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14 July 2014 Practice note: Approval of provisional liquidator's remuneration

By Marc Baddams, Senior Associate and Caterina Meduri, Solicitor


In Brief

In the Matter of CB Constructions (NSW) Pty Ltd [2014] NSWSC 913 is a recent decision of Justice Black which provides a timely reminder of the matters which need to be addressed when seeking court approval for the remuneration of a provisional liquidator under section 473(2) of the Corporations Act 2001 (Cth), and also the fact that such applications will not be successful as a matter of course.

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


Background

The provisional liquidator of CB Constructions (NSW) Pty Ltd was appointed provisional liquidator on 4 May 2009 and then liquidator on 25 May 2009. He had not obtained an order for approval of his remuneration at the time of either of his appointments. He sought an order in respect of his remuneration for the period that he was appointed provisionally at a later date.

On 18 September 2013, he informed the committee of inspection that he would be making an application to the Court for approval of his fees in the sum of $17,528 (inclusive of GST) and $5,567.09 for an insurance disbursement. However, when the application was made on 12 November 2013, the amount sought by the provisional liquidator for approval was $11,044, being an amount of $4,920.20 for his remuneration, and insurance in the amount of $6,123.80 (inclusive of GST). When the matter was listed before the court on 18 December 2013, the amount he then sought was changed to $15,935, plus GST. 

Rules

Rule 9.3 of the Supreme Court (Corporations) Rules 1999 (NSW) sets out some of the procedural requirements to be complied with when seeking an order under 473(2) of the Corporations Act. Importantly, rule 9.3 sets out some notice requirements (and other requirements). Notice of the provisional liquidator's intention to apply for such an order and a copy of the supporting affidavit must be served on any liquidator (except the provisional liquidator), each member of any committee of inspection and if there is no committee of inspection, the 5 largest creditors of the company, and each member of the company who has at least 10% of the issued capital of the company. Each of those parties have a right to serve a notice of objection on the provisional liquidator objecting to the amount of remuneration claimed and the grounds of the objection. 

In this case, the provisional liquidator had not initially served his affidavit on contributories and the court considered that when it was done, the material provided to the contributories would have bewildered them. 

Principles

His Honour considered the principals involved and determined it was a matter for the provisional liquidator to establish the amount of his entitlement to fair and reasonable remuneration: Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 102 and Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11. In considering whether to make an order in respect of a provisional liquidator's remuneration pursuant to 473(2) of the Corporations Act, the Court must have regard to whether the remuneration is reasonable, taking into account the matters set out in section 473(10), which are:

  1. the extent to which the work performed by the liquidator was reasonably necessary;
  2. the extent to which the work likely to be performed by the liquidator is likely to be reasonably necessary;
  3. the period during which the work was, or is likely to be, performed by the liquidator;
  4. the quality of the work performed, or likely to be performed, by the liquidator;
  5. the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator;
  6. the extent (if any) to which the liquidator was, or is likely to be, required to deal with extraordinary issues;
  7. 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;
  8. the value and nature of any property dealt with, or likely to be dealt with, by the liquidator;
  9. whether the liquidator was, or is likely to be, required to deal with:
    1. one or more receivers; or
    2. one or more receivers and managers;
  10. the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company's creditors;
  11. if the remuneration is ascertained, in whole or in part, on a time basis:
    1. the time properly taken, or likely to be properly taken, by the liquidator in performing the work; and
    2. whether the total remuneration payable to the liquidator is capped
  12. any other relevant matters.
Outcome

The court found that the provisional liquidator's evidence did not provide any basis to determine whether the amount he claimed was necessary or to address the matters set out in section 473(10) and declined to approve the remuneration sought.  

The case is a reminder for those seeking approval of their remuneration to have regard to those matters set out in rule 9.3 of the Supreme Court (Corporations) Rules, section 473(10) of the Corporations Act and the need to provide the court with clear evidence in order for it to make a determination in their favour. 

For further information, please contact:

Marc Baddams, Partner  |  Phone: +61 2 9233 5544  |  Email: mrb@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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