Supreme Court New South Wales Medium Neutral Citation: In the matter of Wealth Street Pty Ltd (in liquidation) [2023] NSWSC 1482 Hearing dates: 18 August 2023 Date of orders: 1 December 2023 Decision date: 01 December 2023 Jurisdiction: Equity - Corporations List Before: Williams J Decision: See below at [114] Catchwords: CORPORATIONS — Winding up — Liquidators — Remuneration — Application for determination by court — Where liquidator's affidavit overstated complexity of the liquidation — Where liquidator's affidavit failed to explain delays in winding up process that called for explanation — Where liquidator failed to discharge onus of proving that amount claimed is reasonable remuneration — Where amount of remuneration claimed for work relating to these proceedings unreasonable given deficiencies in liquidator's affidavit — Remuneration fixed in lesser sum than amount claimed — No question of principle Legislation Cited: Corporations Act 2001 (Cth), s 286, sch 2 ss 60-5, 60-10, 60-10(1)(c), 60-12, 60-12(a)–(l), 90-15 Cases Cited: In the matter of Barokes Pty Ltd (ACN 079 714 579) [2020] VSC 555 In the matter of Fearndale Holdings Pty Ltd (in liq) (recs & mgrs apptd) [2020] NSWSC 901 Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; (2017) 343 ALR 524; (2017) 118 ACSR 333; (2017) 35 ACLC 17-004; (2017) 13 BFRA 1; [2017] NSWCA 38 Texts Cited: N/A Category: Principal judgment Parties: Jason Lloyd Porter in his capacity as liquidator of Wealth Street Pty Ltd (in liquidation) (ACN 136 865 024) (Plaintiff) Wealth Street Pty Ltd (in liquidation) (ACN 136 865 024) (Defendant) Representation: Counsel: Ms K Petch (Plaintiff) Solicitors: Rydge Evans Lawyers (Plaintiff) Appearances in person: Mr Michael Safar (Objector) File Number(s): 2023/188956 Publication restriction: N/A Judgment Introduction 1. The plaintiff, Mr Jason Porter, is the liquidator of the defendant, Wealth Street Pty Ltd (in liquidation) (ACN 136 865 024) (the Liquidator and Wealth Street). By originating process filed on 13 June 2023, the Liquidator seeks an order under s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) set out in Schedule 2 to the Corporations Act 2001 (Cth) (the IPS) fixing his remuneration in the sum of $89,585 for work performed, plus $10,000 for work to be performed to finalise the liquidation. 2. The Liquidator gave notice of his intention to apply for the Court to determine his remuneration in accordance with r 9.2 of the Supreme Court (Corporations) Rules 1999 (NSW) (the Corporations Rules). Mr Michael Safar, a director of Wealth Street, objects to the remuneration sought by the Liquidator. Mr Antoun Safar and Ms Laila Safar, who together own a property that Wealth Street leased for the purpose of its business, also object to the Liquidator's application. Mr Michael Safar's objections were put in writing and in oral submissions at the hearing on 18 August 2023. The objections of Mr Antoun Safar and Mrs Laila Safar were made in writing only. 3. Mr Antoun Safar and Ms Laila Safar are the parents of Mr Michael Safar. In these reasons for judgment, references to Mr Safar are references to Mr Michael Safar, unless otherwise stated. 4. For the reasons that follow, I have determined that the Liquidator's past remuneration should be fixed in the sum of $70,346 (in addition to the amount of $25,000 previously approved by creditors), and that the Liquidator's future remuneration up to the finalisation of the winding up should be fixed in an amount of up to $3,500. Applicable principles 1. As counsel for the Liquidator submitted, s 60-5 of the IPS entitles the Liquidator to receive remuneration for necessary work properly performed in relation to the liquidation of Wealth Street in accordance with remuneration determinations made pursuant to s 60-10. 2. Section 60-10 of the IPS provides that remuneration determinations may be made by resolution of the creditors, by a committee of inspection (if any) or, in the absence of a resolution of creditors or any committee of inspection, by the Court. 3. The principles that apply to a determination by the Court are well established. Section 60-12 of the IPS requires the Court to have regard to whether the remuneration is reasonable, taking into account any or all of the matters set out in sub-ss 60-12(a)–(l) and any other relevant matters. Applying the principles articulated in Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr at [54]–[60]: [1] 1. the onus is on the Liquidator to establish the reasonableness of the remuneration claimed, and the function of the Court is to determine the remuneration by considering the material provided, and by bringing an independent mind to bear on the relevant issues; 2. the proportionality in terms of the work done compared with the size of the property the subject of the insolvent administration, or the benefit to be obtained from the work, is an important consideration in determining reasonableness of the remuneration claimed. The work done must be proportionate to the difficulty and importance of the task in the context of which it needed to be performed; 3. evidence of the percentage that the remuneration constitutes of assets realised provides 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 about the proportionality of the remuneration claimed; 4. however, the mere fact that work performed does not lead to augmentation of the funds available for distribution (such as work done to comply with the liquidator's statutory obligations) does not mean that the Liquidator is not entitled to be remunerated for the work; 5. even where work is undertaken in an unsuccessful attempt to recover assets, there is no reason why the Liquidator should not recover remuneration for that work provided that it was reasonable to carry out the work and the amount charged for it is reasonable; and 6. both time-based remuneration and ad valorem remuneration may be appropriate measures of remuneration, depending on the circumstances of the particular liquidation. 1. As Black J said in In the matter of Fearndale Holdings Pty Ltd (in liq) (recs & mgrs apptd): [2] "It is not the Court's role, as constituted by a judge in an application of this kind, to undertake a line by line review of the relevant narratives in an insolvency practitioner's billing record, but the Court will generally review the relevant narratives in a broad way in order to satisfy itself that they support the other evidence led in respect of the claimed remuneration, and I have taken that course here: Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund [2016] NSWSC 1292 at [58]; Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2018] NSWSC 229 ; Re Aberdeen All Farm Pty Ltd (in liq) above." 1. Counsel for the Liquidator referred to the following statement of Hetyey AsJ in In the matter of Barokes Pty Ltd (ACN 079 714 579): [3] "The court's function in a remuneration application is solely to assess whether the external administrator's fees are reasonable and to determine what those fees should be. However, it is not a forum to inquire into the conduct of an external administrator. Nor should it be used as a mechanism to discipline or punish an external administrator. Because the remuneration assessment procedure is a summary one, it is neither appropriate nor possible to examine whether there has been unsatisfactory conduct by an external administrator, including conduct lacking in propriety or tantamount to breach of duty. Were it otherwise, the process could encourage satellite litigation by aggrieved parties with an interest in the external administration. It could also provide an opportunity for a collateral attack on the actions of an external administrator by a party who is otherwise the subject of investigations or claims arising from the company's affairs. Either scenario could unnecessarily delay the finalisation of an external administration. As previously noted, allegations of misconduct, misfeasance, or breach of duty need to be properly tested through evidence, and natural justice afforded to the external administrator. … there are other provisions within the statutory regime which better accommodate the ventilation of grievances by interested persons." 1. I respectfully agree with, and adopt, his Honour's statement. However, where a liquidator fails to adduce evidence in a remuneration application that demonstrates that the work for which remuneration is claimed was necessary work that was properly performed in the winding up of the company, and that the remuneration claimed for the work is reasonable, the Court does not shy away from so concluding, even if that conclusion may expressly or implicitly involve some criticism of the liquidator's conduct in undertaking the relevant work at all, or in causing or permitting the work to be undertaken in the manner in which it was carried out. I do not understand Hetyey AsJ to have been suggesting otherwise in the passage to which I have referred above. 2. In applying these principles to the present case, I have considered all of the Liquidator's written and oral submissions, the notices of objection, and the oral submissions made by Mr Safar at the hearing on 18 August 2023 pursuant to leave granted under rule 2.13 of the Corporations Rules. [4] Summary of evidence about Wealth Street and the liquidation 1. The Liquidator has over 25 years' experience in corporate and personal insolvency and is a National Board Member and Vice President of the Australian Restructuring Insolvency and Turnaround Association. He was appointed on 10 October 2019 as the liquidator of Wealth Street and three related companies—Mortgage Lane Pty Ltd (Mortgage Lane), Property Drive Pty Ltd (Property Drive), and Belladina Holdings Pty Ltd (Belladina). 