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[2018] VSC 705
Supreme Court of Victoria
2018-11-16
SLOSS J
Original judgment source is linked above.
Now produced and shown to me and marked "ARY 3"[299] is a true copy of the 107 pages of spreadsheets exhibited to my affidavit sworn 8 June 2016 in Supreme Court proceeding numbered S CI 2016 01627.
382 Perusal of the spreadsheets contained in exhibit ARY-3 reveals that they generally record work performed by the Liquidators and their professional staff in the course of the liquidation which was charged for at the Pitcher Partners' rates. Those rates were disclosed to, and approved by, creditors at the outset. That more detailed breakdown or substantiation may be contrasted with the level of reporting given by the Liquidators in the reports to creditors that were circulated in advance of the meetings held in the relevant periods.
383 As noted in the chronology above, the work performed by the Liquidators and their staff in the period from 26 March 2006 to 2 October 2011 referable to the legal proceedings was reported by reference to the various legal actions (or group of similar proceedings such as: 'Sean Niven/Beniven', 'ATO' and 'KIS/PRD/Primelight'). The work performed was identified by status of fee earner, hours worked, and cost (referable to hourly rate). A brief description of the work performed was also given in a summary form.
384 At the meeting of creditors held on 11 January 2010, when a request was made by certain creditors that the Liquidators provide additional information about (inter alia) their remuneration, Mr Yeo responded by providing to Mr Morgan and others, a spreadsheet (labelled 'Annexure A') which dissected the work undertaken by the Liquidators (and their staff) for the period from 4 May 2009 to 29 November 2009 in the amount of $296,641 (plus GST). In preparing that analysis, Mr Yeo adopted the format recommended by the Insolvency Practitioners Association of Australia that was based on schedule 1, item 33 of the Corporations Amendment (Insolvency) Act 2007 (Cth).[300] Relevantly, in Annexure C to the Liquidators' report to creditors dated 22 December 2009, the summary of the 'Litigation' tasks undertaken during the period from 19 January 2009 to 29 November 2009 in relation to 'commission claims' referred to:[301]
385 Similarly, in Annexure C to the Liquidators' report to creditors dated 13 August 2010, the Liquidators provided a 'WIP Analysis for the period 30 November 2009 to 25 July 2010' listing each fee earner and their classification and rate, and time spent by reference to (inter alia) each of the 'Legal Actions' listed separately as 'ATO', 'KIS', 'PRD', 'Primelight' and 'Other'. Relevantly, in the case of the legal proceedings for recovery of real estate commissions, $19,388.00 in liquidator's fees was incurred for work performed on the KIS Realty proceeding, $27,495.50 in liquidator's fees was incurred on the Primelight proceeding, and $3,373.50 in liquidator's fees was incurred on the PRD Realty proceeding. In Annexure D to the Liquidators' report to creditors dated 13 August 2010, the summary of the 'Litigation' tasks undertaken during the period 30 November 2009 to 25 July 2010 in relation to 'commission claims' referred to:[302]
386 In like manner, Annexure C to the Liquidators' report to creditors dated 26 May 2011, headed 'WIP Analysis for the period 26 July 2010 to 22 May 2011'[303] and Annexure C to the Liquidators' report to creditors dated 20 October 2011, headed 'WIP Analysis for the period 26 July 2010 to 2 October 2011',[304] provided a similar form of report on the liquidator's remuneration accrued in respect of each of the legal proceedings for recovery of real estate commissions. In each case, Annexure D to the report provided a summary of the 'Litigation' tasks undertaken during the relevant period in relation to 'commission claims', as follows:
(a) For the period from 26 July 2010 to 22 May 2011:[305]
(b) for the (expanded) period from 26 July 2010 to 2 October 2011:[306]
387 The information contained in the annexed summaries was supplemented by, and to be read in the context of, the more detailed information contained in the body of the reports headed 'Summary of Legal Proceedings' (referred to in the chronology above).
388 As will be apparent, the Liquidators' remuneration in the present case has been charged on a time-cost basis from the outset, at the rates notified to the creditors, and all of the remuneration which WPC now seeks to review is remuneration that was approved by the creditors many years ago. In considering the threshold question of whether the remuneration charged is 'reasonable', one issue that arises is whether work undertaken and charged at the standard hourly rates provides the proper measure of 'reasonable remuneration'.
389 Time-based charging as a measure of remuneration has long been the subject of criticism, and its shortcomings noted, in many of the decided cases in England and Australia. In the recent case of Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr,[307] much of the debate before the Court of Appeal of New South Wales centred on the respective merits of time-based charging and ad valorem remuneration. In the leading judgment, Bathurst CJ (with whom Beazley P, Gleeson and Barrett JJA and Beach JA agreed) referred to those oft-cited criticisms of time-based charging, namely that the time spent represents not a measure of value of the services rendered but of the costs of rendering them, and that time spent is only one of a number of factors to be considered, and acknowledged that there is force in them. His Honour then continued, stating:[308]
[59] . . . However, it remains the responsibility of the court to fix reasonable remuneration on the evidence before it, taking into account the matters referred to in s 473(10) [which is the counterpart of s 504(2)[309]]. That must include, in my opinion, considering the work done by the liquidator, whether it was reasonable to carry it out and the appropriateness of the amount charged for it. Such an evaluative process, whilst difficult in some circumstances, does not seem to me to be beyond the competence of the Court.
[60] Further, it should not be concluded from what I have written that a time based calculation will always be appropriate. The task of the Court is to fix reasonable remuneration having regard to the evidence before it and taking into account the matters in s 473(10). Thus for example, the "Lodestar" approach explained by Finkelstein J in [Re Korda; in the matter of Stockford Ltd (2004) 140 FCR 424; [2004] FCA 1682] at [47], may in some circumstances be an appropriate method of undertaking the task: see also [Clout in his capacity as Liquidator of Mainz Developments Pty Ltd (in liq) (2016) 115 ACSR 459; [2016] NSWSC 1146] at [134]- [135].
390 In his judgment, Bathurst CJ provided some helpful guidance as to the way in which the court carries out its function of determining what is reasonable remuneration for a liquidator in any particular case. First, noting that the onus is on the liquidator to establish that the remuneration claimed is reasonable, Bathurst CJ said 'it will be expected that the liquidator in supplying material to enable the Court to assess whether a remuneration claim was reasonable, would supply material by reference to the matters referred to in s 473(10)' (in these circumstances, s 504(2)).[310] Secondly, his Honour agreed that the issue of 'proportionality' is, as the Full Court of the Federal Court said in Templeton v ASIC,[311] a 'well-recognised factor' in considering the question of reasonableness and the matters set out in the statutory provisions such as ss 473(10) and 504(2). He observed that in Templeton, the Full Court:[312]
recognised (at [32]) that the question of proportionality in terms of work done as compared with the size of the property the subject of the insolvency administration or the benefit to be obtained from the work, is an important consideration in determining reasonableness. The court also stated (at [33]), endorsing the observations of McLure JA in [Conlan (as liquidator of Rowena Nominees Pty Ltd) v Adams (2008) 65 ACSR 521; [2008] WASCA 61] (at [47]), that the work done must be proportionate to the difficulty and importance of the task in the context in which it needs to be performed, stating that that is what is encompassed in assessing the value of the services rendered.
