Supreme Court accepts complex task made more difficult by ‘range of challenges’
The Supreme Court of Victoria Commercial Court brings into sharp relief the cost of company failure as external administrators are approved remuneration of more than $320,000 for their work in winding-up Wadley’s Interstate Transport Service (WITS) Holdings in 2019.
The case also sheds light on a messy ending for the 40-plus-year-old company, led by Brian Wadley and Ed Slade, which, in a 2017 interview, was still operating more than 40 trucks.
The administrators made the claim under the Insolvency Practice Schedule (IPS), which deems the court has an obligation to assess and approve an application for remuneration.
“While the parties may have reached agreement between themselves in respect of the amended application, including as to the quantum of the remuneration to be approved, the court still has an obligation to independently consider the application for approval and to come to its own views about whether the remuneration should be approved and in what amount,” the court says
Court records show WITS Holdings operated from premises in Campbellfield, Victoria, and Wetherill Park, New South Wales, and provided interstate services across the east coast of Australia and South Australia.
In March 28, 2019, it was placed into voluntary administration by director Grant Fowler, who had taken control of the company from Wadley in its final years.
Kathryn Warwick, Ross Andrew Blakeley and Joseph Hansell, of FTI Consulting, were appointed administrators.
Even before their appointment, a company creditor, Wex Australia, had applied to the Supreme Court to have WITS wound up.
The company employed about 45 staff with an annual turnover of about $19 million in the financial year ending June 30, 2018.
Initially, the administrators continued to run it as a going concern but by April 4 deemed that it was no longer financially viable, overseeing a managed wind down of the company’s operations, with a liquidator, Stephen Michell of PCI Partners, subsequently appointed.
Read Supreme Court insight on the liquidation of Redstar Transport, here
Central to the application is a “range of challenges arose which added to the complexity of the administration” with the “following matters caus[ing] difficulties”:
- the lease of the premises from which the company had traded in Sydney had expired when the Administrators were appointed. As a result, the Administrators were required to negotiate extensively with the landlord of the site to enable continued use
- when the decision was made on April 4, 2019, to cease trading, the company’s fleet was located across the eastern states. Hence the administrators were required to locate and manage the return of the trucks from various locations
- several key staff members took sick leave when the administration began, including the chief financial officer who was responsible for maintaining the debtor ledgers. As a result, the administrators’ work associated with the debtor ledgers was extremely difficult
- during the administration, the administrators were required to deal with attempts by third parties to steal assets
- given the winding-up application, the administrators were required to complete an urgent evaluation of the business and engage with directors to assess the possibility of a deed of company arrangement. The urgency of this work increased the complexity
- assisting with the transition of the company from administration to liquidation has involved extensive and protracted negotiation with the liquidator
- the difficulty in reaching agreement with the liquidator regarding the equitable and statutory liens
- additional administrative tasks associated with having to pay incurred expenses directly from FTI Consulting to suppliers and contractors, as the administrators did not have sufficient funds to pay these expenses
- receiving and responding to enquiries from customers and sub-contractors in relation to goods in transit and ransom loads
- finalising various ongoing matters, in particular ongoing payroll and superannuation issues
- ongoing statutory compliance required as a result of the protracted process, in particular preparation and review of Business Activity Statements.
The Supreme Court accepts there was a “higher level of risk and responsibility than is usually the case” and that the administrators’ “work has benefited the creditors of the company”.
It approves a total remuneration of $320,988.45, excluding a deduction of $6,371, for the administration, post-administration and other related expenses, amounting to more than 1,100 hours.
Notably, the administrators claimed $70,959 in fees alone was incurred responding to requests from the liquidator, though “do not seek payment of those fees as Ms Warwick considers that this work did not provide any benefit to creditors”.
It’s also mentioned, separately, that “the liquidators seek approval for their remuneration in the amount of $83,049.50 (plus GST) as additional remuneration and $10,000 (plus GST) for future remuneration”.