FEDERAL COURT OF AUSTRALIA

White, in the matter of Macro Realty Developments Pty Ltd and Macro Realty Pty Ltd [2019] FCA 1377

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to section 473(2) of the Corporations Act 2001 (Cth) (Corporations Act) the First Applicants remuneration for work undertaken by them in their capacity as provisional liquidators of Macro Realty Developments Pty Ltd (in liquidation) (CAN 159 678 930) (MRD) for the period 14 March 2017 to 30 May 2017, be fixed in the sum of $122,470.00 (plus GST).

2.    Pursuant to section 473(2) of the Corporations Act the First Applicants remuneration for work undertaken by them in their capacity as provisional liquidators of Macro Realty Pty Ltd (in liquidation) (ACN 143 381 060) (MR) for the period of 14 March 2017 to 30 May 2017, be fixed in the sum of $54,762.50 (plus GST).

3.    Pursuant to section 473(3) of the Corporations Act, the Second Applicants’ remuneration for work undertaken by them in their capacity as liquidators of MRD for the period 30 May 2017 to 26 January 2018, be fixed in the sum of $164,047.50 (plus GST).

4.    The Second Applicants be excused from complying with rules 9.4(2) or 9.4(3) of the Corporations Rules.

5.    Pursuant to rule 10.44(3) of the Federal Court Rules, service on Beng Ong Kok and Julie Ng Siew Min was effective.

6.    The costs of and incidental to the application be costs in the winding up.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MCKERRACHER J:

INTRODUCTION

1    An application was filed by the former provisional liquidators and current court appointed liquidators of Macro Realty Developments Pty Ltd (in liquidation) (MRD) and Macro Realty Pty Ltd (in liquidation) (MR) for determination and approval of:

(1)    their remuneration in relation to the provisional liquidations of MRD and MR; and

(2)    their remuneration in relation to the liquidation of MRD.

2    For the reasons which follow, I made orders approving the remuneration sought by the applicants.

BACKGROUND

3    The Macro group of companies (Macro Group) previously carried on a business involving the acquisition and development of property holdings in Western Australia’s Pilbara region for the purpose of establishing more permanent accommodation for the region’s mining workforce. The Macro Group was largely debt funded by non-traditional financiers and private investors, the majority of whom were based overseas.

4    Following various investor complaints in early 2016, the Australian Securities and Investments Commission (ASIC) commenced an investigation into the Macro Group.

5    On 17 February 2017, ASIC commenced proceedings in this Court (WAD73/2017). On 14 March 2017, the applicants were appointed as provisional liquidators of six companies in the Macro Group, including MRD and MR.

6    On 30 May 2017, on the application of ASIC, the applicants were appointed by the Court as liquidators of those same six companies, including MRD and MR: Australian Securities and Investments Commission v Macro Realty Developments Pty Ltd [2017] FCA 642.

7    Subsequently, in the period between May 2017 and July 2017, variously on the application of ASIC and creditors of the Macro Group, the applicants were appointed as liquidators to an additional 72 companies within the group.

8    Since their initial appointment, the applicants have undertaken considerable work, not just in the provisional liquidations of MRD and MR, and the liquidation of MRD, but also in relation to the liquidation of the broader Macro Group. To date, no remuneration has been approved or paid to the applicants in relation to the external administration of the Macro Group companies. No committees of inspection have been appointed in any of the liquidations of the Macro Group companies.

9    The majority of the Macro Group companies in liquidation have no funds. However, the liquidations of MRD and MR have funds available, and the applicants have commenced these proceedings to seek orders to allow them to apply those funds towards their outstanding remuneration as provisional liquidators of those companies and as liquidators of MRD.

THE APPLICATION

10    The former s 473 of the Corporations Act 2001 (Cth) has been repealed and replaced by provisions contained the Insolvency Practice Schedule (Corporations), forming Sch 2 to the Act. However, s 473 continues to apply to appointments made prior to 1 September 2017: Morgan, in the Matter of Brighton Hall Securities Pty Ltd [2018] FCA 2029 (at [7]-[11]).