391 Further, his Honour also referred with approval to the observation made by Black J in Re Idylic Solutions Pty Ltd,[313] that 'evidence as to the percentage that remuneration constitutes of realisation, will at least provide a measure of objective testing of the reasonableness of the remuneration claimed and will identify those cases in which there ought to be a real concern in that respect'.[314]
392 To these matters, Bathurst CJ added two additional, and important, observations:[315]
[57] . . . First, the mere fact that the work performed does not lead to augmentation of the funds available for distribution does not mean the liquidator is not entitled to be remunerated for it. The most obvious example is work done by a liquidator in complying with his or her statutory obligations. As Farrell J pointed out in [Warner, Re GTL Tradeup Pty Ltd (in liq) (2015) 104 ACSR 633; [2015] FCA 323] at [71] it is relevant to consider whether the work was necessary to be done. If it was, there is no reason the liquidator should not be remunerated for it.
[58] Secondly, there are commonly cases where work is undertaken in an unsuccessful attempt to recover assets whether at the request of creditors or otherwise. Provided it was reasonable to carry out the work and the amount charged for it was reasonable, there is no reason a liquidator should not recover remuneration for undertaking the work. Indeed, as was pointed out in Hall v Poolman (2009) 75 NSWLR 99; [2009] NSWCCA 64 at [128]- [129] there is a public interest in liquidators bringing recovery proceedings such as proceedings against directors for breach of duty or insolvent trading and proceedings for recovery of unfair preferences. However, the liquidator is obliged to make any decision to bring such proceedings with care, and negligence in the exercise of the power to bring proceedings may lead to a liquidator being deprived of costs: Hall v Poolman at [144]-[145].
393 Each of the other judges agreed with Bathurst CJ's reasons. Barrett AJA, in doing so, added the following comment, however, thereby reinforcing the notion that in each case what is reasonable remuneration will turn on its particular facts:[316]
. . . it is, in my view, impossible to say, as a general proposition, that any given basis - whether according to time, value, extent of recoveries, size of company, nature of company or any other factor - merits any claim to precedence over any other in the matter of determination of liquidators' remuneration.
394 In the context of the present case, WPC points to the Liquidators' claim for remuneration incurred in relation to the three legal proceedings for the recovery of real estate commissions as one calling for close scrutiny. That is because, as WPC notes, at least $455,000 in liquidator's remuneration was approved and paid as part of the Liquidators' pursuit of commissions totalling $562,431.82, with the result that the Liquidators appear to be one of the main beneficiaries of that exercise.
395 In my view, having reviewed and considered all of the material before the Court, WPC has demonstrated a sufficient basis for the Court to review the quantum of the remuneration paid to the Liquidators for work performed in respect of the three legal proceedings for recovery of real estate commissions. I am not satisfied, however, that any wider review of the Liquidators' remuneration is warranted.
396 In the case of the legal proceedings for recovery of real estate commissions, they have been conducted by the Liquidators over a long period of time and have incurred significant legal costs, and produced an outcome which Mr Yeo agreed was a 'disappointing' one. It is clear that the Liquidators have carried out many hours of work in relation to that litigation over a long period of time. However, what is not made clear in the Liquidators' reports to date is what tasks were performed by them and their staff and why, in circumstances where much of the legal work and associated tasks were being performed by their respective legal advisers. That is to say, the summary descriptions given in the various reports referred to above do not enable the Court to form any view about whether the (unspecified) work performed by the Liquidators, their partners and staff, was necessary to be undertaken or justified in the sense that the time taken to perform it was proportionate to the difficulty and importance of that task in the context of the respective proceedings. Having said that, however, if the Liquidators can demonstrate that the work carried out by them was necessary or justified, or otherwise reasonable for them to have undertaken in the context of that litigation, then there is no reason why they should not recover reasonable remuneration for undertaking that work.
397 The fact that the remuneration in question was earlier approved by creditors does not prevent the Court reviewing the remuneration. In that regard, I share the view expressed by Black J in Re Bestcare Foods Ltd, that even where the remuneration has been approved by creditors after inspecting documentation provided by the administrators, that approval does not operate as an absolute bar to review by the court.[317] In the present case, and particularly in 2011 following the adverse decision in the Primelight proceeding, it is difficult to characterise the approval given by the creditors to the work done by the Liquidators, and referable to three proceedings, as being based on 'informed' consent on their part.
398 In Paul's Retail Pty Ltd v Morgan, Barrett J in dealing with an application for review of an administrator's or deed administrator's remuneration under s 449E said:[318]
[76] . . . although the statute says nothing about the aim of the initial remuneration fixing process, the objective has been accepted by the courts as that of producing a reasonable remuneration. It must follow, in my view, that the aim of the review process is to determine whether the initial fixing process has miscarried, in the sense that the initially fixed remuneration can be seen to be not reasonable remuneration and, if it has, to substitute a reasonable remuneration for that originally fixed. So much was accepted by Bredmeyer M in GIS Electrical Pty Ltd v Melsom [2001] WASC 314 at [68] when he said that a person seeking review must show that the remuneration initially fixed is not fair and reasonable.
[77] The assessment whether the initially fixed sum is fair and reasonable will be made in the light of all relevant circumstances brought to the court's attention upon the review. These may include circumstances that were not known or foreseen at the time the remuneration was fixed. . . .
399 In the present case, the review to be conducted by the Court is one focussed on the work performed by the Liquidators, their partners and their staff in relation to the proceedings for recovery of real estate commissions during the period from 26 March 2006 to 2 October 2011.
400 In my view, contrary to the Liquidators' submission, for the Court to conduct a review of this kind would be consonant with, and not be contrary to, the furtherance of the overarching obligations in the Civil Procedure Act 2010 (Vic). As the Court is satisfied that a basis for review of that discrete component of the Liquidators' remuneration has been made out, the Liquidators will be required to provide material justifying the reasonableness of the remuneration claimed. As noted above, the aim of the review process will be to determine whether the remuneration that was initially fixed and approved by creditors can be seen to be 'not reasonable' remuneration when viewed in the context in which it was incurred.
