In the matter of CB Constructions (NSW) Pty Ltd [2014] NSWSC 913

Supreme Court New South Wales

Medium Neutral Citation: In the matter of CB Constructions (NSW) Pty Ltd [2014] NSWSC 913 Hearing dates: 26 February 2014 Decision date: 26 February 2014 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Order made for application to be dismissed. Catchwords: CORPORATIONS - winding up - remuneration of provisional liquidator - where provisional liquidator made inconsistent claims for amount of remuneration - whether provisional liquidator has established entitlement to remuneration. Legislation Cited: - Corporations Act 2001 (Cth) ss 473, 473(10), 1322 - Supreme Court (Corporations) Rules 1999 (NSW) r 9.3 Cases Cited: - Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 - Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 Category: Interlocutory applications Parties: John Baird (Plaintiff) CB Constructions (NSW) Pty Ltd (Defendant) Representation: Counsel: J T Johnson (Plaintiff) Solicitors: Sally Nash & Co (Plaintiff) File Number(s): 2009/288487

Judgment - ex tempore 1By Interlocutory Process dated 12 November 2013, the applicant, Mr Ashton Brailey, in his capacity as provisional liquidator of CB Constructions (NSW) Pty Ltd (in liq) ("Company"), applies under ss 473 and 1322 of the Corporations Act 2001 (Cth) and r 9.3 of the Supreme Court (Corporations) Rules 1999 for orders that his remuneration as provisional liquidator be determined by the Court for the period 4 May-25 May 2009. It appears that that was the entire period of Mr Brailey's appointment as provisional liquidator, since he was appointed as provisional liquidator on the former date and as liquidator on the latter date. 2The evidence as to the quantification of Mr Brailey's remuneration is profoundly confusing and has not become clearer notwithstanding that this matter has now twice been listed before this Court. On 18 September 2013, Mr Brailey advised the committee of inspection that he would be making an application to the Court for approval of his fees of $17,528 including GST of $1,593 and approval from the committee was requested for those fees and an insurance disbursement of $5,567.09. Although it is not entirely clear, the form of the minute of that meeting appears to suggest the amount of the insurance disbursement was additional to, rather than included in the amount of fees for which approval was sought. That resolution was approved by the committee of inspection. Mr Johnson who appears for Mr Brailey properly acknowledges that ultimately the approval of a provisional liquidator's remuneration is a matter for the Court. 3By the time the application was made, the amount for which approval was sought had significantly changed. By Interlocutory Process dated 12 November 2013, approval was sought for the amount of Mr Brailey's remuneration now quantified as $4,920.20 including GST and the insurance of $6,123.80 including GST totalling $11,044.00. By this point, the amount of remuneration claimed by Mr Brailey had significantly reduced without explanation and the amount of insurance claimed was largely of the same order, at least if the calculation previously put to the committee of inspection was exclusive of GST. By the time the matter was first listed before me, on 18 December 2013, the amount of remuneration for which approval had been sought had again changed now to the amount of $15,935 plus GST. This was, of course, significantly greater than the amount claimed in the Interlocutory Process. 4The application was supported by an affidavit of Mr Brailey dated 24 October 2013. His evidence is that orders made by the Court on 4 May 2009 appointing him as provisional liquidator and 25 May 2009 appointing him as liquidator did not approve his remuneration as provisional liquidator and the Australian Securities and Investment Commission ("ASIC") had drawn that matter to his attention. In particular, by letter dated 8 April 2013, ASIC had raised a concern Mr Brailey had drawn down remuneration of $15,401 exclusive of GST for the period of provisional liquidation without court approval under s 473 of the Corporations Act. ASIC had also attached a schedule to its letter indicating the make up of the amounts drawn down. Mr Brailey's solicitors had responded by letter dated 6 May 2013 foreshadowing an application to the Court for approval of Mr Brailey's remuneration and noting he had relied on his former solicitors to obtain such orders at the conclusion of the proceedings. 5Mr Brailey gives evidence as to the nature of the Company's business and his role as provisional liquidator, which was to seek to preserve the Company's assets, plant and equipment, which included large and expensive heavy earthmoving machines. Mr Brailey annexes a printout of the work performed, for the costs of which he now seeks the Court's approval and he sets out the experience of the persons who worked on the matter and his charge out rates. The amounts in the relevant schedule are not totalled by Mr Brailey, so it is not readily possible to compare them with the totals for which approval was sought. In paragraph 12 of that affidavit, Mr Brailey stated the amount of his remuneration claimed as provisional liquidator was $4,472.92 plus GST, although the amounts included in the attached printout appear to significantly exceed that amount. He also referred to a disbursement in the nature of the insurance of $6,123.79 including GST, for a total of $11,044 inclusive of GST, broadly consistent with the amount originally sought by the Interlocutory Process and indicated the winding up had been completed and all creditors paid in full. 6Mr Brailey noted that notice of his hourly charge out rates had been provided to creditors as an attachment to a notice of meeting of creditors in May 2009 and the committee of inspection had subsequently approved the liquidator's (as distinct from the provisional liquidator's) fees. Mr Brailey also points to his advice to the committee of inspection that he would be seeking Court approval for his fees in the amount of $17,528 to which I have referred above, and which included the insurance disbursements. 