Insolvency industry bears brunt of COVID-19 concessions
A survey conducted by ARITA, Australia’s peak body for insolvency and restructuring experts, has revealed the substantial impact the Government’s response to COVID-19 has had on the industry.
As outlined in a previous update, the Government has introduced a series of temporary measures in response to the pandemic, including; increasing the minimum amount for a statutory demand from $2,000 to $20,000, suspension of director's personal liability for insolvent trading and an additional safe harbour provision.
Conducted on April 17, the survey of almost 200 insolvency professionals indicated that as a result, insolvency levels have fallen significantly below the standard.
Relevantly, 38.6% of insolvency professionals surveyed reported that their current level of work was significantly less than this time last year and a further 17.8% said it was slightly less. Moreover, 31% of respondents indicated that the quantity of ‘safe harbour’ advisory work was down on the same time last month.
As the current environment continues to place pressure on the industry, more than half of all insolvency firms have registered, or intend to register, for the Government’s JobKeeper subsidy, indicating that year-on-year revenue has declined by at least 40%. The survey also revealed that 13.6% of firms are very concerned about their viability in the next 6 months and a further 42.4% are slightly concerned, with 19% having recently implemented redundancies.
In presenting the findings of the survey, ARITA CEO John Winter noted that, ‘In a typical year, we see around 8,000 natural insolvencies. There is always a natural level of insolvencies as businesses go through their natural lifecycle and it’s a healthy process. What we are seeing is that even businesses that are insolvent are delaying taking action to deal with that.’
Despite acknowledging that the Government efforts had been effective in supporting many businesses struggling in light of the pandemic, he warned that ‘a side effect of that is that businesses that under normal circumstances would have been wound up, are continuing to trade. Many of them will continue to rack up debts with unwitting creditors – quite likely SME’s themselves who are already under financial pressure, too.’
Finally, he acknowledged the ‘genuine concerns from insolvency professionals that, without the behavioural handbrake of insolvent trading laws, directors of businesses large and small are going far deeper into insolvency than they otherwise would have, with no chance of turning their business around. And it’s creditors who will wear the cost of that down the line.’
The survey follows an earlier study conducted by the ABS in April which found that two thirds of Australian businesses were experiencing a reduction in turnover or cash flow and that 64% reported a reduction in demand for their products or services.
Corporate Law and COVID-19
Treasurer Josh Frydenburg has announced a series of potential temporary economic measures in response to the fluid COVID-19 situation. This temporary package has implications for bankruptcy, insolvency and corporate law.
We have summarised the proposed measures below.
Bankruptcy changes
- Increase in the minimum debt threshold for a creditor-initiated bankruptcy procedure from $5000 - $20,000;
- The time to respond to a bankruptcy notice increased from 21 days to 6 months;
- An extension of the protection period for individual’s declaring an intention to present a debtor’s petition extended from 21 days to 6 months.
Insolvency Changes
- Increase in minimum amount for a statutory demand from $2000 - $20,000;
- Increase in time to respond to a statutory demand from 21 days to 6 months;
- Temporary suspension of directors’ personal liability for insolvent trading for six months (egregious cases of dishonesty will still attract criminal liability);
- Insertion of s 588GAAA which provides an additional temporary safe harbour provision during the six-month period.
According to the Bill, the amendments to times for compliance will only apply to procedures commenced on or after the commencement of the amending Schedule. The temporary increase in the monetary threshold will be repealed at the end of the six-month period which starts on the date of commencement.
In addition to the above relief, the Australian Investment and Securities Commission has announced it has adopted a ‘no-action’ position in regard to company AGM’s including:
- a two-month ‘no-action’ position in regard to entities with a financial year end of 31 December that have not held an AGM by 31 March 2020;
- the holding of virtual AGM’s;
- sending supplementary notices of AGM electronically;
- non-compliance with section 249J of the Corporations Act.
ASIC encourages the use of technology to facilitate virtual AGMs and electronic communication, however the company constitution will determine whether or not this is possible. ASIC cannot amend the constitution to allow this, however irregularities may be addressed via other methods.
No changes to financial reporting obligations have been announced yet, however ASIC is monitoring the situation.
While ASIC is entitled to indicate that it will not exercise its regulatory powers in a certain way, this does not prevent third parties from taking action against a company or a Court ruling that conduct has breached legislation. It is highly advisable to seek legal advice prior to undertaking a course of action.
