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Annual General Meeting and Report to Creditors

ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd)

(ACN 052 316 579)

ACN 129 163 837 Pty Ltd (formerly known as Pinnacle Drilling

Underground Pty Ltd)

(ACN 129 163 837)

Zig Zag Investments Pty Ltd

(ACN 002 053 321)

(All In Liquidation)

4 November 2016

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Confidential - this document and the information contained in it are confidential

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Contents

1. Executive Summary 1

2. Update on the Status of the Liquidation 2

3. Investigations 2

4. Dividends to creditors 3

5. Asset Realisations and Expenses to Date 4

6. Liquidators’ Remuneration 5

7. Finalisation 6

8. Receipts and Payments 7

9. Annual Meeting of Creditors 7

Definitions

Liquidators Vaughan Neil Strawbridge and Neil Robert Cussen

AGM Annual General Meeting

ASIC The Australian Securities & Investments Commission

ATO Australian Taxation Office

Companies ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (ACN 052 316 579)

ACN 129 163 837 Pty Ltd (formerly known as Pinnacle Drilling Underground Pty Ltd) (ACN 129 163 837)

Zig Zag Investments Pty Ltd (ACN 002 053 321)

(All In Liquidation)

Deloitte Deloitte Touche Tohmatsu

FEG Fair Entitlements Guarantee Scheme

FWC Fair Work Commission

FY Financial Year Ended XX

PD ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (ACN 052 316 579) (In Liquidation)

PDU ACN 129 163 837 Pty Ltd (formerly known as Pinnacle Drilling Underground Pty Ltd) (ACN 129 163 837) (In Liquidation)

RATA Report as to Affairs

The Act Corporations Act 2001

The Agreement Collective Agreement 2009

The Regulations Corporations Regulations 2001

ZZ Zig Zag Investments Pty Ltd (ACN 002 053 321) (In Liquidation)

Annual Report to Creditors Page 1

4 November 2016

1. Executive Summary

1.1. Appointment

On Thursday, 30 April 2015, we, Vaughan Neil Strawbridge and Neil Robert Cussen, were appointed Joint and Several Administrators of ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (PD), ACN 129 163 837 Pty Ltd (formerly known as Pinnacle Drilling Underground Pty Ltd) (PDU) and Zig Zag Investments Pty Ltd (ZZ), by the Group’s Director, Mr. Philip Lord (the Director), pursuant to Section 436A of the Corporations Act 2001 (Cth) (the Act). Together, these companies operated as the Pinnacle Drilling Group of Companies (the Group).

We were subsequently appointed Joint and Several Liquidators (Liquidators) of the Group on 26 August 2016 by a resolution of creditors pursuant to Section 439A of the Act.

1.2. Purpose of Report

This report has been prepared in accordance with Section 508(3) of the Act and outlines:

The key activities and conduct of the Liquidation appointments for the period 27 August 2015 to 30 September 2016

The matters which remain outstanding

The estimated timeframe for completion.

1.3. Investigation, Offences, Voidable Transactions

We have lodged reports with the Australian Securities & Investments Commission (ASIC) pursuant to Section 533 of the Act. ASIC advised on 26 September 2016 that after considering our reports and subsequent correspondence, it had decided not to commence an investigation into the matters raised at this time.

Our investigations have identified potential unfair preference payments made by PD to the Australian Taxation Office (ATO). We have notified the ATO of this claim and are currently pursuing recovery of same.

1.4. Dividend

We estimate that the following dividends will be paid to priority creditors of PD:

Please note these are estimates only and are subject to change. There will be no dividend paid to unsecured creditors in PD. We do not anticipate a dividend to unsecured creditors in PDU or ZZ.

1.5. Administrators’ and Liquidators’ Remuneration

At the forthcoming Annual General Meeting (AGM), resolutions will be proposed for the approval of the Administrators’ additional professional fees and the Liquidators’ current and future professional fees for the remainder of the winding up. Resolutions will be proposed for PD only.

1.6. Meeting of Creditors

The annual meeting of creditors of the Companies has been called and is to be held on Thursday, 24 November 2016 at 11.00am AEDT, at the offices of Deloitte, Level 9, 225 George Street, SYDNEY NSW 2000. We propose to hold the meetings for the Companies concurrently. Teleconference facilities will be available for the meetings. Please refer to section 9 below for further details.

PD - Estimated Return to Priority Creditors (cents/$) Low High

Wages & Superannuation 100 100

Leave Entitlements 15 61

Retrenchment (PILN & Redundancy) Nil Nil


4 November 2016

1.7. Finalisation

The winding up of PD is expected to be completed by 30 September 2017. The remaining tasks to be completed include the finalisation of the potential unfair preference claims against the ATO and the payment of a distribution to priority creditors (employees). I will be seeking to finalise the administrations of PDU and ZZ within three months of the date of this report.

2. Update on the Status of the Liquidation

2.1. Sale of Residual Plant & Equipment

The remaining plant and equipment of PD has now been realised, with the proceeds paid to the respective secured parties. A summary of the realisations and secured creditor payments is provided in section 4.1 below.

2.2. Collection of Debtors

All pre and post appointment debtors in PD have been collected with approximately 98 per cent of PD’s debtor book recovered successfully. The remaining debtors in PD are impaired and have been deemed uncommercial to realise.

2.3. Estimated Future Recoveries

2.3.1. Unfair Preference

We have finalised our investigations into voidable transactions, and have identified potential unfair preference payments in PD to the ATO during the six months leading up to the appointment of the Administrators. We have issued a letter of demand to the ATO for the repayment of the identified unfair preference payments in PD. The value of the payments identified is $600,312. We will keep creditors advised on our progress. 2.3.2. Shares in Sitegoal Pty Ltd As stated in our Report under Section 439A of the Act, ZZ owns shares in a mining entity, Sitegoal Pty Ltd, which is unrelated to the operations of the Group. We are currently in discussions with an interested party and hope to have this sale completed by the end of 2016.

2.4. Priority Distribution I expect a dividend to be paid to priority creditors in PD, however, the timing of this dividend is dependent on finalising the claim for the potential unfair preference payments with the ATO. A summary of the estimated dividend to priority creditors is provided in section 4.2 below.

3. Investigations

3.1. Reports with ASIC

We lodged our initial report with ASIC pursuant to Section 533(1) of the Act on 9 September 2015. ASIC advised on 26 September 2016 that after considering our report, they would not commence an investigation into the matters raised at this time.

3.2. Voidable Transactions

As stated in our Report under section 439A of the Act, we identified several potential unfair preference payments by PD. We consider it not commercial to pursue the identified preference payments with the exception being the payments to the ATO.

In relation to the ATO, we have identified payments made by PD totalling $600,312 during the six months prior to our appointment as Administrators. We have issued the ATO with a letter of demand


4 November 2016

for this amount and hope to have this claim finalised within six months of the date of this report. We will keep creditors advised of our progress.

3.3. Insolvent Trading

Further investigations undertaken have revealed various defences available to the Director for any possible insolvent trading claim that may exist in relation to possible breaches of s588G(1)-(2). Specifically, pursuant to s588H(5), that the Director appears to have taken reasonable steps to prevent the Company from incurring further debt (including but not limited to seeking advice regarding the Companies’ solvency which ultimately resulted in the appointment of Administrators to the Companies). As stated in our Report under Section 439A of the Act, the Companies’ winding up can largely be attributed to the industrywide downturn in the mining services sector rather than deliberate misconduct by the Director. Our preliminary view is it would be uncommercial to pursue an action for insolvent trading, especially where the Director has signed personal guarantees with a majority of the Companies’ secured creditors. If any creditor would like to discuss this matter further, or would like to consider funding an action, please contact us.

4. Dividends to creditors

4.1. Secured Chargeholder Claims

All plant and equipment of the Group has now been realised, and the table below sets out the amounts owing and amounts paid to secured creditors during the Administration and Liquidation periods (all amounts are excluding GST):

We do not expect the make any further payments to secured creditors.

4.2. Priority Creditor Distribution

Based on the current and estimated future realisations in the liquidation of PD, we estimate that a dividend will be paid to priority creditors.

PD - Secured Creditor Dividends ($'000)

Secured Party

Total Debt

Owing

Dividend

Paid Deficit

Dividend

Rate

Westpac / St George 5,849 5,497 (352) 94

Toyota 1,499 1,008 (491) 67

ME Bank 1,232 434 (798) 35

Bank of Queensland 1,142 646 (496) 57

ANZ Bank 1,041 614 (427) 59

National Australia Bank 882 472 (410) 54

Commonwealth Bank 437 343 (94) 78

Heremes Capital 777 777 - 100

Oaksuave 3,100 - (3,100) -

Total 15,959 9,791 (6,168)

PDU - Secured Creditor Dividends ($'000)

Secured Party

Total Debt

Owing

Dividend

Paid Deficit

Dividend

Rate

Westpac / St George 908 507 (401) 56

ME Bank 370 370 - 100

Commonwealth Bank 474 474 - 100

Total 1,752 1,351 (401)

ZZ - Secured Creditor Dividends ($'000)

Secured Party

Total Debt

Owing

Dividend

Paid Deficit

Dividend

Rate

Westpac / St George 1,911 1,752 (159) 92

Total 1,911 1,752 (159) 92


4 November 2016

Priority creditors will recall that regardless of the Company’s failed attempt to terminate the Collective Agreement 2009 (the Agreement) through an application to the Fair Work Commission (FWC) in about January 2015, the Company reduced wage rates to a level lower than the Agreement but higher than the Mining Industry Award 2010. Priority creditors were paid this reduced rate from January 2015 to the date of their termination on 31 July 2015. Given the Agreement was not properly terminated by the FWC, it is our view that the Agreement still stands and priority creditors are entitled to claim for unpaid entitlements (including the difference in wages and other entitlements received from January 2015) as per the rates stipulated in the Agreement. Priority creditors will be asked to calculate and submit their claim on this basis. Please note the above is an estimate only and has been calculated in accordance with the claims submitted to FEG, which we understand are based on the Agreement. All claims are subject to a formal adjudication process by the Liquidators which will be conducted during the dividend process.

4.3. Return to Unsecured Creditors

As per our report to creditors under Section 439A of the Act dated 14 August 2015, we do not expect a dividend to be paid to unsecured creditors of the Companies.

