Federal Court of Australia

Australian Securities and Investments Commission v A One Multi Services Pty Ltd (No 2) [2022] FCA 1100

ORDERS

In this order, Property has the same meaning as contained in the order dated 29 July 2022.

THE COURT ORDERS THAT:

1.    The receivers’ remuneration for the period from 21 October 2021 to 31 May 2022 inclusive, is:

(a)    fixed in the sum of $773,115.00 plus GST; and

(b)    approved for payment out of the Property of the First, Second and Third Defendants, or any of them.

2.    Costs of the application are reserved.

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

REASONS FOR JUDGMENT

DOWNES J:

Introduction

Background

1    This is an application by Mr John Lindholm and Mr Timothy Michael, the receivers and managers of the property of each of A One Multi Services Pty Ltd (which is the First Defendant), Mr Aryn Hala (who is the Second Defendant) and Ms Heidi Walters (who is the Third Defendant).

2    The receivers were appointed pursuant to orders made by Derrington J on 21 October 2021 (Appointment Orders). Order 5 of the Appointment Orders provided that:

Pursuant to sections 1323(l)(h) and (3) of the Corporations Act, effective on and from 11:59 pm AEST on 21 October 2021, John Ross Lindholm of KPMG, 727 Collins Street, Melbourne, Victoria and Timothy James Michael of KPMG, 71 Eagle Street, Brisbane, Queensland be appointed as joint and several receivers and/or receivers and managers (Receivers) of the Property of each of the First and Second and Third Defendants, until further order, for the purpose of:

(a)     identifying, collecting and securing the Property of the First, Second and Third Defendants held for the purposes of the Business;

(b)     ascertaining the amount of the Investor Funds received by the First, Second or Third Defendants;

(c)     identifying any dealings with, payments of, or distributions by or uses made of the Investor Funds by the First, Second or Third Defendants;

(d)     identifying any Property purchased or acquired with Investor Funds;

(e)     recovering Investor Funds; and

(f)     providing a report to the Court within 28 days in relation to the matters referred to in sub-paragraphs (a) to (e) above.

3    This application is made pursuant to r 14.24 of the Federal Court Rules 2011 (Cth) which entitles a receiver to apply to this Court to have their remuneration fixed.

4    In support of this application, the receivers relied on the following materials:

(1)    the Appointment Orders and the reasons for judgment by Derrington J published on 26 October 2021;

(2)    their application, which is made pursuant to order 6(b) of the Appointment Orders, which enables them to apply in this proceeding for further orders; and

(3)    the affidavit of Mr Michael sworn on 29 July 2022, along with his previous affidavits which were filed on 10 December 2021, 26 May 2022, and 9 June 2022.

5    In these reasons, unless otherwise stated, all references to “Mr Michael’s affidavit” are to Mr Michael’s affidavit sworn on 29 July 2022.

Scope of the application and orders sought

6    By their application, the receivers sought various orders relating to their remuneration and disbursements for work performed to date, as well as approval for prospective remuneration.

7    By paragraph 1, the receivers sought approval to fix their remuneration for the period of 21 October 2021 to 31 May 2022 inclusive in the sum of $773,115.00 (plus GST), and that the fixed amount be approved for payment out of the Defendants’ property.

8    By paragraph 2, the receivers sought approval to fix their disbursements (excluding legal costs) for the period of 21 October 2021 to 31 May 2022 inclusive in the sum of $5,830.00 (plus GST), and that the fixed amount be approved for payment out of the Defendants’ property.

9    Paragraph 3 sought orders in the alternative to the proposed orders in paragraphs 1 and 2. Essentially, by paragraph 3(b), the receivers sought that the remuneration and disbursements (excluding legal costs) for the abovementioned period be reviewed and fixed by the Registrar, and by paragraph 3(g), that 85% of the sums claimed in respect of remuneration and disbursements (excluding legal costs) be approved for immediate payment on an interim basis out of the Defendants’ property until the total sums were fixed by the Registrar or Court. The proposal that interim payment be made was opposed by the Australian Securities and Investments Commission (ASIC) and the Defendants.