Phoenix company wound up following 'fictitious joint venture'
In insolvency and restructuring there is a special emphasis placed upon behaviour known as “phoenix activity”. Phoenix activity is where a new company is created to continue the business of an existing company. Typically, this will involve a company entering into a transaction with another related entity for the sale of its assets. This allows business to continue, however the new company will not have any of the liabilities that the original business had such as obligations to creditors, the ATO or employees.
While there are several legitimate and legal forms of restructuring or reorganising a company, it is particularly unwise to simply enter into such a scheme without first checking its legality. The consequences of doing so are very severe including: liability for a breach of directors’ duties, ASIC penalties, penalties under the Director Penalty Regime of the Taxation Administration Act 1953, and breaches of the Fair Work Act 2009 if the scheme involves the avoidance of employee entitlements.
The recent case of Yeo v Alpha Racking Pty Ltd [2019] FCA 1338 provides a guideline of circumstances that indicate phoenix activity is occurring. The case concerned an application bought by the liquidators of a company known as Alpha Storage. The application sought the winding up of a company known as Alpha Racking as well as the appointment of the plaintiff liquidators as its provisional liquidators. This application was bought due to a suspicion that the assets of Alpha Storage were wrongly being transferred to Alpha Racking for the purpose of defeating creditors.
After reviewing the evidence presented by the liquidators O’Bryan J concluded that a strong case that the directors of Alpha Storage were engaged in a plan to strip the assets of Alpha Storage and transfer them to Alpha Racking had been established. His Honour held at [34] that the phoenixing activity included:
(a) the creation of a false joint venture agreement between the companies;
(b) attempts to have customers pay Alpha Racking — and not Alpha Storage — money they owe to Alpha Storage;
(c) the creation of what appear to be false financial records, including financial statements, for Alpha Racking and Alpha Storage;
(d) the transfer of staff from Alpha Storage to Alpha Racking; and
(e) the setting up of a new financial accounting package for Alpha Racking and the transfer to it of “open” purchase orders that are the property of Alpha Storage.
At [35] his Honour explained how the evidence of the case indicated phoenix activity was taking place:
First, Alpha Storage has issued invoices to third parties, showing that it was a trading entity and not a “labour hire” firm.
Second, security interests have been registered in the name of Alpha Storage on the Personal Property Securities Register and finance agreements exist between Alpha Storage and various financiers (ANZ Bank, Macquarie Leasing Pty Limited, Toshiba, PCP Finance), again showing that Alpha Storage was conducting a trading business.
Third, a “LinkedIn” page gives a description of the business activities of Alpha Storage and there is no reference to a joint venture.
Fourth, the debt owed to the Commissioner of Taxation includes a significant liability for GST which indicates that Alpha Storage operated a significantly sized business.
Fifth, there is no reference to a joint venture in any of the documents provided to or obtained by the liquidators, including the financial accounts and taxation documents of Alpha Storage.
Sixth, the partner from BDO Melbourne who was responsible for preparing Alpha Storage’s accounts and tax returns confirmed that no mention was ever made of a joint venture arrangement and that Alpha Storage traded in its own right.
Seventh, the documents evidencing the lease for the Dandenong South and Brisbane premises are in the name of Alpha Storage. These documents post-date the purported joint venture agreement. Further, the leasing agent of the Dandenong South premises was unaware of any joint venture.
Based on the above findings, his Honour agreed that a strong prima facie case of serious misconduct and potential fraud in the conduct of Alpha Racking’s affairs had been established. The application was therefore granted.
In addition to the Yeo case, the ATO and ASIC also include information on the warning signs of phoenix activity including:
- the company fails and cannot pay its debts
- the company changes its name to its Australian Company Number (ACN) and a new company is registered, often with a similar name to the old company
- the directors or former directors transfer the assets from the old company to the new one for less than market value
- the new company operates the same or similar business as the old company, sometimes from the same premises, using the same assets
- the new company often uses the same bank account, advertising material, websites or contacts details as the old company
- the people involved in managing the old company control the new company, either as the directors or controllers.
Progressive Reforms – Recent developments in Australian directors’ liability
Until recently, Australia had some of the strictest insolvent trading laws in the world. Those laws were designed to lift the corporate veil, so that those in control of a corporation could be held liable for debts incurred while the corporation is unable to pay its debts as and when they are due. Section 588G of the Corporations Act 2001 imposes a duty on a director to prevent insolvent trading. It is designed to act as a deterrence on directors incurring debts when the corporation is insolvent. It imposes personal liability and, in severe cases, there are criminal sanctions.