5. Asset Realisations and Expenses to Date

We provide herein an updated Estimated Statement of Position (ESOP) for PD in relation to future recoveries and expenses (excluding GST):

PD - Estimated Return to Priority Creditors (cents/$) Low High

Wages & Superannuation 100 100

Leave Entitlements 15 61

Retrenchment (PILN & Redundancy) Nil Nil

ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd)

ACN 052 316 579 (In Liquidation)

PD - Estimated Statement of Position as at 30 September 2016 Low ($) High ($)

Cash at Bank 30 September 2016 975,374.94 975,374.94

Estimated Future Recoveries

Voidable Transactions - Unfair Preferences - 600,311.90

Total Estimated Funds 975,374.94 1,575,686.84

Liquidators' Fees Incurred but Not Drawn (338,371.00) (338,371.00)

Estimated Future Costs

Liquidators' Future Fees (62,580.50) (162,580.50)

Liquidators' Disbursements (2.5% of fees) (1,564.51) (4,064.51)

Legal Fees - (35,000.00)

Contingency (50,000.00) (100,000.00)

Total Estimated Future Costs (452,516.01) (640,016.01)

Total Funds Available to Priority Creditors (Wages & Superannuation) 522,858.93 935,670.83

Total Wages & Superannuation (392,163.14) (392,163.14)

Estimated Return to Priority Creditors (Wages & Superannuation) (cents/$) 100 100

Total Funds Available to Priority Creditors (Leave Entitlements) 130,695.79 543,507.69

Total Leave Entitlements (884,835.06) (884,835.06)

Estimated Return to Priority Creditors (Leave Entitlements) (cents/$) 15 61

Shortfall to Priority Creditors (Retrenchment) (754,139.27) (341,327.37)

Total Retrenchment (PILN and Redundancy) (1,492,833.32) (1,492,833.32)

Estimated Return to Priority Creditors (Retrenchment) (cents/$) Nil Nil


4 November 2016

6. Liquidators’ Remuneration

Creditors will note we are only seeking remuneration approval for current and future fees in the Administration and Liquidation of PD. The resolutions set out below will be put to the meeting at the forthcoming AGM on Thursday, 24 November 2016.

6.1. Administrators’ Professional Fees

6.1.1. Administrators’ current remuneration 1 August 2015 to 26 August 2015 At the Second Meeting of Creditors held on 26 August 2015 pursuant to Section 439A of the Act, creditors approved the Administrators’ estimate of professional fees to be incurred for the period 1 August 2015 to 26 August 2015 for the amount of $55,602.50 plus GST. Creditors are advised that additional time was incurred in the amount of $64,256.50 plus GST for the referred period. The additional time was primarily incurred due to higher than expected time costs in finalising the trading of the business, finalising the Administrators’ Report under Section 439A of the Act, and conducting the various meetings of creditors. The table below summarises fees approved to date for the period 1 August 2015 to 26 August 2015 (inclusive):

Amount ($) (exc. GST)

Total fees for the period 1 August 2015 to 26 August 2015 119,859.00

Less: Fee approval obtained at the Creditors meeting held on 26 August 2015 (55,602.50)

Fees Subject to Approval 64,256.50

The following resolution in relation to the Administrators’ additional remuneration for the period 1 August 2015 to 26 August 2015 will be proposed at the upcoming AGM of PD: “That the additional remuneration of the Administrators, their partners and staff, for the period of the Administration from 1 August 2015 to 26 August 2015 is fixed at a sum equal to the additional cost of time spent by the Administrators and the Administrators’ partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016 of fees equalling $64,256.50 plus GST, and that the Administrators can draw the remuneration as required.”

6.2. Liquidators’ Professional Fees and Disbursements

6.2.1. Liquidators’ current remuneration 27 August 2015 to 30 September 2016 At the Second Meeting of Creditors held on 26 August 2015 pursuant to Section 439A of the Act, creditors approved the Liquidators’ estimate of professional fees to be incurred for the period 27 August 2015 to completion for the amount of $144,955.50 plus GST. Creditors are advised that additional time was incurred in the amount of $121,284.00 plus GST for the period 27 August 2015 to 30 September 2016. The additional time was primarily incurred due to:

Attending to FEG adjudication and distribution and liaising with FEG and priority creditors generally regarding entitlements and other matters

Preparing and distributing Payment Summary forms to employees for pre and post appointment periods

Liaising with employees and the ATO regarding issues with entitlements and Payment Summary forms

Reviewing entitlements calculated pursuant to the Agreement and in preparation for distribution

Attending to comprehensive calculation of payroll tax and workers compensation liabilities for pre and post appointment periods

Calculation and payment of superannuation obligations for post appointment period Calculation and negotiation of post sale cost adjustments with the purchaser Preparation and lodgement of quarterly BAS’s with ATO including liaising with ATO on

reversal of general interest charges due to an ATO error Attending to the calculation and recovery of fuel tax credits


4 November 2016

Attending to child support reconciliations and payments to various employees Conducting detailed investigations into voidable transactions including unfair preference

payments and demand letter Liaising with managing Grays Online on the sale of surplus plant and equipment Regularly liaising with secured parties regarding the sale of secured plant and equipment

including attending to the distribution of agreed net proceeds from sale Preparing a report to ASIC pursuant to section 533 of the Act and liaise with ASIC about

preparing of a supplementary report Dealing with issues with the ATO regarding various running balance accounts set up during

the Administration The table below summarises fees approved to date for the period 27 August 2015 to 30 September 2016 (inclusive): Amount ($)

(exc. GST)

Total fees for the period 27 August 2015 to 30 September 2016 266,239.50

Less: Fee approval obtained at the Creditors meeting held on 26 August 2015 for the period 27 August 2015 to completion

(144,955.50)

Fees Subject to Approval 121,284.00

The following resolution in relation to the Liquidators’ additional remuneration for the period 27 August 2015 to 30 September 2016 will be proposed at the upcoming AGM of PD: “That the additional remuneration of the Liquidators, their partners and staff, for the period of the Liquidation from 27 August 2015 to 30 September 2016 is fixed at a sum equal to the additional cost of time spent by the Liquidators and the Liquidators’ partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016 of fees equalling $121,284.00 plus GST, and that the Liquidators can draw the remuneration as required.” 6.2.2. Liquidators’ future remuneration 1 October 2016 to completion

The following resolution in relation to the Liquidators’ future remuneration for the period 1 October 2016 to completion of the Liquidation will be proposed at the upcoming AGM of PD:

“That the prospective remuneration of the Liquidators, their partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016, for the period from 1 October 2016 to finalisation, is fixed and approved to a maximum cap of $62,580.50 plus GST and disbursements, to be drawn only when incurred. Should a lesser amount be actually incurred, only the lesser amount will be drawn. Should a greater amount be actually incurred, further approval from the creditors will be sought.”

6.2.3. Liquidators’ disbursements 27 August 2016 to 30 September 2016

The following resolution in relation to the Liquidators’ disbursements for the period 27 August 2015 to 30 September 2016 will be proposed at the upcoming AGM of PD:

“That the disbursements of the Liquidators for the period of the Liquidation from 27 August 2015

to 30 September 2016, as detailed in the Remuneration Report of 4 November 2016, are approved

in the sum of $10,743.16 plus GST.”

Enclosed for creditors’ perusal is the Remuneration Report dated 4 November 2016 which is attached at Appendix E to this report. The Remuneration Report includes details of our remuneration which is calculated based on the firm’s hourly rates; details of disbursements and expenses incurred which remain unpaid; and the ASIC Information Sheet 85 - Approving Fees: a Guide for Creditors.

7. Finalisation

Below is a summary of the other acts and dealings that remain to be carried out by the Liquidator in order to complete the winding up:


4 November 2016

Finalisation of unfair preference claims against the ATO (PD) Sale of shares (ZZ) Distribution of the final dividend to priority creditors (PD) Dealing with future creditor enquiries (Group) Meeting statutory and tax compliance obligations (Group) Finalisation of the liquidation of the respective entities (Group)

8. Receipts and Payments

A summary of the Liquidators’ receipts and payments for PD, PDU and ZZ for the period 26 August 2015 to 30 September 2016 is attached at Appendix D.

9. Annual Meeting of Creditors

The annual meeting of creditors of the Companies has been called and is to be held on Thursday, 24 November 2016 at 11.00am AEDT, at the offices of Deloitte, Level 9, 225 George Street, SYDNEY NSW 2000. We propose to hold the meetings for the Companies concurrently. Teleconference facilities will be available for the meetings. Date: Thursday, 24 November 2016 Time: 11:00am (AEDT) Location: Deloitte

Level 9, Grosvenor Place 225 George Street Sydney NSW 2000

Dial details: National Toll Free Number: 1800 762 325 Alternative Telephone Number: +61 (2) 9308 3700 Conference ID: 25896908 Please refer to the Notice of Meeting attached at Appendix A for further details.

Attendance at this meeting is not compulsory. Creditors may attend and vote in person, by proxy or by attorney. The appointment of a proxy must be made in accordance with Form 532 – Appointment of Proxy (enclosed as Appendix B).

Proxy forms or facsimiles thereof must be lodged with the Liquidators prior to the commencement of the meeting. Where a facsimile copy of a proxy is sent, the original must be lodged with the Liquidators within 72 hours after the receipt of the facsimile. An attorney of the creditor must show the instrument by which he or she is appointed to the Chairperson of the meeting prior to the commencement of the meeting.

Please note that a creditor is required to lodge a Form 535 - Proof of Debt or Claim (enclosed as Appendix C) to be entitled to vote at the meeting of creditors. A creditor will not be able to vote at the meeting unless a Proof of Debt or Claim is lodged with the Liquidators prior to the commencement of the meeting.

At the upcoming AGM of the Companies, the resolutions which will be put to the meeting solely relate to the Liquidation of PD.

Creditors should provide proxies and Proofs of Debt to the Liquidators prior to the meeting by one of the following methods:

Post Attention: Andrew Whittingham

C/- Deloitte

PO Box N250

Grosvenor Place

Sydney NSW 1220

Email [email protected]

Fax (02) 9322 7001

mailto:[email protected]


4 November 2016

If a creditor wishes to rely upon a Proof of Debt or Claim that they have previously lodged with the Liquidators’ office, they must make reference to that Proof of Debt or Claim when submitting a proxy or when attending the AGM.

