Federal Court of Australia

Australian Executor Trustees Limited v Provident Capital Limited (No 3) [2020] FCA 1840

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 425 of the Corporations Act 2001 (Cth), the remuneration of the receiver of Provident Capital Limited (receivers appointed) (in liquidation) ACN 082 735 573 (Provident) for the period 1 May 2018 to 31 December 2019 (inclusive) be fixed at $511,358.90 (excluding GST).

2.    The remuneration as fixed in accordance with Order 1 be paid as a cost of the receivership of Provident and from the assets of Provident.

3.    Christopher Clarke Hill be retired as the Court appointed receiver of Provident.

4.    Daniel Walley and Andrew John Scott be appointed as the Court appointed joint and several receivers of Provident.

5.    The costs associated with the Interlocutory Processes filed 1 October 2020 and 30 October 2020 be paid as a cost of the receivership of Provident and from the assets of Provident.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

RARES J:

1    On 27 November 2018, I last made orders approving the remuneration of the receivers of Provident Capital Limited (receivers appointed) (in liq) for the period 1 October 2016 to 30 April 2018 in the sum of $669,501.81 in Australian Executor Trustees Limited v Provident Capital Limited (Receivers and Managers Appointed) (In Liq) (No 2) [2018] FCA 1969.

2    The receivers have now applied for the following orders: first, that the current sole receiver, Christopher Hill, be retired and replaced by Daniel Walley and Andrew John Scott as joint and several receivers and secondly, that the receivers’ remuneration for the period 1 May 2018 to 31 December 2019 inclusive be fixed in the sum of $511,358.90, excluding GST.

3    I am satisfied by the affidavits of Cassidy Mackey, sworn 10 September 2020; Allen Salib, sworn 14 September 2020 and 20 October 2020; Mark Stevens sworn on 10 September 2020; and Shawn Salessi, sworn on 16 September 2020 and 6 October 2020, that the liquidator of Provident, the Australian Securities and Investments Commission, the trustee (Australian Executor Trustees Ltd) and Bendigo and Adelaide Bank Limited, have all been served appropriately with all, or some of, a notice of intention of the present claim, the current interlocutory application or the supporting affidavit.

Retirement and replacement of receiver

4    Mr Hill has been the sole receiver since 27 June 2019, as a consequence of the retirement of his colleague, Kenneth Whittingham, from their then new firm of PricewaterhouseCoopers. On 31 October 2020, Mr Hill retired as a partner of PricewaterhouseCoopers to take up partnership at another firm but, pending the Court’s determination of this application, he remains an employee of his old firm. He did not intend that his appointment continue with him at his new firm and has said, quite properly, that if Mr Walley and Mr Scott, who are current partners of PricewaterhouseCoopers, are appointed in his place, he intends to ensure a steady transition of receivership duties between him and them.

5    Both Mr Scott and Mr Walley are official and registered liquidators. They are appropriate persons to be appointed in Mr Hill’s stead as joint and several receivers of Provident, hopefully, to finalise, as appears to be the case, the receivership in the not too distant future. They have said that they intend to continue charging on the original and still continuing scale of fees that I approved when I first appointed receivers to Provident on 29 June 2012: Australian Executor Trustees Ltd v Provident Capital Limited (2012) 203 FCR 461. I am satisfied that it is appropriate to allow Mr Hill to be retired as the sole receiver and manager of Provident and for him to be replaced by Mr Scott and Mr Walley as joint and several receivers and will so order.

The remuneration application

6    The second part of the present application involves the work which the receivers, initially Mr Hill and Mr Whittingham and, for the last six months of 2019, Mr Hill alone, performed as receiver(s) of Provident. Mr Hill explained in support of the present application, that, effectively, from 1 May 2018 to the present time, the sole remaining active loan was over land at Burleigh Views. The bulk of the receivership work undertaken has involved the receivers’ steps to develop and sell the Burleigh Views land as I explained in my reasons in Provident (No 2) [2018] FCA 1969 at [4]–[6]. There, I set out the ten substantive work streams for which the receivers claim remuneration.