2. The Liquidator has been assisted in the liquidation of Wealth Street by a senior manager, a senior accountant, an accountant, and a graduate, together with numerous professional support staff employed by his firm, SV Partners Insolvency (SVP). In addition, the Liquidator engaged Sovereign Private Chartered Accountants (Sovereign Private) to assist him with Wealth Street's outstanding taxation obligations, and to assist him in reconstructing the company's financial records. The Liquidator also engaged Rydge Evans Lawyers (REL). 3. The Liquidator's investigations have revealed that Wealth Street operated a wealth management and financial planning business. It derived income from the provision of financial services to customers, commissions received from insurance products, and management fees charged to Mortgage Lane and Property Drive. Mr Safar and Mr Abdullah Popal were the directors of Wealth Street at all relevant times. 4. Wealth Street provided financial services through a licenced financial service provider—Mr Chandar Varadan—whose services were provided to Wealth Street through Meru Solutions Pty Ltd. 5. Precision Accounting & Taxation Services were Wealth Street's accountants. Ms Michelle Toomey was Wealth Street's principal contact at that firm. 6. Wealth Street's registered office and principal place of business was located at premises in Baulkham Hills that the company leased from Mr Safar's parents. Mortgage Lane and Property Drive also operated from those premises. Mortgage Lane operated a mortgage origination business. Property Drive operated a real estate investment services business. 7. On 17 June 2019, Mr Safar commenced proceedings in this Court seeking numerous declarations and orders against Mr Popal in relation to the affairs of Wealth Street, Mortgage Lane, Property Drive, and Belladina. Insofar as those claims concerned Wealth Street, the relief sought by Mr Safar included an order compelling Mr Popal to take all steps necessary to pay Wealth Street's creditors out of funds standing to the credit of Wealth Street's bank account, and an order removing Mr Popal as a director of Wealth Street (the 2019 proceedings). Wealth Street, Mortgage Lane, Property Drive, and Belladina were also named as plaintiffs in the 2019 proceedings. 8. Mr Varadan ceased providing services to Wealth Street on 31 August 2019 in the context of the dispute between the directors that was the subject of the 2019 proceedings. Wealth Street then ceased trading before being placed into liquidation on 10 October 2019. 9. On 14 November 2019, Mr Safar submitted a proof of debt in the winding up of Wealth Street claiming $6,826.56 in respect of numerous expenses incurred by Wealth Street that he claimed to have paid from his personal funds, and $50,785.73 in respect of his legal costs in the 2019 proceedings. As referred to later in these reasons, [5] the Liquidator ultimately rejected Mr Safar's proof to the extent that it related to his legal costs, and admitted the balance of the claim to proof in the amount of $4,480.40. 10. On 7 February 2020, a notice of discontinuance was filed on behalf of Wealth Street, Mortgage Lane, Property Drive, and Belladina in the 2019 proceedings. 11. In the present proceedings, the Liquidator has deposed in his affidavit sworn on 15 May 2023 that Wealth Street shared expenses with Mortgage Lane and Property Drive, including rent and associated outgoings, cleaning costs, information technology costs, and some staff costs. Mr Safar, Mr Popal, and Ms Toomey have informed the Liquidator and his staff that there was an agreement between Wealth Street, Mortgage Lane, and Property Drive that Wealth Street would pay all of those shared expenses in full during each financial year, and that Wealth Street would then charge Mortgage Lane and Property Drive management fees at the conclusion of the financial year. 12. The management fees were the mechanism through which Mortgage Lane and Property Drive reimbursed Wealth Street for a proportion of the shared expenses. However, the amount of the management fees charged by Wealth Street was not calculated by reference to the extent to which each of the three companies caused or contributed to the incurring of the shared expenses. Mr Safar has informed the Liquidator's staff that it was not possible to determine the proportion of the shared expenses incurred by each company, and that the amount of the management fees was therefore calculated by apportioning the shared expenses pro rata in accordance with the extent of each of the three companies' contributions to the revenue of the group of companies. 13. According to the general ledger reports and balance sheets of Wealth Street, there were a number of inter-company loans between Wealth Street, Mortgage Lane, and Property Drive. Mr Safar has informed the Liquidator that those loans were predominantly used to support Wealth Street's working capital requirements. Accordingly, when Wealth Street charged management fees to Mortgage Lane and Property Drive at the end of each financial year, those fees were typically applied to reduce the amount of the loan owing by Wealth Street to Mortgage Lane and Property Drive. 14. As at the date of the Liquidator's appointment, Wealth Street had $97,052.29 cash at bank, and the following amounts were owing under the inter-company loans according to Wealth Street's balance sheet and the Report on Company Activities and Property (ROCAP) completed by Mr Safar: 1. $94,999.86 was owing by Wealth Street to Mortgage Lane; 2. $188,690.88 was owing by Mortgage Lane to Property Drive; and 3. $109,999.65 was owing by Property Drive to Wealth Street. 1. The Liquidator has given evidence that he had some difficulty in obtaining Wealth Street's books and records, which were provided to him in electronic form in about March 2020 without the passwords that were required to access the relevant electronic documents. The Liquidator engaged an external information technology consultant to access those electronic documents at a modest cost of $266.75. The time costs of the Liquidator's staff in obtaining access to the books and records amount to $751.00 for the period up to and including March 2020. During the period from about 19 June 2020 to 29 July 2020, there was an exchange of approximately six emails between Mr Safar and the Liquidator's staff, in which Mr Safar sought information about the progress of the winding up, the Liquidator's staff requested additional information from Mr Safar (principally in relation to the approach to calculating the management fees charged by Wealth Street to Mortgage Lane and Property Drive), and Mr Safar responded to those requests. 2. The Liquidator has given evidence that, once he obtained access to the books and records, they appeared to him to be incomplete or inaccurate, including because they were not up to date and were not supported by primary source documents. However, in his third report to creditors dated 29 October 2020, the Liquidator stated that—although he had initially considered that the books and records may not have been sufficient to comply with s 286 of the Corporations Act—the directors had subsequently provided further books and records, and the Liquidator was of the view that the directors had maintained the books and records of Wealth Street to a sufficient standard. 3. After reviewing the books and records, the Liquidator formed the view that the approach to calculating the management fees was inconsistent from one financial year to the next. In particular, the Liquidator identified that there was no evidence that management fees had been raised or paid between Wealth Street and Mortgage Lane for the 2015 to 2017 financial years, and that Mortgage Lane had recommenced paying management fees to Wealth Street in the 2018 financial year at a rate that the Liquidator describes as "reduced". No management fees had been charged for the 2019 financial year. 4. In responding to the Liquidator's requests for information in June and July 2020, Mr Safar had advised that: 1. during the 2015 to 2018 financial years, Wealth Street had not charged management fees to Mortgage Lane because Mortgage Lane had employed its own staff who also serviced the needs of Wealth Street and Property Drive, and the directors formed the view that those benefits provided by Mortgage Lane to Wealth Street offset the benefits that Wealth Street was providing to Mortgage Lane through the payment of shared expenses; and 2. Mortgage Lane had reduced its staff during the 2018 financial year and returned to relying on Wealth Street's staff, as a result of which the directors formed the view that the benefits provided by each company to the other were no longer offsetting, and that Mortgage Lane should resume paying management fees to Wealth Street. 1. Mr Safar had also informed the Liquidator that he agreed that management fees should be charged by Wealth Street to Mortgage Lane and Property Drive for the 2019 financial year. 2. Notwithstanding Mr Safar's explanations referred to above, the Liquidator has given evidence that: "I formed the suspicion, based on the likely inaccuracies in the records of Management Fees, that [Wealth Street's] books and records may contain other inaccuracies. Having formed that suspicion and, because it was my obligation to ensure that proofs between the companies were accurate, for the benefit of their respective third party creditors, I instructed Sovereign Private to conduct a review and reconstruction of the intercompany loan accounts, including a review of the calculation of the Management Fees." 1. The Liquidator's evidence does not explain why he was not satisfied with the information and explanations provided by Mr Safar about the calculation of the management fees, why he suspected inaccuracies in the records of the management fees after considering Mr Safar's information and explanations, and why those suspected inaccuracies caused him to suspect inaccuracies in other components of Wealth Street's books and records. 