Should you have any queries in regards to this report or the upcoming annual meeting, please do not hesitate to contact Andrew Whittingham of this office on (02) 8260 4390 or by email at [email protected]. Yours faithfully

Vaughan Neil Strawbridge Joint and Several Liquidator Encl.

mailto:[email protected]

Appendix A

FORM 529

CORPORATIONS ACT 2001

Subregulation 5.6.12(6)

NOTICE OF CREDITORS’ MEETING

A.C.N. 052 316 579 PTY LTD (FORMERLY PINNACLE DRILLING PTY LIMITED) ACN 052 316 579

A.C.N. 129 163 837 PTY LTD (FORMERLY PINNACLE DRILLING UNDERGROUND PTY LTD) ACN 129 163 837

ZIG ZAG INVESTMENTS PTY LTD ACN 002 053 321

(ALL IN LIQUIDATION) (“the Companies”)

Notice is given pursuant to Section 508(1) of the Corporations Act 2001 that an annual meeting of creditors of the Companies will be held at the offices of Deloitte, Level 9, 225 George Street, Sydney NSW 2000 on Thursday, 24 November 2016 at 11:00AM (AEDT). The purpose of the meeting is to receive an account of the Liquidators’ acts and dealings and the conduct of the Winding Up. The Agenda for the meeting is as follows:

1. To receive a Circular from the Liquidators providing an update on the Winding Up; 2. To consider and if thought fit, approve the Liquidators’ professional fees and disbursements; 3. To consider and if thought fit, approve the former Administrators’ professional fees; 4. To consider any other business.

Attendance at this meeting is not compulsory. Creditors may attend and vote in person, by proxy or by attorney. The appointment of a proxy must be made in accordance with Form 532. A special proxy can be lodged showing approval or rejection of each resolution. Proxy forms or facsimiles thereof must be lodged with our office by 4.00pm on the day prior to the meeting. Where a facsimile copy of a proxy is sent, the original must be lodged with our office within 72 hours after receipt of the facsimile. An attorney of the creditor must show the instrument by which he or she is appointed to the Chairperson of the meeting, prior to the commencement of the meeting. In accordance with Regulation 5.6.23(1) of the Corporations Regulations, creditors will not be entitled to vote at this meeting unless they have lodged particulars of their claim against the relevant company with the Liquidators prior to the commencement of the meeting. DATED this 4th day of November 2016. Vaughan Strawbridge Joint and Several Liquidator Deloitte Touche Tohmatsu Grosvenor Place 225 George Street SYDNEY NSW 2000 Telephone: (02) 9322 7000

Appendix B

FORM 532


Regulation 5.6.29

APPOINTMENT OF PROXY

ACN 052 316 579 PTY LTD (FORMERLY PINNACLE DRILLING PTY LTD)

ACN 052 316 579 (IN LIQUIDATION) (“the Company”)

*I/*We (1) ....................................................................................................................................

of ................................................................................................................................................

a creditor of the Company, appoint (2) .............................................................................................

....................................................................................................................................................

or in his or her absence ..................................................................................................................

as *my/our *general/special proxy to vote at the meeting of creditors to be held at the offices of Deloitte, Level 9, Grosvenor Place, 225 George Street, Sydney NSW 2000 on Thursday, 24 November 2016 at 11:00 am (AEDT), or at any adjournment of that meeting. (3)

(i) to vote on all matters arising at the meeting (IF GENERAL PROXY)

OR (ii) to vote for or against the following resolutions (IF SPECIAL PROXY)

ONLY COMPLETE THE FOLLOWING IF YOU HAVE APPOINTED A SPECIAL PROXY ABOVE:

Please circle your preferred voting option.

1. To consider and if thought fit, approve the Joint and Several Administrators’ current remuneration for the period 1 August 2015 to 26 August 2015 (inclusive):

“That the additional remuneration of the Administrators, their partners and staff, for the period of the Administration from 1 August 2015 to 26 August 2015 is fixed at a sum equal to the additional cost of time spent by the Administrators and the Administrators’ partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016 of fees equalling $64,256.50 plus GST, and that the Administrators can draw the remuneration as required.”

FOR / AGAINST / ABSTAIN

2. To consider and if thought fit, approve the Joint and Several Liquidators’ current remuneration for the period 27 August 2015 to 30 September 2016 (inclusive):

“That the additional remuneration of the Liquidators, their partners and staff, for the period of

the Liquidation from 27 August 2015 to 30 September 2016 is fixed at a sum equal to the

additional cost of time spent by the Liquidators and the Liquidators’ partners and staff, calculated

at the hourly rates as detailed in the Remuneration Report of 4 November 2016 of fees equalling

$121,284.00 plus GST, and that the Liquidators can draw the remuneration as required.”


3. To consider and if thought fit, approve the Joint and Several Liquidators’ prospective fees

and disbursements for the period 1 October 2016 to completion:

“That the prospective remuneration of the Liquidators, their partners and staff, calculated at

the hourly rates as detailed in the Remuneration Report of 4 November 2016, for the period

from 1 October 2016 to finalisation, is fixed and approved to a maximum cap of $62,580.50

plus GST and disbursements, to be drawn only when incurred. Should a lesser amount be

actually incurred, only the lesser amount will be drawn. Should a greater amount be actually

incurred, further approval from the creditors will be sought.”


4. To consider and if thought fit, approve the Joint and Several Liquidators’ disbursements:

“That the disbursements of the Liquidators for the period of the Liquidation from 27 August 2015

to 30 September 2016, as detailed in the Remuneration Report of 4 November 2016, are approved

in the sum of $10,743.16 plus GST.”


DATED this day of 2016

Signature

CERTIFICATE OF WITNESS

This certificate is to be completed only if the person giving the proxy is blind or incapable of

writing. The signature of the creditor, contributory, debenture holder or member must not be

witnessed by the person nominated as proxy.

I, .................................................... of ..........................................................................

certify that the above instrument appointing a proxy was completed by me in the presence of

and at the request of the person appointing the proxy and read to him or her before he or she

signed or marked the instrument.

Dated:

Signature of Witness:

Description:

Place of Residence:

* Strike out if inapplicable (1) If a firm, strike out "I" and set out the full name of the firm. (2) Insert the name, address and description of the person appointed. (3) If a special proxy add the words "to vote for" or the words "to vote against" and specify the particular resolution.

FORM 532


Regulation 5.6.29


ACN 129 163 837 PTY LTD (FORMERLY PINNACLE DRILLING UNDERGROUND PTY LTD)


*I/*We (1) ....................................................................................................................................

of ................................................................................................................................................


....................................................................................................................................................


as *my/our *general/special proxy to vote at the meeting of creditors to be held at the offices of Deloitte, Level 9, Grosvenor Place, 225 George Street, Sydney NSW 2000 on Thursday, 24 November 2016 at 11:00 am (AEDT), or at any adjournment of that meeting. (3) (i) to vote on all matters arising at the meeting, if any (IF GENERAL PROXY)

OR

(ii) to vote for or against the following resolutions (IF SPECIAL PROXY)



NO RESOLUTIONS PROPOSED


Signature


This certificate is to be completed only if the person giving the proxy is blind or incapable of writing. The signature of the creditor, contributory, debenture holder or member must not be witnessed by the person nominated as proxy.

I, ........................................................... of .................................................................................. certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him or her before he or she signed or marked the instrument. Dated:

Signature of Witness: Description:

Place of Residence:

* Strike out if inapplicable

(1) If a firm, strike out "I" and set out the full name of the firm. (2) Insert the name, address and description of the person appointed. (3) If a special proxy add the words "to vote for" or the words "to vote against" and specify the particular

resolution.

FORM 532


Regulation 5.6.29


ZIG ZAG INVESTMENTS PTY LTD


*I/*We (1) ....................................................................................................................................

of ................................................................................................................................................


....................................................................................................................................................


as *my/our *general/special proxy to vote at the meeting of creditors to be held at the offices of Deloitte, Level 9, Grosvenor Place, 225 George Street, Sydney NSW 2000 on M Thursday, 24 November 2016 at 11:00 am (AEDT), or at any adjournment of that meeting. (3) (i) to vote on all matters arising at the meeting, if any (IF GENERAL PROXY)

OR

(ii) to vote for or against the following resolutions (IF SPECIAL PROXY)



NO RESOLUTIONS PROPOSED


Signature


This certificate is to be completed only if the person giving the proxy is blind or incapable of writing. The signature of the creditor, contributory, debenture holder or member must not be witnessed by the person nominated as proxy.

I, ........................................................... of .................................................................................. certify that the above instrument appointing a proxy was completed by me in the presence of and at the request of the person appointing the proxy and read to him or her before he or she signed or marked the instrument. Dated:

Signature of Witness: Description:

Place of Residence:

* Strike out if inapplicable

(1) If a firm, strike out "I" and set out the full name of the firm. (2) Insert the name, address and description of the person appointed. (3) If a special proxy add the words "to vote for" or the words "to vote against" and specify the particular

resolution.

Appendix C

FORM 535



FORMAL PROOF OF DEBT OR CLAIM (GENERAL FORM)

ACN 052 316 579 PTY LTD (FORMERLY PINNACLE DRILLING PTY LTD)


To the Liquidator of ACN 052 316 579 Pty Ltd (Formerly Pinnacle Drilling Pty Ltd) 1. This is to state that the company was, on 30 April 2015(1) and still is, justly and truly indebted to(2)

.........................................................................................................................................

..................................................................................................................................... for ......................................................... dollars and ............................................................ cents. Particulars of the debt are:

2. To my knowledge or belief the creditor has not, nor has any person by the creditor's order, had or

received any manner of satisfaction or security for the sum or any part of it except for the following:(5)

3.(6)* I am employed by the creditor and authorised in writing by the creditor to make this statement. I

know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, still remains unpaid and unsatisfied.

3.(6)* I am the creditor's agent authorised in writing to make this statement in writing. I know that the debt was incurred and for the consideration stated and that the debt, to the best of my knowledge and belief, still remains unpaid and unsatisfied.


Signature of Signatory .........................................................................................................................

NAME IN BLOCK LETTERS ....................................................................................................................

Occupation .........................................................................................................................................

Address ..............................................................................................................................................

See Directions overleaf for the completion of this form

Date Consideration(3) Amount ($) GST Included ($) Remarks(4)

Directions

* Strike out whichever is inapplicable. (1) Insert date of Court Order in winding up by the Court, or date of resolution to wind up, if a voluntary

winding up.

