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. The Liquidators' submissions 1. By written and oral submissions made in the application, Mr Silver has in turn taken me through the history of the relevant transactions and the history of the liquidation, referring to a number of the matters which I have addressed above, and identified the matters which have been the subject of investigations by the Liquidators, resulting in the proceedings relating to the Doody Street Property, and identifying matters which may be the subject of further claims. Mr Silver summarises the work which has been the primary focus of the Liquidators in the period for which remuneration is claimed, including the investigations in relation to the sale of the Doody Street Property and a debate which arose from the lodgement of their caveat over that property, and engagement with the Attorney General's Department in respect of funding. He also refers to the meeting in January 2021 at which, as I noted above, the majority of creditors by number, but not by value, approved the amount of remuneration claimed, and has taken me through Mr Sallway's evidence as to the work done during the relevant period. 2. Mr Silver draws attention to well-established authority in respect of an application of this kind, including the Court of Appeal's decision in Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; (2017) 118 ACSR 333; [2017] NSWCA 38, which I then applied in dealing with the liquidator's remuneration application in that matter in Re Sakr Nominees Pty Ltd [2017] NSWSC 668. I there summarised (at [22]ff) the applicable principles by reference to the legislative structure as it then stood. I noted the importance of proportionality between the work done and the value of the services provided, and the concern that has at times been expressed as to time-based remuneration, while recognising that recommendation on that basis was very common. I noted that the Court of Appeal had left open the possibility that different approaches to costing could be adopted, and had emphasised the importance of proportionality, and the need for a liquidator to establish that the amount of remuneration claimed is reasonable in the relevant circumstances. 3. I also summarised the relevant principles in Re Aberdeen All Farm Pty Ltd (in liq) [2020] NSWSC 770, to which Mr Silver also referred, in dealing with an application for approval of a liquidator's recommendation under the Insolvency Practice Schedule (Corporations). I there pointed to Gleeson JA's observations in Re Banksia Securities Ltd (in liq) (Recs and Mgrs apptd) [2017] NSWSC 540, in dealing with the receiver's claim for remuneration, as to the principles arising from the Court of Appeal's decision in Sakr Nominees. I also noted, by reference to authority, that the Court does not undertake a line by line review of the narratives in the insolvency practitioner's billing record in an application of this kind, but will seek to satisfy itself in a broad way that those narratives are supported by the evidence led in respect of the claimed remuneration. I have taken that approach in this application. 4. Mr Silver submits that, having regard to the detail of Mr Sallway's evidence and the supporting documents, the work carried out by the Liquidators, considered by reference to the factors specified in s 60-12 of the Insolvency Practice Schedule (Corporations) is proportionate to the matters in issue in the liquidation, by reference to both the complexity of the claims and the significant value of those claims, here up to $20 million in respect of the Doody Street Property, and the Liquidators' remuneration should be approved on that basis. 5. I have, as I have noted, had regard to Mr Sallway's detailed evidence and undertaken a broad review of the schedules on which Mr Sallway relies for the Liquidators' claim to remuneration. Mr Sallway's affidavit provides a detailed explanation of the work that he and his staff have done and, as I have noted, addresses the process adopted to review the time charges made, and the allocation of that work between team members to seek to use less senior staff where possible. I have regard to the complexity of the issues raised, and the fact that the work has needed to be done in the context of litigation, including the issues in respect of the claim for a caveat and subsequent court orders in respect of the Doody Street Property, which involves a higher level of responsibility on the part of the Liquidators. 6. It seems to me that I can be satisfied, on the evidence here, that the amounts charged are proportionate, both to the amount of the work done and the complexity of the issues, and to the potential for recovery to the benefit of creditors. I am satisfied that the Liquidators' claim for remuneration should be approved in the amounts claimed, on that basis. Orders 1. For these reasons I make the following orders: 1. Pursuant to s 60-10 of the Insolvency Practice Schedule (Corporations), the Applicants are entitled to receive remuneration for work performed in relation to the external administration of MB Australia Pty Ltd (in liq) for the period from 1 July 2020 to 31 December 2020 in the sum of $93,619.00, including GST. 2. The costs of this application be costs in the liquidation of the company. 3. The exhibits be returned. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2021