While this act still applies, in 2015 the Australian Productivity Commission recommended reforms to Australia’s corporate insolvency regime, designed to enable restructuring of economically viable companies with less emphasis on punishing for financial failure.
The recommendations of the commission were to restrict formal company restructuring procedures to those businesses that were capable of being economically viable in the future. They also recommended the introduction of a safe harbour defence to allow directors to explore early restructuring options without liability for insolvent trading, and a restriction on the enforcement of Ipso facto rights in certain circumstances.
These changes have now been legislated and have commenced operation. One of the main reasons for their recommendation and implementation was empirical data suggesting that insolvent trading cases were not so extensive, with those cases that do proceed to trial, often weighted heavily in favour of the liquidator plaintiff as against the defendant director.
Following corporate failure, directors are often penniless and pursuing them is not economic. It is therefore not unsurprising to find that reported cases of insolvent trading are not extensive in the more than 40 years since Australia has had insolvent trading laws, in one form or another.
The commission sought to address the tension between the desirability for strong insolvent trading protection on the one hand and encouraging a business restructure while the corporation is in financial distress on the other.
Safe harbour reforms
One of the ways they have achieved this is via the implementation of safe harbour reforms. The object of the reforms is to encourage directors to pursue restructuring opportunities that will deliver a better outcome to key stakeholders.
A safe harbour applies from the time the directors, who suspect insolvency, start to develop and implement a course of action that is reasonably likely to lead to a better outcome for the corporation than immediate administration or liquidation. It also operates as an exception to the insolvent trading provisions of the Corporations Act 2001, providing directors protection from any personal liability for debts that are incurred directly or indirectly in connection with the course of action.
Directors can still be liable for insolvent trading if they continue to incur debts while the corporation is insolvent, but safe harbour, if implemented correctly, can provide a defence to insolvent trading, thereby encouraging restructure and turnaround solutions as opposed to liquidation and personal liability.
Safe harbour rules require directors to take an active role in the restructure, while acting honestly and genuinely. They must also use up-to-date financial information to assess the likely outcome of restructure and comply with obligations to pay employee entitlements when they fall due. Meeting all of the company’s taxation reporting obligations, while properly maintaining books and records is also a requirement.
Under safe harbour rules, directors must engage with key stakeholders to develop and implement the restructuring plan. Once it becomes clear that a corporation is not viable, the protection of safe harbour will cease. Protections are not absolute and will require extensive advice and planning as well as consultation with key stakeholders. Their object is to encourage a restructure if it is reasonably likely to lead to a better outcome for the corporation.
Safe harbour does not appear to protect against other breaches of the Corporations Act 2001 and a liquidator may well still be entitled to pursue a creditor for an unfair preference, i.e. where the creditor is paid when the corporation is insolvent and the creditor receives more than they would if the corporation was wound up.
Ipso facto reforms
These reforms introduce a stay on parties being able to enforce rights against a corporation which goes into administration, has a receiver appointed or enters into a scheme of arrangement. The aim of these reforms is to preserve the going concern value of a corporation by creating a moratorium on enforcement of certain clauses in commercial contracts.
Without these reforms, a restructure may be jeopardised because the going concern value of a corporation can be destroyed by enforcement action. The new provisions introduce a stay on enforcing contractual rights including termination rights where the corporation goes into administration, has a receiver appointed or enters into a scheme of arrangement.
The stay is expressed to be a restriction on the ability to enforce a right that arises by reason of an express provision of a contract, agreement or understanding. The court maintains an overriding discretion to lift a stay, if that is appropriate in the interests of justice.
Conclusion
The Safe Harbour and Ipso facto reforms are significant changes to the corporate insolvency and restructuring landscape in Australia. They promote or seek to promote maximising the opportunity for preserving a going concern to assist with a corporate restructure in appropriate circumstances. The reforms present a useful step towards dispelling the long-held view that insolvent trading in Australia is focused on punitive outcomes rather than promoting entrepreneurship.
This article is an excerpt from the IR Global Australasian Guide. A full copy of the publication can be accessed here.