(2) Insert full name and address (including ABN) of the creditor and, if applicable, the creditor's partners. If prepared by an employee or agent of the creditor, also insert a description of the occupation of the creditor.

(3) Under "Consideration" state how the debt arose, for example "goods sold and delivered to the

company between the dates of .....................................................", "moneys advanced in respect of the Bill of Exchange".

(4) Under "Remarks" include details of vouchers substantiating payment. (5) Insert particulars of all securities held. Where the securities are on the property of the company,

assess the value of those securities. If any bills or other negotiable securities are held, specify them in a schedule in the following form:

Date Drawer Acceptor Amount Date Due $ ¢

(6) If proof is made by the creditor personally, strike the two (2) paragraphs numbered 3.

Annexures A. If space provided for a particular purpose in a form is insufficient to contain all the required

information in relation to a particular item, the information must be set out in an annexure.

B. An annexure to a form must: (a) have an identifying mark; (b) and be endorsed with the words: "This is the annexure of (insert number of pages) pages marked (insert an

identifying mark) referred to in the (insert description of form) signed by me/us and dated (insert date of signing); and

(c) be signed by each person signing the form to which the document is annexed. C. The pages in an annexure must be numbered consecutively.

D. If a form has a document annexed the following particulars of the annexure must be written on the

form: (a) the identifying mark; and (b) the number of pages.

E. A reference to an annexure includes a document that is with a form.

FORM 535




ACN 129 163 837 PTY LTD (FORMERLY PINNACLE DRILLING UNDERGROUND PTY LTD)

ACN 129 163 837

(IN LIQUIDATION) (“the Company”)

To the Liquidator of ACN 129 163 837 Pty Ltd (Formerly Pinnacle Drilling Underground Pty Ltd) 1. This is to state that the company was, on 30 April 2015(1) and still is, justly and truly indebted to(2)

......................................................................................................................................... ..................................................................................................................................... for ......................................................... dollars and ............................................................ cents.

Particulars of the debt are:



3.(6)* I am employed by the creditor and authorised in writing by the creditor to make this statement. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, still remains unpaid and unsatisfied.


DATED this day of 2016 Signature of Signatory .........................................................................................................................


Occupation .........................................................................................................................................

Address ..............................................................................................................................................



Directions


winding up.
















FORM 535




ZIG ZAG INVESTMENTS PTY LTD

ACN 002 053 321

(IN LIQUIDATION) (“the Company”)

To the Liquidator of Zig Zag Investments Pty Ltd 1. This is to state that the company was, on 30 April 2015(1) and still is, justly and truly indebted to(2)

......................................................................................................................................... ..................................................................................................................................... for ......................................................... dollars and ............................................................ cents.

Particulars of the debt are:



3.(6)* I am employed by the creditor and authorised in writing by the creditor to make this statement. I know that the debt was incurred for the consideration stated and that the debt, to the best of my knowledge and belief, still remains unpaid and unsatisfied.


DATED this day of 2016 Signature of Signatory .........................................................................................................................


Occupation .........................................................................................................................................

Address ..............................................................................................................................................



Directions


winding up.
















Appendix D

ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) ACN 052 316 579 (In Liquidation)Liquidators' receipts and payments for the period 26 August 2015 to 30 September 2016 Amount ($)RECEIPTSCash at bank (as at 26 August 2015) 3,759,171.72 Sales 79,666.67 Pre-appointment debtors 28,233.34 Bank interest 26,036.24 FEG Funds received 2,386,422.04 Incorrect receipt of 3rd Party Funds 536,387.04 Labour hire receipts 193,545.42 Reimbursement of finance costs 75,489.26 Residual asset sales 3,090,906.00 Transfer fees 308.18 GST on receipts 319,651.28 Total receipts 10,495,817.19 PAYMENTSAdvertising / marketing costs (67,899.26) Superannuation (302,552.29) Telephone & fax (3,748.05) Drilling consumables (20,000.00) Employee travel (3,447.44) Secured creditor distribution (2,665,128.29) Commission paid (154,320.30) FEG distribution (2,386,432.85) Insurance (172,026.15) Legal fees (66,727.59) Insurance of assets (323.60) Stationery & printing (1,208.18) Liquidators' remuneration (666,605.50) Liquidators' expenses (99,183.53) Storage costs (4,832.82) Transport / courier (8,170.00) Stamp duty (230.45) Debtor factoring fees (2,251.33) Remit incorrect deposits to 3rd party (821,958.57) Payroll tax (170,611.97) Other asset realisation costs (2,858.75) Pre-appointment child support (7,252.83) Child support withheld (6,706.54) GST / PAYG Liability (1,885,965.96) Total payments (9,520,442.25) Cash at bank as at 30 September 2016 975,374.94

ACN 129 163 837 Pty Ltd (formerly known as Pinnacle Drilling Underground Pty Ltd) ACN 129 163 837 (In Liquidation)Liquidators' receipts and payments for the period 26 August 2015 to 30 September 2016 Amount ($)RECEIPTSCash at bank (as at 26 August 2015) 146,783.12 Bank interest 1,767.71 Total receipts 148,550.83 PAYMENTSGST clearing account (93,027.00) Total payments (93,027.00) Cash at bank as at 30 September 2016 55,523.83

Zig Zag Investments Pty LtdACN 002 053 321 (In Liquidation)Liquidators' receipts and payments for the period 26 August 2015 to 30 September 2016 Amount ($)RECEIPTSCash at bank (as at 26 August 2015) 242,337.04 Bank interest 1,845.91 Residual proceeds of property in trust 987.42 GST clearing account 3,734.20 Total receipts 248,904.57 PAYMENTSInsurance (1,551.87) Legal fees (460.00) Liquidators' remuneration (35,215.50) Stamp Duty (123.94) GST clearing account (182,850.00) GST on payments (3,722.74) Total payments (223,924.05) Cash at bank as at 30 September 2016 24,980.52

Appendix E

Remuneration Report – 4 November 2016 Advice to creditors – remuneration ACN 052 316 579 Pty Ltd (In Liquidation) (formerly known as Pinnacle Drilling Pty Ltd) ACN 052 316 579 (“PD” or “the Company”) Remuneration Methods There are four basic methods that can be used to calculate the remuneration charged by an insolvency practitioner. They are:

Time based / hourly rates This is the most common method. The total fee charged is based on the hourly rate charged for each person who carried out the work multiplied by the number of hours spent by each person on each of the tasks performed. Fixed Fee The total fee charged is normally quoted at the commencement of the administration and is the total cost for the administration. Sometimes a practitioner will finalise an administration for a fixed fee. Percentage The total fee charged is based on a percentage of a particular variable, such as the gross proceeds of assets realisations. Contingency The practitioner’s fee is structured to be contingent on a particular outcome being achieved.

Method chosen Given the nature of this Administration we propose that our remuneration be calculated on the time based / hourly rates. This is because:

We will only be paid for work done, subject to sufficient realisations of the assets of the Group; It ensures creditors are only charged for work that is performed. Our time is recorded and charged in six minute increments and staff are allocated to duties according to their relevant experience and qualifications; We are required to perform a number of tasks which do not relate to the realisation of assets, e.g. responding to creditor enquiries, reporting to the ASIC, distributing funds in accordance with the provisions of the Corporations Act 2001; and We are unable to estimate with certainty the total amount of fees necessary to complete all tasks required in this Administration.

Explanation of Hourly Rates The rates for our remuneration calculation are set out in the following table together with a general guide showing the qualifications and experience of staff engaged in the Administration and the role they take in the Administration. The hourly rates charged encompass the total cost of providing professional services and should not be compared to an hourly wage.

Title Description Hourly Rate (excl GST)

Appointee Registered liquidator. Brings his or her specialist skills to the administration or insolvency task. $585.00 Partner Registered liquidator. Brings his or her specialist skills to the administration or insolvency task. $585.00 Principal/ Consultant

Typically CA or CPA qualified with in excess of 10 years’ experience on insolvency matters with a number of years at manager level. Answerable to the appointee but otherwise responsible for all aspects of an administration. Capable of controlling all aspects of an administration. May be appropriately qualified to take appointments in his/her own right.

$485.00

Director Typically CA or CPA qualified with in excess of 8 years’ experience on insolvency matters with a number of years at manager level. Answerable to the appointee but otherwise responsible for all aspects of an administration. Capable of controlling all aspects of an administration. May be appropriately qualified to take appointments in his/her own right.

$485.00

Manager Typically CA or CPA qualified with 6 to 8 years’ experience working on insolvency matters. Will have experience conducting administrations and directing a number of staff. $420.00

Senior Analyst

Typically completed or near completion of CA or CPA qualifications with 4 to 6 years insolvency experience. Assists in planning and control of smaller matters as well as performing some more difficult tasks on larger matters.

$315.00

Analyst Typically studying towards CA or CPA qualification with 2 to 4 years insolvency experience. Works under supervision of more senior staff in performing day-to-day fieldwork. $210.00

Graduate Junior staff member who has completed a university degree with less than one year's experience working on insolvency matters. Works under supervision of more senior staff in performing day-to-day fieldwork. This may include staff located in other offices of Deloitte overseas. These staff work under the supervision of Australian staff with insolvency experience.

$110.00

Secretary Advanced secretarial skills $160.00 Other Clerical

Support secretarial and administrative skills $160.00

Other Junior Junior staff member who has not yet completed a university degree with less than one year's experience working on insolvency matters. Works under supervision of more senior staff in performing day-to-day fieldwork.

$110.00

Our best estimate for the cost of the Liquidation to completion is $1,067,557 (excluding GST and disbursements). This amount includes remuneration previously drawn and paid in the Administration, and expected future remuneration in the Liquidation.

Disbursements Disbursements are divided into three types: Externally provided professional services - these are recovered at cost. An example of an externally provided professional service disbursement is legal fees Externally provided non-professional costs such as travel, accommodation and search fees - these are recovered at cost Internal disbursements such as photocopying, printing and postage. These disbursements, if charged to the Administration, would generally be charged at cost; though some expenses such as telephone calls, photocopying and printing may be charged at a rate which recoups both variable and fixed costs. The recovery of these costs must be on a reasonable commercial basis. We are not required to seek creditor approval for disbursements, but must account to creditors. Details of the basis of recovering internal disbursements in this Administration are provided below. Full details of any actual costs incurred will be provided with future reporting. Basis of disbursement claim

Internal Rate (Excl GST)

Advertising At cost - based on commercial rates charged by ASIC and state and national newspapers Courier At cost - based on commercial rates charged by major external courier firms Data room fees Fixed fee plus $20.00 per megabyte Postage Australia Post rates Photocopying - external At cost - based on commercial rates as offered by commonly used external providers Staff vehicle use $0.70 per km Stationery, printing, photocopying, telephone and faxes 2.5% of incurred insolvency fees

Scale applicable for financial year ending 30 June 2016.