11    Accordingly, as the relevant appointments occurred prior to 1 September 2017, this application has been brought under the former s 473 of the Act and former r 9.3 and r 9.4 of the Federal Court (Corporations) Rules 2000 (Cth). By their minute of proposed orders, the applicants seek:

1.    Pursuant to section 473(2) of the Corporations Act 2001 (Cth) (Corporations Act) the First Applicants remuneration for work undertaken by them in their capacity as provisional liquidators of Macro Realty Developments Pty Ltd (in liquidation) (CAN 159 678 930) (MRD) for the period 14 March 2017 to 30 May 2017, be fixed in the sum of $122,470.00 (plus GST).

2.    Pursuant to section 473(2) of the Corporations Act the First Applicants remuneration for work undertaken by them in their capacity as provisional liquidators of Macro Realty Pty Ltd (in liquidation) (ACN 143 381 060) (MR) for the period of 14 March 2017 to 30 May 2017, be fixed in the sum of $54,762.50 (plus GST).

3.    Pursuant to section 473(3) of the Corporations Act, the Second Applicants’ remuneration for work undertaken by them in their capacity as liquidators of MRD for the period 30 May 2017 to 26 January 2018, be fixed in the sum of $164,047.50 (plus GST).

4.    The Second Applicants be excused from complying with rules 9.4(2) or 9.4(3) of the Corporations Rules.

5.    Pursuant to rule 10.44(3) of the Federal Court Rules, service on Beng Ong Kok and Julie Ng Siew Min was effective.

6.    The costs of and incidental to the application be costs in the winding up.

THE EVIDENCE

12    The applicants read four affidavits in support of the relief sought in their minute:

    the affidavit of Hayden Leigh White, sworn 18 June 2019 (the White Affidavit);

    the affidavit of Tegan Esther Healey, sworn 19 June 2019;

    the affidavit of Tegan Esther Healey, sworn 16 August 2019; and

    the affidavit of Tegan Esther Healey, sworn 19 August 2019.

13    These affidavits provide evidence of:

    the work carried out by the provisional liquidators of MRD and MR, and the liquidators of MRD;

    the reports provided by the provisional liquidators and liquidators to creditors;

    the remuneration claimed by the applicants and itemised accounts (by way of detailed time entries) in relation to the claimed remuneration;

    the basis for the view formed by the applicants that it would not be practically possible to convene a meeting of creditors of MRD to consider and approve the remuneration of the liquidators of MRD;

    service of notice of this application on the 5 largest creditors of MRD and MR, and on the shareholders of MRD and MR holding more than 10% of the issued capital of those companies; and

    service of this application on ASIC and confirmation by ASIC that it neither consents to nor opposes the application and does not seek to be heard.

14    In relation to the applicants’ submission that it would not be practically possible to convene a meeting of creditors of MRD, the applicants rely on the evidence contained in the White Affidavit. In relation to this point, Mr White deposes (at [33]-[40]):

Costs of convening a creditors meeting

33    The Liquidators together with our staff, conducted an assessment of the likely costs and issues arising from convening a meeting of MRD’s creditors for the purposes of approving our remuneration pursuant to s 473(3)(b)(i) of the [Act].

34    As a result of our assessment, the Liquidators have formed the view that:

   34.1    there are likely in excess of 1,800 creditors of MRD;

34.2    we have not been able to locate a reliable or complete database of all MRD’s creditors, and we have formed the view that it is unlikely such a database exists;

34.3    despite our best efforts since the Orders, we have not been able to compile a comprehensive list of all MRD’s creditors; and

34.4    we have obtained reliable contact details for approximately 405 creditors.

35    We have identified a significant spread in the geographical locations of the creditors of MRD. Annexed to this affidavit and marked “HLW-12” is a schedule my staff prepared summarising the locations of creditors we have so far identified.

36    As the schedule demonstrates:

36.1    a significant proportion of MRD’s creditors (in number) are located in Malaysia and Singapore;

36.2    the most significant proportion of MRD’s creditors (in value of debt) are located in Australia:

36.3    there are also a significant number of creditors in both value and number located in the UK and other international destinations; and

36.4    there is no readily discernible central or convenient geographic location amongst the creditors in either number or value of debt at which a creditors meeting could be held.

37    The Liquidators formed the view that Singapore would likely be the least inconvenient location for creditors to attend a creditors meeting.