7    Mr Hill’s affidavit of 4 September 2020 details the basis on which the current amount claimed for remuneration has been calculated and the work done to support those claims consistently with the views I expressed in my reasons in Australian Executor Trustee Ltd v Provident Capital Limited (2018) 125 ACSR 133 when approving the receivers’ remuneration for an earlier period. Mr Hill applied the same discount as I decided there in respect of the current work performed by the consultant, Simon Coulter, resulting in a reduction of $4,341.60 in the sum claimed, as compared to what the receivers in fact paid Mr Coulter for the 60.6 hours in which he worked. His fees accounted for about 4 per cent of the total claim.

8    The receivers seek the following sums for the ten workstreams which I consider below:

Active workstreams

Indirect workstreams

9    Asset management: Mr Hill explained that the work done on the realisation the Burleigh Views land has been protracted and complex. That is because of the significant difficulties that the property presented in being made ready for subdivision and sale.

10    The main focus of the work that the receivers undertook during the period of this claim involved litigation in the Planning and Environment Court of Queensland and negotiations with the local council to achieve conditions for development consent for the land of a kind that would realise a satisfactory sum on its sale. This, in turn, required the receivers to engage geotechnical experts to undertake extensive testing and reporting in order to identify and demonstrate that concerns about future land slippage had been addressed properly, and what necessary civil work should be completed so as to make occupation of the townhouses possible.

11    The receivers also had to engage surveyors, engineers, town planners, and other consultants to create a two-stage development of the site. Mr Hill anticipated that the sale of stage 1, consisting of 18 almost-complete townhouses, will occur later this week, which he hopes will realise in order of $3,150,000 for the estate at completion. Stage 2 related to 18 townhouses that had not yet been developed or completed. It settled on 23 October 2020 with the estate receiving approximately $500,000, before settlement adjustments.

12    On about 6 March 2018, negotiations with the council resulted in the receivers being able to agree draft conditions for development approval of part of stage 1, and on 4 April 2019, they agreed draft conditions of approval for the second part. On about 6 September 2019, following a mediation, the council offered to purchase stage 2.

13    As Mr Hill explained, without the receivers achieving those outcomes, they would not have been able to sell any part of the Burleigh Views land for the benefit of the debenture holders, as the remaining secured creditors of Provident. In addition, Mr Hill explained that the receivers had had to deal with break-ins at the development site and the eviction of persons who squatted there. They and their staff had to make frequent visits to the site and ensure that persons familiar with the history and difficulties continued their involvement in the ongoing work, including Mr Coulter.

14    Mr Hill anticipates that, as a result of the successful sale of the Burleigh Views land, about 2.4 cents per dollar of principal owing will be paid to debenture holders as their final distribution from the receivership. He also explained that a small sum was expended on finalising other litigation concerned with the realisation of other assets.

15    I am satisfied that the amount claimed for asset management is a fair and reasonable sum and should be allowed.

16    Loan portfolio management: This work involved pursuing guarantors for the amounts owing after securities were realised and corresponding with various trustees in bankruptcy, processing dividends or distributions from a bankrupt estate, as well as discharging mortgages where loans had been repaid before the appointment of the receivers. Of the other significant items, the amount for

17    Creditor management: The amount for this significant item involved dealing with a foreshadowed claim by the trustee for debenture holders, raised early in 2018 against Provident, which, ultimately, the trustee withdrew following settlement of the class action against it in October 2018, as well as reporting to, and answering queries from, debenture holders and liaising with the debenture holder registry.

18    I am satisfied that the amounts claimed under this head are appropriate and reflect the work necessary to be done.

19    Administration: This is the remaining substantive item. Mr Hill explained that this stream involved managing the electronic and hard copy books and records of Provident, maintaining its IT and loan management systems, bank account administration work, statutory reporting duties, dealing with insurance requirements, strategic planning of the receivership, general file administration, ad hoc work and, particularly, preparing for the previous and current remuneration applications, being the one that I determined on 27 November 2018 and part of the work done in anticipation of the present application.