Remuneration Request Approval Report Part 1: Declaration We, Vaughan Strawbridge and Neil Cussen of Deloitte Touche Tohmatsu have undertaken a proper assessment of this remuneration claim for our appointment as Joint and Several Administrators of ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (“PD”) in accordance with the law and applicable professional standards. We are satisfied that the remuneration claimed is in respect of necessary work, properly performed, or to be properly performed, in the conduct of the Administration. Part 2: Executive Summary To date, remuneration totalling $666,605.00 (excluding GST and disbursements) has been approved and paid in relation to the Administration of PD. This remuneration report details approval sought for the following fees: Period Report Reference Amount (ex GST)

Past remuneration approved: 30 April 2015 to 31 July 2015 $611,003.00 1 August 2015 to 26 August 2015 $55,602.50 27 August 2015 to completion $144,955.50 Total past remuneration approved $811,561.00 Current remuneration approval sought: Voluntary Administration Resolution 1: 1 August 2015 to 26 August 2015 (additional remuneration sought) 3.1 $64,256.50

Liquidation Resolution 2: 27 August 2015 to 30 September 2016 (additional remuneration sought) Resolution 3: 1 October 2016 to completion (estimate) Total remuneration being sought

3.2

3.3

$121,284.00

$62,580.50 $248,121.00

* Approval for the future remuneration sought is based on an estimate of the work necessary to the completion of the Liquidation. Should additional work be necessary beyond what is contemplated, further approval may be sought from creditors. Please refer to report section references detailed in the above table for full details of the calculation and composition of the remuneration approval sought. This differs to the estimate of costs provided in the Remuneration Advice to Creditors which accompanies our Report to Creditors under section 439A of the Act dated 14 August 2015, which estimated a cost to completion of the Liquidation of $144,955.50 (excluding GST), for the following reasons:

Attending to FEG adjudication and distribution and liaising with FEG and priority creditors generally regarding entitlements and other matters

Preparing and distributing Payment Summary forms to employees for pre and post appointment periods Liaising with employees and the ATO regarding issues with entitlements and Payment Summary forms Reviewing entitlements calculated pursuant to the Agreement and in preparation for distribution Attending to compressive calculation of payroll tax and workers compensation liabilities for pre and post appointment periods in NSW, Queensland and Western Australia Calculation and payment of superannuation obligations for post appointment period Calculation and negotiation of post sale cost adjustments with the purchaser Preparation and lodgement of quarterly BAS’s with ATO including liaising with ATO on reversal of general interest charges due to an ATO error Attending to calculation and recovery of fuel tax credits Attending to child support reconciliations and payments to various employees Conducting detailed investigations into voidable transactions including unfair preference payments and demand letter Liaising with managing Grays Online on the sale of surplus plant and equipment Regularly liaising with secured parties regarding the sale of secured plant and equipment including attending to the distribution of agreed net proceeds from sale Preparing a report to ASIC pursuant to section 533 of the Act and liaise with ASIC about preparing of a supplementary report Dealing with issues with the ATO regarding various running balance accounts set up during the Administration Part 3: Description of work completed / to be completed 3.1 Resolution 1: Actual work completed for the period 1 August 2015 to 26 August 2015 (inclusive) Task Area General Description Includes

Assets 12.1 hours $6,172.00

Sale of Business Finalising sale of business transaction matters with the Purchaser pursuant to the terms of the contract of sale Arranging transfer of funds to secured creditors following completion of sale Plant and Equipment Liaising with valuers regarding updated asset listing, inspection and valuation Engaging GraysOnline to facilitate an online marketing and auction campaign for residual assets not acquired by Purchasers Assets subject to specific charges All tasks associated with realising a charged asset Pre-appointment Debtors Pursue debtors Preparation of correspondence to debtors requesting payment of outstanding amounts Liaising with the Groups’ debtor finance factoring provider Stock Reviewing stock values Liaising with purchasers Other Assets Tasks associated with realising other assets Leasing Reviewing asset finance contracts Arranging releases of registered security interests to facilitate transfer of assets with charges to the Purchaser

Creditors 197.9 hours $69,021.00

Creditor Enquiries Receiving and responding to creditor enquiries via telephone and email Maintaining creditor enquiry register Review and prepare correspondence to creditors and their representatives via facsimile, email and post

Task Area General Description Includes Correspondence with committee of creditors members

PPSR Claims and secured creditors Preparation of correspondence to all parties with a registered security interest Discussions with lawyers regarding the validity of various claims Progressing the adjudication of various PPSR claimants Providing regular updates to the secured creditor regarding the progress of the Administration and realisation of assets Responding to secured creditors’ queries Creditor notifications Preparation and distribution of general correspondence to creditors and their representatives Dealing with proofs of debt Receipting and filing proofs of debt (POD’s) when not related to a dividend Corresponding with OSR and ATO regarding POD when not related to a dividend Committee of Creditors Correspondence with Committee of Creditor Members Meeting of Creditors Booking venue for second meeting on 26 August 2015 Advertising Notice of Meeting with ASIC Forwarding Notice of Meeting to all known creditors Receiving and processing creditors’ proxy forms Preparation of meeting file including agenda, meeting slides, certificate of postage, attendance registers, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting Running the meeting Preparation and lodgement of minutes of meetings with ASIC

Employees 38.3 hours $13,238.50

Employees enquiries Receiving and responding to employee enquiries via telephone and email Preparation and distribution of correspondence to employees and their representatives Maintenance of an employee register Responding to various employee enquiries regarding their termination as a result of the administration Calculation of entitlements Liaising with the Group’s payroll staff and HR Manager regarding employee details, documentation and calculation of entitlements Reviewing employment contracts, Awards and Enterprise Bargaining Agreements (EBAs) Obtaining legal advice regarding employment contracts, Awards and EBAs Updating employee entitlement calculations (where applicable) Reviewing employee files and Group’s books and records Reconciling superannuation accounts Liaising with solicitors regarding entitlements Workers compensation claims Preparation of actual wage declaration forms for NSW, QLD and WA Review insurance policies

Task Area General Description Includes Other employee issues Correspondence to employees who were made redundant as a consequence of the administration Provide separation certificates to employees (where applicable) Reviewing employees unfair dismissal claims Reconciliation and payment of all employee related expenses including wages, payroll tax, superannuation, PAYG and workers compensation insurance Obtaining legal advice in relation to unfair dismissal claims Correspondence with employees claiming unfair dismissal Correspondence with Child Support Correspondence with Centrelink

Trade On 28.8 hours $11,107.00

Trade On Management Maintaining purchase order register Authorising purchase orders (where applicable) Arranging payment of invoices incurred by the Administrators during trade-on period Receiving and following up supplier enquiries via telephone and email Liaising with management and staff Preparing and authorising receipt vouchers Preparing and authorising payment vouchers Liaising with superannuation funds regarding contributions, termination of employees employment Liaising with OSR regarding payroll tax issues Processing receipts and payments Preparing and authorising payment vouchers Preparing and authorising receipt vouchers Reconciling post-appointment sales receipts Entering receipts and payments into Administrators’ accounting system Budgeting and financial reporting Finalising trading profit or loss

Administration 54.0 hours $20,320.50

Correspondence Receipt of general correspondence Processing return to sender correspondence Document maintenance/file review/checklist

First month, then six monthly administration review Filing of documents File reviews Updating checklists Insurance Correspondence with insurer regarding ongoing insurance requirements Bank account administration Bank account reconciliations Monitoring of Group and Administration bank accounts ASIC Forms Preparing and lodging all required ASIC forms ATO and other statutory reporting

Preparation and lodgement of all necessary reporting, including GST and PAYG Preparing BAS Completing PAYG summaries Planning / Review Discussions regarding status of administration Books and records / storage Dealing with records in storage Sending job files to storage

TOTAL 331.1 hours $119,859.00

3.2 Resolution 2: Actual work completed for the period 27 August 2015 to 30 September 2016 (inclusive) Task Area General Description Includes Assets 74.4 hours $32,705.00

Plant and Equipment Liaising with GraysOnline in the finalisation of the online marketing and auction campaign for residual assets not acquired by Purchasers in the going concern sale Pre-appointment Debtors Correspondence with debtors requesting payment of outstanding amounts


Creditor Enquiries Receiving and responding to creditor enquiries via telephone and email Maintaining creditor enquiry register Review and prepare correspondence to creditors and their representatives via facsimile, email and post PPSR Claims Finalisation of unresolved claims Secured creditor Providing regular updates to the secured creditor regarding the progress of the Administration and realisation of assets Responding to secured creditors’ queries Creditor notifications Preparation and distribution of general correspondence to creditors and their representatives Dealing with proofs of debt Receipting and filing Formal Proofs of Debt (POD’s) when not related to a dividend Corresponding with OSR and ATO regarding POD when not related to a dividend


Employees enquiries Receiving and responding to employee enquiries via telephone and email Preparation and distribution of correspondence to employees and their representatives Maintenance of an employee register Preparation of letters to employees advising of their entitlements and options available Receive and prepare correspondence in response to employees objections to leave entitlements FEG Communications with FEG regarding the status of the liquidation and likely entitlements position Correspondence with FEG Preparing notification spreadsheet Preparing FEG quotations Preparing FEG distributions Calculation of entitlements Liaising with the Group’s payroll staff and HR Manager regarding employee details, documentation and calculation of entitlements Reviewing employment contracts; Awards and Enterprise Bargaining Agreements (EBAs) Obtaining legal advice regarding employment contracts; Awards and EBAs Updating employee entitlement calculations (where applicable) Reviewing employee files and Group’s books and records Reconciling superannuation accounts Liaising with solicitors regarding entitlements

Task Area General Description Includes Finalisation of employee entitlements Correspondence with employees regarding final entitlements position and likely dividend Adjudicating FEG calculations of employee entitlements