2. On 28 July 2020, the Liquidator and members of his staff received an email from Mr Robert Campbell of Sovereign Private providing advice in relation to the management fees. The email stated (emphases added): "As you pointed out in your correspondence with Michael Safar, there were inconsistencies in methodology across the years, particularly with regards to 2015 to 2017, whereby Mortgage Lane (ML) was excluded, and then included again in 2018. The methodology, as I see it, and ignoring 2015 to 2017, was to allocate costs across the entities based on revenue, then allocate the costs from Wealth Street to the others in proportion with the share of group revenue. If the entities were essentially sharing resources across all entities, and there were difficulties specific use between them, I would suggest this would be a fair, albeit unsophisticated, method of apportionment. Unfortunately this methodology appears more arbitrary for the 2015 to 2018 years due to the change in calculations. The point made was that in 2015 ML began to operate separately and employ it's own staff, so the cross charge of costs was not appropriate. However as the costs were allocated again from 2018, despite ML still having internal staff, this rationale seems flawed. This is particularly so as the exclusion of ML appears to coincide with periods of reduced profit in ML, whereby a change in methodology to exclude it from calculations decreases taxable income for the group and does not increase loss positions for ML. Given the inconsistency of application it makes it more difficult to agree this methodology is appropriate, although perhaps there is something that we are missing. If there were correspondence with the ATO regarding this available, that may shed some light on the situation, however I am mindful of the delays that this is adding to completion of the engagement. To that end I have prepared some other options, which utilise the same methodology of allocating the costs based on revenue split, however utilise the split based on average revenue over a period. Using the method historically employed, plus some other methods utilising various time periods and averages, I have prepared options for the allocation of costs/charging of management fees. Per the attached spreadsheet they are: 1. The historic methodology, ie a split of costs based on percentage of total group revenue for the 2019 year, 2. Using the average revenue split from the years of 2011 – 2014 pIus 2018, ie the years that were actually used to split the management fees across the three entities, 3. Using the average revenue split from the years of 2011 – 2018, and 4. Using the average revenue split from the years of 2011 – 2019. I have excluded 2020 from the calculations as there are no costs to allocate. The first is the method that has been used to date, namely allocation of costs based on revenue split for the year. The second provides an allocation percentage based on the average revenue split for the years of 2011 – 2014 & 2018, ie the years that were actually used to split the management fees across all entities. I do not favour this method due to the gap from 2015 – 2017 without a valid reason for this. The third method provides an allocation percentage based on average revenue split for the years of 2011 – 2018, ie including the years that were excluded in the first method. Applying the historical average to the current year's cost split provides some consistency and trend to the allocation. The fourth method is the same as the third, however it also includes 2019's revenue to the average revenues. It has the same advantages of the second method, however with extra data to strengthen the trend. Whilst none of the methods covered are ideal, the fourth method is based on the strongest rationale, and without a specific allocation to each entity of the costs, or at least allocation of larger items such as employee time, this is likely as good as we will get." 1. There is no evidence presently before the Court that explains the reasons why Mr Campbell considered that the management fee calculations were "flawed" merely because Wealth Street recommenced allocating some costs to Mortgage Lane from 2018 at a time when that company still had internal staff, notwithstanding that Mr Safar had informed the Liquidator that Mortgage Lane had reduced its staff during 2018, and that the Liquidator had identified that the management fee charged by Wealth Street to Mortgage Lane for the 2018 financial year was at a "reduced rate". 2. The Liquidator has not adduced any evidence explaining why, despite the matters referred to immediately above that appear to explain what Mr Campbell described as a "flaw" in the historical approach to the calculation of management fees, the Liquidator says that he accepted Mr Campbell's advice and instructed Sovereign Private to embark on a process of recalculating past management fees—replacing the "fair, albeit unsophisticated, method" that had been applied historically with Mr Campbell's fourth option that he acknowledged was not ideal—and revising Wealth Street's accounts and reconstructing the intercompany ledgers based on that recalculation. The Liquidator gave the following evidence: "I read Mr Campbell's email at the time it was sent and agreed with his advice. I formed the view that it was necessary for the Company's accounts to be revised based on Mr Campbell's recommended approach to ensure that first, the intercompany loan position was correct, because that had a flow-on effect on the amount of the intercompany liabilities owing between each company and second, because the amount of Management Fees paid or payable directly affected the tax payable by each of [Wealth Street], Mortgage Lane and Property Drive. Accordingly, I instructed Sovereign Private to recalculate the Management Fees for the 2015-2018 financial years using Mr Campbell's recommended approach …" 1. The Liquidator gave evidence that he also caused Sovereign Private to calculate management fees for the 2019 financial year in accordance with Mr Campbell's recommended approach, and to incorporate those management fees into the intercompany loan accounts. 2. In his affidavit sworn on 15 May 2023, the Liquidator described the outcome of this process as being that: 1. the sum of $94,999.86 that had been recorded in Wealth Street's balance sheet as at the date of the Liquidator's appointment as owing by Wealth Street to Mortgage Lane was reduced to $35,581.27 as a result of the deduction of the 2019 financial year management fee of $59,418.70 that Sovereign Private had calculated was payable by Mortgage Lane to Wealth Street; 2. the sum of $188,690.88 that had been recorded in Wealth Street's balance sheet as at the date of the Liquidator's appointment as owing by Mortgage Lane to Property Drive remained unchanged, as management fees were not raised between Mortgage Lane and Property Drive; and 3. the sum of $109,999.65 that had been recorded in Wealth Street's balance sheet as at the date of the Liquidator's appointment as owing by Property Drive to Wealth Street was increased to $152,583.95 as a result of adding the 2019 financial year management fee of $42,584.30 that Sovereign Private had calculated was payable by Property Drive to Wealth Street. 1. It is plain from the figures referred to immediately above that the only changes made to the intercompany loan accounts and balance sheet of Wealth Street were adjustments to account for management fees for the 2019 financial year in the amounts calculated by Sovereign Private. 2. This is confirmed by the time charging records in the "Workflow Summary" spreadsheet exhibited to the Liquidator's affidavit, which reveal that the Liquidator made a decision on or about 14 September 2020 not to recalculate management fees for previous years, and instructed Sovereign Private to limit their further work to calculating the management fees for the 2019 financial year and the preparation and lodgement of outstanding tax returns. It appears from the Workflow Summary that Sovereign Private had completed the calculation of the 2019 financial year management fees by the end of September 2020. By 30 September 2020, the Liquidator's staff had received correspondence from Mr Campbell about the management fees and other matters, and were considering amended loan account figures and dividend outcomes. 3. It is regrettable that this change to the Liquidator's earlier instructions to Sovereign Private referred to at [35] above was not referred to in the Liquidator's affidavit. It is equally regrettable that it was not drawn to my attention at the hearing of the remuneration application, when I questioned on more than one occasion why the Liquidator had considered it necessary to recalculate past management fees, and whether that work was in fact necessary. These issues were also raised by Mr Safar's submissions, in which he complained about the Liquidator reviewing and recalculating past management fees despite the explanations that he had provided to the Liquidator about how those fees had been calculated in past financial years. My questions, and Mr Safar's submissions, were based on the Liquidator's evidence referred to at [31] and [35] above, which conveys that he did in fact undertake a "review and reconstruction" of the intercompany loan accounts, including in respect of the 2015–2018 financial years, and that the need to undertake this work made the winding up complex and time consuming. That is misleading, although I do not suggest that the Liquidator or his legal representatives intended to mislead the Court. I accept that the more likely explanation is inadequate attention to detail in the preparation of the affidavit, which was then relied on as the basis for the preparation of submissions. 