401 It follows from the conclusions I have reached that:
(a) in respect of WPC's application made pursuant to s 536(1)(b) of the Corporations Act, the Court will hold an inquiry into the Liquidators' conduct, confined to their conduct in pursuing the PRD Realty litigation in the Queensland District Court on and from 16 June 2011 through to the settlement reached in late April 2015; and
(b) in respect of WPC's application made pursuant to s 504(1) of the Corporations Act, the Court will review and consider the reasonableness of the remuneration paid to the Liquidators during the period from 26 March 2006 to 2 October 2011 for work performed in respect of the three legal proceedings for the recovery of real estate commissions.
402 Otherwise, WPC's applications for relief pursuant to ss 504(1) and 536(1)(b) of the Corporations Act are dismissed. I will hear from the parties on the appropriate form of orders.
[1] Messrs Mark Anthony Korda, David Winterbottom and Oren Zohar, all of the firm of KordaMentha, were appointed as the receivers and managers of WPC (the 'receivers of WPC'). Mr Zohar has since retired as a receiver: see affidavit of Russell Morgan sworn 28 March 2018, at [4].
[2] WPC lodged a proof of debt which has been admitted in the amount of $28,663,909.
[3] Section 536 of the Corporations Act was repealed by item 177 of Schedule 2, Part 2 to the Insolvency Law Reform Act 2016 (Cth). Section 504 was repealed by item 165 of Schedule 2, Part 2 of that same act. Both provisions were replaced by the Insolvency Practice Schedule (Corporations) (Sch 2 of the Corporations Act), commencing 1 September 2017: see ss 90-10 and 90-15. Counsel accepted that ss 504 and 536 remained applicable in this case. That is correct given that ss 504 and 536 continue to apply as the proceeding was commenced prior to the commencement day: see s 1617 of the Corporations Act.
[4] See outline of the plaintiff's oral submissions, dated 7 April 2018, at [7].
[5] See outline of the plaintiff's oral submissions, dated 7 April 2018, at [8].
[7] Order 1 of the orders made by Sifris J on 8 December 2017 provided that:
The proceeding be set down for hearing (on an estimate of one day) . . . to determine:
(a) whether the Court should conduct an inquiry under section 536(1)(b) of the Corporations Act 2001 (Cth) (Act) and, if appropriate, the terms of such an inquiry; and
(b) whether the Court should conduct a review pursuant to s 504(1) of the Act of the remuneration paid to the defendants in respect of the period between 26 March 2006 and 2 October 2011 and, if appropriate, the terms of any such review.
At the hearing, the parties referred to the process set out by Barrett J in BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; (2010) 79 ACSR 558 at [42]- [46] concerning the Court's jurisdiction to conduct an inquiry under s 536(1)(b).
[8] Filed in (related) proceeding S CI 2016 01627.
[9] Being the date of the fifth annual meeting of creditors at which Mr Yeo informed creditors to the effect that, following the dismissal of the Company's claim in the Primelight proceeding on 15 October 2010, and with the recent settlement of the KIS Realty proceeding, he would now seek to negotiate a 'commercial outcome' in the PRD Realty proceeding.
[10] In his second Affidavit, Mr Yeo deposes (at [51]) that:
On or about 27 March 2006, the creditors of the Company resolved, pursuant to section 439C(c) of the Corporations Act 2001 (Cth) (Act) that the Company be wound up and Mr Rambaldi and I were appointed joint and several liquidators of the Company by Creditors' Voluntary Liquidation.
However, this resolution does not appear to be formally recorded in the copy of the minutes of the 27 March 2006 meeting included in the court book (see exhibit RHM-15). See also the circular to creditors of WPF dated 3 April 2006: exhibit RHM-2.
[11] Defendants' outline of submissions dated 24 November 2017, at [4]-[5].
[13] 'Westpoint Realty' was a company within the Westpoint Group, and a holder of a real estate agent's licence. In the correspondence forwarded to the Liquidators (and described below), the solicitors for Westpoint Realty recorded they were instructed that 'Westpoint Realty is the holder of a real estate licence and is the only entity legally entitled to receive any property sales commission in regard to [the Grosvenor properties]'. Mark Korda, Oren Zohar and Brian McMaster of KordaMentha were appointed receivers and managers of Westpoint Realty on 20 April 2006. It subsequently went into liquidation at a later date: see second Yeo Affidavit, at [42].
[16] In a facsimile dated 4 May 2006, Primelight:
(a) acknowledged that WPF was appointed as sub-agent to sell the Grosvenor Properties, that the sale of those properties had settled, that Primelight was holding WPF's share of the commission for these sales and that WPF had a claim on these monies; and
(b) stated that Primelight had no intention on paying those monies to any party until the resolution of the issue of which party has entitlement to the monies.
(see second Yeo Affidavit, at [53] and exhibit ARY-6).
[18] Mr Rod Randall of the Victorian Bar.
[19] KIS Realty was also a company within the Westpoint Group, that was controlled by Mr Carey: see second Yeo Affidavit, at [29].
[22] The claim against Mr Carey was based on the following:
(a) Mr Carey was advised by Deacons about the compliance issues associated with the real estate agents' licence; and
(b) Mr Carey ignored that advice from Deacons and allowed the Company:
(i) to carry out all the work alleged in the pleadings filed in the KIS Realty Proceedings, the PRD Realty Proceedings and the Primelight Proceedings; and
[27] Section 60(1)(a) of the REBA Act provides:
(1) An agent is not entitled to receive any commission, reward, or other valuable consideration in respect of his services in that capacity unless -
(a) he is licensed in that capacity and he holds a current triennial certificate in respect of his licence when he renders the services; and
(b) he has a valid appointment to act in that capacity which is in writing signed by the person for whom the services are or are to be rendered or by some other person lawfully authorised to sign on behalf of the person for whom the services are or are to be rendered.
[28] Westpoint Finance Pty Ltd (in liq) v Primelight Pty Ltd [2010] WADC 159, at [25]-[40].
[29] Westpoint Finance Pty Ltd (in liq) v Primelight Pty Ltd [2010] WADC 159, at [37].
[35] This letter is referred to at paragraphs [174]-[179] below.
[37] Mr Leslie Glick QC was engaged as senior counsel. Junior counsel retained in the matter, Mr Rod Randall, had recently been appointed as an Associate Justice of the Supreme Court of Victoria.
[43] Mr Phillip Tucker of the Queensland Bar.
[45] Mr Yeo deposes that senior counsel was retained at this point in time on behalf of the Company to assist Mr Tucker: second Yeo Affidavit, at [135].