38    Based on the Liquidators’ preliminary estimate, the costs of convening and holding a creditors’ meeting in Singapore including renting an appropriate meeting room, preparing and circulating the necessary documentation, and administration throughout the meeting would likely exceed $65,000. Annexed to this affidavit and marked “HLW-13” is a schedule my staff and I have prepared setting out our calculations of the estimated cost of convening and holding a creditors’ meeting in Singapore.

39    In addition to this estimate, I believe that:

39.1    there would be additional costs of arranging video conferencing or teleconferencing facilities for international creditors who could not attend a meeting Singapore;

39.2    creditors who sought to attend in person may be required incur significant personal costs in circumstances where the likely dividend to unsecured creditors will be nil or negligible;

39.3    there may be significant time costs arising from the need to adjudicate creditor claims for the purposes of voting at the meeting on the date of the meeting itself, many of which claims may not be presented until the actual meeting;

39.4    the poor state of the MRD’s records means we may need to rely heavily on creditors providing adequate supporting documentation to authenticate their debts, and as a result, significant time would be spent liaising with creditors and attending to their queries;

39.5    we have identified significant language barriers amongst international creditors, which would likely further result in the need for expenses arising from translation services at a meeting;

39.6    cultural and legal differences amongst creditors from multiple distinct legal jurisdictions would likely delay the meeting process, including so that the applicable rights, duties, obligations, processes and procedures under Australian law could be adequately explained to international creditors;

39.7    the issues identified above will likely cause further time delays (with resulting increases in costs); and

39.8    we anticipate we would require significant contemporaneous legal and accounting advice in addition to administrative and logistical assistance to address these issues (and further complications likely to arise in the course of any meeting).

40    Further, with regard to the costs and issues previously identified, significant geographical, legal and linguistic distinction amongst creditors, the Liquidators formed the view that a creditors’ meeting is not likely an effective means of:

40.1    communicating creditors’ rights to them regarding the liquidation of MRD and approval of our remuneration;

  40.2    adjudicating creditors’ claims;

  40.3    accurately relaying our findings to creditors; and

40.4    obtaining a meaningful consensus concerning approval of our remuneration.

15    Annexure HLW-12 sets out the following table:

Geographical locations of creditors of MRD

16    Annexure HLW-13, setting out the calculations of the estimated costs of convening and hold a creditors meeting in Singapore, estimates the combined costs of professional fees and disbursements of $66,875.

THE PRINCIPLES

17    This application raises three separate issues:

    the determination of MRD and MR provisional liquidators’ remuneration;

    the determination of MRD liquidators’ remuneration; and

    the notice and service of the remuneration applications.

It is convenient to address each in turn.

Determination of provisional liquidator remuneration

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

19    The onus is on the provisional liquidator to establish that the remuneration claimed is fair and reasonable. The Court’s task is to then form a view on whether the provisional liquidator has made out a prima facie case for the determination of the amounts claimed. Creditors and contributories must be given an opportunity to be heard, but if there is no objection, and if the provisional liquidator has made out a prima facie case, then fair and reasonable remuneration should be allowed: Morgan (at [17]-[22]), citing Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96.

20    Regarding the evidence to be adduced, there is no strict rule. However, the overriding point is that sufficient information must be provided so that the Court can discharge its statutory function of determining the provisional liquidator’s remuneration.

21    That being said, r 9.3(7) of the Corporation Rules provides that a provisional liquidator must file an affidavit that at least states the nature of the work performed and the amount of remuneration claimed and r 9.3(8) of the Corporation Rules provides that the affidavit must also provide evidence of the matters mentioned in s 473(10) of the Act to the extent that they are relevant to the provisional liquidation and as if the references to ‘liquidator’ in that section were references to ‘provisional liquidator’.

22    Section 473(10) of the Act provides:

473    General provisions about liquidators

…

(10)    In exercising its powers under subsection (3), (5) or (6), the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:

(a)    the extent to which the work performed by the liquidator was reasonably necessary;

(b)    the extent to which the work likely to be performed by the liquidator is likely to be reasonably necessary;

(c)    the period during which the work was, or is likely to be, performed by the liquidator;

(d)    the quality of the work performed, or likely to be performed, by the liquidator;

(e)    the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator;

(f)    the extent (if any) to which the liquidator was, or is likely to be, required to deal with extraordinary issues;

(g)    the extent (if any) to which the liquidator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

(h)    the value and nature of any property dealt with, or likely to be dealt with, by the liquidator;

(i)    whether the liquidator was, or is likely to be, required to deal with:

(i)    one or more receivers; or

(ii)    one or more receivers and managers;

(j)    the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;

(k)    if the remuneration is ascertained, in whole or in part, on a time basis:

(i)    the time properly taken, or likely to be properly taken, by the liquidator in performing the work; and

(ii)    whether the total remuneration payable to the liquidator is capped;

   (l)    any other relevant matters.