Other employee issues Final reconciliation and payment of all employee related expenses including wages, payroll tax, superannuation, PAYG and workers compensation insurance Correspondence with Child Support Correspondence with Centrelink Assisting employees with their FEG applications Preparation and distribution of PAYG payment summaries

Trade On 107.9 hours $37,927.50

Trade On Management Arranging payment of invoices incurred by the Administrators during trade-on period Receiving and following up supplier enquiries via telephone and email Liaising with management and staff Liaising with superannuation funds regarding contributions, termination of employees employment Liaising with OSR regarding payroll tax issues Processing receipts and payments Preparing and authorising payment vouchers in relation to trading period Preparing and authorising receipt vouchers in relation to trading period Reconciling post-appointment sales receipts Entering receipts and payments into Liquidators’ accounting system Budgeting and financial reporting Finalising trading profit or loss

Investigation 51.5 hours $22,433.50

Conducting investigation Final review of the Group’s books and records Final investigations into the affairs of the Group, including possible insolvent trading actions Identify unfair preference claims and contact recipient Various communications with the Director of the Group requesting particulars on the financial position, history, and affairs Review statement of financial position Review of specific transactions Obtaining legal advice where necessary regarding investigations into the Group’s affairs Finalisation of the investigation file Examinations Preparing brief to solicitor Liaising with solicitor(s) regarding examinations Attendance at examination Reviewing examination transcripts Liaising with solicitor(s) regarding outcome of examinations and further actions available Litigation / Recoveries Internal meetings to discuss status of litigation Liaising with solicitors regarding recovery actions Attending to negotiations Attending to settlement matters ASIC reporting Preparing statutory investigation reports Liaising with ASIC

Task Area General Description Includes Dividend 2.8 hours $1,584.00

Processing proofs of debt Preparation of correspondence to potential creditors inviting lodgement of POD Receipt of POD Maintain POD register


Correspondence Receipt of general correspondence Processing return to sender correspondence Document maintenance/file review/checklist

First month, then six monthly administration review Filing of documents File reviews Updating checklists Insurance Identification of potential issues requiring attention of insurance specialists Correspondence with insurer regarding ongoing insurance requirements Reviewing insurance policies Bank account administration Bank account reconciliations Correspondence with bank regarding specific transfers Monitoring of Group and Administration bank accounts ASIC Forms Preparing and lodging all required ASIC forms Correspondence with ASIC regarding statutory forms ATO and other statutory reporting

Preparation and lodgement of all necessary reporting, including GST and PAYG Preparing BAS and fuel tax credits Completing PAYG summaries Liaising with ATO on reversal of General Interest Charge (GIC) due to an ATO error Planning / Review Discussions regarding status of administration Books and records / storage Dealing with records in storage Sending job files to storage

TOTAL 762.1 hours $266,239.50

3.3 Resolution 3: Estimated work to be completed for the period 1 October 2016 to completion (inclusive) Task Area General Description Includes


Creditor Enquiries Receiving and responding to creditor enquiries via telephone and email Maintaining creditor enquiry register Review and prepare correspondence to creditors and their representatives via facsimile, email and post Secured creditor reporting Preparing correspondence to secured creditor Responding to secured creditor’s queries Creditor reports Preparation of Annual Report for 2016 and associated annexures Dealing with proofs of debt Receipting and filing proofs of debt (POD’s) when not related to a dividend Corresponding with OSR and ATO regarding POD when not related to a dividend

Task Area General Description Includes Meeting of Creditors Forward notice of meeting to all known creditors Preparation of AGM file, including agenda, certificate of postage, attendance register, list of creditors, reports to creditors, advertisement of meeting and draft minutes of meeting Preparation and lodgement of minutes of AGM with ASIC Responding to stakeholder queries and questions immediately following AGM


Employees enquiries Receive and follow up employee enquiries via telephone Maintain employee enquiry register Review and prepare correspondence to employees and their representatives via facsimile, email and post FEG General correspondence with FEG Preparing further FEG/GEERS distributions (if necessary) Liaise with FEG regarding priority distribution Employee (priority) dividend Correspondence with employees regarding priority dividend Correspondence with ATO regarding SGC proof of debt Calculating priority dividend rate Preparing priority dividend file Preparing priority distribution Receipting employee POD Adjudicating employee POD Ensuring PAYG is remitted to ATO

Investigation 43.5 hours $12,495.00

Litigation / Recoveries Investigation of potential unfair preference claims Preparation of letter to ATO regarding potential unfair preference claim Consider ATO response to unfair preference claim Internal meetings to discuss status of ATO unfair preference claim Discussions with solicitors regarding ATO unfair preference claim (in required) Attend to negotiation of ATO unfair preference claim Attend to settlement of ATO unfair preference claim


Document maintenance/file review/checklist Regular management reviews of status of the Liquidation Filing of documents File reviews Updating checklists

Bank account administration Bank account reconciliations Correspondence with bank regarding specific transfers ASIC Form 524 and other forms Preparing and lodging ASIC forms including Correspondence with ASIC regarding statutory forms ATO and other statutory reporting

Preparing BAS

Task Area General Description Includes Finalisation Notifying ATO of finalisation Cancelling ABN / GST / PAYG registration Completing checklists Finalising WIP Planning / Review Discussions regarding status of administration Books and records / storage Preparing books and records listings Dealing with records in storage Sending job files to storage

TOTAL 204.4 hours $62,580.50

Part 4: Calculation of Remuneration See Attachment A Part 5: Statement of remuneration claim 5.1 Resolution 1: Statement of remuneration claim – current remuneration 1 August 2015 to 26 August 2015 At the Second Meeting of Creditors held on 26 August 2015 pursuant to Section 439A of the Act, creditors approved the Administrators’ estimate of professional fees to be incurred for the period 1 August 2015 to 26 August 2015 for the amount of $55,602.50 plus GST. Creditors are advised that additional time was incurred in the amount of $64,256.50 plus GST for the referred period. The additional time was primarily incurred due to higher than expected time costs of finalising the trading of the business, and finalisation of the Administrators’ Report under section 439A of the Act. The table below summarises fees approved to date for the period 1 August 2015 to 26 August 2015 (inclusive): Amount ($) (exc. GST) Total fees for the period 1 August 2015 to 26 August 2015 119,859.00 Less: Fee approval obtained at the Creditors meeting held on 26 August 2015 (55,602.50) Fees Subject to Approval 64,256.50

The following resolution in relation to the Administrators’ additional remuneration for the period 1 August 2015 to 26 August 2015 will be proposed at the upcoming AGM of PD: “That the additional remuneration of the Administrators, their partners and staff, for the period of the Administration from 1 August 2015 to 26 August 2015 is fixed at a sum equal to the additional cost of time spent by the Administrators and the Administrators’ partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016 of fees equalling $64,256.50 plus GST, and that the Administrators can draw the remuneration as required.” 5.2 Resolution 2: Statement of remuneration claim – current remuneration 27 August 2015 to 30 September 2016 At the Second Meeting of Creditors held on 26 August 2015 pursuant to Section 439A of the Act, creditors approved the Liquidators’ estimate of professional fees to be incurred for the period 27 August 2015 to completion for the amount of $144,955.50 plus GST. Creditors are advised that additional time was incurred in the amount of $121,284.00 plus GST for the period 27 August 2015 to 30 September 2016.

The table below summarises fees approved to date for the period 27 August 2015 to 30 September 2016 (inclusive): Amount ($) (exc. GST) Total fees for the period 27 August 2015 to 30 September 2016 266,239.50 Less: Fee approval obtained at the Creditors meeting held on 26 August 2015 for the period 27 August 2015 to completion (144,955.50) Fees Subject to Approval 121,284.00

The following resolution in relation to the Liquidators’ additional remuneration for the period 27 August 2015 to 30 September 2016 will be proposed at the upcoming AGM of PD: “That the additional remuneration of the Liquidators, their partners and staff, for the period of the Liquidation from 27 August 2015 to 30 September 2016 is fixed at a sum equal to the additional cost of time spent by the Liquidators and the Liquidators’ partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016 of fees equalling $121,284.00 plus GST, and that the Liquidators can draw the remuneration as required.” 5.3 Resolution 3: Statement of remuneration claim – future remuneration 1 October 2016 to completion The following resolution in relation to the Liquidators’ future remuneration for the period 1 October 2016 to completion of the Liquidation will be proposed at the upcoming AGM of PD: “That the prospective remuneration of the Liquidators, their partners and staff, calculated at the hourly rates as detailed in the Remuneration Report of 4 November 2016, for the period from 1 October 2016 to finalisation, is fixed and approved to a maximum cap of $62,580.50 plus GST and disbursements, to be drawn only when incurred. Should a lesser amount be actually incurred, only the lesser amount will be drawn. Should a greater amount be actually incurred, further approval from the creditors will be sought.” Part 6: Remuneration recoverable from external sources Department of Employment payments Funding received from the Department of Employment (DE) to facilitate a FEG or GEERS distribution by Appointees may be a limited or partial funding agreement. As such, where higher fees are incurred than the amount agreed with DE there is no restriction in the liquidation being charged for the shortfall on the basis that all Remuneration claimed is necessary and properly incurred in accordance with ARITA’s Code. While the money received from DE is not subject to creditor approval and can be paid directly to the practitioner, any shortfall must be appropriately approved in accordance with the relevant legislation prior to drawing. In seeking creditor approval for any shortfall, practitioners must provide separate disclosure of the total time charged, DE receipt(s) and any shortfall amount in the Remuneration report. Practitioners must ensure that they do not “double dip” in relation to FEG or GEERS Remuneration and that the amount received from DE is allocated to the Administration. To facilitate this, practitioners must ensure that any work undertaken in relation FEG or GEERS distributions is appropriately identified in their time recording system, including an adjustment for any direct payments from DE. Funding from the DE is strictly limited to those liquidations where there is insufficient funds or assets available to cover the costs of administering distributions for employee entitlements under the FEG Scheme. The Company has sufficient funds to cover the costs of the Liquidators providing these distribution services. Accordingly, the Liquidators will not be recovering any funds from the DE in relation to the same.