[46] Westpoint Finance Pty Ltd (in liq) v PRD Realty Pty Ltd [2014] QDC 284.
[51] Mr Carl Möller of the Victorian Bar.
[52] Proceeding numbered COR 136 of 2015.
[53] KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149.
[54] Ibid, at [19]-[21]. WPF and KIS Realty had entered into an agreement whereby KIS Realty granted WPF a licence to act as its authorised agent and to conduct the 'WPF Business', which was said to be 'the business of selling residential/commercial real estate to investors'. As consideration for the agreement, KIS Realty was to receive the 'Service Fees' (defined in Sch 2 to the Services Agreement). Clause 4.1 provided that '[s]ubject to the provisions of clause 5 and payment of the Service Fee pursuant to clause 3.2, KIS grants WPF a right, title and licence to use the KIS Licence to conduct the KIS Business'. Under cl 8.2 of that agreement, WPF warranted that it had obtained, and would maintain, all necessary licences to conduct the WPF Business. The Liquidators asserted, inter alia, that the contract was illegal as it contravened statutory provisions concerning the transfer of relevant licences. On that basis, the Liquidators claimed that KIS Realty ought not be entitled to the 'Service Fee': KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149, at [14]-[18].
[55] KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149, at [24].
[56] KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149(S).
[57] First Morgan Affidavit, exhibit RHM-11.
[58] First Yeo Affidavit, exhibit ARY-3.
[59] First Morgan Affidavit, exhibit RHM-5. Proceeding S CI 2009 00475.
[60] Second Yeo Affidavit, at [13(a)(i)].
[62] Second Yeo Affidavit, at [13(c)(ii)].
[63] Second Yeo Affidavit, exhibit ARY-58.
[64] First Morgan Affidavit, exhibit RHM-1.
[67] First Morgan Affidavit, exhibit RHM-1.
[69] First Morgan Affidavit, exhibit RHM-15. Note also the comments at footnote 10 above.
[71] First Morgan Affidavit, exhibit RHM-3.
[73] First Morgan Affidavit, exhibit RHM-3.
[74] First Morgan Affidavit, exhibit RHM-4 (emphasis in original).
[75] Reference was made to 'commission claims', 'uncommercial transaction claims' and 'preference payment claims'.
[76] First Morgan Affidavit, at [66].
[77] First Morgan Affidavit, exhibit RHM-30.
[78] Exhibit RHM-29. In the second Yeo affidavit at [179], Mr Yeo explained that:
. . . Pursuant to section 260-45 of Schedule 1 of the Taxation Administration Act 1953 (Cth) a liquidator of a company must not, without the permission of the Commissioner of Taxation, part with any of the assets of the company before receiving the requisite notice from the Commissioner under that provision, unless the Commissioner has lodged a proof of debt in respect of the company in question. In this particular case, the Commissioner was not a creditor of the Company because the Company had significant trading losses. Therefore there would not be any proof of debt submitted to the Company by the Commissioner. Accordingly, the liquidators required the relevant notice from the Commissioner before they could make the foreshadowed dividend payment.
[79] First Morgan Affidavit, exhibit RHM-29.
[80] First Morgan Affidavit, exhibit RHM-5.
[81] Again, the Liquidators made reference to 'commission claims', 'uncommercial transaction claims' and 'preference payment claims'.
[82] First Morgan Affidavit, at [75].
[83] Second Yeo Affidavit, exhibit ARY-67.
[84] First Morgan Affidavit, at [76].
[85] The content of the 'new documents and information' that had come to light in the KIS Realty proceeding was not disclosed by the Liquidators in the letter dated 25 January 2010.
[86] First Morgan Affidavit, exhibit RHM-6.
[87] Although those requirements only applied to appointments pursuant to a creditors' voluntary liquidation beginning on or after 31 December 2007, he considered them to be both best practice and in the best interests of creditors: see Second Yeo affidavit, at [185].
[88] Ms Hall was recorded as 'Assistance Manager 1'. The two other employees were recorded as 'Manager 1' and 'Senior Accountant 2.
[90] First Morgan Affidavit, at [80]-[83] and exhibit RHM-20; second Yeo Affidavit, at [186].
[91] First Morgan Affidavit, exhibit RHM-7.
[93] See first Morgan Affidavit at [85]-[100] and exhibit RHM-21; second Yeo Affidavit at [189]-[190].
[94] First Morgan Affidavit, at [95].
[95] See the minutes of meeting on 1 September 2018: first Morgan Affidavit, exhibit RHM-21.
[97] First Morgan Affidavit, at [106].
[98] First Morgan Affidavit, exhibit RHM-21.
[99] See paragraphs 34 and 44-46 above.
[100] First Morgan Affidavit, at [115].
[101] First Morgan Affidavit, exhibit RHM-31.
[103] First Morgan Affidavit, exhibit RHM-8.
[104] First Morgan Affidavit, exhibit RHM-32.
[105] This appears to be a reference to the Options Paper prepared by the Senate's Economics References Committee entitled The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework, dated September 2010.
[106] This appears to be a reference to the Australian Government's Proposals paper: A Modernisation and Harmonisation of the Regulatory Framework Applying to Insolvency Practitioners in Australia, dated December 2011.
[107] First Morgan Affidavit, exhibit RHM-32.
[108] First Morgan Affidavit, exhibit RHM-22.
[109] First Morgan Affidavit, at [120].
[111] This was later disputed by Mr Yeo in an email to Mr Morgan dated 8 July 2011 where he said: '. . . I did not make a comment to the effect that ". . . in hindsight you would have done things differently". This is not an accurate representation of the discussions . . . ': first Morgan Affidavit, exhibit RHM-34.
[112] First Morgan Affidavit, exhibit RHM-33.
[114] First Morgan Affidavit, exhibit RHM-34.
[116] First Morgan Affidavit, exhibit RHM-35.
[117] First Morgan Affidavit, at [136] and exhibit RHM-35; second Yeo Affidavit, at [198] and exhibit ARY-76.
[118] First Morgan Affidavit, exhibit RHM-35.
[122] First Morgan Affidavit, exhibit RHM-36.
[123] Second Yeo Affidavit, at [198].
[124] First Morgan Affidavit, exhibit RHM-9.
[125] It is not apparent why the period covered by Annexure D commenced on 29 July 2010, rather than 26 July 2010.
[126] First Morgan Affidavit, exhibit RHM-38.
[127] First Morgan Affidavit, exhibit RHM-23.
[128] First Morgan Affidavit, at [145]-[149].
[129] First Morgan Affidavit, exhibit RHM-10.
[130] First Morgan Affidavit, at [16(j)], [154]-[162] and exhibit RHM-24; second Yeo Affidavit, at [206]-[207] and exhibit ARY-83.
