preparing the instructions to Rigby Cooke who, it appears, prepared the draft affidavit. I do recognise and acknowledge that the preparation of the main affidavit relied upon is an important task and likely to be time consuming, and that significant input from Worrells would be required in reviewing and amending the draft affidavit. However, I do not accept that it was necessary for all of that remuneration to be incurred in relation to that task, particularly given the lack of information I have referred to. I therefore propose to reduce the amount in respect of remuneration for preparing this application, by deducting $2,692 from the amount for which approval was sought.[47]

66 For the above reasons, I will approve the Former Liquidators' remuneration in the amount of:

(a) $28,171.62 (including GST) in respect of the Further Period; and

(b) $8,465.88 (including GST) in respect of remuneration incurred in preparing this application.

67 Orders will be made in accordance with the above, along with orders that the Former Liquidators' costs of this proceeding be paid out of the property and assets of the Company.

68 The Court requests that the Former Liquidators' solicitors forward draft orders in accordance with these reasons to the Associate to Judicial Registrar Matthews.

[1] Affidavit of Con Kokkinos sworn 21 May 2020, [11] ('Kokkinos Affidavit').

[3] By orders made on the Court's own motion, the proceeding has been referred to me pursuant to r 84.04 of the Supreme Court (General Civil Procedure) Rules 2015 for hearing and determination.

[9] First Gregorich Affidavit, [3]-[10].

[10] Second Gregorich Affidavit, [3]-[10].

[11] Regulation 10.25.02(3) of the Corporations Regulations 2001 ('Corporations Regulations').

[15] There are some minor changes to the language used: for example, s 60-12 of the Practice Schedule refers to the extent to which the work was 'necessary and properly performed', whereas s 473(10) of the Act referred to the extent to which the work performed was 'reasonably necessary'.

[16] [2012] VSC 650 (14 December 2012).

[17] [2011] VSC 380; (2011) 85 ACSR 144 ('Thackray').

[18] Traditional Values [60], citing Thackray [2011] VSC 380; (2011) 85 ACSR 144, [63]-[64] (citations omitted).

[19] [2017] NSWSC 668 ('Sakr').

[23] [2017] NSWCA 38 ('Sanderson').

[36] Kokkinos Affidavit, [30]-[31].

[42] Worrells' hourly rates as at their appointment, for the 2015 financial year and for the 2016 financial year are contained in Exhibit CK-1 to the Kokkinos Affidavit, at p 39, 135-136. The Current Liquidators' hourly rates effective 1/1/17 are also contained in Exhibit CK-1 at p 134. The Worrells' rates are not dissimilar to those of the Current Liquidators (taking into account the differences in applicable years).

[43] See paragraph 45 above.

[44] [2013] FCA 699, [54]. This reasoning was followed in ACN 104 635 369 Pty Ltd (in liq) (formerly Total Plant Services Pty Ltd) v Hamilton (2015) FCA 1219 (13 November 2015) [53].

[45] Exhibit CK-1, pp 96-100, pp 135-141.

[46] May 2013 Report, Exhibit CK-1, pp28-56; report to creditors March 2014, Exhibit CK-1, pp 62-87; report to creditors dated 13 November 2018, Exhibit CK-1, pp 135-141.

[47] This is roughly half of the amount in the Workbench extract that I calculated as being referable to this task.