In the matter of MB Australia Pty Ltd (in liq) (recs apptd) [2021] NSWSC 913

Supreme Court New South Wales

Medium Neutral Citation: In the matter of MB Australia Pty Ltd (in liq) (recs apptd) [2021] NSWSC 913 Hearing dates: 19 July 2021 Date of orders: 19 July 2021 Decision date: 19 July 2021 Jurisdiction: Equity - Corporations List Before: Black J Decision: Determination of liquidator's remuneration. Catchwords: CORPORATIONS — Winding up — Liquidators — Remuneration — Whether costs incurred proportionate to issues raised in liquidation. Legislation Cited: - Insolvency Practice Schedule (Corporations), s 60-10 Cases Cited: - Re Aberdeen All Farm Pty Ltd (in liq) [2020] NSWSC 770 - Re Banksia Securities Ltd (in liq) (Recs and Mgrs apptd) [2017] NSWSC 540 - Re Sakr Nominees Pty Ltd [2017] NSWSC 668 - Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; (2017) 118 ACSR 333; [2017] NSWCA 38 Category: Procedural rulings Parties: Andrew Sallway and Helen Newman in their capacity as liquidators of MB Australia Pty Ltd (in liq) (Applicant) Representation: Counsel: P Silver (Applicant)

Solicitors: Hogan Lovells (Applicant) File Number(s): 2019/377096

Judgment – ex tempore (Revised 20 July 2021)

Notice of the application and affidavit evidence 1. By Interlocutory Process filed on 6 July 2021, Mr Sallway and Ms Newman, as Liquidators ("Liquidators") of MB Australia Pty Ltd (in liq) ("Company"), apply for a determination under s 60-10 of the Insolvency Practice Schedule (Corporations) that they are entitled to remuneration for work performed in relation to the liquidation of the Company from 1 July 2020 to 31 December 2020 in the sum of $93,619, exclusive of GST. 2. The application is supported by a detailed affidavit dated 20 May 2021 of Mr Sallway, one of the Liquidators. Mr Sallway outlines the nature of the Company's operations in conducting chocolate cafes that traded under the name "Max Brenner", and to its ownership of a property in Doody Street, Alexandria ("Doody Street Property") which was sold in a complex transaction prior to the Company's liquidation, a matter which is presently the subject of proceedings brought by the Liquidators against several parties. He also refers to the circumstances in which the Company was initially placed in voluntary administration, and he, Ms Newman and a third liquidator were appointed as joint and several liquidators by the Supreme Court of Queensland, in a winding up application. The Court there observed that matters relating to the sale of the Doody Street Property raised the possibility that it had been sold at a substantial undervalue and that that warranted further investigation. Mr Sallway also summarises, in some detail, the complex transactions which appear to have brought about the sale of the Doody Street Property and refers to the steps subsequently taken by the Liquidators, initially to lodge a caveat and subsequently to obtain consent orders which protect the Company's interest in respect of the Doody Street Property. 3. Mr Sallway also sets out the work done by the Liquidators during the period for which remuneration is claimed, which relates to a significant extent to developing the claim in respect of the Doody Street Property, and progressing that claim in proceedings in the Commercial List, but also to dealings with the Commonwealth of Australia in respect of funding for certain aspects of the liquidation. Mr Sallway also refers to previous remuneration determinations by creditors of the Company, where the Liquidators' remuneration was approved by creditors on several occasions. At a meeting in January 2021, the remuneration now claimed in this application was approved by a majority of creditors by number, but not by value, with the creditors voting against that remuneration determination being, essentially, those who are Defendants or associated with Defendants in the proceedings in relation to the Doody Street Property, who also voted against a proposed funding arrangement in respect of the proceedings at that meeting. Mr Sallway notes, and the minutes of that meeting indicate, that creditors were then advised that the Liquidators would, not surprisingly, seek Court approval for their remuneration where creditors had not approved it. 4. Mr Sallway's affidavit outlines the work undertaken during the relevant period, by a detailed description of categories of the work done. I have, in accordance with the usual practice, undertaken a broad but not line by line review of the schedules on which the Liquidators rely which record that work. Mr Sallway identifies the work done, by reference to the ARITA categories. The investigation category, in which a substantial amount of work has been done, includes work relating to the proceedings in respect of the Doody Street Property. He also refers, as is common in applications of this kind, to the time recording system used by his firm, and to a practice by which he or one of his managers checks time recorded by staff members to determine whether it is reasonably commensurate to the nature of the work performed, and reduces the charge for work done if it is excessive for the particular task. He also refers to the schedule which summarises work completed by reference to hours and remuneration charged by relevant staff members, and a schedule in that form is useful to determine the extent of delegation in a manner, which may reduce the average hourly charge, by using less senior staff for work where appropriate. 5. Mr Sallway refers to the challenges involved in the liquidation in the period for which remuneration is claimed, largely arising in respect of the investigation of and proceedings in respect of the sale of the Doody Street Property, which has required extensive engagement by the Liquidators with legal advisors. He refers to the hourly rates charged by his firm, for staff at relevant levels, and expresses the view that the rates charged are reasonable, having regard to specified criteria. That view is, of course, not conclusive of the fact, but it is plainly desirable that liquidators turn their minds to that question in an application of this kind. He also refers to the desirable practice of using less senior and cheaper staff, where possible, to undertake relevant work. He indicates that he has undertaken a review of the claimed remuneration, and believes the costs claimed are reasonable and properly reflect the substantial amount of the work done. Again, that view is not conclusive of the fact, but it is once again desirable that liquidators turn their minds to that question in an application of this kind. 6. By a further affidavit dated 2 July 2021, Mr Sallway indicates the steps which have been taken to serve this application on creditors, with a particular focus on service on creditors who have taken an active role in respect of the liquidation, and upon contributories. Notwithstanding the fact that several creditors had opposed the resolution for approval of the remuneration at the earlier meeting, as I noted above, no creditor or contributory appeared at the hearing before me to oppose the application. 7. Mr Silver, who appears for the Liquidators in this application, also took me to the Amended Summons and Commercial List Statement in respect of the proceedings relating to the sale of the Doody Street Property, which are notable for the complexity of the issues raised, the multiplicity of transactions leading to the sale of that property, and the complexity of the issues raised. That provides support for Mr Silver's submission that the costs incurred by the Liquidators in this period reflect the complexity of the issues raised, in the preparation for and conduct of the proceedings.