[131] First Morgan Affidavit at [163] and exhibit RHM-40.
[132] Second Yeo Affidavit, at [121].
[133] Second Yeo Affidavit, exhibit ARY-84; first Morgan Affidavit, exhibit RHM-44.
[134] First Morgan Affidavit, at [177].
[135] First Morgan Affidavit, at [178].
[136] Second Yeo Affidavit, at [128].
[137] Creditors were informed of this decision in the report to creditors and members dated 28 August 2013.
[138] First Morgan Affidavit, exhibit RHM-46.
[139] First Morgan Affidavit, exhibit RHM-47.
[140] First Morgan Affidavit, exhibit RHM-11.
[142] First Morgan Affidavit, exhibit RHM-48 (emphasis in original).
[144] First Morgan Affidavit, exhibit RHM-53.
[145] First Morgan Affidavit, [194] and exhibit RHM-50.
[146] Ibid, [196] and exhibit RHM-50.
[147] Ibid, [195] and exhibit RHM-50.
[148] First Morgan Affidavit, exhibit RHM-51.
[151] First Morgan Affidavit, at [197] and exhibit RHM-52.
[152] First Morgan Affidavit at, [197] and exhibit RHM-52.
[153] First Morgan Affidavit, exhibit RHM-54 (emphasis in original).
[154] First Morgan Affidavit, exhibit RHM-54.
[155] Second Yeo Affidavit, exhibit ARY-89. See also first Morgan Affidavit, exhibit RHM-12.
[156] The minutes of the meeting held on 17 June 2014 record that apart from the chairperson and the minutes secretary, Mr Morgan (who attended by telephone as proxy for WPC) was the only person present, and accordingly the meeting was adjourned for seven days. The reconvened meeting was not attended by the necessary quorum, and therefore the meeting lapsed: first Morgan Affidavit, exhibit RHM-26; first Morgan Affidavit, at [201]-[202].
[157] First Morgan Affidavit, exhibit RHM-55. Presumably a reference to the decision of Kourakis CJ in Viscariello v Macks (2014) 103 ACSR 542; [2014] SASC 189. See also: Macks v Viscariello (2017) 130 SASR 1; [2017] SASCFC 172.
[158] First Morgan Affidavit, exhibit RHM-56.
[159] Westpoint Finance Pty Ltd (in liq) v PRD Realty Pty Ltd [2014] QDC 284.
[160] First Morgan Affidavit, exhibit RHM-57.
[161] First Morgan Affidavit, exhibit RHM-58.
[162] First Morgan Affidavit, exhibit RHM-13.
[163] Other parts in the Remuneration Report included: Part 7: Remuneration recoverable from external sources; Part 8: Disbursements; Part 9: Report on Progress of the Administration; Part 10: Queries; Part 11: Information Sheet; Part 12: Advice to Creditors (identifying the four basic methods of charging being time based/hourly rates, fixed fee, percentage and contingency).
[164] This was later noted in the Liquidators' report to creditors dated 30 May 2016.
[165] First Morgan Affidavit, exhibit RHM-27.
[166] First Morgan Affidavit, at [212].
[167] First Morgan Affidavit, at [214].
[168] KIS Realty Pty Ltd (in liq) v Yeo & Rimbaldi [2016] WASC 149.
[169] First Morgan Affidavit, exhibit RHM-14.
[170] First Morgan Affidavit, exhibit RHM-14.
[171] Second Yeo Affidavit, exhibit ARY-95.
[173] Second Yeo Affidavit, exhibit ARY-95.
[174] Second Yeo Affidavit, at [159].
[175] KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149(S).
[176] See Third Morgan Affidavit, at [15].
[177] (2010) 79 ACSR 558; [2010] NSWSC 959 ('BL & GY International Co Ltd').
[182] [2002] WASCA 302; (2002) 172 FLR 218 ('GIS Electrical Pty Ltd v Melsom') (with whom Templeman and Miller JJ agreed).
[183] (1989) 19 NSWLR 434 at 438.
[184] GIS Electrical Pty Ltd v Melsom, at 228 [49].
[185] (2009) 75 NSWLR 99 ('Hall v Poolman').
[186] BL & GY International Co Ltd, at 568-569 [40] (emphasis added).
[187] (2009) 75 NSWLR 99, at 127 [90]. Note that in Vink v Tuckwell [2008] VSC 100; (2008) 216 FLR 309, Robson J at (at 324 [86]) had earlier expressed the view that '[a] complaint under s 536(1)(b) with respect to the conduct of the liquidator in connection with the performance of his or her duties should be confined to the liquidator's failure to observe the matters referred to in s 536(1)(a) . . .'. The Court of Appeal in Hall v Poolman observed (at 126-127 [89]) that if Robson J intended by that observation to import into s 536(1)(b), as a matter of construction the limiting words of s 536(1)(a), then they would 'respectfully disagree'.
[188] See WPC's document entitled 'Plaintiff's statement of facts and contentions in respect of the application made pursuant to section 536(1)(b), Corporations Act 2001' dated 10 November 2016 ('plaintiff's s 536 submissions dated 10 November 2016'), at [21] (emphasis added).
[190] WPC's outline of submissions in reply dated 15 December 2017, at [13] (citations excluded) (emphasis added).
[191] Outline of the plaintiff's oral submissions dated 7 April 2018, at [7]-[8] and [28]-[29] (emphasis added).
[192] Citing the first Morgan affidavit, at [88]-[96], [110], [121]-[126] and [160]-[161].
[193] Outline of the plaintiff's oral submissions, dated 7 April 2018, at [30]-[31].
[194] Transcript 09/04/2018, at 4 (Mr Collins QC).
[195] Ibid, at 4-5 (emphasis added) (Mr Collins QC).
[196] Transcript 09/04/2018, at 40 (Mr Corbett QC).
[198] [2010] NSWSC 959; (2010) 79 ACSR 558, at 569 [42]-[46]. The three-stage process has since been adopted by other courts. See, e.g.: ASIC v Dunner [2013] FCA 872; (2013) 303 ALR 98; 95 ACSR 75 (per Middleton J) at 102 [14]-[16]; Oswal v Carson & Ors (No 6) [2014] FCA 1435 (per Siopis J, in the context of an inquiry under s 423) at [56].
[199] Leslie, Re Aboriginal Councils and Associations Act 1976 v Hennessy [2001] FCA 371 at [6] (per Ryan, Dowsett and Hely JJ) ('Leslie v Hennessy'). In Hall v Poolman, the Court of Appeal agreed (at 121 [59]) that the matters of the kind considered by the Full Court in Leslie v Hennessy had relevance in the context of an application under s 536(1). See also observations of Siopis J in Oswal v Carson & Ors (No 3) (2013) 93 ACSR 645; [2013] FCA 337, at [56].