Part 7: Disbursements Disbursements are divided into three types: Externally provided professional services - these are recovered at cost. An example of an externally provided professional service disbursement is legal fees. Externally provided non-professional costs such as travel, accommodation and search fees - these are recovered at cost. Internal disbursements such as photocopying, printing and postage. These disbursements, if charged to the Administration, would generally be charged at cost; though some expenses such as telephone calls, photocopying and printing may be charged at a rate which recoups both variable and fixed costs. The recovery of these costs must be on a reasonable commercial basis. We have undertaken a proper assessment of disbursements claimed for ASW, in accordance with the law and applicable professional standards. I am satisfied that the disbursements claimed are necessary and proper. The following disbursements have been incurred by the Liquidators’ firm for the period from 27 August 2015 to 30 September 2016. Where amounts have been paid to my firm for externally provided services and costs, which is in reimbursement of a cost previously paid by my firm either due to a lack of funds in the Liquidation at the time the payment was due or the direct invoicing of my firm by the supplier.

Disbursements Basis Total (excl. GST) ($) General Expenses At Cost 1,074.55 Stationery, printing, photocopying, telephone and faxes 2.5% of incurred insolvency fees 6,655.99 Travel- Taxi/train/tolls/parking/mileage At cost, mileage at $0.70 per km 2,858.22 Search and filing fees At Cost 154.40 Total (excluding GST) 10,743.16

The following resolution in relation to the Liquidators’ disbursements for the period 27 August 2015 to 30 September 2016 will be proposed at the upcoming AGM of PD: “That the disbursements of the Liquidators for the period of the Liquidation from 27 August 2015 to 30 September 2016, as detailed in the Remuneration Report of 4 November 2016, are approved in the sum of $10,743.16 plus GST.” Part 8: Queries Should you have any queries regarding this remuneration report, please contact Mr Andrew Whittingham on telephone (02) 8260 4390 or by email at [email protected]. Part 9: Information Sheet Refer to Attachment B for ASIC Information Sheet 85 Approving fees: a guide to creditors.

Attachment A

ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (In Liquidation)Actual remuneration for the Administration period 1 August 2015 to 26 August 2015 (inclusive)Employee Position Total($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($)Cussen, Neil Partner 585.00 4.0 2,340.00 3.0 1,755.00 1.0 585.00 - - - - - - Strawbridge, Vaughan Partner 585.00 25.3 14,800.50 0.7 409.50 8.3 4,855.50 3.0 1,755.00 2.5 1,462.50 10.8 6,318.00 Orr, David Director 485.00 1.0 485.00 - - - - - - - - 1.0 485.00 Wright, Tony Director 485.00 28.9 14,016.50 7.7 3,734.50 12.0 5,820.00 1.2 582.00 8.0 3,880.00 - - Robinson, Philip Manager 420.00 37.5 15,750.00 0.5 210.00 28.5 11,970.00 2.5 1,050.00 - - 6.0 2,520.00 Atkins, Mitchell Senior Analyst 315.00 4.5 1,417.50 - - 4.5 1,417.50 - - - - - - Clark, Carol Senior Analyst 315.00 11.8 3,717.00 - - - - - - - - 11.8 3,717.00 Singleton, Benjamin Senior Analyst 315.00 111.7 35,185.50 0.2 63.00 94.9 29,893.50 2.2 693.00 4.7 1,480.50 9.7 3,055.50 Spowart, Naty Senior Analyst 315.00 2.3 724.50 - - - - - - - - 2.3 724.50 Smith, Sarah Senior Analyst 315.00 97.3 30,649.50 - - 44.5 14,017.50 28.9 9,103.50 13.6 4,284.00 10.3 3,244.50 Henderson, Emma Analyst 210.00 0.2 42.00 - - - - - - - - 0.2 42.00 Murray, Yvonne Support/Secretary 160.00 0.1 16.00 - - - - - - - - 0.1 16.00 Hanrahan, Will Graduate 110.00 4.8 528.00 - - 2.7 297.00 0.5 55.00 - - 1.6 176.00 Reid, James Graduate 110.00 1.5 165.00 - - 1.5 165.00 - - - - - - Zhuang, Kelly Graduate 110.00 0.2 22.00 - - - - - - - - 0.2 22.00 TOTAL 331.1 119,859.00 12.1 6,172.00 197.9 69,021.00 38.3 13,238.50 28.8 11,107.00 54.0 20,320.50 Less: fees drawn 55,602.50 )( Total fees requiring approval 64,256.50 GST 6,425.65 TOTAL (including GST) 70,682.15 Average hourly rate ($/hour ex. GST) 362.00 510.08 348.77 345.65 385.66 376.31

Administration$/hour (ex GST) Total hours Assets Creditors Employees Trade on

Attachment A

ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (In Liquidation)Actual remuneration for the period 27 August 2015 to 30 September 2016 (inclusive)Employee Position Total

($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($)Cussen, Neil Partner 585.00 9.0 5,265.00 9.0 5,265.00 - - - - - - - - - - - - Strawbridge, Vaughan Partner 585.00 30.3 17,725.50 3.5 2,047.50 3.7 2,164.50 1.8 1,053.00 7.2 4,212.00 - - 2.60 1,521.00 11.5 6,727.50 Rubbo, Donna Principal 485.00 0.8 388.00 - - - - 0.8 388.00 - - - - - - - - Wright, Tony Director 485.00 68.3 33,125.50 21.7 10,524.50 6.5 3,152.50 4.3 2,085.50 - - 35.3 17,120.50 - - 0.5 242.50 George, Tanya Manager 420.00 19.9 8,358.00 - - - - - - 18.2 7,644.00 - - - - 1.7 714.00 Hermann, Jacqueline Manager 420.00 1.9 798.00 - - - - 1.8 756.00 0.1 42.00 - - - - - - Robinson, Philip Manager 420.00 79.3 33,306.00 21.0 8,820.00 0.4 168.00 13.6 5,712.00 0.7 294.00 2.0 840.00 - - 41.6 17,472.00 Tyler, Paul Manager 420.00 0.2 84.00 - - - - 0.2 84.00 - - - - - - - - Wollinski, Christopher Manager 420.00 0.7 294.00 - - - - 0.7 294.00 - - - - - - - - Clark, Carol Senior Analyst 315.00 13.9 4,378.50 - - - - - - - - - - - - 13.9 4,378.50 Singleton, Benjamin Senior Analyst 315.00 339.0 106,785.00 19.2 6,048.00 5.3 1,669.50 168.4 53,046.00 55.7 17,545.50 6.2 1,953.00 0.20 63.00 84.0 26,460.00 Spowart, Naty Senior Analyst 315.00 5.8 1,827.00 - - - - - - - - - - - - 5.8 1,827.00 Smith, Sarah Senior Analyst 315.00 130.0 40,950.00 - - 2.6 819.00 81.2 25,578.00 26.0 8,190.00 - - - - 20.2 6,363.00 Whittingham, Andrew* Senior Analyst 315.00 18.0 5,670.00 - - 2.0 630.00 0.3 94.50 - - 8.0 2,520.00 - - 7.7 2,425.50 Franklin, Tamara Analyst 210.00 5.3 1,113.00 - - - - 1.0 210.00 - - - - - - 4.3 903.00 Henderson, Emma Analyst 210.00 1.0 210.00 - - - - - - - - - - - - 1.0 210.00 Lau, Adrien Analyst 210.00 4.6 966.00 - - - - 4.6 966.00 - - - - - - - - Whittingham, Andrew* Analyst 210.00 12.4 2,604.00 - - - 12.4 2,604.00 - - - - - - - - Murray, Yvonne Support/Secretary 160.00 0.1 16.00 - - - - - - - - - - - - 0.1 16.00 Au, Lyn Graduate 110.00 2.5 275.00 - - - - 2.0 220.00 - - - - - - 0.5 55.00 Hanrahan, Will Graduate 110.00 2.5 275.00 - - 1.0 110.00 1.5 165.00 - - - - - - - - Pulver, Harry Graduate 110.00 9.1 1,001.00 - - - - - - - - - - - - 9.1 1,001.00 Thay, Kevin Graduate 110.00 3.0 330.00 - - - - 2.0 220.00 - - - - - - 1.0 110.00 Chew, Shanni Vacationer 110.00 4.5 495.00 - - - - 4.5 495.00 - - - - - - - - TOTAL 762.1 266,239.50 74.4 32,705.00 21.5 8,713.50 301.1 93,971.00 107.9 37,927.50 51.5 22,433.50 2.8 1,584.00 202.9 68,905.00 Less: Fees previously approved 144,955.50 )( Total fees requiring approval 121,284.00 GST 12,128.40 TOTAL (including GST) 133,412.40 Average hourly rate ($/hour ex. GST) 349.35 439.58 405.28 312.09 351.51 435.60 565.71 339.60

Investigations Dividend Administration$/hour (ex GST) Total hoursAssets Creditors Employees Trade on

Attachment A

ACN 052 316 579 Pty Ltd (formerly known as Pinnacle Drilling Pty Ltd) (In Liquidation)Future remuneration for the period 1 October 2016 to completion (inclusive)Employee Position Total

($) Hours Total ($) Hours Total ($) Hours Total ($) Hours Total ($)Strawbridge, Vaughan Partner 585.00 8.1 4,738.50 2.5 1,462.50 1.0 585.00 1.2 702.00 3.4 1,989.00 Wright, Tony Director 485.00 16.2 7,857.00 4.0 1,940.00 4.2 2,037.00 2.0 970.00 6.0 2,910.00 George, Tanya Manager 420.00 12.8 5,376.00 - - - - - - 12.8 5,376.00 Robinson, Philip Manager 420.00 27.4 11,508.00 8.4 3,528.00 6.6 2,772.00 5.8 2,436.00 6.6 2,772.00 Clark, Carol Senior Analyst 315.00 8.3 2,614.50 - - - - - - 8.3 2,614.50 Whittingham, Andrew Senior Analyst 315.00 78.1 24,601.50 28.4 8,946.00 16.9 5,323.50 22.4 7,056.00 10.4 3,276.00 Thay, Kevin Graduate 110.00 53.5 5,885.00 10.2 1,122.00 14.8 1,628.00 12.1 1,331.00 16.4 1,804.00 TOTAL 204.4 62,580.50 53.5 16,998.50 43.5 12,345.50 43.5 12,495.00 63.9 20,741.50 GST 6,258.05 TOTAL (including GST) 68,838.55 Average hourly rate ($/hour ex. GST) 306.17 317.73 283.80 287.24 324.59

Investigations Administration$/hour (ex GST)

Total hours

Creditors Employees

Attachment B

Important note: This information sheet contains a summary of basic information on the topic. It is not

INFORMATION SHEET 85

Approving fees: a guide for creditorsIf a company is in financial difficulty, it can be put under the control of an independent external administrator.