UK case reignites debate on the correct extent of judicial intervention
A recent decision in the United Kingdom has shed light on the topical issue surrounding the proper extent of judicial intervention. The case of Serafin v Malkiewicz & Ors [2019] EWCA Civ 852 ensued after Mr Serafin appealed an earlier decision on a number of grounds, including that the trial judge had exercised unfair judicial treatment against him.
Mr Serafin was a Polish immigrant who relocated to London where he subsequently engaged in a number of small business ventures, including a food business, which he launched in 2008. In 2011, a bankruptcy order was issued in relation to that business, with the Official Receiver finding Mr Serafin had engaged in misconduct by disposing of £123,743 whilst insolvent. As a result, Mr Serafin was made subject to a five-year Bankruptcy Restrictions Undertaking (BRU) in 2012.
In October 2014, Mr Serafin was the subject of an article published in Nowy Czas, a magazine popular among London’s Polish community. The article was entitled ‘Bankruptcy Need Not Be Painful’ and Mr Serafin contended that it contained serious defamatory allegations about him that amounted to a character assassination. He subsequently brought an action against the magazine’s editor and co-publishers, complaining of 14 different defamatory allegations.
The matter was heard over a 7-day period, after which Justice Jay found that many of the allegations were in fact ‘seriously defamatory’. Despite this, his Honour dismissed the claim in its entirety after finding some of the allegations to be untrue. Mr Serafin subsequently appealed the decision on five grounds, including that the trial judge had shown him ‘unfair judicial treatment’.
On appeal, counsel for Mr Serafin asserted that the judge’s interventions were accusatory, with the judge acting as an advocate for the defendant’s case rather than a neutral umpire. Mr Serafin also argued that the judge ought to have considered that there was an inherent risk of unfairness on the basis that he was an unrepresented litigant who was not legally qualified and did not have English as a first language, whilst his opponent was a very experienced silk.
In doing so, Mr Serafin tendered evidence that Justice Jay had formed a prejudicially adverse view of his evidence and character. The evidence included comments made by his Honour that Mr Serafin was “fundamentally untrustworthy” and warning Mr Serafin that “you will lose” and “I will hold things against you.” His Honour also told Mr Serafin “your reputation is already starting to fall apart, because you are a liar and you do treat women in a frankly disgraceful way.”
Furthermore, when counsel for the defendants suggested that the judge ask Mr Serafin which parts of the article he maintained were false, Justice Jay quipped, “I would not even bother, Mr Metzer, I think we have got to assume every point is lies.”.
On appeal, the court held that it was wrong for Justice Jay to “descend into the arena and give the impression of acting as an advocate”. In doing so, it concluded that it was “immediately apparent…that the Judge’s interventions during the Claimant’s evidence were highly unusual and troubling” and that his Honour “used language which was threatening, overbearing, and frankly, bullying”.
In deliberating this ground, the court considered Michel, which notes that not all departures from good practice render a trial unfair. However, having regard to the ‘nature, tenor and frequency of the Judge’s interventions’, the court concluded that an appeal was warranted.
In allowing the appeal, the court declared that Justice Jay “not only seriously transgressed the core principle that a judge remains neutral during the evidence, but he also acted in a manner which was, at times, manifestly unfair and hostile to the Claimant”.
Ultimately, this case reinforces that the role of a judge is to determine the dispute of the parties impartially and that one should not engage in bullying or unnecessary intervention. Although a UK case, it reflects trends in the Australian legal system, with almost two thirds of Victorian barristers reported to have been bullied from the bench. The rising number of instances such as this certainly begs the question of whether Queensland ought to create a Judicial Commission as has been done in New South Wales.
The scope of judicial intervention is a complex topic, which requires an open debate.
Worried you’re trading insolvent? Here’s what to look out for
In 2003, the Victorian Supreme Court considered the case of ASIC v Plymin, Elliot & Harrison [2003] VSC 123, in which it was found that a number of companies had traded whilst insolvent. As a result, the associated directors were liable to compensate the creditors $1.4 million for debts incurred in the insolvent period. The case has subsequently been relied upon to identify instances of corporate insolvency, after the court outlined 14 factors likely to indicate insolvent trading. These indicators include:
- Continuing Losses
- Liquidity ratios below 1
- Overdue Commonwealth and State taxes
- Poor relationship with present bank, including inability to borrow further funds
- No access to alternative finance
- Inability to raise further equity capital
- Suppliers placing company on COD, or otherwise demanding special payments before resuming
- Creditors unpaid outside trading terms
- Issuing of post-dated cheques
- Dishonoured cheques
- Special arrangements with selected creditors
- Solicitors' letter, summonses, judgements or warrants issued against the company
- Payments to creditors of rounded sums which are not reconcilable to specific invoices
- Inability to produce timely and accurate financial information to display the company's trading performance and financial position, and make reliable forecasts
Although this has now become the standard list of indicators used by liquidators to justify assertions of insolvency, it is important to remember that they remain indicators only. As such, a court will ultimately make a finding of insolvency ‘on the facts’. Accordingly, the indicators alone cannot be relied upon as a fail-safe template and liquidators may need to provide further evidence to support an allegation of insolvent trading.
