A recent judgment of the Federal Court of Australia underscores the Himalayan hurdles facing insolvency practitioners who seek the court’s approval for payment of remuneration yet to be earned from assets held on trust.
The protagonists in this matter are Tim Michael and John Lindholm, two of the plethora of “Special Advisors” swelling KPMG’s senior ranks since it swallowed the Ferrier Hodgson partnership back in 2019.
“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.” Justice Kylie Downes
In Australian Securities and Investments Commission v A One Multi Services Pty Ltd (No 2) [2022] FCA 1100 Justice Kylie Downes recounts how the two men recently came before him seeking approval of their remuneration as receivers of A One Multi Services Pty Ltd (A One) from the date of their appointments by the court on 21 October 2021 to 31 May 2022.
The sum sought was $773,115.00 plus GST, a figure which reflected a 6.39 per cent discount that Michael said in an affidavit had been applied after a review of the WIP Spreadsheet submitted in support of the application.
Further, Michael and Lindholm sought approval for payment of 85 per cent 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 they consider appropriate.
This order was sought subject to a requirement for the receivers to seek retrospective approval from the court of any amounts paid under this order before the end of their appointment.
Opposing the application for future fee approval were the former director and director respectively of A One, themselves in a spot of bother thanks to allegations that they fleeced punters of their super to invest in cryptocurrency, property, fast cars, luxury items and a commensurate lifestyle. The pair are defending the proceedings.
Also opposing the application for orders approving payment of future fees was ASIC, which, bankrolled by funds from the liquidator’s levy, can afford senior counsel like Mark Steele to block bids for fee approval that the regulator might consider border on the entrepreneurial.
As it turned out his honour found nothing untoward about the application for remuneration already earned but he wasn’t going out on a limb in respect of the request that he approve pay for work yet to be done, particularly given the extent of the opposition.
“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,” the judge said in his reasons for denying the receivers the order sought.
“Further, the opposition by ASIC to order 3 was an important reason to refuse to make this order.”
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