ATO attacks liquidators’ fee bid on multiple fronts

A liquidators’ remuneration application lodged in the Supreme Court of Victoria is being opposed by The Australian Tax Office (ATO) on the basis that much of the work should have been performed by more junior staff.

In an 82 page affidavit dated December 21, 2022 ATO senior insolvency advisor Gary Busby outlines six grounds of objection to the remuneration application, which was commenced on October 14, 2022 by Richard Albarran and Richard Lawrence.

“Notwithstanding that the former liquidators appear to have employees with a range of seniority, a high-level review of time charges for the period 27 April 2020 to 12 October 2020 suggests that a significant number of the tasks performed have been charged at a more senior level than necessary and should have been more appropriately performed by more junior staff.” ATO Senior Insolvency Advisor Gary Busby.

The Hall Chadwick duo filed their claim two years after they were ousted as the liquidators of Tauro Capital Pty Ltd.

Upon being being replaced by PKF’s Paul Allen and Jason Stone, Albarran and Lawrence sought creditor approval for their fees.

But at a subsequent meeting in December of that year creditors declined to pass the remuneration resolutions despite them being discounted by 15 per cent, leaving the Hall Chadwick pair $225,000 out of pocket.

18 months passed before Albarran and Lawrence issued a notice of intent to apply to have their fees approved by the the court and the ATO, along with Tauro creditor and Business Pty Ltd director Rhondalynn Korolak filed objections shortly thereafter.

In his affidavit Busby listed the following objections:

“various time sheet comments contain insufficient information to allow assessment of the work’s necessity or reasonableness;

“work has been carried out at an inappropriate level of seniority and/or that excessive time has been spent on various tasks, and;

“inappropriate duplication of work by the plaintiffs and the plaintiffs’ staff”.

Busby said that the Deputy Commissioner of Taxation (DCoT) was also of the view that Albarran and Lawrence had charged excessive amounts in respect of the provision of written reports and circulars to creditors and in respect to the preparation of the Minutes of the October 12, 2020 creditors meeting which saw the pair replaced.

He said a lack of detail proliferated throughout the WIP submitted in support of the application.

“While the failure to particularise attendances for which remuneration is sought is endemic throughout the work in progress report, specific examples of this include the following attendances with either unspecified work or insufficient particulars as to what action has been taken,” Busby said.

Another problem with the ex-liquidators’ application in the ATO’s view was that more than a third of the work during the relevant period was performed by partners.

“Notwithstanding that the former liquidators appear to have employees with a range of seniority, a high-level review of time charges for the period 27 April 2020 to 12 October 2020 suggests that a significant number of the tasks performed have been charged at a more senior level than necessary and should have been more appropriately performed by more junior staff,” Busby said.

Referring to a table from the WIP Report Busby said “almost 72% of the cost during this period was attributable to staff at the level of Senior Manager and above. Partner level (which includes the former
liquidators) accounted for more than one third of the total costs.

“It is hard to see why so many tasks required senior staff expertise as the main activities undertaken by the former liquidators during this period appear to have been largely in relation to settlement discussions in respect of various related party loan accounts and a potential insolvent trading claim against the director; seeking funding for public examinations and dealing with enquiries from creditors,” Busby said.

In his affidavit Lawrence speaks of the particular and myriad difficulties of the Tauro Liquidation, which included dealing with fallout from multiple complaints former Tauro clients had made to the Australian Financial Complaints Authority (AFCA).

Lawrence said the disputes involved allegations that Tauro had failed to raise capital for clients who had engaged its services, or otherwise that the Company had made misrepresentations to clients about its capacity to source investors.

This required the former liquidators to seek legal advice in respect of contingent creditor claims.

They also sought legal advice in respect of material published online by a creditor which Albarran and Lawrence regarded as defamatory and incurred further costs dealing with complaints made to ASIC and ARITA about their conduct of the liquidation.

Neither ASIC or ARITA has commenced any investigation based on the complaints.

In the course of their investigations Lawrence and Albarran identified various issues requiring investigation but were unable to source funding from either creditors, ASIC or the ATO before being replaced.

While they did elicit a $150,000 settlement offer in respect of around $1.6 million owing on Tauro director Simon Ward’s loan account, after they were replaced Allen and Stone extracted $900,000 from Ward without being funded.

The remuneration application is currently set down for a hearing on April 17.

Further reading:

Hall Chadwick Duo Preparing Hail Mary Fee Application

Brawl Abrewin’ As Ex-Liquidators Covet Funds In Trust

Hall Chadwick Duo Backing Controversial Compromise

Liquidator To Relinquish Casting Vote On Tauro Offer