10    By paragraph 4, the receivers sought approval for the payment of 85% of their remuneration and disbursements (excluding legal fees) on and from 1 June 2022 and for the duration of their appointment to be paid on a monthly basis, or less frequently as the receivers consider appropriate. This order was sought subject to a requirement for the receivers to seek retrospective Court approval of any amounts paid under this order before the end of their appointment. This order was also opposed by ASIC and the Defendants.

11    Counsel for the receivers provided a draft order at the hearing of the application, which modified the form of the orders sought in the application. That draft order provided as follows:

1.    The Receivers’ remuneration for the period from 21 October 2021 to 31 May 2022 inclusive, is:

(a)    fixed in the sum of $773,115.00 plus GST; and

(b)    approved for payment out of the Property of the First, Second and Third Defendants, or any of them.

2.    The part of the Receivers’ disbursements for the period from 21 October 2021 to 1 May 2022 inclusive, which part is identified as requiring approval in the affidavit of Timothy James Michael filed 29 July 2022 at [110] (internal disbursements with a profit component), is:

(a)    fixed in the sum of $5,830.00 plus GST; and

(b)    approved for payment out of the Property of the First, Second and Third Defendants or any of them.

3.    85% of the Receivers’ remuneration and of the Receivers’ future internal disbursements with a profit component, incurred by the Receivers on and after 1 June 2022 and for the remainder of their appointment, are approved for payment from the Property of the First, Second and Third Defendants or any of them on an interim basis and subject to the following requirements:

(a)    the payments are to be made no more often than once a calendar month;

(b)    prior to the end of their appointment, the Receivers are to seek retrospective approval from the Court of all amounts so paid (which is not to be taken to deprive them of seeking approval for payment of additional amounts); and

(c)    in the event that the Court refuses to approve any part of any payment so made, the Receivers are to repay that part to the Defendant or Defendants which owned the Property used to pay that part, within 14 days of the refusal.

4.    Costs of the application be reserved.

12    ASIC did not oppose the relief sought in paragraphs 1, 2 and 4 of the draft order but did oppose the order in paragraph 3. The Defendants opposed orders 1 and 3 but not orders 2 and 4. Order 2 was made on 8 September 2022.

13    For the following reasons, I am satisfied that order 1 and order 4 of the draft order should be made, but not order 3.

14    By their written submissions, the Defendants took issue with the receivers not having sought approval of disbursements comprised of various legal fees incurred during the course of the receivership to date. That issue was not the subject of any relief sought by any party in the application and was not pressed with any force by senior counsel for the Defendants after its relevance to the application before the Court was questioned. Accordingly, it is not appropriate to consider that issue in these reasons.

Legal principles

15    The approach to be taken by the Court on an application to fix the remuneration of receivers is well established. However, the issue of approving “prospective remuneration” is less common. It is necessary to briefly set out a summary of the legal principles which are relevant to the exercise of the Court’s power in fixing a receivers’ remuneration under both scenarios.

Power to fix remuneration generally

16    A receiver, being an officer of the court, is required to obtain the approval of the Court for the payment to themselves of remuneration: Cape v Redarb Pty Limited (Receiver and Manager appointed) [1991] FCA 769; (1991) 32 FCR 407 at 417.

17    The power to fix the receivers’ remuneration under r 14.24 of the Federal Court Rules is governed by the general principle that the Court should only allow remuneration which is fair and reasonable: Australian Securities and Investments Commission v Linchpin Capital Group Ltd (No 3) (2020) 142 ACSR 193; [2020] FCA 44 at [7] (Derrington J).

18    A summary of the principles to be applied is found in In the matter of Say Enterprises Pty Ltd [2018] NSWSC 396 at [6], where Brereton J set out the following propositions by reference to the equivalent rule of the Uniform Civil Procedure Rules 2005 (NSW):

(1)    A receiver is entitled to the costs, charges and expenses properly incurred in the discharge of the receiver’s ordinary duties, or in the performance of extraordinary services that have been sanctioned by the Court.

(2)    The ultimate question is what amount of remuneration is ‘reasonable’, and this involves considering whether the work in respect of which remuneration is claimed was reasonably undertaken in the due course of the receivership, and whether the amount claimed for it is a fair and reasonable reward for it. The objective is to award a sum or devise a formula which will reasonably and fairly compensate the receiver for the time and trouble expended in the execution of his or her duties and the responsibility he or she has assumed.

