Receivers’ appointor extracts discount on appeal

Victorian Court of Appeal takes axe to receivers' expenses.
Receivers' fees discounted by appeals court.

Hall Chadwick’s Richard Albarran. Appeals court discounts fees after seven year fee battle with appointor.

The issue of receivers’ fees and expenses is endlessly vexed it seems. In the Supreme Court of Victoria’s court of appeal this week judgment was delivered in relation to a lengthy battle fought between Hall Chadwick’s David Ross and Richard Albarran and their appointor.

The pair were appointed receivers of Action Cycles in July 2011 by Gippsreal Ltd under a deed of appointment and indemnity which among other things capped their remuneration at $15,000. What could go wrong?

Plenty obviously. On 22 August 2011 Action commenced a proceeding in the Supreme Court against the receivers and Gippsreal contending that it was not in default under its loan agreement with Gippsreal.

Action sought declarations that the receivers’ appointment was invalid, an injunction restraining them from acting upon their appointment, and a raft of other orders.

On 2 September 2011, a judge restrained Ross and Albarran from exercising any power of sale until the hearing and determination of the proceeding.

On 18 November 2011, the same judge dissolved the injunction following an application by the receivers and Gippsreal. On 23 November 2011, Action Cycles appealed against that order and, on 1 December 2011, the Court of Appeal restrained the exercise of any power of sale until the hearing and determination of the appeal and referred the appeal for mediation.

The receivers and Gippsreal were represented by separate counsel and solicitors and according to the latest Court of Appeal judgment, these proceedings (including the appeal) are referred to as ‘the first proceeding’.

In early 2012 there was a deed of settlement entered into by the receivers, Gippsreal and Action Cycles. The First Proceeding was agreed to be compromised and Action agreed that the receivers’ appointment was valid.

Gippsreal for its part agreed to accept $1.9 million from Action by April 27, 2012 in full settlement of its claim. Action subsequently defaulted on its obligations under that deed and on May 3 sought again to restrain Gippsreal and the receivers – who had agreed under the settlement deed to withdraw – from selling any assets of Action or its directors or from taking any steps to enforce the settlement.

Five days later Gippsreal countered with what’s come to be known as the second proceeding, which identified Action Cycles, its directors and Albarran and Ross as defendants. Gippsreal’s second proceeding sought to enforce the terms of the deed of settlement. In August 2012 Action filed a defence and counter claim in the second proceeding in which it named Gippsreal and the receivers as defendants.

Action’s bid to reignite the first proceeding was swiftly shot down and in August 2012 orders in the second proceeding included a declaration that the deed of settlement was valid and binding upon the parties, and an order that Action Cycles and its owners pay the costs of the proceeding, counterclaim and the receivers on an indemnity basis. For this purpose, the receivers’ costs were by order fixed at $114,817.35.

Then on 10 September 2013, Leonard Legal, who (sic) acted as solicitors for the receivers in the first and second proceedings, advised Gippsreal that $434,884.70 was owed to the receivers under the deeds of appointment and indemnity, as to $188,331.18 on account of remuneration and as to $246,553.52 on account of legal fees.

In February 2015 the receivers commenced action against Gippsreal. Eventually a Victorian Supreme Court judge found: “The settlement sum in the Deed of Settlement comprised principle, interest, default interest and costs. Most significantly, the settlement sum included uncapped Receivers’ remuneration.”

Gippsreal appealed and on Wednesday the Court of Appeal delivered a judgment which in places was critical of the 2015 decision. Ross and Albarran, the court of Appeal ruled, were entitled to $54,016.82, in addition to the $16500 originally paid to them by Gippseal. So will the receivers appeal?   

Further reading: Ross And Albarran Reject Cap On Fees

About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

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