Determination of liquidator remuneration

23    Section 473(3) provides:

473    General provisions about liquidators

…

(3)    A liquidator is entitled to receive such remuneration by way of percentage or otherwise as is determined:

(a)    if there is a committee of inspection—by agreement between the liquidator and the committee of inspection; or

(b)    if there is no committee of inspection or the liquidator and the committee of inspection fail to agree:

(i)    by resolution of the creditors; or

(ii)    if no such resolution is passed—by the Court.

…

24    There are two lines of authority regarding committees of inspection and meetings of creditors to determine remuneration of liquidators.

25    There is authority to the effect that it is in essence a prerequisite that a liquidator must seek to have either the committee of inspection (if there is one) or the creditors determine their remuneration before applying to the Court: Re Interchase Co Ltd (In Prov Liq) (1993) 44 FCR 501 per Drummond J (at 502-503, 506) and Re Ricki Pty Ltd [2015] NSWSC 2048 per Brereton J (at [2]).

26    Rule 9.4(2)(b) of the Corporation Rules also provides that an application for determination of a liquidator’s remuneration under s 473(3)(b)(ii) in this Court must not be made until after the date of the meeting of creditors mentioned in s 473(4) of the Act. However, r 9.4(3)(c) of the Corporation Rules also provides for a mode of service of the notice of the remuneration application if there is no committee of inspection and no meeting of creditors has been convened and held.

27    In contrast, there is also authority confirming that a court may determine a liquidator’s remuneration where no committee of inspection was held and where it was not practically possible to convene a meeting of creditors to determine the liquidator’s remuneration: Re Earning Pty Ltd (in liq) [2019] VSC 152 per Matthews JR (at [25]) and Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd [2012] VSC 71 per Gardiner AsJ (at [7]). See also Re Walker as liq of One.Tel Ltd (2005) 189 FLR 467 (at [11], [25]-[34]) and Re Perdives Pty Ltd [2015] QSC 230 (at 321).

28    In Park v Whyte (No 2) [2018] 2 Qd R 413, Jackson J observed (at [58]):

In the case of a winding up by the court, where there is no agreement between the liquidator and any committee of inspection or resolution of the creditors, a liquidator appointed by the court is entitled to receive remuneration as is “determined” by the court: s 473(3)(b)(ii) CA.

See also Re Melbourne Co-Operative Book Shop Ltd (in liq) [2015] VSC 69 per Sifris J (at [6]).

29    In Deputy Commissioner of Taxation v Starpicket Pty Ltd (No 2) [2013] FCA 699, while a judge of this Court, Gordon J noted:

10    In this case, no committee of inspection was appointed by the creditors, nor was there any resolution of creditors fixing the Liquidator’s remuneration. That fact notwithstanding, the Court has jurisdiction to fix remuneration of the Liquidator pursuant to s 473(3)(b)(ii) of the [Act]: see Barbo Group Pty Ltd v Investment and Construction Enterprise Pty Ltd [2012] VSC 71 at [7].

11    Rule 9.4 of the Federal Court (Corporations) Rules 2000 (Cth) (the Corporations Rules) stipulates that an application under s 473(3)(b)(ii) of the [Act] must be made by interlocutory process in accordance with Form 3 in the winding up proceeding: r 9.4(2)(a). Rule 9.4(3) requires the Liquidator to serve notice of its intention to apply for such an order in accordance with Form 16 at least 21 days before filing the interlocutory process.

12    The Liquidator accepts that no such notice or application, compliant with the requirements of r 9.4, has been filed in these proceedings. Nevertheless, both the Liquidator and the Commissioner submitted that it is permissible and appropriate for the Court to make an order fixing the Liquidator’s remuneration (and disbursements) in connection with the liquidation of Starpicket. Neither Starpicket nor the Scotts opposed that submission.