[200] [2002] WASCA 302; (2002) 172 FLR 218, at 233 [66].
[201] See Vink v Tuckwell (2008) 216 FLR 309; [2008] VSC 100, at [82] (per Robson J) (citing Naumoski v Parbery [2002] NSWSC 1097; (2002) 171 FLR 332 at [14]); Oswal v Carson & Ors (No. 3) (2013) 93 ACSR 645; [2013] FCA 337, at [97] (per Siopis J).
[204] (2013) 93 ACSR 645; [2013] FCA 337, at [96].
[205] (2013) 93 ACSR 645; [2013] FCA 337, at [96].
[208] Re S & D International Pty Ltd (in liquidation) (receiver and manager appointed) [2009] VSC 225.
[209] See plaintiff's s 536 submissions dated 10 November 2016, at [15].
[210] Citing Pace v Antlers (in liq) (1998) 80 FCR 485 at 499, referred to with approval by Middleton J in ASIC v Dunner [2013] FCA 872; (2013) 95 ACSR 76, at [30].
[211] Citing Yeomans v Walker (1986) 5 NSWLR 378 at 383 (per Hodgson J); Viscariello v Macks [2014] SASC 189; (2014) 103 ACSR 542 at [815] (per Kourakis CJ) (see, on appeal, Macks v Viscariello (2017) 130 SASR 1, at 93 [424]. The appeal was allowed in part).
[212] Viscariello v Macks [2014] SASC 189; (2014) 103 ACSR 542, at [817]; Macks v Viscariello (2017) 130 SASR 1, at 93 [424].
[213] When the proceedings were commenced the total of the commissions claimed was $562,432, but this was later amended to $739,205.
[214] The three proceedings were commenced on 9 May 2007. It is unclear what amount of liquidators' remuneration was incurred in the period between 9 May 2007 and 3 May 2009. The liquidators' remuneration incurred in progressing the three proceedings for recovery of commissions between 4 May 2009 and 2 October 2011 was $386,040.50. The Liquidators have applied for remuneration in connection with the legal actions for the period between 3 October 2011 and 3 May 2015 in the amount of $68,335.
[215] See outline of the plaintiff's oral submissions, dated 7 April 2018, at [29].
[216] See outline of the plaintiff's oral submissions, dated 7 April 2018, at [28].
[218] See plaintiff's s 536 submissions dated 10 November 2016, at [27].
[219] See outline of the plaintiff's oral submissions, dated 7 April 2018, at [16]. The cases referred to included: Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) (2007) 18 VR 250 at [139], Dover Beach Pty Ltd v Geftine Pty Ltd [2008] VSCA 248; (2008) 21 VR 442 at [57]- [59], Zullo Enterprises Pty Ltd v Sutton [1999] QCA 417; [2000] 2 Qd R 196 and FJ Richards Pty Ltd v Mills Pty Ltd [1995] 1 Qd R 1. I note that most of these cases were also referred to in WPF's outline of submissions dated 13 September 2010.
[220] [2010] WADC 159, at [37].
[221] Ibid, at [40] (emphasis added).
[222] Transcript 09/04/2018, at 27 (Mr Collins QC).
[223] Defendants' outline of submissions dated 24 November 2017, at [39].
[226] See Oswal v Carson & Ors (No. 3) (2013) 93 ACSR 645; [2013] FCA 337, at [98].
[227] See WPC's outline of submissions in reply dated 15 December 2017, at [13].
[228] See first Morgan Affidavit, exhibit RHM-1.
[229] Second Yeo Affidavit, exhibit ARY-6.
[230] First Yeo Affidavit, exhibit ARY-3 (affidavit of Mr Yeo dated 21 December 2015 at [17.3]).
[231] Transcript 09/04/2018, at 4 (Mr Collins QC).
[232] As noted above, Mr Morgan deposes that he became aware of the outcome of the Primelight proceeding during the course of a phone call with Ms Hall, on or around 10 or 11 March 2011.
[233] First Morgan Affidavit, exhibit RHM-8.
[234] First Morgan Affidavit, exhibit RHM-22.
[235] First Morgan Affidavit, exhibit RHM-22.
[236] First Morgan Affidavit, exhibit RHM-11.
[237] First Morgan Affidavit, exhibit RHM-11.
[238] First Morgan Affidavit, exhibit RHM-47.
[241] Second Yeo Affidavit, exhibit ARY-89. See also first Morgan Affidavit, exhibit RHM-12.
[242] Second Yeo Affidavit, at [141]; first Morgan Affidavit, exhibit RHM-13.
[244] BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; (2010) 79 ACSR 558, at [42] (per Barrett J).
[246] Transcript 09/04/2018, at 34-35 (Mr Collins QC).
[247] See Transcript 09/04/2018, at 35 (Mr Collins QC). In the case of the interest, it increased the amount of KIS Realty's proof of debt to $5,738,389.21, but WPC contended that the interest was not recoverable because of the operation of s 563B of the Corporations Act. In the case of the claim that the debt was secured, WPC noted that no charge had been lodged and on the hearing of the appeal KIS Realty did not advance any claim that it had been secured.
[248] Transcript 09/04/2018, at 35-36 (Mr Collins QC).
[250] The release was framed in the following terms (with emphasis added):
3. Subject to obtaining the Approval and save for as provided by these Terms of Settlement, [WPF], Yeo and Rambaldi and KIS {Realty] and [Mr Norm] Carey hereby mutually release and forever discharge each other, Madgwicks, their servants and agents, from all claims, actions, suits, demands, causes of action and costs of whatsoever kind which either party now has, or at any time had, or may have or but for these Terms of Settlement could or might have had against the other party arising out of or in any way relating to the subject matter of the Proceedings, the Claims and the Third Party Action.
[251] KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149, at [23]-[24].
[252] KIS Realty Pty Ltd (in liq) v Yeo & Rambaldi [2016] WASC 149, at [5].
[253] Transcript 09/04/2018, at 94 (Mr Collins QC).
[254] C.f. GIS Electrical Pty Ltd v Melsom [2002] WASCA 302; (2002) 172 FLR 218, at 228 [49]; Northbourne Developments Pty Ltd v Reiby Chambers Pty Ltd (1989) 19 NSWLR 434, at 438.
[255] GIS Electrical Pty Ltd v Melsom [2002] WASCA 302; (2002) 172 FLR 218, at 233 [66].
[256] BL & GY International Co Ltd v Hypec Electronics Pty Ltd [2010] NSWSC 959; (2010) 79 ACSR 558, at [43] (per Barrett J).