(3)    The receiver bears the onus of justifying the reasonableness and prudence of the tasks undertaken for which remuneration is sought, and the reasonableness of the remuneration claimed for them.

(4)    Remuneration may be allowed on the basis of a fixed salary, a commission on receipts, or a quantum meruit having regard to the time, trouble and responsibility involved. It is a matter for the Court to determine what basis is appropriate in the particular case, having regard to the principle that the remuneration must be reasonable.

(5)    If a time-based approach is adopted, the Court is guided by professional scales of charges, with emphasis on the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work. The Court will usually act on time sheets created in the receiver’s office, provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff.

(6)    By analogy, the task involves consideration of the matters referred to in Corporations Act, s 425(8), which applies to receivers appointed under an instrument, namely:

(a)    the extent to which the work performed by the receiver was reasonably necessary;

(b)    the extent to which the work likely to be performed by the receiver is likely to be reasonably necessary;

(c)    the period during which the work was, or is likely to be, performed by the receiver;

(d)    the quality of the work performed, or likely to be performed, by the receiver;

(e)    the complexity (or otherwise) of the work performed, or likely to be performed, by the receiver;

(f)    the extent (if any) to which the receiver was, or is likely to be, required to deal with extraordinary issues;

(g)    the extent (if any) to which the receiver was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;

(h)    the value and nature of any property dealt with, or likely to be dealt with, by the receiver;

(i)    whether the receiver was, or is likely to be, required to deal with:

(i)    one or more other receivers; or

(ii)    one or more receivers and managers; or

(iii)    one or more liquidators; or

(iv)    one or more administrators; or

(v)    one or more administrators of deeds of company arrangement;

(j)    the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company’s creditors;

(k)    if the remuneration is ascertained, in whole or in part, on a time basis:

(i)    the time properly taken, or likely to be properly taken, by the receiver in performing the work; and

(ii)    whether the total remuneration payable to the receiver is capped;

(l)    any other relevant matters.

7    Many of those factors — in particular, pars (d)–(e) and (g)–(h) — have as their unifying theme the concept of proportionality (being the relationship of the work done and the remuneration claimed to the value of the estate), which is an important consideration in determining reasonableness.

8    It will rarely be appropriate for a Judge to review a decision of a Registrar on remuneration on an item-by-item basis.

9    In respect of disbursements, no Court approval or specific order is necessary in the absence of a challenge, although receivers should scrutinise them to ensure that they are reasonable and properly payable, and the Court has an inherent jurisdiction to review receivers’ disbursements as they are officers of the Court. However, a receiver may seek a direction that he would be justified in paying certain disbursements in order to obtain prior protection in respect of such a disbursement.

(citations omitted)

19    The principles from Say Enterprises have been cited with approval in this Court in relation to applications brought under r 14.24: see e.g. Hutchins, in the matter of Ardenberg Pty Ltd (in liq) (Administrators Appointed) (No 2) [2020] FCA 1424 at [17] (Yates J); Griffiths (Receiver and manager, and liquidator) of Samandac Pty Ltd (in liq) v Trustee for Chrisamanda Trust (No 2) [2018] FCA 1832 at [13] (Gleeson J).

20    In particular, whilst receivers’ remuneration applications are not made under Ch 5 of the Corporations Act 2001 (Cth), it is appropriate to take into account the same or similar matters that the Court would take into account in determining whether remuneration is reasonable under s 425(8) of that Act: In the matter of Banksia Securities Ltd (in liq) (receivers and managers appointed) [2017] NSWSC 540 at [41]–[42], which was cited with approval in Australian Securities and Investments Commission v Marco (No 11) [2022] FCA 704 at [22] (Feutrill J) and Australian Securities and Investments Commission v Marco (No 8) [2021] FCA 885 at [8] (McKerracher J).

21    Further, as observed by Jackson J in Park v Whyte (No 2) [2018] 2 Qd R 413; [2017] QSC 229 (which Derrington J cited with approval in Linchpin):

163    … [I]n determining remuneration it is not the function of the court to hypercritically assess the day by day activities or tasks carried out in the course of a complex administration over a lengthy period of time with the benefit of hindsight. In this context, it is sometimes remarked that the remuneration available to insolvency practitioners should be sufficient to encourage them to carry out the important public function of the administration of insolvent entities for the benefit of creditors, investors (whether company members or fund members) and the public administration of the insolvency laws in general.