4. On or about 4 December 2020, the Liquidator lodged proofs of debt reflecting the intercompany loan balances referred to at [37] above on behalf of Wealth Street in the liquidation of Property Drive, on behalf of Mortgage Lane in the liquidation of Wealth Street, and on behalf of Property Drive in the liquidation of Mortgage Lane. Recognising that he would have a conflict of interest in preparing each of those proofs of debt in one capacity, and adjudicating on them in another capacity, the Liquidator commenced proceeding 2021/180333 in this Court for directions pursuant to s 90-15 of the IPS in June 2021. Those proceedings were determined following a short hearing before Rees J on 16 August 2021. Her Honour made orders on that date that the Liquidator, in his capacity as liquidator of each of the three companies, is justified in admitting to proof: 1. in the liquidation of Wealth Street, the claim by Mortgage Lane for $35,581.27; 2. in the liquidation of Mortgage Lane, the claim by Property Drive for $188,690.88; and 3. in the liquidation of Property Drive, the claim by Wealth Street for $152,583.95. 1. The Liquidator has recovered funds totalling $259,706.62 for the benefit of Wealth Street and its creditors, comprising: 1. $97,052.29 cash at bank at the time of the Liquidator's appointment; 2. $152,583.95, being the amount paid to Wealth Street in the winding up of Property Drive on 9 February 2022, and representing full payment of the proof of debt submitted by the Liquidator on behalf of Wealth Street; 3. trail commissions of $1,779.69; and 4. GST refunds totalling $8,290.71. 1. The payment from Property Drive is the most significant recovery. In his affidavit sworn on 15 May 2023, the Liquidator has described it as: "… the most complex of the recoveries because it required a reconstruction and then assessment of [Wealth Street's] books and records concerning intercompany liabilities." 1. However, as I have explained above, the reconstruction and assessment initially contemplated by the Liquidator did not proceed. The Liquidator instructed Sovereign Private to calculate management fees for the 2019 financial year that had not been recorded in Wealth Street's books at the time of the Liquidator's appointment shortly after the end of that financial year on 10 October 2019, and to update the intercompany loan accounts to account for that 2019 fee. The evidence adduced in these proceedings does not support the Liquidator's characterisation of that work as "complex". As referred to at [39] above, it was not a time-consuming process. 2. In relation to trail commissions, the Liquidator has given evidence that Mr Safar told him in the early stages of the liquidation that Wealth Street was entitled to receive trail commissions from Infocus Securities in respect of insurance policies that Wealth Street had brokered. The Liquidator's staff identified from Wealth Street's books and records that were then available to them that Wealth Street had received commissions totalling approximately $96,217.36 in the 2019 financial year. The Liquidator's initial notice to creditors dated 24 October 2019 stated that the directors of Wealth Street had advised that the company had trail commissions payable in respect of a number of customers within its books, and that the Liquidator was in the process of determining the value of those commissions. 3. In a further report to creditors dated 10 January 2020, the Liquidator advised that Infocus Securities had terminated the Corporate Authorised Representative agreement pursuant to which the commissions were paid to Wealth Street, with effect from 25 October 2019. The Liquidator advised that he had received $1,779.69 in trail commissions in the period from his appointment up to 28 October 2019, and he anticipated that commissions had ceased as a result of the termination of the agreement. 4. The Liquidator has given evidence that he obtained a copy of the Corporate Authorised Representative agreement on 8 March 2020 and ascertained that it included a clause to the effect that Infocus Securities' obligation to pay trail commissions to Wealth Street ceased if Wealth Street became insolvent. The Liquidator instructed solicitors to advise in relation to the enforceability of that clause and, based on that advice, resolved that the probability of recovering any further trail commissions was low and determined not to take any such steps. The Liquidator advised creditors accordingly in his report dated 29 October 2020. That report stated that the directors of Wealth Street remained of the view that its commission book had a realisable value, but that the Liquidator had received legal advice confirming that the Corporate Authorised Representative agreement had been validly terminated and that Wealth Street was no longer entitled to commissions. The Liquidator advised creditors that there would therefore be no further recoveries in respect of commissions. In my opinion, this evidence demonstrates that the Liquidator acted both promptly and reasonably, and on the basis of legal advice, in relation to trail commissions. I reject Mr Safar's submission to the contrary. 5. The Liquidator has admitted proofs of debt totalling $211,151.44 in the winding up of Wealth Street in favour of the following creditors: 1. Mr Safar—$4,480.40; 2. Mr Antoun Safar and Mrs Laila Safar—$10,868.00; 3. Precision Accounting & Taxation Services—$3,300.00; 4. the Australian Taxation Office (ATO)—$107,728.59; 5. Meru Solutions Pty Ltd—$49,193.18; and 6. Mortgage Lane—$35,581.27. 1. As I have already mentioned, the Liquidator rejected Mr Safar's proof of debt to the extent that it related to Mr Safar's legal costs of the 2019 proceedings that had been discontinued on 7 February 2020. 2. The Liquidator paid an interim dividend of 30 cents in the dollar to creditors on 9 February 2022. The total amount paid was $64,745.43. The remuneration application 1. The Liquidator has given evidence that the winding up "has not been simple as was originally suggested to me by Mr Safar when I accepted the appointment". The Liquidator provided a revised estimate of $25,000 for his total remuneration for the winding up of Wealth Street after he realised that it would be more complex than Mr Safar had suggested because "there was significant work to be done to reconstruct the accounts and management fees, filing of additional tax returns, obtaining information and company documents on a locked server, dealing with Mr Safar's information requests and disputes and a court application of approval of intercompany proofs of debt." 2. The Liquidator's $25,000.00 estimate for his remuneration as liquidator of Wealth Street was included in his initial report to creditors. Creditors approved payment of that sum on 14 November 2019 for the period from 10 October 2019 to finalisation of the liquidation. 3. The Liquidator has given evidence that, as the winding up of Wealth Street progressed, he realised that it was "more involved", and that he would therefore incur fees in excess of his $25,000 estimate, for two reasons: 1. Mr Safar "routinely asked my team many questions that took substantial staff time to respond to"; and 2. "the recoveries were made more complex by reason of the inadequate record keeping of [Wealth Street] and intercompany liability position". 1. This evidence is difficult to understand because the two reasons identified by the Liquidator as causing him to realise that his fees would exceed his $25,000 estimate are also mentioned in his list of the matters that he took into account in arriving at the $25,000 estimate. 2. By about the end of January 2022, a majority of creditors in number had rejected two proposals put forward by the Liquidator for the approval of further remuneration. The Liquidator formed the view at that time that it would be necessary to apply to the Court for approval of his remuneration, and that the winding up could not be completed until that application was made and determined. The Liquidator commenced these proceedings approximately 18 months later, on 13 June 2023. The Liquidator has given evidence that he "elected to delay" the commencement of these proceedings pending the assessment and payment of Mortgage Lane's taxation liability "due to the interrelated nature of the liquidations … and to save on incurring additional costs in the administration of the three companies". The Liquidator's evidence does not explain why the interrelated nature of the liquidations rendered it appropriate to delay the commencement of these proceedings, and to therefore delay the completion of the winding up of Wealth Street. Nor does the Liquidator's evidence identify any costs that were saved by doing so. Counsel for the Liquidator was unable to identify any cogent reasons for the delay when I raised this question at the hearing. 3. The Liquidator now seeks an order fixing his further remuneration in the sum of $89,585 for work performed, and $10,000 for work yet to be performed. These proposed amounts are in addition to the $25,000 that has already been approved by creditors and paid to the Liquidator. The Liquidator has given evidence that he arrived at the amount of $89,585 after reviewing the Workflow Summary, considering whether each item of work was necessary and whether the amount charged is reasonable given the nature of the task, the time taken, and the relevant fee earner's level of experience and responsibility, and writing off work that consisted of correcting errors of more junior staff, and any charges that the Liquidator considers excessive for the relevant task. 4. The Liquidator has also given evidence that, in his opinion, appropriate and reasonable delegation of work has occurred in respect of the remuneration claimed, having regard to the nature and complexity of the tasks undertaken, and to the skill and experience of each fee earner. 