I am here to help
If you have answered yes to any of the above indicator's your company may be insolvent. Please do not hesitate to contact me so that we can work together to identify your legal position, safeguard the longevity of your business and recover debt from your debtors.
Insolvency Rules construed by Court
Recently, in The Matter of 1st Fleet Pty Ltd (in liq) [2019] NSWSC 6, the New South Wales Supreme Court offered guidance on the scope and operation of the Insolvency Practice Schedule (Corporations) (IPSC), which provides rules on when creditors can request and are entitled to recover specified information and documents from external administrators.
On 22 May 2012, Liquidators were appointed as voluntary administrators of First Fleet and its associated companies and at a creditors meeting on 2 July 2012, it was decided that a Committee of Inspection be appointed.
The Committee subsequently approved the liquidator’s remuneration on a time basis and by 18 July 2018, the Liquidators had accrued $4.4 million in remuneration for work done between 25 April 2012 and 1 July 2018.
Having advanced $9,444,014 to employees of the Companies in liquidation under the General Employee Entitlements and Redundancy Scheme (GEERS) and the Fair Entitlements Guarantee (FEG) scheme, the Commonwealth had an interest in the matter. Accordingly, on 24 August 2018, solicitors for the Commonwealth questioned whether certain persons acting as creditor representatives appointed to the Committee of Inspection were ineligible, and if so, whether the Committee of Inspection consequently lacked authority to pass remuneration resolutions. They also expressed concern that the quantum of remuneration was unreasonable.
The Commonwealth subsequently sought information from the liquidators regarding the formation of the Committee of Inspection and remuneration approved by it, including a breakdown of the calculation of remuneration payments to the liquidators. However, the liquidators failed to comply and so the case ensued.
Ultimately, the court was required to consider whether the liquidator’s failure to comply with the Commonwealth's request constituted a breach of sections 70-45 and 70-55 of the IPSC, and whether it should subsequently order the production of that information under s 70-90. In doing so, Justice Black was required to determine whether the Commonwealth's request was both relevant and reasonable, in which case, the liquidators would be obliged to comply with it.
Here, the court referred to section 70-15 of the Insolvency Practice Rules (Corporations) 2016, which it deemed an exhaustive list of the circumstances in which it is reasonable to comply with a request.
Ultimately, Justice Black held that it is only reasonable for an external administrator to comply with a request if that external administrator, acting in good faith, is of the opinion that one or other of the specified circumstances exists, and it is otherwise reasonable for that external administrator to comply.
Committee Constitution
The court refused the Commonwealth's request for information, finding that it was unreasonable on three grounds;
- The liquidators had confirmed that after having made appropriate searches, to their knowledge, there were no further documents to be produced.
- The liquidators could not reasonably be asked to produce information to 'establish', or documents to 'support', propositions which the Commonwealth, not they, had formulated and which they did not advance.
- A number of the orders sought in the Originating Process had been significantly reformulated from those originally sought, and thus the liquidators could not be held to have failed to produce the documents because they were not previously requested to do so.
Liquidator’s Remuneration
The court was satisfied that where the liquidators had not produced the information sought by the Commonwealth, they should now be ordered to do so.
The liquidators were also ordered to pay half of the Commonwealth’s costs, without recourse to 1st Fleet’s assets.
This decision highlights some key indicators regarding the scope of sections 70-45 and 70-55 of the IPSC, particularly its broad interpretation and reinforces that where information or documents are required to be disclosed, the court only has a narrow discretion to withhold an order. Moreover, it clarifies the scope of an external administrator’s obligations, reinforcing that where a party (like the Commonwealth) requests specific information or documents and GEERS or FEG payments have been received by the external administrator on behalf of the company to which they are appointed, it is mandatory to provide the information and documents sought.