164    As well, the preparation of detailed affidavit material setting out extensive support for the correlation of individual or groups of line items and charges to particular tasks and functions of sufficient utility to be classed as reasonable remuneration is itself a time consuming and expensive exercise. In the usual course, those costs must be added to the costs of the application for remuneration to be paid to the relevant administrators or liquidators.

22    A receiver will not be disentitled to remuneration for work done which does not lead to augmentation of the funds in the receivership (for example, to meet statutory obligations), or which involves an unsuccessful attempt to recover assets, if the work was reasonable to be carried out and reasonably charged: Sanderson as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38 at [12], [57]–[58] (Bathurst CJ with whom Beazley P, Gleeson JA, Barrett AJA and Beach AJA agreed); Ardenberg at [20].

23    In considering the reasonableness of remuneration claimed, the question of proportionality is important. As stated by the Full Court in Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545; [2015] FCAFC 137 (Besanko, Middleton and Beach JJ):

[32]    The question of proportionality in terms of the work done as compared with the size of the property or activity the subject of the insolvency administration or the benefit or gain to be obtained from the work is an important consideration in determining overall reasonableness: …

[33]    Generally, in looking at proportionality, the value of the services rendered must be considered. We would endorse the observations of McLure JA in Conlan as liquidator of Rowena Nominees Pty Ltd (rec and mngr apptd) (in liq) v Adams (2008) 65 ACSR 521; [2005] WASCA 61 at [47] where her Honour observed:

[47]     As to the performance of a task reasonably embarked upon, the work done must be proportionate to the difficulty or importance of the task in the context in which it needs to be performed. This is what is encompassed in assessing the value of the services rendered. Using an example from the law, the time spent by an appropriately qualified and experienced practitioner in drafting a statement of claim should be proportionate to the amount in issue.

[34]    Finally, even if one was not to address proportionality as an express factor, nevertheless its absence may have forensic significance in determining reasonableness. Another way to look at proportionality can be to conclude from a lack of proportionality between the cost of the work done relative to the value of the services provided that there has been overcharging or excessive remuneration claimed.

…

[52]    More generally, in considering the question of proportionality one also has to bear in mind two other points that may be overlooked. First, in performing some work, it may not be entirely clear ex ante what the precise benefit might be. A situation where work was being performed to preserve property of known value is quite different to the situation where work was being performed to achieve a return to creditors that was unclear. In the latter case, it might be inappropriate to use a hindsight analysis of known returns after the event to assess whether the work performed was proportional to the task; in such a situation one would look at the expected realistic return at the time the work was performed rather than actual outcomes. Second, some work may be sufficiently complex and labour intensive such as to justify a cost/benefit ratio of 6/10. After all, if the duty of the receivers is to maximise returns and it is necessary to spend $0.60 to achieve $1.00, then proportionality is satisfied even if the ratio might be high.

(citations omitted)

Power to authorise prospective remuneration

24    The receivers, Defendants and ASIC all accepted that the Court has power to approve prospective remuneration for work not yet performed, which is consistent with the authorities: see e.g. Cape v Redarb; Lucantonio v Benscrape Pty Ltd (No 2) [2020] NSWSC 1114.

25    In Cape v Redarb, the Full Court stated at 421:

A further option is for the court to authorise the receiver to draw moneys as required to meet remuneration and out-of-pocket expenses, on the footing that the receiver will account for those drawings from time to time when his accounts are prepared. Such a course was adopted by Young CJ in Waldron v MG Securities (Australasia) Ltd where the accounting was ordered to occur every six months.

26    Such an approach may be justified where the work done by the receiver to date has been undertaken in a reasonable and proper manner, the receiver has identified future tasks needed to be undertaken with reasonable specificity, estimates are given for the likely cost associated with each of the identified future tasks, the amount of prospective remuneration will be capped, the likely duration of the remainder of the receivership is identified, the assets of the company which have been or are likely to be recovered are identified (along with their value) so that there is an assurance that the assets will not be depleted by payments made to the receiver, there will be a review by the Court of the amounts charged by the receivers for future work either periodically or at the conclusion of the receivership, any amounts charged which are found not to be fair and reasonable will be repaid by the receiver, the risk that the receiver will not be able to repay any such amount is low, and the receivership is of such a magnitude that it would be unrealistic to expect the receiver to be kept out of remuneration for professional services for periods of months at a time.