This information sheet gives general information for creditors on the approval of an external administrator’s fees in a liquidation of an insolvent company, voluntary administration or deed of company arrangement (other forms of external administration are not discussed in this information sheet). It outlines the rights that creditors have in the approval process.

Entitlement to fees and costs A liquidator, voluntary administrator or deed administrator (i.e. an ‘external administrator’) is entitled to be:

• paid reasonable fees, or remuneration, for the work they perform, once these fees have been approved by a creditors’ committee, creditors or a court, and

• reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need creditors’ committee, creditor or court approval).

External administrators are only entitled to an amount of fees that is reasonable for the work that they and their staff properly perform in the external administration. What is reasonable will depend on the type of external administration and the issues that need to be resolved. Some are straightforward, while others are more complex.

External administrators must undertake some tasks that may not directly benefit creditors. These include reporting potential breaches of the law and lodging a detailed listing of receipts and payments with ASIC every six months. The external administrator is entitled to be paid for completing these statutory tasks.

For more on the tasks involved, see ASIC’s information sheets INFO 45 Liquidation: a guide for creditors and INFO 74 Voluntary administration: a guide for creditors.

Out-of-pocket costs that are commonly reimbursed include:

a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances. You will need a qualified professional adviser to take into account your particular circumstances and to tell you how the law applies to you.

© Australian Securities & Investments Commission, December 2008 Page 1 of 5

APPROVING FEES: A GUIDE FOR CREDITORS

• legal fees

• valuer’s, real estate agent’s and auctioneer’s fees

• stationery, photocopying, telephone and postage costs

• retrieval costs for recovering the company’s computer records, and

• storage costs for the company’s books and records.

Creditors have a direct interest in the level of fees and costs, as the external administrator will, generally, be paid from the company’s available assets before any payments to creditors. If there are not enough assets, the external administrator may have arranged for a third party to pay any shortfall. As a creditor, you should receive details of such an arrangement. If there are not enough assets to pay the fees and costs, and there is no third party payment arrangement, any shortfall is not paid.

Who may approve fees Who may approve fees depends on the type of external administration: see Table 1. The external administrator must provide sufficient information to enable the relevant decision-making body to assess whether the fees are reasonable.

Table 1: Who may approve fees

Creditors’ committee

Creditors Court

Administrator in a voluntary administration

1

Administrator of a deed of company arrangement

1

Creditors’ voluntary liquidator

1 5 r3

Court-appointed liquidator 1 4, 5 2 1 If there is one. 2 If there is no approval by the committee or the creditors. 3 Unless an application is made for a fee review. 4 If there is no creditors’ committee or the committee fails to approve the fees. 5 If insufficient creditors turn up to the meeting called by the liquidator to approve fees, the liquidator is entitled to be paid

up to a maximum of $5000, or more if specified in the Corporations Regulations 2001.

Creditors’ committee approval If there is a creditors’ committee, members are chosen by a vote of creditors as a whole. In approving the fees, the members represent the interests of all the creditors, not just their own individual interests.

There is not a creditors’ committee in every external administration. A creditors’ committee makes its decision by a majority in number of its members present at a meeting, but it can only act if a majority of its members attend.

To find out more about creditors’ committees and how they are formed, see ASIC’s information sheets INFO 45 Liquidation: a guide for creditors, INFO 74 Voluntary administration: a guide for creditors and INFO 41 Insolvency: a glossary of terms.

Creditors’ approval Creditors approve fees by passing a resolution at a creditors’ meeting. Unless creditors call for a poll, the resolution is passed if a simple majority of creditors present and voting, in person or by proxy,

© Australian Securities & Investments Commission, December 2008 Visit our website: www.asic.gov.au

Page 2 of 5


indicate that they agree to the resolution. Unlike where acting as committee members, creditors may vote according to their individual interests.

If a poll is taken, rather than a vote being decided on the voices or by a show of hands, a majority in number and value of creditors present and voting must agree. A poll requires the votes of each creditor to be recorded.

A separate resolution of creditors is required for approving fees for an administrator in a voluntary administration and an administrator of a deed of company arrangement, even if the administrator is the same person in both administrations.

A proxy is where a creditor appoints someone else to represent them at a creditors’ meeting and to vote on their behalf. A proxy can be either a general proxy or a special proxy. A general proxy allows the person holding the proxy to vote as they wish on a resolution, while a special proxy directs the proxy holder to vote in a particular way.

A creditor will sometimes appoint the external administrator as a proxy to vote on the creditor’s behalf. An external administrator, their partners or staff must not use a general proxy to vote on approval of their fees; they must hold a special proxy in order to do this. They must vote all special proxies as directed, even those against approval of their fees.

Calculation of fees Fees may be calculated using one of a number of different methods, such as:

• on the basis of time spent by the external administrator and their staff

• a quoted fixed fee, based on an upfront estimate, or

• a percentage of asset realisations.

Charging on a time basis is the most common method. External administrators have a scale of hourly rates, with different rates for each category of staff working on the external administration, including the external administrator.

If the external administrator intends to charge on a time basis, you should receive a copy of these hourly rates soon after their appointment and before you are asked to approve the fees.

The external administrator and their staff will record the time taken for the various tasks involved, and a record will be kept of the nature of the work performed.

It is important to note that the hourly rates do not represent an hourly wage for the external administrator and their staff. The external administrator is running a business—an insolvency practice—and the hourly rates will be based on the cost of running the business, including overheads such as rent for business premises, utilities, wages and superannuation for staff who are not charged out at an hourly rate (such as personal assistants), information technology support, office equipment and supplies, insurances, taxes, and a profit.

External administrators are professionals who are required to have qualifications and experience, be independent and maintain up-to-date skills. Many of the costs of running an insolvency practice are fixed costs that must be paid, even if there are insufficient assets available to pay the external administrator for their services. External administrators compete for work and their rates should reflect this.

These are all matters that committee members or creditors should be aware of when considering the fees presented. However, regardless of these matters, creditors have a right to question the external administrator about the fees and whether the rates are negotiable.

It is up to the external administrator to justify why the method chosen for calculating fees is an appropriate method for the particular external administration. As a creditor, you also have a right to question the external administrator about the calculation method used and how the calculation was made.


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Report on proposed fees When seeking approval of fees, the external administrator must send committee members/creditors a report with the notice of meeting setting out:

• information that will enable the committee members/creditors to make an informed assessment of whether the proposed fees are reasonable

• a summary description of the major tasks performed, or to be performed, and

• the costs associated with each of these tasks.

Committee members/creditors may be asked to approve fees for work already performed or based on an estimate of work yet to be carried out.

If the work is yet to be carried out, it is advisable to set a maximum limit (‘cap’) on the amount that the external administrator may receive. For example, future fees calculated according to time spent may be approved on the basis of the number of hours worked at the rates charged (as set out in the provided rate scale) up to a cap of $X. If the work involved then exceeds this figure, the external administrator will have to ask the creditors’ committee/creditors to approve a further amount of fees, after accounting for the fees already incurred.

Deciding if fees are reasonable If asked to approve an amount of fees either as a committee member or by resolution at a creditors’ meeting, your task is to decide if that amount of fees is reasonable, given the work carried out in the external administration and the results of that work.

You may find the following information from the external administrator useful in deciding if the fees claimed are reasonable:

• the method used to calculate fees

• the major tasks that have been performed, or are likely to be performed, for the fees

• the fees/estimated fees (as applicable) for each of the major tasks

• the size and complexity (or otherwise) of the external administration

• the amount of fees (if any) that have previously been approved

• if the fees are calculated, in whole or in part, on a time basis:

o the period over which the work was, or is likely to be performed

o if the fees are for work that has already been carried out, the time spent by each level of staff on each of the major tasks

o if the fees are for work that is yet to be carried out, whether the fees are capped.

If you need more information about fees than is provided in the external administrator’s report, you should let them know before the meeting at which fees will be voted on.

What can you do if you think the fees are not reasonable? If you do not think the fees being claimed are reasonable, you should raise your concerns with the external administrator. It is your decision whether to vote in favour of, or against, a resolution to approve fees.

Generally, if fees are approved by a creditors’ committee/creditors and you wish to challenge this decision, you may apply to the court and ask the court to review the fees. Special rules apply to court liquidations.

You may wish to seek your own legal advice if you are considering applying for a court review of the fees.


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Reimbursement of out-of-pocket costs An external administrator should be very careful incurring costs that must be paid from the external administration—as careful as if they were dealing with their own money. Their report on fees should also include information on the out-of-pocket costs of the external administration.

If you have questions about any of these costs, you should ask the external administrator and, if necessary, bring it up at a creditors’ committee/creditors’ meeting. If you are still concerned, you have the right to ask the court to review the costs.

Queries and complaints You should first raise any queries or complaints with the external administrator. If this fails to resolve your concerns, including any concerns about their conduct, you can lodge a complaint with ASIC at www.asic.gov.au/complain, or write to:

ASIC Complaints PO Box 9149 TRARALGON VIC 3844

ASIC will usually not become involved in matters of commercial judgement by an external administrator. Complaints against companies and their officers can also be made to ASIC. For other enquiries, email ASIC through [email protected], or call ASIC’s Infoline on 1300 300 630 for the cost of a local call.

To find out more For an explanation of terms used in this information sheet, see ASIC’s information sheet INFO 41 Insolvency: a glossary of terms. For more on external administration, see ASIC’s related information sheets at www.asic.gov.au/insolvencyinfosheets:

• INFO 74 Voluntary administration: a guide for creditors

• INFO 75 Voluntary administration: a guide for employees

• INFO 45 Liquidation: a guide for creditors

• INFO 46 Liquidation: a guide for employees

• INFO 54 Receivership: a guide for creditors

• INFO 55 Receivership: a guide for employees

• INFO 43 Insolvency: a guide for shareholders

• INFO 42 Insolvency: a guide for directors

• INFO 84 Independence of external administrators: a guide for creditors

These are also available from the Insolvency Practitioners Association (IPA) website at www.ipaa.com.au. The IPA website also contains the IPA’s Code of Professional Practice for Insolvency Professionals, which applies to IPA members.

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