13    The Court has a general power under r 1.32 of the Rules to make any order that the Court considers appropriate in the interests of justice. Following the 31 October 2012 Orders, the parties with an interest in the question of the Liquidator’s remuneration in connection with the liquidation of Starpicket were on notice that the Court would be making a determination with respect to that issue and were afforded the opportunity to be heard. The Liquidator filed affidavit material in support of his claims on 3 December 2012. The relevant parties had ample time and opportunity to respond. In these circumstances, it is fair and just to dispense with the requirement for the Liquidator to make a formal application for his remuneration under s 473(3)(b)(ii) of the [Act].

(Emphasis added.)

30    The rationale behind this approach is that while the persons who are financially interested in the outcome of the liquidation are entitled to be consulted whenever it is practically feasible to do so, the Court must have jurisdiction to determine a liquidator’s remuneration where the explicit power to fix a liquidator’s remuneration proves to be practically incapable of being exercised or where there is some other creditors’ rejection, deadlock or paralysis that otherwise practically precludes resolution prior to court application. As Black J noted in Re Hunter Valley Dental Surgery Pty Ltd [2017] NSWSC 1144 (at [21]):

…Section 473(3)(b)(ii) of the [Act] provides for the liquidator to receive remuneration determined, inter alia, by the Court, if, relevantly, the committee of inspection and the liquidator fail to agree by resolution of creditors the amount of that remuneration. In this case, no such agreement has been reached, although that failure reflects, not a lack of consensus so far as the majority creditor is concerned, but the practical difficulties in convening a meeting of creditors in circumstances that all parties’ interests will be served by the termination of the winding up occurring promptly, so that further costs of the liquidator are avoided.

(Emphasis added.)

31    In the first line of cases no exception appears to be contemplated or at least referred to (although in Re Interchase, Drummond J did confine his observations to ‘in the circumstances that exist here’). Whereas in the second line of authorities there are some exceptions acknowledged. There is clear authority, albeit under former legislation, that absent a committee of inspection approval, a creditors meeting must be called at least unless to do so, on clear evidence before the court, would not be practicable in the circumstances: see Re Molyneux Aluminium Pty Ltd [1970] VR 456 per Lush J (at 457) followed by White M in Re Sectam Pty Ltd (1990) 8 ACLC 476. I think this necessarily would be a rare case. See also Re Norfolk Island Airlines Pty Ltd (in liq) (1991) 5 ACSR 430 and Re Spedley Securities (unreported, Supreme Court of New South Wales, Kearney J, 25 November, 1991).

32    Although some of these authorities are not particularly recent, I consider that they are consistent with the current text and purpose of the legislation. It seems to me that in a rare case where the Court is persuaded that it is impracticable to convene a meeting of creditors, it may approve the remuneration claim. It has certainly done so in the recent and not so recent past. In such a rare case not only would the impracticability be a key factor, but what also may be relevant is the nature of the notice to the creditors and their response (if any), the opportunity afforded to object, and other measures taken to ensure clear and open communications with the creditors likely to be affected by the remuneration claim.

33    Further, the cases illustrate that the circumstances which may bring a liquidator to the Court to seek orders fixing their remuneration may vary widely. There may be ‘no known current creditors’: Re Earning (at [25]). It may be that all creditors of the company have been paid ‘100 cents in the dollar and in that sense are no longer creditors’: Re Perdives. It may be, such as the application presently before this Court, that there exists genuine ‘practical difficulties in convening a meeting of creditors’: see Hunter Valley Dental Surgery (at [21]). It is because these variety of possible impediments to satisfying s 473(3)(a) and s 473(3)(b)(i) that the power is conferred on the Court by s 473(3)(b)(ii). While this is not to say that liquidators should be readily encouraged to apply to the Court to seek orders in respect of their remuneration and thereby circumvent the primary processes contemplated, it is a recognition that rare circumstances may arise where the impediments are such that it is in the interests of justice that the Court fixes a liquidator’s remuneration.

34    Rule 1.8 of the Corporation Rules provides for a power for this Court to give directions in relation to the practice and procedure to be followed in a proceeding in certain circumstances, including if difficulty arises in relation to practice and procedure. I am satisfied this power extends to excuse any non-compliance with r 9.4(2)(b) if the Court is satisfied that it is appropriate to do so in the circumstances: see Hayes, in the matter of Henry Walker Eltin Group Limited (subject to deed of company arrangement) (No 2) [2014] FCA 30.