Order 1 – Fixed remuneration

Circumstances of the appointment

27    In Australian Securities and Investments Commission v A One Multi Services Pty Ltd [2021] FCA 1297, Derrington J made the Appointment Orders, having found that ASIC had adduced prima facie evidence which indicated that:

(1)    the Defendants were involved in a business pursuant to which they induced individuals to lend money to the First Defendant, as a result of misleading or deceptive conduct;

(2)    that business also involved inducing people to lend money from their superannuation funds whereby the Defendants apparently arranged for individuals to establish a self-managed superannuation fund and to rollover their superannuation savings from a managed or institutional fund into the self-managed superannuation fund from which they made loans to the First Defendant;

(3)    ASIC’s investigations showed that the Defendants had accumulated large amounts of monies which they had utilised for their own purposes or for making investments on their own behalf.

28    Derrington J also observed that:

(1)    there was at least a prima facie case that the Defendants’ conduct involved misappropriating for personal use funds received by the First Defendant: at [29];

(2)    it was necessary or desirable to protect the interests of investors to make orders protecting or preserving the assets presently in the Defendants’ control, as those assets may be used to meet investors’ claims for damages or compensation: at [32];

(3)    it was appropriate to appoint the receivers for the purposes of both identifying the assets which might be available and preserving them, particularly given that an extremely large amount of investor funds appear to have been dissipated for the personal and private use of the Second and Third Defendants: at [33].

29    The receivers consented to the appointment and indicated their hourly remuneration rates which was subject to Court approval.

30    Relevantly, the receivers were empowered by the Appointment Orders to, amongst other things, enter into possession and take control of property of the Defendants.

31    The property of the Defendants was defined in the consent order made on 29 July 2022, and the receivers proposed that I adopt the same definition for any orders made pursuant to their application. There was no opposition to this proposal.

Evidence in the application relating to past work

32    Mr Michael, in his affidavit sworn 29 July 2022, provides an account of the work which the receivers and their staff have undertaken over the course of the receivership over the relevant period from 21 October 2021, being the date of appointment, to 31 May 2022 to support the receivers’ application for remuneration.

33    Mr Michael has been a registered liquidator since 2005, and is a special advisor of KPMG with expertise in restructuring and insolvency.

34    Mr Michael has provided an account of the extensive work performed by the receivers in his affidavit of 29 July 2022. This work has also been detailed in his previous affidavits of 10 December 2021, 26 May 2022, and 9 June 2022.

35    Mr Michael’s affidavits identify the extent and complexity of the work undertaken by the receivers and their staff. In particular, such work includes locating, securing and realising the value of the property purchased with Investor Funds (as defined in the Appointment Orders), including real property, luxury vehicles and goods, and cryptocurrency worth millions of dollars. In relation to cryptocurrency, Mr Michael deposed that investigations of more than 27,000 transactions was necessary and that:

The work and analysis required in attempting to locate and identify cryptocurrency accounts and transactions has been particularly complex, technical and time consuming …

36    Counsel for the receivers provided a helpful summary of the work performed by the receivers as follows:

(1)    seeking information from the Defendants;

(2)    obtaining and imaging books and records;

(3)    undertaking bank account analyses and bank traces;

(4)    securing funds in bank accounts;

(5)    seeking to identify and secure cryptocurrency;

(6)    seeking to secure and sell motor vehicles, motor bikes, e-bikes and e-scooters;

(7)    seeking to secure and sell real properties;

(8)    dealing with security holders where required;

(9)    seeking to secure and sell luxury goods;

(10)    undertaking other extensive investigations seeking to identify other assets of the Defendants not delivered to the receivers on appointment;

(11)    dealing with court process including in relation to variations of the Appointment Orders, making application for clarification of the receivers’ powers (relating to defending proceedings in respect of real property of the Defendants) which was heard on 10 June 2022 and seeking orders to enforce the Defendants’ disclosure of data (relating to cryptocurrency) which was ultimately resolved by consent orders made on 29 July 2022;

(12)    liaising with ASIC throughout as required;

(13)    corresponding directly, and through solicitors, with the Defendants;

(14)    corresponding with investors and creditors; and

(15)    undertaking a variety of necessary administrative tasks including in relation to insurance, bank accounts, ASIC forms and Business Activity Statements (BAS).

