Ex-BDO partner David Whyte might have departed the profession for a life after insolvency but retirement doesn’t mean the abandonment of entitlement to fees incurred, as can be seen from Bruce & Anor v LM Investment Management Limited & Ors [2021] QSC 203.
In this long running saga Whyte as receiver of LM First Mortgage Investment Fund (FMIF) has frequently been pitted against FTI Holdings’ John Park in what one judge has described as adversarial litigation between two parties “whose interests align”. Make off that what you will.
Park is liquidator of related entity LM Investment Management Limited (LMIML) and had to surrender the role as receiver to Whyte in 2013 after it became impossible for even ASIC to ignore the elephantine conflict in the room.
This most recent decision of Supreme Court of Queensland judge Peter Callaghan involves an application by Whyte for approval for remuneration generated in the period from 1 November 2020 to 30 April 2021, during which time Whyte has been nominally retired from the BDO partnership but continues his work as court appointed receiver of FMIF with the job of winding up the fund in accordance with its constitution.
Aligned with that role is the progressing of a $200 million damages claim against FMIF’s former auditor Ernst & Young (EY).
Not unlike previous decisions in respect of Whyte’s applications for approval of fees in this matter, judges have been inclined to refer to concepts of “proportionality” and the “reasonableness” of amounts being claimed then signed off, despite referring to the absence of various elements that might assist the court in satisfying itself about the reasonableness of the amounts claimed.
Justice Callaghan refers to the fact that in more conventional proceedings the material put in support of the application would be tested by cross examination.
“That procedure would often be preceded by some form of disclosure and, commonly, be performed with the benefit of advice from an independent expert retained for that purpose,” the judge said.
“Nothing like that is possible here, and so there has been no cross examination, by the Court, of the Court appointed receiver.”
There’s also some revealing detail about the work done in progressing there claim against EY.
“Mr Whyte has been advised that this work is necessary if the claim is to succeed, but it is not straightforward. To illustrate, the case demands consideration of five expert reports one of which is over 2000 pages long.
“That is just one item taken from a list that contains a dozen more examples of the work that has been undertaken.
“The costs involved in the tasks undertaken for this purpose, as identified by Mr Whyte in his affidavit, are portentous. However, there remains the possibility that $200 million in damages may be awarded,” the judge said.
It is this that Park has questioned in correspondence to Whyte which the receiver then properly put before the court in his application.
Apparently Park said he’d be delighted if the claim succeeds so why the objection? Perhaps he’s concerned about the expanding hole in the funds available to him as liquidator which Whyte’s labours as receiver continue to enlarge?
His honour reported that: “The complaint remains, however, that there has been insufficient disclosure of information that would allow for assessment as to the reasonableness of the expenses being incurred by the litigation.”
Ultimately, and with a sense that he would’ve liked more, his honour approved the application, ordering that from: “1 November 2020 to 30 April 2021, the remuneration of David Whyte, as the person for responsible for ensuring that the FMIF is wound up in accordance with its constitution, be fixed in the amount of $1,383,829.15 (inclusive of GST)”.
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Further reading:
Liquidator Of LMIML Challenges Receiver’s Fees
Receiver Denied Bid To Use “Other People’s Money”
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