35    In the event that the Court has jurisdiction to hear the remuneration application under s 473(3)(b)(ii), s 473(10) then provides that in exercising its power under s 473(3), the Court must have regard to whether the remuneration is reasonable and then sets out a number of factors that the Court may take into account (as identified above).

36    Otherwise, the principles applicable to the Court’s assessment of the approval of liquidators’ remuneration are settled. For example, in Morgan, it was noted (at [17]-[22]):

17    It is well settled that the onus is on the liquidator to establish that the remuneration claimed is reasonable and that it is the function of the Court to determine the remuneration by considering the material provided and bringing an independent mind to bear on the relevant issues: Sanderson v Sakr (2017) 93 NSWLR 459 (at [54]), citing Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96; Conlan (as liquidator of Rowena Nominees Pty Ltd) v Adams (2008) 65 ACSR 521 (at [28]-[29]).

18    Although Venetian Nominees and Conlan related to the legislation as it stood prior to the 2007 amendments, the principles referred to in those cases remain applicable. Further, it will be expected that the liquidator in supplying material to enable the Court to assess whether a remuneration claim was reasonable, would supply material by reference to the matters referred to in s 473(10) of the CA: Sakr per Bathurst CJ (at [54]).

19    In Venetian Nominees, the Full Court of the Supreme Court of Western Australia (Kennedy, Ipp and Wallwork JJ) set out the general principles applicable to the Court’s assessment of a liquidator’s remuneration. Those principles were summarised in the later Court of Appeal (McLure JA, Buss JA, Newnes AJA) decision in Conlan (at [28]) and cited by Davies J in Thackray v Gunns Plantations Ltd (2011) 85 ACSR 144 (at [60]) as follows:

(a)    A summary procedure is involved, not unlike that applicable to the taxation of solicitors’ costs, which is not necessarily subject to all the rules that would apply in an action.

(b)    The initial task of the court is to consider whether the liquidator has made out a prima facie case on the evidence before the court that the remuneration claimed is fair and reasonable. The Court must make that assessment “bringing an independent mind to bear on the relevant issues” even though at that point there is no objector.

(c)    There is no absolute rule regarding the amount of detail required to support a remuneration claim. But the evidence relied on should be sufficient to enable potential objectors to review the amounts claimed and ascertain whether there are matters to which objection should be taken. If there is inadequate evidence supporting the claim, no order should be made.

(d)    If the liquidator establishes a prima facie case, the court should allow for an objection procedure to enable objections to be made.

(e)    If there are objectors to the claim or any part, the court should then establish the validity of those objections.

20    The meaning of a ‘prima facie’ case on the evidence before the Court, in this context, was explained as follows by McLure JA in Conlan (at [31]):

The expression “prima facie” is used in Venetian Nominees to mean that the claimant’s evidence is sufficient to enable the court to determine whether the claimed remuneration is fair and reasonable. So, for example, there must be evidence relating to the work done by particular persons, how long it took to do the work, their hourly rate and the reasonableness of the rate.

21    Thackray concerned an application by the receivers and managers of Great Southern Managers Australia Limited (receivers and managers appointed) (in liquidation), which was the responsible entity of 45 managed investment schemes at the time of their appointment, to establish their entitlement to be indemnified out of the scheme property of ten of those managed investment schemes, secured by equitable lien upon the lienable property, for their remuneration for work performed and expenses reasonably incurred in taking steps for the care, protection, preservation and realisation of the assets and property of those ten schemes.

22    In Thackray, Davies J (then in the Supreme Court of Victoria) noted that the receivers argued that the standard of proof on their application could not be higher (and, if anything, was lower) than the standard on insolvency practitioners for the purposes of s 473(3) of the CA, which is to establish that the remuneration claimed is fair and reasonable. However, her Honour went on to note (at [63]-[64]):

[63] … Nevertheless, the receivers accepted that the principles set out Venetian Nominees Pty Ltd v Conlan are persuasive and that they should put sufficient evidence before the court to enable the court to determine that the amounts claimed are fair and reasonable. That involved providing sufficient detail of the work that was done and the expenses claimed for the court to assess the reasonableness of the remuneration claimed for that work and the reasonableness of the expenses incurred by the receivers. The reasonableness of remuneration may be adduced by evidence for example of an appropriate benchmark, such as the Insolvency Practitioners Association of Australia rates, for comparative work by persons with the relevant status and qualifications for that kind of work and justification of the hours spent. That amount can then be adjusted up or down to reflect other factors including:

(a)    complexity above the norm for the kind of work involved;

(b)    novelty and difficulty of the issues faced;

(c)    the ultimate outcome obtained by the claimant.