5. The total amount of past and future remuneration for which the Liquidator now seeks approval exceeds the sum of $94,200 that remains in the liquidation bank account. The Liquidator accepts that, if and to the extent that the remuneration fixed by the Court exceeds the balance of the liquidation account, his remuneration will be written off. 6. If the Court were to fix the Liquidator's additional remuneration in the amounts now sought, this would take the total remuneration to $124,585, which would represent approximately 47.8 per cent of the total recoveries of $259,706 (or 76.6 per cent of the recoveries of $162,654, excluding the cash at bank as at the date of the Liquidator's appointment). There would be no further distributions to creditors, and the total remuneration of $124,585 would be almost double the interim distribution of $64,745 that the Liquidator has paid to Wealth Street's creditors. For all of the reasons that follow, I accept Mr Safar's submission that the total remuneration claimed is disproportionate to the recoveries, having regard to the nature of the work and the context in which it was performed. 7. The remuneration claim relates to the nine categories of work described below that have been itemised in the Workflow Summary. The information presented in relation to each category of work in the Workflow Summary is challenging to digest because it has not been presented chronologically, nor has it been presented by fee earner. Indeed, I am unable to discern any methodology that has been applied in determining the order in which line items of work appear within many of the categories. Whilst I have not undertaken a line-by-line review of the Workflow Summary, those deficiencies in the manner in which the information has been presented in the spreadsheet have necessitated a more detailed review than would ordinarily be undertaken in order to determine the remuneration application. 8. It is convenient at this point to record that Mr Safar's submissions included an allegation that that the Liquidator "would often duplicate entries for the same task in the timesheet records". Mr Safar did not refer to a single example of the alleged duplication, and failed to comply with a direction made by the Court prior to the hearing of these proceedings requiring him to prepare and serve a copy of the Workflow Summary containing his line-by-line objections to the remuneration claim. 9. The remuneration has been calculated on the basis of time charging, at hourly rates of up to $680 per hour for the Liquidator, $545 per hour for the senior manager, $355 per hour for the senior accountant, $305 per hour for the accountant, and $210 per hour for the graduate. The hourly rates for support staff range between $140 and $220. In my experience, these rates are reasonable, in that they fall within the range commonly charged in the insolvency industry. I do not consider that it was unreasonable for the Liquidator to apply a time-based method of charging. The question remains whether the overall amount of remuneration now claimed represents reasonable remuneration for the work that has been done. I shall address that question by reference to each category of work identified in the Workflow Summary. Intercompany Loan Recovery from Property Drive and outstanding taxation lodgements [6] 1. The Workflow Summary records that this category of work was carried out between about February 2020 and August 2021 and relates principally to: 1. engaging and liaising with Sovereign Private in relation to the preparation and lodgement of outstanding tax returns; 2. obtaining and considering information from Mr Safar in relation to the calculation of management fees, and liaising with Sovereign Private in relation to the calculation of management fees and intercompany loan accounts; and 3. preparation of proofs of debt, obtaining legal advice in relation to those proofs and the underlying issues concerning the management fee and intercompany loan accounts, and the application made to the Court for directions concerning the admission of those proofs referred to at [41] above. 1. Considered individually, none of the time entries within this category appear to be unreasonable. They describe work of a kind that I accept was necessary, and that work appears to have been undertaken by a member of the Liquidator's staff of the appropriate level of seniority. However, the work relating to the proceedings referred to at [41] above appears to have been undertaken over an unduly lengthy period of time. The senior manager assisting the Liquidator was instructing solicitors about making an application to the Court for directions concerning related party proofs of debt as early as 28 September 2020, shortly before Sovereign Private completed its calculation of the 2019 financial year management fees. The process of reviewing, considering, and amending a supporting affidavit to be sworn by the Liquidator appears to have commenced in February 2021, with further work done in May and June 2021. The proceedings were commenced on about 24 June 2021, following which a supplementary affidavit was prepared. The proceedings were heard and determined within half a day on 16 August 2021, less than two months after they had been commenced. The evidence does not explain the delay between September 2020 and June 2021 in preparing the originating process and supporting affidavit. There is no apparent reason why the same work could not reasonably have been undertaken over a period of no more than three months, in which case the proceedings would most likely have been heard and determined by about the end of February 2021. Thus, the manner in which this work was done appears to have prolonged the winding up process by approximately five months from March to July 2021. I accept Mr Safar's submission that this was one cause of the delay, and resulting increase in costs, of the winding up of Wealth Street. 2. The total amount of remuneration claimed in respect of this category is $16,645. The time written off by the Liquidator is minimal. 3. I consider that the amount of $16,645 is reasonable remuneration for this category of work. The prolongation of the winding up by approximately five months is relevant to the claims for remuneration in respect of some of the other categories of work referred to below. Michael Safar Requests for Information [7] 1. As referred to at [51]–[54] above, one of the reasons propounded by the Liquidator for the time taken to wind up Wealth Street, and for the level of his remuneration claimed, is the need for his staff to spend substantial time responding to Mr Safar's requests for information, and the intercompany loan position. 2. The Liquidator's affidavit cites the examples of Mr Safar's requests for information made on 5 November 2020 and 1 July 2021. 3. On 5 November 2020, Mr Safar sent an email to the Liquidator referring to the third report to creditors dated 29 October 2020 and stating (emphasis in original): "Consider the ROCAP provided to you 10th October 2019 confirmed only the ONE realisable asset being the insurance trail commission book – you provided me clear guidance in our meeting 10th October 2019 that this liquidation would likely cost $15,000 - $20,000 so the basis for expending creditor funds in excess of $96,559 which includes the amount you seek further approval is of great concern." 1. Mr Safar's email then requested the following information in relation to the winding up of Wealth Street: "- Copy of all email and letter correspondence sent from SVP and Rydge Evans Lawyers to the Infocus Group - Confirmation of Major tasks performed between 10 October 2019 and 29 October 2020 and the costs associated with each of these tasks - As per my phone conversation with you 23rd October 2020 and phone conversation with Phillip and 7th October 2020, I was advised on both occasions that accountant has finalsied [sic] FY2019 and FY2020 financials and finalised the intercompany management fee methodology & accordingly confirmed the chargeable dollar amounts – Each of the three reports were silent on this matter in Annexure A – Accordingly please provide the management fee amounts charged between Wealth Street Pty Ltd (In Liquidation), Mortgage Land Pty Ltd (In Liquidation) and Property Drive Pty Ltd (In Liquidation) for FY2019 - Copy of SVP timesheets for all staff with sufficient descriptions of work stream performed - Costs agreements and invoices issued by Rydge Evans Lawyers and the basis for expending creditor funds in excess of $18,327 in legal fees - Copy of the two lodgements to ASIC on or around 10th April 2020 and 10th October 2020 of the SVP account detailing receipts and payments" 1. The references to "SVP" are references to the Liquidator's firm, SV Partners Insolvency (NSW) Pty Ltd. The reference to "Phillip" is a reference to Mr Phillip Christman, the senior manager who has been working with the Liquidator on the winding up of Wealth Street. 2. These were reasonable requests, in circumstances where the Liquidator was seeking creditor approval for remuneration of $27,302 for the period up to 27 September 2020 (in addition to the $25,000 that had already been paid to the Liquidator with creditor approval), plus $15,000 up to the finalisation of the winding up. The third report to creditors included only a very high level description of the fees incurred, and yet to be incurred, and stated that: "The costs of the Administration to date have been significantly larger than initially expected due to the complexity of the matter and the ongoing complications with progressing same." 1. It is not clear from the third report to creditors, or from any other evidence presently before the Court, what "ongoing complications" existed or were anticipated at the time of the report on 29 October 2020. As I have said at [64] above, there is no evidence of any reason why the Liquidator's application for directions in relation to the related company proofs of debt could not reasonably have been commenced by the end of 2020, in which case the proceedings would most likely have been heard and determined by about the end of February 2021. In that scenario, there is no evidence of any reason why Wealth Street's claim in the winding up of Property Drive would not have been paid in full promptly after the end of February 2021, and why the winding up—including any contested remuneration application—could not have been completed by no later than December 2021. I accept Mr Safar's submission, and the submissions of Mr Safar's parents, that the Liquidator unreasonably delayed finalising the winding up of Wealth Street. I reject the Liquidator's submissions that there has been no inappropriate delay. 