The Federal Court has fixed the remuneration of the liquidators of three Adelaide companies at $3.9 million, compared to the $5.8 million they sought, in a decision that raises key issues for registered liquidators to consider.
The liquidators, John Sheahan and Ian Lock of Sheahan & Lock, were also ordered to repay the difference of $1.9 million, as well as interest and the Australian Securities and Investments Commission’s (ASIC’s).
The Court heard that both the hourly rates charged and the volume of work undertaken by Sheahan and Lock had concerned the regulator, given that the surplus funds they recovered from receivership appointments over the companies that were sufficient to pay all creditors in full plus interest and make distributions to shareholders.
Justice Besanko, presiding over the matter, agreed with ASIC’s submission that the liquidators undertook unnecessary work streams and also performed those that were needed to a greater extent that required. The regulator also argued that Sheahan and Lock’s charge rates, travel claims, and the amount of work performed by senior staff were excessive.
His Honour discounted the partner and manager rates the two liquidators charged by 20 per cent, and senior manager rates by 10 per cent. He also ordered additional reductions in remuneration related to identified work streams by 0 – 65 per cent, depending on whether either the work undertaken, or its extent were necessary.
The decision could serve as a reminder to liquidators that timesheet entries must be approved prior to seeking approval from the creditors, and that they needed to be descriptive enough to allow determination of which work stream or task the time related to.
ASIC also warned that shareholders needed to be better regarded by liquidators, cautioning liquidators to both consider the benefit investors would receive by undertaking a work stream and justify the continuation of streams shareholder weren’t keen on.
Finally, the regulator advised liquidators to manage work streams with work plans and to remember that remuneration for preparing non-compliant remuneration reported wouldn’t be paid.
The three now-liquated companies Sheahan and Lock’s contentious work related to were SK Foods Australia Pty Ltd, Cedenco JV Australia Pty Ltd, and SS Farms Australia Pty Ltd.