[64] The court is looking for evidence of overcharging. Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the “reasonableness” of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim.

(Citations omitted.)

37    The principle question is whether the remuneration claimed is reasonable.

Notice and service

38    Rule 9.3(3) and r 9.4(3) of the Corporation Rules provide that at least 21 days before an application to determine the remuneration of a provisional liquidator or liquidator is filed and where there is no committee of inspection and where no meeting of creditors has been held, the provisional liquidator or liquidator must serve a Form 16 notice of their intention to apply for determination of their liquidation on:

(1)    each of the five largest (measured by amount of debt) creditors of the company; and

(2)    each member of the company whose shareholding represents at least 10% of the issued capital of the company.

39    Rule 9.3(3) and r 9.4(3) do not require personal service of the Form 16 notice.

40    Rule 10.31 of the Federal Court Rules 2011 (Cth) deals with ordinary service of documents within Australia, which can be effected by personal service or by sending the document by pre-paid post to the recipient’s proper address.

41    Rule 10.44 of the Federal Court Rules deals with service of documents (other than originating applications) on persons in a foreign country and r 10.44(3) confirms that where a document was served on a person in a foreign country without leave of the Court, the party serving the document can apply to the Court for an order confirming the service.

CONSIDERATION

The application for determination of the remuneration of the provisional liquidators of MRD and MR

42    The applicants carried out considerable work in the provisional liquidations of MRD and MR.

43    The report of the provisional liquidators of MRD dated 28 April 2017 and the report of the provisional liquidators of MR dated 28 April 2017 are in evidence. Those reports set out the work undertaken by the applicants in the provisional liquidations and provide relevant information about the Macro Group and the context of the appointment including that:

    the applicants were required to provide a report to the Court and to ASIC within 45 days of their appointment as to the provisional liquidations of the six relevant entities including MRD and MR;

    the Macro Group included over 250 different individual entities with approximately 60 of those actively involved in either operations or capital raising activities;

    the property owned by the Macro Group included around 280 land lots in Newman, Western Australia;

    the Macro Group had raised over $120 million from predominantly overseas investors in the 15 months up to March 2016;

    there were serious deficiencies in the accuracy, quality and completeness of the information available to the provisional liquidators; and

    there were a number of potential breaches of the Act identified from the information available including the likely alteration of records.

44    The remuneration reports of the provisional liquidators of MRD and MR are in evidence, as are the itemised accounts of the work carried out by the provisional liquidators of MRD and MR and these remuneration reports and itemised accounts provide detailed information as to the remuneration claimed by the provisional liquidators. The remuneration reports also set out the declaration by the applicants that they have assessed the remuneration claimed in accordance with the law and applicable professional standards and are satisfied that the remuneration claimed is in respect of necessary work, properly performed, in the conduct of the provisional liquidations.

45    Based on this evidence, the Court is satisfied that the applicants have established, on a prima facie basis, that:

    the work undertaken by the provisional liquidators was reasonably necessary given the size and complexity of the Macro Group, the nature of the assets of the group, the substantial difficulties encountered in relation to the companies’ records, the timeframe for preparation of the report to the Court and ASIC, and the number and geographically diverse nature of the creditors;

    the work has been charged on a time charge basis which ensures that remuneration has only been sought for work actually carried out;

    the work was carried out by persons at an appropriate level of seniority;

    the remuneration claimed for the work is fair and reasonable; and

    sufficient information has been provided to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken.

46    The applicants’ submissions also note that:

    notice was given to all creditors of their intention to apply for determination of the remuneration of the provisional liquidators of MRD and MR and no response was received to this notice; and

    Form 16 notices along with drafts of the proposed application were also served on the 5 largest creditors of MRD and MR, and the 2 shareholders of MRD and MR holding more than 10% of the issued share capital of the companies, and no responses have been received from any of those parties. An aide memoire was provided to the Court which points to the evidence of service in respect of these creditors and shareholders.