2. According to the Liquidator's affidavit, he and his staff spent a total of 9.1 hours responding to Mr Safar's 5 November 2020 information request, for which remuneration totalling $3,297 is now claimed. A review of the entries in the Workflow Summary that the Liquidator identifies as recording this work discloses that the Liquidator and his staff spent approximately 4.2 hours collating and reviewing material to be provided to Mr Safar in response to his request and almost 3 hours "preparing" what is described as a "detailed response". There is no evidence of any response having been sent to Mr Safar's request, save for a holding response on 9 November 2020 advising that the Liquidator and his staff were in the process of gathering the information requests and expected to be able to respond by 11 November 2020, and an email from Mr Christman to Mr Safar on 11 November 2020 which simply states: "Please see attached". It appears that the documents attached to that email gave rise to some further requests from Mr Safar, but the Workflow Summary discloses that the responses to those requests took no more than 1.5 hours in total. That evidence is insufficient to discharge the Liquidator's onus of establishing the reasonableness of the sum of $3,297 claimed as remuneration for responding to Mr Safar's 5 November 2020 information request. 3. The Liquidator issued a circular to creditors on 30 June 2021. The evidence adduced in support of this remuneration application did not include a copy of the circular. After receiving the circular by email on 30 June 2021, Mr Safar sent an email to the Liquidator's firm in the following terms on 1 July 2021: "I have lost all trust, faith and confidence in the administration of each of the abovementioned companies that commenced some 629 days ago. Creditors have families to feed and bills to pay. Creditors have businesses to operate and manage through these difficult Covid times. Creditors deserve better than this. Creditors are owed a level of professionalism and a duty of care that far exceeds the treatment to date. Request for information 1) Please provide detail of when the liquidator submitted to the ATO for tax clearance in each of the abovementioned companies – itemised date for each company 2) Please provide specific date the ATO issued clearance certificate for each company. – itemised date for each company 3) Provide copy of administration books/records – specifically: - Copy of SVP timesheets for the period 10 October 2019 to 30 June 2021 - Copy of bank statements for the abovementioned companies for the period 1 December 2020 to 30 June 2021 4) Liquidator attestation that the SVP timesheets for the period 10 October 2019 to 29 October 2020 that were provided to me via email on 11th November 2020 and formed the basis for the Third Report to Creditors dated 29 October 2020 have not been altered, modified or amended 5) Liquidator attestation that ALL invoices that relate to ALL Creditors, including but not limited to A&L Safar, were provided to his office between the dates 17th October 2019 and 17th November 2019 6) Liquidator attestation that he received from me via email the ROCAP for each of the abovementioned companies on 10th October 2019 with prior his [sic] issue of Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) declaration dated 24 October 2019." 1. The Liquidator has given evidence that he and his staff spent a total of 6.2 hours considering this request, collating information requested, and preparing a response to the request between 4 and 13 July 2021, for which remuneration in the amount of $2,647 is now claimed. The Liquidator has deposed that the response "included a requirement to obtain advice from REL". Based on the terms of the request, it is not apparent to me why the Liquidator required legal advice in order to respond to the request. Nor does the evidence disclose any reason why 6.2 hours were spent in responding to the request. Items 1, 2, 4, 5, and 6 of the request sought information or confirmation ("attestation") of matters that must have been known to, or readily ascertainable by, the Liquidator and his staff. Item 3 of the request sought copies of documents that must have been in the possession of the Liquidator and his staff and could readily be produced to Mr Safar. 2. The evidence before the Court in these proceedings did not include a copy of the response sent by the Liquidator, or by REL on his behalf, to Mr Safar's request for information dated 1 July 2021. However, the evidence did include a copy of REL's invoice issued to the Liquidator for the July 2021, which records that REL charged fees totalling $2,506 for their work in reviewing the information request, advising in relation to the response, and drafting the response. 3. For the reasons explained at [76] above, the evidence adduced by the Liquidator is insufficient to discharge his onus of establishing that the amount of $2,647 is a reasonable amount of remuneration for the work done in responding to Mr Safar's 1 July 2021 information request. That is all the more so in circumstances where the Liquidator incurred legal fees totalling $2,506 in responding to this request. 4. The total amount of remuneration claimed in respect of responding to Mr Safar's information requests during the period from February 2020 to February 2022 is $12,591. The time written off by the Liquidator is minimal. For the reasons explained above, I reject the submission made on behalf of the Liquidator that many of Mr Safar's requests for information were not straightforward. That submission was not supported by a single example. For the reasons explained above, the Liquidator has failed to discharge his onus of proving the reasonableness of the remuneration claimed for responding to the 5 November 2020 and 1 July 2021 information requests that he selected as examples in his affidavit. Having regard to the matters referred to at [74] and [76] above, I consider that one quarter of the amount claimed for responding to each of those requests would represent reasonable remuneration for that work. Based on my review of the Workflow Summary items relating to this category, other requests by Mr Safar were requests for progress updates in relation to the winding up, and requests for information about statements made in reports to creditors with which Mr Safar disagreed. Doing the best that I can with the limited evidence adduced about the work involved in responding to those requests, I consider that one quarter of the amount claimed for that work would be reasonable remuneration for that work. Accordingly, the amount of remuneration fixed by the Court will include an amount of $3,148 for responding to Mr Safar's requests for information. Dealing with Michael Safar's proof of debt and rejection [8] 1. As referred to earlier in these reasons, Mr Safar submitted a proof of debt in the winding up of Wealth Street on 14 November 2019 claiming $6,826.56 by way of reimbursement for numerous Wealth Street expenses paid out of his personal funds and $50,785.73 in respect of his legal costs in the 2019 proceedings. 2. Both the contemporaneous documents exhibited to the Liquidator's affidavit and relevant entries in the Workflow Summary disclose that the Liquidator and his staff engaged in correspondence with Mr Safar concerning the expenses component of the claim, including seeking further information and supporting documents, and that the Liquidator sought and obtained legal advice concerning the legal costs component of the claim. As referred to at [49] above, Mr Safar's proof of debt was admitted in the amount of $4,480.40, representing part of the expenses claim. The legal costs component of the claim was rejected. 3. Based on my review of the Workflow Summary entries and of the contemporaneous documents referred to above, the work undertaken by the Liquidator and his staff was necessary work that was undertaken in a reasonable manner by staff with the appropriate level of seniority. The sum of $2,660.00 is a reasonable amount of remuneration for this category of work, in my opinion, even taking into account the costs of $5,168.90 incurred by the Liquidator in obtaining legal advice about Mr Safar's claim for his legal costs of the 2019 proceedings. Recovery of trail commission book held with Infocus Securities [9] 1. The total amount of remuneration claimed for this category of work is $3,302. 2. The Workflow Summary describes work performed by the Liquidator and his staff during the period from about 11 May to 28 October 2020 that is consistent with the evidence summarised at [45]–[47] above. Based on that evidence and my review of the Workflow Summary, the work undertaken by the Liquidator and his staff was necessary work having regard to the information initially provided by Mr Safar about the trail commission book, and that work was undertaken in a reasonable manner by staff with the appropriate level of seniority in the period after the Liquidator obtained a copy of the Corporate Representative Agreement on 8 March 2020. The Workflow Summary reveals that most of the work was undertaken by the senior manager and the accountant, with the Liquidator personally involved in considering the implications of Infocus Securities' advice that the agreement had been terminated. 