Pub­li­ca­tions

Prac­tice note: Approval of pro­vi­sion­al liquidator’s remuneration


In Brief

In the Mat­ter of CB Con­struc­tions (NSW) Pty Ltd [2014] NSWSC 913 is a recent deci­sion of Jus­tice Black which pro­vides a time­ly reminder of the mat­ters which need to be addressed when seek­ing court approval for the remu­ner­a­tion of a pro­vi­sion­al liq­uida­tor under sec­tion 473(2) of the Cor­po­ra­tions Act 2001 (Cth), and also the fact that such appli­ca­tions will not be suc­cess­ful as a mat­ter of course.

Sec­tion 473(2) pro­vides A pro­vi­sion­al liq­uida­tor is enti­tled to receive such remu­ner­a­tion by way of per­cent­age or oth­er­wise as is deter­mined by the Court.”


Background

The pro­vi­sion­al liq­uida­tor of CB Con­struc­tions (NSW) Pty Ltd was appoint­ed pro­vi­sion­al liq­uida­tor on 4 May 2009 and then liq­uida­tor on 25 May 2009. He had not obtained an order for approval of his remu­ner­a­tion at the time of either of his appoint­ments. He sought an order in respect of his remu­ner­a­tion for the peri­od that he was appoint­ed pro­vi­sion­al­ly at a lat­er date.

On 18 Sep­tem­ber 2013, he informed the com­mit­tee of inspec­tion that he would be mak­ing an appli­ca­tion to the Court for approval of his fees in the sum of $17,528 (inclu­sive of GST) and $5,567.09 for an insur­ance dis­burse­ment. How­ev­er, when the appli­ca­tion was made on 12 Novem­ber 2013, the amount sought by the pro­vi­sion­al liq­uida­tor for approval was $11,044, being an amount of $4,920.20 for his remu­ner­a­tion, and insur­ance in the amount of $6,123.80 (inclu­sive of GST). When the mat­ter was list­ed before the court on 18 Decem­ber 2013, the amount he then sought was changed to $15,935, plus GST

Rules

Rule 9.3 of the Supreme Court (Cor­po­ra­tions) Rules 1999 (NSW) sets out some of the pro­ce­dur­al require­ments to be com­plied with when seek­ing an order under 473(2) of the Cor­po­ra­tions Act. Impor­tant­ly, rule 9.3 sets out some notice require­ments (and oth­er require­ments). Notice of the pro­vi­sion­al liquidator’s inten­tion to apply for such an order and a copy of the sup­port­ing affi­davit must be served on any liq­uida­tor (except the pro­vi­sion­al liq­uida­tor), each mem­ber of any com­mit­tee of inspec­tion and if there is no com­mit­tee of inspec­tion, the 5 largest cred­i­tors of the com­pa­ny, and each mem­ber of the com­pa­ny who has at least 10% of the issued cap­i­tal of the com­pa­ny. Each of those par­ties have a right to serve a notice of objec­tion on the pro­vi­sion­al liq­uida­tor object­ing to the amount of remu­ner­a­tion claimed and the grounds of the objection. 

In this case, the pro­vi­sion­al liq­uida­tor had not ini­tial­ly served his affi­davit on con­trib­u­to­ries and the court con­sid­ered that when it was done, the mate­r­i­al pro­vid­ed to the con­trib­u­to­ries would have bewil­dered them. 

Principles

His Hon­our con­sid­ered the prin­ci­pals involved and deter­mined it was a mat­ter for the pro­vi­sion­al liq­uida­tor to estab­lish the amount of his enti­tle­ment to fair and rea­son­able remu­ner­a­tion: Venet­ian Nom­i­nees Pty Ltd v Con­lan (1998) 20 WAR 96 at 102 and One­fone Aus­tralia Pty Ltd v One​.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11. In con­sid­er­ing whether to make an order in respect of a pro­vi­sion­al liquidator’s remu­ner­a­tion pur­suant to 473(2) of the Cor­po­ra­tions Act, the Court must have regard to whether the remu­ner­a­tion is rea­son­able, tak­ing into account the mat­ters set out in sec­tion 473(10), which are:

  1. the extent to which the work per­formed by the liq­uida­tor was rea­son­ably necessary;
  2. the extent to which the work like­ly to be per­formed by the liq­uida­tor is like­ly to be rea­son­ably necessary;
  3. the peri­od dur­ing which the work was, or is like­ly to be, per­formed by the liquidator;
  4. the qual­i­ty of the work per­formed, or like­ly to be per­formed, by the liquidator;
  5. the com­plex­i­ty (or oth­er­wise) of the work per­formed, or like­ly to be per­formed, by the liquidator;
  6. the extent (if any) to which the liq­uida­tor was, or is like­ly to be, required to deal with extra­or­di­nary issues;
  7. the extent (if any) to which the liq­uida­tor was, or is like­ly to be, required to accept a high­er lev­el of risk or respon­si­bil­i­ty than is usu­al­ly the case;
  8. the val­ue and nature of any prop­er­ty dealt with, or like­ly to be dealt with, by the liquidator;
  9. whether the liq­uida­tor was, or is like­ly to be, required to deal with: 
    1. one or more receivers; or
    2. one or more receivers and managers;
  10. the num­ber, attrib­ut­es and behav­iour, or the like­ly num­ber, attrib­ut­es and behav­iour, of the company’s creditors;
  11. if the remu­ner­a­tion is ascer­tained, in whole or in part, on a time basis: 
    1. the time prop­er­ly tak­en, or like­ly to be prop­er­ly tak­en, by the liq­uida­tor in per­form­ing the work; and
    2. whether the total remu­ner­a­tion payable to the liq­uida­tor is capped
  12. any oth­er rel­e­vant matters.

Outcome

The court found that the pro­vi­sion­al liquidator’s evi­dence did not pro­vide any basis to deter­mine whether the amount he claimed was nec­es­sary or to address the mat­ters set out in sec­tion 473(10) and declined to approve the remu­ner­a­tion sought. 

The case is a reminder for those seek­ing approval of their remu­ner­a­tion to have regard to those mat­ters set out in rule 9.3 of the Supreme Court (Cor­po­ra­tions) Rules, sec­tion 473(10) of the Cor­po­ra­tions Act and the need to pro­vide the court with clear evi­dence in order for it to make a deter­mi­na­tion in their favour.