47    I am satisfied the applicants have complied with their obligations under r 9.3(3) of the Corporation Rules.

48    To the extent necessary, the applicants also sought relief pursuant to r 10.44(3) of the Federal Court Rules in relation to the service of documents, referred to above, on one of the five largest creditors of MRD and one of the five largest creditors of MR in Singapore.

49    In circumstances where the applicants have established a prima facie case for the determination of the remuneration claimed for the provisional liquidations of MRD and MR and where they have complied their notice and service obligations and no objections have been raised, it is appropriate for the Court to grant the orders sought in relation to the remuneration of the provisional liquidators of MRD and MR. I accordingly made those orders.

The application for determination of the remuneration of the liquidators of MRD

50    The applicants submit that it was not practically possible to convene a meeting of creditors of MRD to determine the remuneration of the liquidators of MRD based on the following matters:

    there are likely over 1,800 creditors of MRD;

    despite best efforts, the applicants have not been able to identify a comprehensive list of MRD’s creditors;

    the applicants have only obtained contact details for approximately 405 creditors of MRD;

    a significant portion of the identified MRD creditors are located overseas;

    there is no discernible central or convenient geographic location amongst the creditors at which a meeting could be held;

    given the jurisdictional issues, convening a meeting overseas would require significant contemporaneous legal and accounting advice in addition to administrative and logistical assistance to address these issues;

    without taking into account the costs to convene a creditors’ meeting, neither the secured creditors nor the unsecured non-priority creditors will receive any return; and

    there are no remaining unsecured priority creditors.

51    It is also noted that all of the notices given and documents served in relation to the provisional liquidators remuneration application also dealt with the proposed application for determination of the MRD liquidators’ remuneration application and no response was received at the date of the hearing before this Court from the five largest MRD creditors, the substantial shareholders of MRD, or indeed from any party at all.

52    It is clear given these matters that there was not, and is not, any real prospect of the applicants being able to convene a meeting of creditors of MRD to determine the remuneration of the liquidators of MRD.

53    In these circumstances, it is appropriate for the Court to hear and determine the application under s 473(3)(b)(ii) of the Act without the applicants having first convened a meeting of creditors and for the Court to grant the necessary relief to enable the application to be made.

54    As to the evidence before this Court of the work carried out by the liquidators of MRD:

    the liquidator reports dated 12 September 2017, 30 January 2018 and 3 August 2018 set out the work carried out in the liquidation of the Macro Group;

    the remuneration report of the liquidators of MRD dated 18 April 2018 provides detailed information as to the remuneration claimed by the MRD liquidators and sets out the declaration of the liquidators that the remuneration claimed is in respect of necessary work, properly performed; and

    the itemised account of the remuneration of the MRD liquidators provides further detail as to the specific tasks carried out by the liquidators and their team and the time spent on those tasks.

55    Based on this evidence the Court is satisfied that the applicants have established on a prima facie basis that:

    the work undertaken by the liquidators of MRD was reasonably necessary given the size and complexity of the Macro Group, the nature of the assets of the group, the substantial difficulties encountered in relation to the companies’ records, and the number and geographically diverse nature of the creditors;

    the work has been charged on a time charge basis which ensures that remuneration has only been sought for work actually carried out;

    the work was carried out by persons at an appropriate level of seniority;

    the remuneration claimed for the work is fair and reasonable; and

    sufficient information has been provided to enable potential objectors to review the amounts claimed and to ascertain whether there are matters to which objection should be taken.

56    Having regard to the matters already set out above in relation to notice of the application and service on the creditors and shareholders of MRD, the applicants have complied with their obligations under r 9.4(3) of the Corporation Rules.

57    To the extent necessary, the applicants also sought relief pursuant to r 10.44(3) of the Federal Court Rules in relation to the service of documents referred to above, on one of the five largest creditors of MRD and one of the five largest creditors of MR in Singapore.

58    In circumstances where the applicants have established a prima facie case for the determination of the remuneration claimed for the liquidation of MRD and where they have complied their notice and service obligations and no objections have been raised, it is appropriate for the Court to grant the orders sought in relation to the remuneration of the liquidators of MRD. I accordingly made those orders.

Associate:

Dated:    26 August 2019