3. In my opinion, the sum of $3,302 is a reasonable amount of remuneration for this category of work which, if the information initially provided by the directors had been correct, had the potential to lead to the realisation of a valuable asset for the benefit of creditors. Administration [10] 1. This category of work relates to what the Liquidator has described in his affidavit sworn on 15 May 2023 as routine administration of the liquidation of Wealth Street, including filings with the Australian Securities and Investments Commission (ASIC), dealing with the ATO, preparing Business Activity Statements, general correspondence, conducting file reviews and preparing checklists, planning and review, paying third party service providers, reconciling payments, preparing funds transfers, and data entry. 2. The total amount of remuneration claimed for this category of work is $14,879. The time entries in the Workflow Summary cover: 1. a period from 9 April 2020 to 9 January 2023 in relation to ASIC filings; 2. a period from 18 February 2020 to 11 November 2022 in relation to preparation and lodgement of Business Activity Statements and other dealings with the ATO; 3. a period from 6 February 2020 to 12 January 2023 in relation to bank account administration; 4. a period from 10 February 2020 to 28 April 2022 in relation to correspondence, which includes correspondence with the ATO in relation to taxation clearance, and correspondence with creditors in relation to their proofs of debt and the interim dividend paid on 9 February 2022; and 5. a period from 7 February 2020 to 8 April 2022 in relation to planning and review. 1. The Liquidator has not written off any of the time spent on ASIC filings, and on preparation and lodgement of Business Activity Statements and other dealings with the ATO. Minimal time spent on bank account administration and general correspondence has been written off. The Liquidator has written off a slightly greater amount of time spent on planning and review. 2. I am satisfied based on my review of the Workflow Summary that the work undertaken was necessary whilst the liquidation was ongoing, and that it was undertaken by staff with the appropriate level of seniority. For example, data entry and similar tasks in the bank account administration category were generally undertaken by professional support staff, whereas bank reconciliation reports were approved by the senior manager and by the Liquidator. By contrast, planning and review meetings typically involved the accountant, the senior manager, and the Liquidator. 3. However, for the reasons explained at [73] above, there is no evidence of any reason why the liquidation was not finalised by the end of 2021. Accordingly, I consider that the reasonable amount of remuneration for general administration is the amount claimed in respect of the period up to and including 31 December 2021 and, in addition, the lodgement of the ASIC Form 5602 on 5 January 2022 reporting in respect of the previous 12 month period, the work done in early 2022 to prepare and lodge the Business Activity Statement for the quarter ended 31 December 2021, and administrative work relating to the payment of the interim dividend (which was necessary work that would have been done earlier in the scenario referred to at [73]). According to my review of the Workflow Summary, this results in an amount of $11,974.50 for this category (being a reduction of $2,904.50 from the claimed amount of $14,879.00). Investigations/Litigation [11] 1. The work described in the Workflow Summary for this category of work relates principally to the steps taken in the first half of 2020 to recover all books and records of Wealth Street, the preparation and lodgement of a s 533 report with ASIC, and the preparation of this remuneration application. The work done in relation to the preparation of this remuneration application commenced in February 2022—after creditors rejected two remuneration proposals put forward by the Liquidator, as referred to at [55] above. Ultimately, these proceedings were not commenced until 13 June 2023. The Liquidator has written off most of the time relating to the preparation of the remuneration application between February 2022 and about mid-May 2022. After those write offs, the total amount of remuneration claimed for the "Investigations/Litigation" category of work is $13,246. 2. I am satisfied based on the Liquidator's evidence and my review of the Workflow Summary that the work undertaken was necessary. It was necessary for the Liquidator to take steps to obtain all of Wealth Street's books and records. The Liquidator was obliged to file the s 533 report if the criteria in that section were satisfied. In circumstances where creditors had declined to approve the remuneration claimed by the Liquidator in excess of the initial $25,000, it was necessary for the Liquidator to commence these proceedings and to prepare the necessary evidence to support the application. In the scenario referred to at [73] above, the work relating to the remuneration application should have been done during 2021, rather than in the period from May to October 2022. The work was nevertheless necessary. 3. Based on my review of the Workflow Summary, I am satisfied that all work in this category was undertaken by staff with the appropriate level of seniority. 4. Of the total amount of $13,246.00 claimed for the whole of this category of work, $9,248.50 relates to the work done during the period from May to October 2022 for the purpose of these proceedings—principally reviewing draft versions of the Liquidator's affidavit, reviewing time records to be included in the exhibit to the affidavit, and collating and reviewing other documents to be included in the exhibit. In my opinion, that amount of remuneration—which is in addition to the legal costs that the Liquidator will have incurred in connection with these proceedings—is unreasonable, having regard to the quality of the work that was produced. As I have referred to at [53]–[54] above, the Liquidator's affidavit gives an explanation for exceeding his $25,000 estimate that is internally inconsistent and therefore difficult to comprehend. As I have referred to at [55] and [64] above, the Liquidator's affidavit fails to offer any explanation for significant delays in the completion of the winding up, which plainly called for an explanation. As I have referred to at [40] and [43]–[44] above, the Liquidator's affidavit conveys the misleading impression that he undertook a "review and reconstruction" of the intercompany loan accounts, including in respect of the 2015–2018 financial years, and that the need to undertake this work rendered the winding up complex and time consuming. As I have said at [40] above, I do not suggest that the Liquidator or his legal representatives intended to mislead the Court. I accept that the more likely explanation is inadequate attention to detail in the preparation of the affidavit, which was then relied on as the basis for the preparation of submissions which were similarly misleading. Taking all of those matters into account, and also having regard to the fact that the Liquidator will have incurred and paid legal fees in respect of these proceedings in addition to the $9,248.50 claimed as remuneration, I consider that the reasonable remuneration for the work of the Liquidator and his staff in preparing for these proceedings is one quarter of the amount claimed, being $2,357. 5. The effect of my determination in relation to the component of work relating to these proceedings is that the reasonable amount of remuneration for the whole of the work in the investigations/litigation category is $6,354.50 (which represents a reduction of $6,891.50 from the claimed amount of $13,246.00). Employees [12] 1. This category of remuneration claimed relates to work done during the period between about July 2020 and March 2021 in preparing superannuation guarantee calculations and liaising with the ATO in relation to those calculations. Based on my review of the Workflow Summary, I am satisfied that the modest amount of $433 claimed is reasonable remuneration for this category of work that was necessary in the winding up of Wealth Street. Creditors [13] 1. This category of remuneration claimed relates to work done predominantly in the 2020 and 2021 calendar years in preparing reports and circulars to creditors, and considering and adjudicating on proofs of debt. There was also work done in the early months of 2022 in connection with the payment of the interim dividend to creditors. There is some overlap between the work that has been included in this category with work that has been included in the category relating to Mr Safar's proof of debt referred to above and in the dividends category referred to below. However, my review of the Workflow Summary has not identified any double counting of work. The overlap is apparent from different staff members of SVP allocating similar kinds of work to different categories. 2. Based on my review of the Workflow Summary, I am satisfied that this work was necessary, and that it was undertaken in a reasonable manner. Most of the work was undertaken by the senior manager and the accountant, who in my opinion would be the staff with the appropriate levels of experience to undertake this work. 3. Mr Safar has alleged in his submissions that there was a "repeated failure by the Liquidator to be candid in disclosure to Creditors", which had "resulted in the Liquidator billing the administration for work that is not necessary, proper or reasonable." Mr Safar did not identify any evidence in support of that submission. I therefore reject the submission as unfounded. 