37    Annexed to Mr Michael’s affidavit was a spreadsheet described as the WIP Spreadsheet, which formed the basis of the claim by the receivers for their past remuneration.

38    In relation to the WIP Spreadsheet, Mr Michael gave this evidence:

Throughout the Receivership, the Receivers and their staff have recorded the time taken to complete each individual work tasks via a computerised system.

It is my practice in this and all receiverships to periodically review the quantum of the “work in progress” (WIP) recorded on the system to ensure that it represents a fair and reasonable charge for the work done.

Furthermore, before any invoices are issued or any application is made to the Court for approval of remuneration, either I or another senior staff member will review each recorded time entry to confirm that it represents a fair and accurate charge for the work done. We will confirm the timesheet narrations are adequate and that the time recorded against each narration is commensurate with the task performed. If we consider the time billed for a certain task is not reasonable, then we ‘write down’ this time entry based on our expertise and experience in the industry. There have been a number of such write downs during the course of the receivership to date.

… The WIP Spreadsheet was generated by the computerised time recording system and reviewed in accordance with the process described in the preceding paragraphs. I have caused some redactions to be made to the WIP Spreadsheet to remove references to potentially sensitive parts of the Receivers' investigations. Each time entry includes the following particulars:

(a)    date;

(b)    employee name;

(c)    phase (Assets, Creditors, Investigations and Administration);

(d)    detailed description of the task performed;

(e)    time taken to undertake the task (in hours);

(f)    charge rate for the relevant employee (excluding GST); and

(g)    total amount charged (excluding GST).

To the best of my knowledge, the WIP Spreadsheet records the work performed by me and my staff during the Remuneration Period accurately and in sufficient detail. The WIP Spreadsheet was prepared under my supervision and reviewed by me.

The WIP Spreadsheet indicates that the total remuneration accumulated by the Receivers during the Remuneration Period, after the write downs referred to above, is $825,911.00 (ex. GST).

In order to ensure the remuneration claimed for the Remuneration Period is reasonable, the Receivers have:

(a)    reviewed the narrations recorded in the WIP Spreadsheet and assessed the appropriateness of the time taken to perform each task, writing off further time where necessary;

(b)    confirmed that each task was performed by an appropriate staff member (i.e., not one of excessive seniority and thus expense), and if not, adjusting the relevant time entry;

(c)    confirmed that staff members who jointly attended certain teleconferences and meetings have recorded their time consistently and if not, adjusting the relevant time entry; and

(d)    amended certain narrations to ensure they adequately describe the task performed.

…

The time entries recorded in the WIP Spreadsheet are based on each staff member's hourly charge rates as at 21 October 2021. These rates have not changed throughout the Remuneration Period. [Those rates are annexed to the affidavit].

The Receivers believe that these charge rates are reasonable in light of:

(a)    each staff member’s level of experience;

(b)    the complexity of the work performed in relation to the Appointment;

(c)    each staff member's level of responsibility;

(d)    the costs incurred by KPMG in performing the work in relation to my appointment;

(e)    the high level of risk which KPMG accepted in taking the Appointment; and

(f)    the nature of the work actually performed in relation to the Orders.

39    As to the issue of proportionality, Mr Michael gave this evidence:

As a result of the review processes [referred to above], I have discounted the total remuneration recorded in the WIP Spreadsheet by the total amount of $52,796.00 (excluding GST). That is a further reduction by more than 6.39%.

The Receivers therefore claim remuneration in the sum of $773,115.00 plus GST [for the relevant period].

I have considered whether the claimed remuneration is proportionate with the size, nature and value of work which was reasonably performed. … [There have been] realisations of $1,290,000.00 to date, with potential future realisations estimated to fall between $2,000,000.00 and $6,000,000.00 in the form of real property, loans owed to the Defendants and other assets belonging to the Defendants as detailed in my June Affidavit. We are also investigating certain cryptocurrency which has not yet been delivered to the Receivers, valued between $40,000,000.00 and $200,000,000.00 by the Second Defendant.