[257] See defendants' outline of submissions dated 24 November 2017, at [42(e)].
[258] Third Yeo Affidavit, at [5] and exhibit ARY-96.
[259] Transcript 09/04/2018, at 68 (Mr Corbett QC).
[260] Third Morgan Affidavit, at [5]-[9] and [13]-[14].
[261] First Morgan Affidavit, exhibit RHM-32.
[262] First Morgan Affidavit, at [138].
[263] Transcript 09/04/2018, at 68-69 (Mr Corbett QC).
[266] Outline of the plaintiff's oral submissions, dated 7 April 2018 at [1]; first Morgan Affidavit at [17]. In the report to creditors dated 30 May 2016 (exhibit RHM-14 to the first Morgan Affidavit) the Liquidators reported that total remuneration for the Liquidators as at that time was $1,396,813.00 and that total receipts were $4,333,537.57. It should be noted that the sum of $1,403,305.50 approved by creditors is not the total remuneration that the Liquidators seek. In a separate proceeding commenced by the Liquidators (No. SCI 2016 01627), they seek approval of a further $305,784 in remuneration for the period between 3 October 2011 to 3 May 2015. An additional amount is also sought for the period from 4 May 2015 to the present day.
[267] WPC's submissions entitled Plaintiff's statement as to the bases on which it seeks review of the Liquidators' remuneration and grounds on which it says the remuneration is not reasonable' dated 10 November 2016 ('plaintiff's s 504 submissions, dated 10 November 2016') at [2].
[268] See Transcript 09/04/2018, at 4 (Mr Collins QC).
[269] See, e.g.: transcript 09/04/2018, at 113 and 118 (Mr Collins QC).
[270] Outline of the plaintiff's oral submissions, dated 7 April 2018, at [2]; described in the second Yeo Affidavit, at [14]. WPC noted that the Liquidators' remuneration amounted to 35% of the total realisations: plaintiff's s 504 submissions, dated 10 November 2016, at [7].
[271] In his affidavit of 15 July 2016, Mr Morgan states (at [38]) that this amount 'is the net amount, after [Plan] Australia's fees, recovered by the Company'. See also second Yeo Affidavit, at [14(g)].
[272] Outline of the plaintiff's oral submissions, dated 7 April 2018, at [3(a)]. The legal fees incurred for the exercise up until 10 February 2017 was a sum of $114,379: second Yeo affidavit, exhibit ARY-1.
[273] [2010] NSWSC 1387 ('Kennards Hire').
[275] The amending Act was the Corporations Amendment (Insolvency) Act 2007 (Cth) (see item 35 of Schedule 1, Part 2).
[278] Plaintiff's s 504 submissions, dated 10 November 2016, at [4]-[6].
[279] Defendants' outline of submissions dated 24 November 2017, at [19]-[20].
[280] Prior to its repeal, s 449E(2) provided:
Where remuneration is determined under paragraph (1)(a) or (b) or paragraph (1A)(a) or (b), the Court may, on the application of ASIC, of the administrator or of an officer, member or creditor of the company:
[281] [2009] NSWSC 1222; (2009) 76 ACSR 26, at 46 [79].
[282] In the matter of Cardinal Project Services Pty Ltd [2017] NSWSC 920.
[283] Ibid, at [15]. As Barrett J noted in Kennards Hire at [75]:
. . . That is the way in which the question was posed in Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1222; (2009) 76 ACSR 26 at [79] in a passage not challenged by either party on appeal (Paul's Retail Pty Ltd v Morgan [2010] NSWCA 217; (2010) 79 ACSR 580 at [54]-[56]).
[284] In the matter of Cardinal Project Services Pty Ltd [2017] NSWSC 920, at [27] (footnotes omitted).
[285] Ibid, at [15], citing Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1222; (2009) 76 ACSR 26, at 45-46 [76]-[78] (per Barrett J).
[286] [2014] NSWSC 1630 ('Re Bestcare Foods Ltd').
[288] Re Bestcare Foods Ltd, at [57]-[59].
[290] Ibid, at [26] (citations omitted).
[291] Section 499(7) was inserted by Act No. 132 of 2007, s 3, Sch 1, Pt 2, item 33. Subsections 499(3) to (7) were repealed and substituted by item 164 of Sch 2, Pt 2 of the Insolvency Law Reform Act 2016 (Cth).
[292] Exhibit ARY-94. In his affidavit dated 15 July 2016, Mr Morgan observes (at [17]-[18]) that the creditors have approved Liquidators' remuneration in the amount of $1,403,305.50 and the Liquidators have paid themselves $1,389,871.39, leaving an unpaid remuneration amount of $13,434.10 (sic.).
[293] Plaintiff's reply submissions, at [7], citing Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1222; (2009) 76 ACSR 26, at [85].
[294] Ibid, at [7], citing Re Bestcare Foods Ltd, at [65].
[295] Transcript 09/04/2018, at 5 (Mr Collins QC). The appeal concerning the KIS Realty proof of debt took place at a later point in time, outside the period that is the subject of WPC's application to review: Transcript 09/04/2018, at 22 (Mr Collins QC).
[296] Ibid, at 5-8 (emphasis added) (Mr Collins QC).
[297] Liquidators' outline of submissions dated 26 October 2017, at [18]; second Yeo Affidavit, at [18]-[19].
[298] Second Yeo affidavit, at [21]-[24].
[299] Exhibit ARY-3 is comprised of copies of exhibits ARY-3, ARY-4, ARY-5, ARY-6 and ARY-7 to Mr Yeo's affidavit dated 8 June 2016 filed in the related proceeding (S CI 2016 01627).
[300] Although those requirements only applied to appointments pursuant to a creditors' voluntary liquidation beginning on or after 31 December 2007, he considered them to be both best practice and in the best interests of creditors: see second Yeo Affidavit, at [185].
[301] First Morgan Affidavit, exhibit RHM-5.
[302] First Morgan Affidavit, exhibit RHM-7.
[303] First Morgan Affidavit, exhibit RHM-8.
[304] First Morgan Affidavit, exhibit RHM-9.
[305] First Morgan Affidavit, exhibit RHM-8.
[306] First Morgan Affidavit, exhibit RHM-9.
[307] [2017] NSWCA 38; (2017) 93 NSWLR 459 ('Sakr Nominees').
[309] Earlier in his judgment Bathurst CJ had noted ((2017) [2017] NSWCA 38; 93 NSWLR 459, at 463 [12]):
. . . Section 504(2) provides for the same matters to be taken into account as those referred to in s 473(10). Similar provisions are made in respect of the court's power to fix the remuneration of receivers and administrators (s 425(8) and s 449E(4)). It is well established that the same principles are to be applied in fixing remuneration under each provision: Templeton v Australian Securities and Investments Commission (2015) FCAFC 137; (2015) 108 ACSR 545 at [28].
