Court lops receivers’ fees by 50 per cent

receivers' fees

Hall Chadwick’s Richard Albarran.

receivers' fees

Hall Chadwick’s David Ross.

It doesn’t do to mix your WIP. Nor does it do to confuse a judge. Hall Chadwick duo Richard Albarran and David Ross may have accidentally done both, and it’s cost them eighty grand.

The recent lopping of around three quarters off their claim for remuneration as receivers of the DOH Family Trust follows a period during which Albarran and Ross have also acted as 1) voluntary administrators of the the trust’s corporate trustee Western Port Holdings Pty Ltd (WPH); 2) deed administrators of WPH and 3); liquidators of WPH.

Along the way they’ve traded WPH’s business – Makesafe Traffic Management – sought and obtained approvals from WPH’s creditors or its Committee of Inspection (COI) for payment of about $1.1 million in fees and ultimately sold the assets for $1.9 million to a purchaser who then sold it to the original owners. Neat.

But when they sought approval late last year for about $122,000 in fees generated in their capacity as receivers of the trust, they set in train a sequence of events that would see Victorian Supreme Court judicial registrar Patricia Matthews cluster bomb their claim with discounts. When the smoke cleared $47,000 remained.

In essence Albarran and Ross were unable to satisfy the registrar that they hadn’t mixed claims for work done as liquidators or deed administrators of WPH for which the COI had already approved payment with their claim for work done as receivers of the assets of the DOH Family Trust.

Details of the registrar’s concerns are conveniently summarised in Re Western Port Holdings Pty Ltd [2018] VSC 352 (27 June 2018) and while there’s no suggestion that any intermingling that might’ve occurred was in any way intentional, the problem seems to be with Albarran’s affidavits.

“The Fourth Albarran Affidavit does not explain how it is to be viewed in light of the Third Albarran Affidavit, in particular, there is no explanation for how work now claimed as part of the receivership was earlier claimed as part of the deed administration period,” the registrar said.

Describing Albarran’s fourth affidavit as “somewhat confusing” the registrar also said that it failed to adequately differentiate tasks and work undertaken as receivers and tasks undertaken as deed administrators. In respect of a revised WIP report submitted by the receivers she complained that: “I have no real way of working out which specific narrations, hours and fees relate to which item”.

Similarly the WIP Report for the liquidation component of the job also failed to provide the requisite clarity.

” … while it is somewhat helpful to have that information, it does not really allow me to properly assess whether there has been duplication between liquidation and receivership tasks, or whether some of the items in the Revised WIP Report have been incorrectly classified’, she said.

When a judicial officer is confused, it’s a good bet they are going to demonstrate extreme caution and after deducting $18000 for various small issues she was certain had not been adequately shown to be related to the receivership Registrar Matthews arrived at a figure of $104,278.50. Then she put down her secateurs and fired up the hedge trimmer.

“As a result of the other concerns I have identified ….. I will apply a 50 per cent discount to that figure, which produces an amount of $52,139.25 (‘Revised Base Amount’).

“While the percentage amount is clearly quite arbitrary, given the concerns identified and the lack of information, and taking into account the fact that the liquidators’ and deed administrators’ fees have already been approved by the committee of inspection or creditors, I consider it appropriate to discount the Receivers’ remuneration in this way,” the registrar said.

And just when you might think the vines were now more than sufficiently skeletal, some further offending foliage was burned off with an application of the principle of proportionality.

“Balancing the difficulties with proportionality which I have identified with the undoubted complexity of the Receivers’ task, and in light of the discounting I have already applied, I propose to apply a further small discount of 10 per cent to the Revised Base Amount to arrive at a final figure of $46,925.33, which I will round to $47,000.00,” she said.

“In all the circumstances, I consider this to be a suitable and reasonable remuneration incurred by the Receivers in their role as receivers.”

Liquidators, there are lessons for your lawyers here.

2 Comments on "Court lops receivers’ fees by 50 per cent"

  1. Jim Johnson | 6 July 2018 at 10:07 am | Reply

    It has always been the case that each separate form of administration ought be separately recorded for purposes of remuneration claim as each separate administration will be the subject of a different approval regime. In the case of a court appointed receiver and manager of a trustee that would usually be the court (obviously with reference to the beneficiaries of the trust and or creditors of the trust).

    There are separate duties and responsibilities.

    Such steps also avoid question of conflict of interest and duty where the external administrators are in control o the trustee of the trust and the trust.

    It is only then that a proper determination of fair reasonable and proportionate charges can be made for the particular administration.

  2. John Goddard | 6 July 2018 at 10:10 am | Reply

    Brilliant, I hope other liquidators took some notes here, love your style of writing Peter.

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