As explained in my June Affidavit, significant work has been undertaken which would not have been necessary if the Defendants had made appropriate disclosure and provided sufficient books and records. For these reasons, I consider the remuneration claimed proportionate with the difficulty and importance of the tasks undertaken and the potential benefits for the investors and creditors.

…

In the Receivers' opinion:

(a)    the remuneration claimed is in respect of necessary work which was properly performed;

(b)    the amount of work performed is proportionate with the complexity of the Receivership. The Receivership has been large and complex and has involved many and varied issues;

(c)    a reasonable and necessary amount of time was spent on each task in light of its difficulty and importance. The Receivership concerned matters of public importance and has been undertaken in part for the purpose of furthering the interests of investors and ensuring that funds are recovered and preserved for the ultimate return to them;

(d)    each task for which remuneration is sought was performed by a staff member of appropriate experience, expertise and seniority; and

(e)    this affidavit, in conjunction with the contents of the annexures, sets out details of the relevant matters mentioned in section 425(8) of the Corporations Act 2001 (Cth).

40    Some minor parts of entries in the WIP Spreadsheet were redacted, but no objection was taken to it being admitted into evidence and relied upon by the receivers. The redactions were explained by a further affidavit of Mr Michael which was filed after the hearing at the request of the Court.

Consideration

41    For the following reasons, I am satisfied that the receivers’ claim for fixed remuneration as set out in order 1 is made out, and that order 1 should be made.

42    First, it was submitted by the Defendants that various features of the receivers’ claimed remuneration lead to the conclusion that it is excessive, including unnecessary work carried out or work not within the scope of the appointment and inappropriate allocation of tasks in terms of the seniority of staff allocated to the task. Various permutations to this submission were put forward.

43    However, Mr Michael’s affidavit was not challenged by the Defendants. No evidence was adduced which contradicted Mr Michael’s evidence, or provided any reason not to accept it. Nor was Mr Michael subjected to any cross-examination, including about the opinions expressed by him. The Defendants did not dispute that any of the identified work was in fact undertaken by the receivers. No issue was made in relation to Mr Michael’s qualifications and expertise as an insolvency practitioner.

44    On review, the evidence relied upon by the applicants, including in Mr Michael’s affidavit, provides ample support for the Court to be satisfied that the fixed sum claimed for the relevant period should be approved for payment out of the property. The time recording and other details contained in the WIP Spreadsheet is comprehensive and there were no doubts raised by the Defendants as to its accuracy. On a review of these time entries, no particular line item stands out as being unreasonable. Nor is there any reason not to accept the opinions expressed in Mr Michael’s affidavit as set out above.

45    The Defendants took issue with some of the entries in the WIP Spreadsheet which referred to the receivers’ conduct of an “investigation” into the Defendants. In that regard, it was submitted that it was ASIC’s responsibility to make any investigations as they were the plaintiff in the proceedings. However, this submission should be rejected. As counsel for the receivers explained, the Appointment Orders listed the purposes of the appointment of the receivers which relevantly included ascertaining the amounts of funds, identifying dealings with them, identifying, collecting and securing all those things and that such activities involve “investigations” as part of their work. The fact that the receivers call this work “investigations” in their own internal documents does not provide a proper basis for a concern that they are doing ASIC’s work or that they are doing work outside of the scope of the Appointment Orders.

46    Second, the Defendants appeared to challenge the ability of the receivers to claim remuneration which is based on hourly rates and noted that the Corporations Act acknowledges that another method of calculating remuneration may be appropriate. However, claiming remuneration based on time charging by reference to hourly rates is standard practice for professionals in the position of the receivers, and there is no cogent reason to adopt an alternative approach in this case.

47    Third, the Defendants submitted that the approval process involving a Registrar was a more appropriate course in this case. For example, it was submitted that the issue of proportionality should be determined by a Registrar. No compelling reason was put forward as to why that would be so, or what different process would be undertaken by a Registrar than by a Judge. Certainly, for the purposes of this application, I was not persuaded that a Registrar would be in any better position than me to undertake the exercise of considering whether the remuneration sought be the receivers is “fair and reasonable”. Further, the application was brought before a Judge, a hearing date was fixed, written submissions were filed and exchanged in advance of the hearing and the Defendants were given a fair opportunity to make any further submissions which they wished to make at the hearing about the orders being sought. Making an order now to refer the application to a Registrar will only lead to an increase in costs and a delay in the receivers being paid for work which they have performed, without any real benefit in doing so and with a further depletion of the property to pay for the further hearing before the Registrar.