Sydney property developer jailed for phoenix activity
In a recent decision of the New South Wales District Court, a Sydney business man was sentenced to six years in jail and ordered to pay $1.8 million in reparations, after he was convicted of tax fraud relating to illegal phoenix activity.
On 25 January 2019, the court found that Benjamin Ensor had fraudulently lodged false Business Activity Statements on behalf of nine companies he was sole director of between 2008 and 2011. Ensor subsequently used the money obtained from this practice to fund the development of five luxury apartments in Manly and to purchase a bevy of luxury items including a catamaran, a marina at Lake Macquarie and a new home.
It was also revealed that Ensor structured his companies to fraudulently obtain GST credits, reporting his business expenditure at more than $24 million in order to claim over $2.2 million in GST refunds. In doing so, Ensor created false invoices relating to project management services and high value excavators, trailers and trucks.
He also failed to report the sales of the Manly apartments on which he should have paid more than $1.5 million.
Ultimately, the ATO alleged that Mr Ensor’s actions saw him defraud the Commonwealth of $3.4 million.
The decision follows increased efforts to curb illegal phoenix operations, with ATO Assistant Commissioner Aislinn Walynn declaring that this case exhibits classic illegal phoenix behaviour, in which “companies were deliberately liquidated to avoid paying creditors and taxes”, whilst “new companies continued operating the same or a similar business with the same ownership.”
In doing so, she declared that the “result demonstrates the ATO’s commitment to detecting and prosecuting the most egregious tax crimes and should serve as a warning to those who think they can flout the law and get away with it.”
ARITA set to publish 4th Code of Professional Practice
Late last year ARITA released a consultation draft for the 4th edition of its Code of Professional Practice for Insolvency Practitioners, which serves to educate ARITA members as to their professional responsibilities and provide a reference for stakeholders to gauge the conduct of practitioners. Of the changes, perhaps the most significant is to the format of the Code, which features an overarching Code of Ethics and is then split into two separate codes; one for formal insolvency appointments and the second for all other advisory work.
Insolvency Services
This section of the Code has been drafted with reference to the proposed APES 330, and is to apply only to those working on formal insolvency appointments. The standard has been greatly simplified from previous editions, with much of the previous content shifted out to non-binding Practice Statements.
Advisory Services
This item is to focus on matters such as pre-insolvency work and safe harbour advising.
ARITA is currently reviewing feedback on the code, following a period of public consultation which closed on Monday.
VSC approves remuneration after liquidator incurs $7k fee justifying $34k
In the recent decision of Custometal Engineering Pty Ltd (in liquidation) [2018] VSC 726, two liquidators incurred almost $7,000 in fees whilst seeking to justify their $34,000 remuneration.
The case ensued after Custometal Engineering Pty Ltd entered voluntary administration on 21 September 2017, with Sam Kaso and Daniel Juratowitch appointed as administrators.
On 11 October 2017, the Supreme Court of Victoria ordered that the administration be terminated, that the Company be wound up and that Kaso and Juratowitch be appointed as joint and several liquidators.
Subsequently, in September 2018 the liquidators sought approval of their remuneration as the Company’s administrators pursuant to s60-10(1)(c) of the Insolvency Practice Schedule for the amount of $33,872.50. They also sought that the costs of the application be costs in the Company’s liquidation, hence bringing the total claim to $40,860.
Accordingly, the court was required to consider whether liquidators had prima facie established a case for remuneration and subsequently whether that remuneration should be approved under r9.2 Supreme Court (Corporations) Rules 2013 (Vic). In doing so, the court was required to consider whether the remuneration being claimed was reasonable.
In determining the reasonableness of the remuneration, Matthews JR considered the following factors:
- Whether there was an appropriate delegation of the work performed;
- Whether the tasks conducted were necessary to have been performed;
- Whether the time taken to complete those tasks, and therefore the amounts charged for them, was reasonable; and
- Whether there was any evidence of unnecessary duplication of work.
Ultimately the court was satisfied to approve the remuneration sought by the liquidators, holding that the liquidator’s costs of application be costs in the Company’s liquidation.
In an era where issues of proportionality are high on the agenda, particularly with the judiciary, this case presents an interesting example of a situation where the costs of making such an application seem disproportionate to the costs being sought and presents yet a further example of why approval of these costs should be facilitated in a different manner, possibly by legislative change as the current law sees many liquidators spending significant resources to justify their remuneration at additional cost to creditors.