7Subsequently, by letter dated 9 December 2013, ASIC again wrote to Mr Brailey's solicitors in respect of the material which had been served in respect of this application and indicated concerns as to inconsistencies in the quantum of the remuneration claimed. ASIC noted its calculation of the amount in Mr Brailey's work in progress ledger, exhibited to his affidavit, was $15,935 inclusive of GST, significantly more than the amount of remuneration initially claimed in the application and noted that that amount was also different from the amount of remuneration previously drawn down by Mr Brailey. ASIC raised several specific questions seeking explanation of those matters, to which Mr Brailey's legal representatives did not, with respect, substantively respond in their response to ASIC's letter. 8At the initial hearing of this application before me, Mr Brailey sought to increase the amount of remuneration claimed to be set out in his work in progress ledger of $15,935 as calculated by ASIC, now not including insurance, more than $11,000 more than the amount for which approval had originally been sought. It then emerged that Mr Brailey's supporting affidavit had not been served on contributories, as required by r 9.3 of the Supreme Court (Corporations) Rules, and the matter was adjourned to allow Mr Brailey an opportunity to address these matters. 9Mr Brailey has done so only in part by further evidence now led before me. He gives evidence by his affidavit dated 30 January 2014 that he served a notice of intention to apply for remuneration and his affidavit dated 24 October 2013 on contributories. That affidavit, as I noted above, expressly indicated his claim for remuneration was $4,472.92 plus GST. Contributories had also been provided with copies of ASIC's letter pointing to the difficulties with that calculation and his solicitors' response to it, to which I have referred above. Mr Brailey did not, so far as the evidence goes, advise contributories of the fact he was now seeking to increase the amount of remuneration claimed to that calculated by ASIC or seek to explain to contributories the various inconsistent quantifications of the amounts claimed. Contributories who read the material provided to them would, in my view, have been at best bewildered. 10Mr Brailey also makes no attempt to explain to the Court, by further evidence, how the various inconsistent calculations of the remuneration have arisen. It is one thing to say, as Mr Johnson implicitly does in submissions, that they are the result of error. However, some further explanation might well be expected as to how a provisional liquidator would make errors of this magnitude in calculations of this kind. 11Mr Johnson submits the notice of application has been given to contributories and it appears there has been no response from them. Mr Johnson notes that Mr Brailey's claim (as amended) is now calculated by reference to ASIC's calculation of his work in progress. That, of course, has the difficulty, which I raised with Mr Johnson when the matter was last before me, that ASIC was not purporting to calculate the amount of remuneration to which Mr Brailey was entitled, but only pointed out, correctly, that Mr Brailey's records were inconsistent with the amount he claimed. In particular, ASIC had not sought to verify that Mr Brailey had done the work which was recorded in his work in progress ledger, or to form any view as to whether that work was reasonable, and Mr Brailey's evidence does not address the amended calculation so as to do so. Mr Johnson also submits, although Mr Brailey does not give evidence as to this matter, that his earlier drawing of remuneration "on account" was on the basis of an assumption that it would be authorised. Mr Johnson submits it would be open to the Court to fix the amount of Mr Brailey's remuneration as $15,935 plus GST for a total of $17,528. 12Turning now to the applicable legal principles, a provisional liquidator is plainly entitled to fair and reasonable remuneration. However, it is a matter for the provisional liquidator to establish the amount of that entitlement: Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 102; Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 at [24]. The Court has power to fix a provisional liquidator's remuneration under s 473 of the Corporations Act, and s 473(10) specifies matters to which the Court must have regard in determining whether such remuneration is reasonable, which include the extent to which the work performed was reasonably necessary; the period within which it was performed; the complexity of the work performed; the value and nature of any property dealt with or likely to be dealt with; the number, attributes and behaviour of the company's creditors; if the remuneration is ascertained, in whole or in part, on a time basis, the time properly taken in performing the work; and any other relevant matters. The Court, constituted by a judge, will typically deal with matters of principle rather than conducting a review of quantum. If the Court determines that it is appropriate to fix the remuneration, then the usual course is for the question of the particular quantum of that remuneration to be referred to a registrar in order to determine that amount. 13In this case, it appears that Mr Brailey did work as a provisional liquidator which would, in the ordinary course, warrant a claim for remuneration. However, I am not satisfied that Mr Brailey has established that entitlement. The Court has been presented with a range of inconsistent claims for remuneration which Mr Brailey does not seek to explain by evidence. I have pointed to the various competing figures above. Mr Brailey's evidence also does not provide any basis to determine whether the amount now claimed, as amended, was necessary or to address the factors specified in s 473(10) of the Corporations Act in respect of that amended claim. These gaps in the evidence remain although the matter has already been adjourned once to allow them to be filled. 14I am not satisfied, on the evidence, that I should approve either the remuneration initially claimed or the larger amount now claimed. I am also not prepared to refer the matter to a registrar, where the evidence before the Court does not seem to me to be sufficiently coherent to allow any decision to be made by the registrar on such a reference. In these circumstances, the proper order is simply that the application be dismissed. If Mr Brailey seeks to bring a further application, it will need to be supported by appropriate evidence explaining the discrepancies to which I have referred above.