48    Senior counsel for the Defendants submitted that if the Court was against the submission that the matter ought to go before a Registrar, then the remuneration claimed should be discounted by 20%. No basis was provided for the 20% discount except that it had been done in another case to which I was not taken. In the circumstances, 20% appeared to be an arbitrary discount and, without any proper justification being provided for it, it should not be accepted. And, as stated above, the remuneration claimed by the receivers had already been discounted by 6.39%.

49    As to the issue of proportionality, the receivership has achieved realisations to date of $1,290,000 and there are potential future realisations of between $2 million and $6 million. Further, the receivers are continuing to investigate the recovery of cryptocurrency not yet delivered to them with a value of between $40 million and $200 million. Accordingly, I consider the work performed by the receivers during the relevant period to be proportionate to the size of the property or activity of the receivership.

50    Finally, there was no objection by ASIC to the making of order 1. This was an important factor which supports the making of the order.

Order 3 – Provisional approval of future remuneration

Evidence in the application relating to future work

51    In Mr Michael’s affidavit, he deposes to the receivers’ future anticipated work in completing the receivership. In particular, Mr Michael anticipates that the receivers will attend to the following tasks to finalise the receivership:

(1)    finalising investigations into, and recovering, cryptocurrency;

(2)    finalising investigations into, and recovering, money owed to the Defendants;

(3)    finalising investigations into missing luxury items and those which have been claimed to be of sentimental value to the Defendants;

(4)    obtaining and analysing copies of documents, text messages and applications which have been deleted or removed from devices prior to the receivers imaging the electronic devices;

(5)    defending claims against the proceeds of sale of the Ferrari and Audi;

(6)    defending claims against Numeralla Avenue;

(7)    selling the Defendants’ assets;

(8)    undertaking investigations regarding potential recovery claims against the Defendants and other related or associated parties;

(9)    instructing and taking advice from the receivers’ legal representatives as required;

(10)    undertaking investigations into creditors and investors;

(11)    reporting to creditors and investors; and

(12)    continuing to liaise with ASIC as necessary.

52    Additionally, Mr Michael anticipates that the receivers will need to complete various administrative tasks, including: preparing final BAS lodgements with the Australian Taxation Office; closing the receivers’ bank accounts; attending to final lodgements with ASIC; and seeking Court orders retiring the receivers.

53    Mr Michael’s affidavit indicated that the receivers’ investigations have been hindered by a lack of available information and that the summary of future tasks to be undertaken is based on an understanding of the current information available. It is apparent that the extent of future work to be undertaken by the receivers may change.

54    It is relevant that the receivership is ongoing and it is unclear how long the receivership is going to continue.

Consideration

55    For the following reasons, I am not satisfied that this is an appropriate case to make order 3.

56    First, the authorities relied upon by the receivers provided examples of where such an order had been made but in circumstances where the facts of those cases did not align with the facts of the current application.

57    Second, there is force in ASIC’s submission that the receivers should not have access to “what are in effect trust funds”, in advance of demonstrating entitlement to remuneration in a particular amount from such funds. Further, the opposition by ASIC to order 3 was an important reason to refuse to make this order.

58    Third, Mr Michael did not provide an estimate of how much time would be required to be spent on the identified future tasks, an estimate of the likely remuneration that would be payable for each of the tasks and nor did he identify how long the receivership is expected to continue. This raises an obvious concern about the depletion of the property.

59    Fourth, the receivers emphasised that the making of order 3 would minimise unnecessary future time and expense arising from separate applications for retrospective approvals. However, if order 3 was to be made in the terms sought, at least one application would nonetheless be required in any event, which would involve both time and cost. Further, the time and cost involved in making further applications for approval is insufficient to justify making order 3 having regard to the other matters which tell against it, as set out above.

Conclusion

60    For these reasons, the following orders will be made:

(1)    The receivers’ remuneration for the period from 21 October 2021 to 31 May 2022 inclusive, is:

(a)    fixed in the sum of $773,115.00 plus GST; and

(b)    approved for payment out of the property of the First, Second and Third Defendants, or any of them.

(2)    Costs of the application are reserved.

Associate:

Dated:    16 September 2022