Cameron Shaw.
Well they’ve taken their time but the reasons determining an application for almost $1 million in remuneration have entered the public domain, and how worthy of the wait they are.
In 266 paragraphs Federal Court judge Michael Feutrill has meticulously laid bare why the overwhelming majority of the fees and costs sought by Hall Chadwick partners Richard Albarran, Cameron Shaw and Marcus Watters should be rejected.
In the process the judge has branded the trio’s claim for $982,855.53 (incl GST) for 10 weeks work as administrators of AMS Holdings (WA) Pty Ltd (AMS) as “excessive and unreasonable”, questioned their commercial judgment and ruled that instead of almost $1 million they’re entitled to $100,192.26 (incl GST) for remuneration and $84,014.37 (incl GST) for disbursements and legals.
“ASIC expressed ‘serious concerns regarding the circumstances’ of the administrators’ appointment. The circumstances included the absence of the administrators’ consent for the proceedings against AMS to continue and an apparent intention to convene and hold the second meeting of creditors for the purpose of voting on a resolution to enter into a DOCA before the hearing on 28 and 29 October 2020.”
As told in Australian Securities and Investments Commission v Marco (No 15) [2024] FCA 347 Albarran, Cameron and Watters accepted the appointment as VAs of AMS in September 2020.
Upon their appointment they warned recipients of their first circular “that it was difficult to estimate with certainty the costs of the voluntary administration but these ‘may be greater than $100,000 (plus GST)’. They weren’t kidding.
At the time a final hearing of an application brought by ASIC to wind up AMS was imminent, interim receivers from McGrathNicol had been appointed by the court in May of that year and orders freezing the assets of AMS controller and alleged Ponzi-scheme operator Chris Marco had been in place since 2018.
“ASIC expressed ‘serious concerns regarding the circumstances’ of the administrators’ appointment,” the judge said.
“The circumstances included the absence of the administrators’ consent for the proceedings against AMS to continue and an apparent intention to convene and hold the second meeting of creditors for the purpose of voting on a resolution to enter into a DOCA before the (winding up) hearing on 28 and 29 October 2020.”
But for a DoCA to be propounded creditors needed a report and without a detailed investigation there could be no genuine report.
Yet by the time Albarran, Shaw and Watters came on the scene there had in fact been two court judgments in favour of AMS scheme investors, an interim report produced by receivers Rob Brauer and Rob Kirman and a report from forensic accountant Luke Howman-Giles of KPMG.
A wealth of intel was available but Albarran, Shaw and Watters commenced their own detailed investigation, in the process deploying a truckload of minions.
“In addition to the three administrators, the worksheets of their firm indicate that approximately 40 other Hall Chadwick staff performed work during the administration,” the judge said.
“The administrators and staff spent 739.70 hours preparing reports to creditors, 496.30 hours adjudicating proofs of debt (including investor claims), 354.10 hours on creditor meetings (including minutes and preparation), 120.30 hours on DOCA related tasks, 98.90 hours investigating assets in general and 141.40 hours investigating investments.”
All this activity was undertaken in circumstances where the VAs had refused ASIC’s requests that they agree to adjourn the second meeting as soon as it opened and withheld their consent for the winding up proceedings to continue.
Their focus seemed to be on getting Marco’s DoCA in front of creditors, yet as the judge pointed out, that option was no sure thing.
“The total time-cost of that work was $950,508.35 (incl GST). It was all performed in a period of about ten weeks in respect of a company that had no assets available to discharge its liabilities to creditors and in circumstances where there was a very significant risk that, if the creditors voted in favour of it, the DOCA would not be performed,” the judge said.
Finding that the former VAs had “not demonstrated that the time and amount claimed for that work (even with a 15% discount) represents the ‘value’ of the services rendered to the creditors in the performance of their statutory duties in the circumstances of the administration of AMS” the judge dismissed claims made in 11 of a total of 15 categories of work.
While accepting that administrators must have broad discretion in terms of the work they choose to undertake, the judge said the evidence showed that the work Albarran, Shaw and Watters performed was “manifestly outside the boundaries of the ‘fair degree of latitude’ a Court should afford an external administrator in the exercise of commercial judgment”.
“With a proper appreciation of the risk that the conditions to continuation of any DOCA would not be satisfied and the probability that there would not be any property of AMS available to meet its liabilities to creditors, I cannot accept that any prudent business-person spending his or her own money would have embarked on work of the nature and extent the administrators performed,” he said.
“I also infer from the evident lack of proportionality between the cost of the work relative to the value of the services provided that the remuneration claimed in all these categories is excessive and unreasonable.
“Likewise, there is no correlation between the costs to creditors and any likely benefit that could have resulted from that work,” he said.
Albarran, Shaw and Watters filed their application for court approval in early 2021 after they were tossed out by creditor.
Subsequent to their removal McGrathNicol’s Brauer and Kirman were appointed liquidators by order of the court.
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