20    Mr Hill said that the majority of the work claimed for administration related to the preparation of the previous and current remuneration applications. He exhibited the individual entries of time spent on this work stream in a spreadsheet of over four pages that detailed nearly 300 hours that he and his staff spent in the generation of the fees claimed for administration. However, there is no calculation in the material before me of the proportion, or the exact amount of work done in preparing for the remuneration applications.

21    I raised with counsel for the receivers my concern that the overall amount of this claim was in the order of 10 per cent of the two most recent claims for remuneration, namely, the one for the period ended 30 April 2018 and the other for the current period that together total nearly $1.2 million. I am mindful of what Mr Hill explained, namely that in preparing the current claim the receivers not only reduced the amount they claimed for Mr Coulter, but also had considered that some of the work should not be charged and Mr Hill had written off sums for work that he did not consider reasonable, having regard to the requirements of the s 425 of Corporations Act 2001 (Cth) and the ARITA code of professional practice. Mr Hill said that the receivers had written off about 14.65 per cent of the fees in their monthly billing summaries before formulating the current claim. I am also mindful of the fact that the receivers’ fees for this complex and difficult receivership have not increased since I first fixed them in 2012.

22    As Mr Hill’s evidence demonstrated, officers of the Court appointed to administer insolvent estates must report to the Court about their administration and ensure appropriate record-keeping so as to enable them to give explanations and ensure transparency about the fees for work they seek approval to charge to the estate for their personal remuneration. Moreover, in undertaking complex receiverships or liquidations, as officers of the Court, persons in the position of the receivers can find themselves engaged in tasks that are unexpectedly more difficult, complex or longer-lasting than anticipated, at the time of accepting their appointment.

23    At the same time, a balance needs to be struck to ensure proportionality between amounts charged to the estate in order to formulate and pursue a claim for remuneration itself, on the one hand, with the overall recovery of assets and nature of the work for which the claims are made, on the other hand.

24    Mr Hill estimated that in the period between 3 July 2012 and 31 March 2020 the estate will have received nearly $154 million. To date, Provident has repaid in full the loan due to Adelaide and Bendigo Bank of about $75.4 million, and has made distributions to debenture holders comprising about $18.2 million of principal and $4.75 million of interest. He anticipates that at the end of the receivership, following distribution of the funds achieved on settlement of the sale of the Burleigh Views land, the receivers will have distributed approximately 20.7 cents in the dollar to debenture holders, comprising interest to 3 July 2012 of 3.8 cents in the dollar and principal of 16.9 cents.

25    He explained that since their appointment, the receivers had undertaken work to the value of about $12.97 million for their professional fees, but only had received $12.46 million as remuneration under orders of the Court. He estimated that future fees for the period from 1 January 2020 to the completion of the receivership to could be approximately $250,000, excluding GST, although the receivership may last a little longer, given the delays in the sale of the Burleigh Views land since he swore his affidavit of 4 September 2020.

26    As I noted in my reasons in Provident (2018) 125 ACSR 133, 138–139 [28]–[31], the ultimate question on an application for approval of remuneration under s 425(8) of the Corporations Act, is the reasonableness of the charges claimed which the Court must assess, having regard to a broad range of evaluative factors: Templeton v Australian Securities Investments Commission (2015) 108 ACSR 545 at 553–554 [28]–[32] per Besanko, Middleton and Beach JJ. The mere fact that some of the work performed does not lead to the augmentation of the estate, does not necessarily entail that the Court’s officers should not be remunerated for having undertaken that work.

27    While I have had some concern as to the total amount claimed for administration, in the end I am satisfied that I should approve what has been claimed, in light of all of the matters to which I have referred. The Court’s officers should be, and I am satisfied that Mr Hill actually has been, mindful of the need to maintain an appropriate degree of proportionality between the work done to justify a claim for remuneration and the overall burden that such work imposes on the estate. I have had particular regard to the fact that Mr Hill has arrived at the present claim by writing off a significant proportion of time (about 14.65%) that the receivers and their staff appear to have spent in performing work for the receivership.

Conclusion

28    For these reasons I will approve the receivers’ claim for remuneration of $511,358.90 (excluding GST) for the period 1 May 2018 to 31 December 2019 (inclusive).

Associate:

Dated:    22 December 2020