Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2)

• Jurisdiction: Australia Federal only
• Judge: BESANKO J
• Judgment Date: 11 February 2019
• Neutral Citation: [2019] FCA 93
• Date: 11 February 2019
• Court: Federal Court

FEDERAL COURT OF AUSTRALIA

Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) (No 2) [2019] FCA 93

File number:	SAD 222 of 2015
Judge:	BESANKO J
Date of judgment:	11 February 2019
Catchwords:	CORPORATIONS — application for orders under s 1322(4)(a) of the Corporations Act 2001 (Cth) — alternative application for determination or fixing of remuneration under s 449E(1)(c) and s 511 of the Act — where plaintiffs appointed joint and several administrators of three companies pursuant to s 436A of the Act — where plaintiffs subsequently appointed joint and several liquidators of the companies pursuant to ss 439C(c) and 446A of the Act — where plaintiffs purported to receive remuneration following resolutions by creditors of the companies — where plaintiffs required to provide a report to creditors containing certain information prior to creditors determining remuneration under s 449E(7) and s 499(7) of the Act — where plaintiffs contravened s 449E(7) and s 499(7) of the Act by failing to provide remuneration reports to creditors and by providing inadequate remuneration reports to creditors — where the Australian Securities and Investments Commission intervened in the proceeding under s 1330 of the Act ; CORPORATIONS — where plaintiffs seek orders under s 1322(4)(a) of the Act that the fixing of their remuneration as administrators and liquidators of the companies in various periods is not invalidated by any contravention of s 449E(7) or s 499(7) of the Act — consideration of the meaning of “contravention” in the context of s 1322(4)(a) — consideration of the meaning of “acted honestly” in the context of s 1322(6)(a)(ii) — whether plaintiffs bear the onus of establishing that they acted honestly — consideration of the meaning of “substantial injustice” in the context of s 1322(6)(c) — whether the test for substantial injustice is limited to ascertaining whether any person will suffer substantial injustice by reason of an order being made under s 1322(4)(a) — whether the Court has a residual discretion to refuse to make an order under s 1322(4)(a) notwithstanding satisfaction of the relevant preconditions under s 1322(6) — whether public interest considerations are relevant to the exercise of the residual discretion ; CORPORATIONS — where plaintiffs seek the determination or fixing of their remuneration as administrators under s 449E(1) of the Act and as liquidators under s 511 of the Act — consideration of the factors relevant to the determination of whether remuneration is reasonable under s 449E(4) and s 473(10) of the Act — consideration of the concept of “proportionality” in assessing reasonableness of remuneration — whether it is necessary for the Court to conduct a line by line analysis of remuneration claimed before concluding whether remuneration is reasonable or excessive — whether insolvency practitioner bears onus of establishing reasonableness and prudence of tasks undertaken — whether liquidator is entitled to remuneration for work carried out that will not augment funds available to creditors — whether liquidator who acts reasonably in pursuing recoveries is entitled to remuneration even though no recoveries are ultimately made — consideration of the reasonableness of plaintiffs’ hourly charges — whether plaintiffs should have brought an application under s 511 of the Act seeking directions from the Court in relation to disputed debt and equity investigations — consideration of the extent of liquidator’s duty to augment assets of the company — consideration of the public interest in liquidator conducting investigations and examinations — whether liquidator is required to seek or obtain approval of the Court or the creditors in the course of conducting investigations and before instigating recovery proceedings — where the only two parties interested in the pool of assets from which the plaintiffs proposed to fund further investigations and possible legal proceedings requested information regarding proposed investigations and associated costs — consideration of the extent of liquidator’s duty to assist and cooperate with authorities ; EVIDENCE — where ASIC adduced expert evidence of insolvency practitioner — where witness addressed plaintiffs’ claimed remuneration by reference to standard of a “competent and prudent insolvency practitioner” — whether witness had additional training, study or experience to demonstrate the acquisition of specialist knowledge of what a competent and prudent practitioner would do — consideration of the meaning of “competent and prudent and insolvency practitioner” — whether evidence of work competent and prudent insolvency practitioner would perform is relevant to Court’s assessment of reasonableness of the remuneration claimed
Legislation:	Corporations Act 2001 (Cth) ss 425, 436A, 439A, 439C, 446A, 449E, 473, 474, 499, 504, 511, 533, 553C, 1322, 1330 Corporations Amendment (Insolvency) Act 2007 (Cth) Proceeds of Crime Act 2002 (Cth) s 202 Uniform Companies Acts 1961 s 366
Cases cited:	ANZ National Bank Ltd v Sheahan and Lock [2013] 1 NZLR 674 Australian Securities and Investments Commission v Dunner [2013] FCA 872; (2013) 303 ALR 98 Australian Securities and Investments Commission v Rowena Nominees Pty Ltd [2003] WASC 112; (2003) 45 ACSR 424 Conlan v Adams [2008] WASCA 61; (2008) 65 ACSR 521 Editions Tom Thompson Pty Ltd v Pilley (1997) 77 FCR 141 Hall & Ors v Poolman & Ors [2007] NSWSC 1330; (2007) 215 FLR 243 Hall v Poolman [2009] NSWCA 64; (2009) NSWLR 99 Ide v Ide [2004] NSWSC 751; (2004) 50 ACSR 324; (2004) 184 FLR 44 Lock, in the matter of Cedenco JV Australia Pty Ltd (in liq) [2017] FCA 1306 Lucantonio v Kleinert [2009] NSWSC 853 Meadow Springs Fairway Resort Ltd (In Liq) v Balanced Securities Ltd [2007] FCA 1443; (2007) 25 ACLC 1433 Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120; (2010) 80 ACSR 11 Re Compaction Systems Pty Ltd [1976] 2 NSWLR 477; (1976) 2 ACLR 135 Re Helios Energy Ltd [2017] FCA 840; (2017) 122 ACSR 174 Re HIH Insurance Ltd (in liq); McGrath (in his capacity as Liquidators of HIH Insurance Limited (in liq) [2001] NSWSC 997; (2001) 39 ACSR 645 Re Korda; in the matter of Stockford Ltd [2004] FCA 1682; (2004) 140 FCR 424 Re Walker [2005] NSWSC 557; (2005) 189 FLR 467 Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459 SK Foods LP v SK Foods Australia Pty Ltd (in liq) (No 3) [2013] FCA 526; (2013) 214 FCR 543 Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545 Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
Dates of hearing:	27, 28, 29, 30 November 2017
Registry:	South Australia
Division:	...