4. Mr Safar addressed specific criticism to the Liquidator's Declaration of Independent, Relevant Relationships and Indemnities (DIRRI) dated 24 October 2019. Mr Safar alleged that the DIRRI was misleading because it stated that the conduct of the winding up of Wealth Street and its related companies by one practitioner would lead to efficiencies in each administration and would therefore be in the best interests of creditors. Mr Safar asserts that it is clear from the Liquidator's affidavit sworn on 15 May 2023 that he was aware that it would not be possible to finalise an orderly winding up in a timely or cost-effective manner. I reject that submission, which misstates the Liquidator's evidence. As referred to at [51] above, the Liquidator realised when he gave his $25,000 remuneration estimate on 24 October 2019 that it would be necessary to investigate the accounts and management fees. The Liquidator's evidence does not suggest that he realised, at this point, that it would be more efficient to have different liquidators appointed to Wealth Street and each of its related companies. Indeed, there is no evidence that this is the case. That unfounded notion permeated all of Mr Safar's submissions. As counsel for the Liquidator submitted, the information provided in the DIRRI did not rule out the possibility that a conflict of interest may arise between Wealth Street and the related companies, and stated that the Liquidator would take appropriate action if that occurred and would keep creditors informed. That is what happened. 5. For all of those reasons, I am satisfied that the amount of $17,209 claimed is reasonable remuneration for this category of work. Dividends [14] 1. The entries in the Workflow Summary for this category describe work that relates principally to the payment of the interim dividend on 9 February 2022, and to the necessary adjudication of proofs of debt and correspondence with creditors that preceded the payment of that dividend. 2. The total amount of remuneration claimed for this category of work is $8,620.00. The amount of time written off by the Liquidator is minimal. 3. I am satisfied based on my review of the Workflow Summary that the work undertaken was necessary, and that it was undertaken by staff with the appropriate level of seniority—principally by the accountant and senior manager, with the Liquidator signing dividend cheques and reviewing and approving material correspondence to creditors. 4. In my opinion, the sum of $8,620 is a reasonable amount of remuneration for this category of necessary work. Total claim for past remuneration 1. My determinations in relation to each of the categories of remuneration claimed for past work at [63]–[105] above result in total remuneration of $70,346 for that work. Future remuneration 1. As referred to at [56] above, the Liquidator also claims remuneration in an amount of $10,000 for work that was not included in the past remuneration component of the claim, some of which is yet to be performed. In his affidavit sworn on 15 May 2023, the Liquidator has broken that estimate of future fees down into the following three categories: 1. $1,500 for work relating to creditors, including receiving and following up creditor enquiries, maintaining a creditor enquiry register, reviewing and preparing correspondence to creditors, and collating and preparing a report to creditors regarding the progress of the liquidation; 2. $5,000 for work relating to these proceedings, including instructing solicitors and attending court for the hearing of the remuneration application, gathering information to support the remuneration application, and liaising with solicitors regarding the proceedings; and 3. $3,500 for administration, including general correspondence, preparation of general file notes, updating checklists, strategy meetings and discussions regarding the status of the administration, filing documents, conducting bank account reconciliations, preparing and lodging ASIC forms, notifying the ATO of the finalisation of the liquidation, completing all ASIC filing requirements regarding the finalisation of the liquidation, and deregistering the company. 1. I do not consider that it is reasonable for the Liquidator to receive further remuneration relating to creditors. No further work in relation to creditors would be required at this time if the liquidation had been completed within a reasonable time frame. For the reasons explained at [73] above, there is no evidence of any reason why the liquidation could not reasonably have been completed by no later than December 2021. 2. Any further work done by the Liquidator and his staff in relation to these proceedings that is not included in the claim referred to at [94] above did not address the material deficiencies in the evidence there referred to. If the Liquidator or one of his staff attended the hearing of the proceedings (in person or remotely), that did not produce any discernible benefit to the conduct of the proceedings. In particular, counsel for the Liquidator was unable to answer the questions that I asked during the hearing about why the Liquidator had considered it necessary to recalculate past management fees, and whether that work was in fact necessary. Counsel was unable to address those questions even after I adjourned to allow time for counsel to take instructions. Those instructions should have been promptly forthcoming if the Liquidator or one of his staff had been in attendance at the hearing (or providing instructions by telephone) and performing their role competently. Taking all of those matters into account, the Liquidator has not discharged his onus of proving that it is reasonable for him to receive further remuneration for work relating to these proceedings in addition to the remuneration allowed at [94] above. 3. I accept that the Liquidator and his staff may be required to make a further distribution to creditors, notify the ATO of the finalisation of the liquidation, complete all ASIC filing requirements regarding the finalisation of the liquidation, and deregister the company. I accept that the Liquidator's estimate of $3,500.00 represents reasonable remuneration for this administrative work. In circumstances where there is no evidence explaining why the liquidation was not completed by December 2021, I do not consider that the Liquidator is reasonably entitled to remuneration in excess of this sum for matters such as "general correspondence", "general file notes", "strategy meetings", and "discussions regarding the status of the administration", which would not be necessary at this time if the winding up had been conducted with an appropriate degree of expedition. Conclusion 1. For all of the reasons above, there will be orders fixing the Liquidator's past remuneration in the sum of $70,346, and future remuneration in an amount of up to $3,500. 2. This will take the Liquidator's total remuneration to $98,846, including the sum of $25,000 previously approved by creditors. That represents approximately 38.06 per cent of the total recoveries of $259,706 (or 60.77 per cent of the recoveries of $162,654, excluding the cash at bank as at the date of the Liquidator's appointment). The total remuneration represents a relatively high proportion of total recoveries. However, I do not consider that it is disproportionate to recoveries in circumstances where the intercompany loan accounts did require investigation, and it was necessary for the Liquidator to apply to the Court for directions in relation to the related company proofs of debt. 3. There may be a modest further distribution to creditors. That will depend on the extent to which the Liquidator considers that the legal costs that he has incurred in respect of these proceedings have been reasonably incurred, and whether the amount of legal costs are no more than is fair and reasonable in the circumstances, including having regard to my observations at [94] above. [15] To the extent that the Liquidator is satisfied that the costs were reasonably incurred, and that they are in a fair and reasonable amount, he is entitled to pay those disbursements out of the assets of Wealth Street. The order sought in prayer 3 of the originating process that the costs of the proceedings be paid out of those assets is neither necessary nor appropriate. 4. The orders of the Court are as follows: 1. Order pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) that the remuneration that the Plaintiff is entitled to receive for necessary work properly performed by him as Liquidator of the Defendant is determined in the amount of $70,346 plus GST (in addition to the amount of $25,000 plus GST previously approved by creditors of the Defendant and paid). 2. Order pursuant to s 60-10(1)(c) of the Insolvency Practice Schedule (Corporations) that the Plaintiff is entitled to receive further remuneration in an amount of up to $3,500 (plus GST) for additional necessary work to be performed by him as Liquidator of the Defendant up to and including the finalisation of the winding up of the Defendant. ********** Endnotes 1. (2017) 93 NSWLR 459; (2017) 343 ALR 524; (2017) 118 ACSR 333; (2017) 35 ACLC 17-004; (2017) 13 BFRA 1; [2017] NSWCA 38 at [54]-[60] (Bathurst CJ, Beazley P, Gleeson and Barrett JJA, and Beach AJA agreeing). 2. [2020] NSWSC 901 at [38]. 3. [2020] VSC 555 at [69] (citations omitted). 4. See above at [2]. 5. See below at [48]–[49]. 6. Lines 4–138 of the Workflow Summary. 7. Lines 142–225 of the Workflow Summary. 8. Lines 228–252 of the Workflow Summary. 9. Lines 255–287 of the Workflow Summary. 10. Lines 292–624 of the Workflow Summary. 11. Lines 628–668 of the Workflow Summary. 12. Lines 673–679 of the Workflow Summary. 13. Lines 683–765 of the Workflow Summary. 14. Lines 768–818 of the Workflow Summary. 15. Legal Profession Uniform Law (NSW), s 172. Part 2 of the Legal Profession Uniform Law Application Act 2014 (NSW) applies the Legal Professional Uniform Law as set out in Schedule 1 of the Legal Profession Uniform Law 2014 (Vic) as a law of New South Wales. 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: 01 December 2023