[310] [2017] NSWCA 38; (2017) 93 NSWLR 459, at 470 [54].
[311] (2015) 108 ACSR 545; (2015) FCAFC 137 ('Templeton').
[312] [2017] NSWCA 38; (2017) 93 NSWLR 459, at 471 [55].
[313] (2016) 115 ACSR 581; [2016] NSWSC 1292, at [50].
[314] [2017] NSWCA 38; (2017) 93 NSWLR 459, at 471 [56].
[315] Ibid, at 471 [57]-[58] (emphasis added).
[316] Sakr Nominees [2017] NSWCA 38; (2017) 93 NSWLR 459, at 473 [71].
[317] [2014] NSWSC 1630, at [57]-[59].
[318] [2009] NSWSC 1222; (2009) 76 ACSR 26, at 46 [76]-[77].
Westpoint Corporation Pty Ltd (in liq)
Yeo [2018] VSC 705
[53] The court must bear in mind the place of s 536 in the regulatory system established under Australia's corporations legislation when construing the section. It must be recognised that this section, together with the virtually identical provision applicable to controllers of the property of a corporation in s 423, is a broadly expressed supervisory jurisdiction over the conduct of persons in control of the affairs of a corporation, in circumstances where normal market forces and the exercise by shareholders of their rights to control are attenuated or non-existent. These powers are one part of a range of regulatory powers conferred on the court and/or ASIC to ensure the lawful, orderly and efficient conduct of the affairs of corporations during such a period. The detailed regulatory scheme found in the Corporations Act (Cth) manifests in this, as in so many other respects, the central significance of corporate conduct for the economic and social life of the nation.
. . .
[61] The powers conferred by s 536 have a common element, namely that they are powers of a regulatory nature concerned with the supervision of liquidators of all kinds. The court has a long-established role in the supervision of court-appointed liquidators, and s 536 confers a statutory supervisory jurisdiction in respect of liquidators of all kinds.
. . .
[66] It is pertinent to recognise that the powers conferred by s 536(1) are vested in both the court and the regulator, and therefore that the court is performing a regulatory role, in the sense that its function under s 536, like the function of ASIC under the section, is supervisory. Although the power conferred by s 536(3) is conferred on the court alone, it is of the same supervisory nature . . .
. . .
[69] One of the considerations relevant to the exercise of the discretion under each of the powers in s 536 is whether or not there is another appropriate remedy: see Leslie v Hennessy [[2001] FCA 371] (at [6]). Accordingly, where an issue is raised as to whether a decision made by a liquidator should be reversed or modified, the appropriate procedure is under s 1321: see Belvista Pty Ltd v Murphy [(1993) 11 ACSR 628] (at 630), per McLelland CJ in Eq; Re Glowbind [(2003) 181 FLR 208] (at 465 [21]), per Burchett AJ. Section 536 should not be used to assist a person engaged in litigation with a liquidator akin to discovery, at any rate where the litigation does not involve the kind of supervisory issues characterised by McLelland CJ as "disciplinary reasons": see Re Bauhaus Pyrmont Pty Ltd (In Liq) [2006] NSWSC 742 per Barrett J.
. . .
[100] Section 536 constitutes part of the armoury of the supervisory jurisdiction of the court with respect to liquidators. The approach identified by McLelland J in Northbourne Developments [(1989) 19 NSWLR 434], to the effect that such supervision is in a general sense, "disciplinary" is applicable. In my opinion, a complaint under s 536(1)(b) requires some form of communication requesting the court to take steps to rectify or review something that had been done by a liquidator. A plea to exercise a statutory power to excuse default on the part of a former officer of the company, by reason of the conduct of the liquidator in pursuing litigation against him or her, is not such a request.
[42] . . . At the first stage, the court, upon application made, decides whether an inquiry into the liquidator's conduct is warranted. In [Hall v Poolman], the Court of Appeal pointed out that that there need not be a prima facie evidentiary case of lack of faithful performance or observance of requirements. But the applicant must point to something about the liquidator's conduct that is a sufficient basis for making an order for inquiry; and it is desirable that this be articulated in pleaded form: Re Fox Home Loans Pty Ltd [2005] NSWSC 1050. Once such a basis has been shown, the court has a discretion whether or not to order an inquiry.
[43] If the court sees fit to order an inquiry, the proceeding moves to its second stage and the inquiry itself takes place. Despite being an "inquiry", the second stage must be structured so as to be adversarial in nature, with the liquidator enjoying all the usual safeguards and protections: [Commissioner for Corporate Affairs v Harvey [1980] VicRp 64; [1980] VR 669; (1979) 4 ACLR].
[44] The task of the court at the second stage is to make a judgment about the liquidator's conduct, viewed in the light of the whole of the requirements applying to liquidators and taking account, of necessity, of the circumstances of the particular winding-up. What the liquidator ought properly to have done will be conditioned by circumstances. Thus, for example, a liquidator without funds will not be expected to act in the same way as an adequately funded liquidator. In the same way, a liquidator has a degree of freedom in allocating available resources and prioritizing work. Leaving to one side matters of dishonesty, lack of due care and obvious failure to address the decision at hand, it can never be said in the abstract that a liquidator who fails to take a certain step (or, for that matter, one who takes a certain step) thereby engages in misconduct. Context is all-important.
[45] If, having heard the competing submissions at the second stage, the court decides that the liquidator's conduct was in some way deficient, it embarks upon the third stage and decides whether or not to make an order. As noted above, the orders at the court's disposal include an order that the liquidator make good loss occasioned by the liquidator's deficient conduct.
(2003) 181 FLR 208
(2004) 140 FCR 424
(2009) 75 NSWLR 99
(2017) 130 SASR 1
(2002) 172 FLR 218
(1989) 19 NSWLR 434
(2008) 216 FLR 309
(2013) 303 ALR 98
(2002) 171 FLR 332
(1998) 80 FCR 485
(1986) 5 NSWLR 378
(2007) 18 VR 250
(2008) 21 VR 442
(2017) 93 NSWLR 459
[46] The power of the court at the third stage is the power to "take such action as it thinks fit". But that power is not exercisable unless and until the second stage has been completed by means of an inquiry. This is the effect of the statutory language: ". . . and where the court . . . so inquires, the court may take such action as it thinks fit" [emphasis added]. The court cannot take substantive action except as a consequence of an inquiry. It follows that it is not open to the court, as a matter of jurisdiction, to make an order simply on the basis that relevant parties consent to the making of the order.