Worrells ‘Workbench’ evaded KPMG scrutiny

You might think a sizeable share of $20 million, generated by receivers winding down a poisoned partnership, would be enough to satisfy the most exacting beneficiary. No.

In the following case, Worrells Chris Cook and Raj Khatri not only had to respond to repeated inquiries from one of the members of the tainted alliance but had to neuter criticisms from a rival insolvency expert and defeat a bid by the dissatisfied beneficiary to have KPMG scrutinise Worrells’ proprietary ‘Workbench‘ internal electronic file management system.

That’s gratitude for you.

iNO came across the details of this matter while reading the December 8, 2023 judgement of Supreme Court of Queensland judge Lincoln Crowley in the matter of Palmer & Anor v Palmer & Ors [2023] QSC 278. No, not that Palmer.

These Palmers – through their partnership – operated a cattle station near Taroom and a pub in nearby Munduberra, each of which is located on prime grazing land west of Hervey Bay in south east Queensland.

When relations between the partners soured an application was made to court and on being appointed receivers in August 2019 Cook and Khatri took control of the pub, cattle station and other assets and commenced the process of wind down.

The cattle station was sold at auction that year and raised $22.5 million. The pub, poker machine licenses and land raised almost $1 million through a sale to a company linked to the partner doing the complaining, though only after it had been traded on for an extended period while the purchaser sought multiple extensions to the settlement date.

There was also residential property offloaded, and a share portfolio transferred to the partners in specie.

Throughout the process Cook and Khatri have been getting paid by issuing “Interim Certificates” which allow for the payment of up to 80 per cent of the amount claimed from the assets of the partnership.

Running in tandem with the issuance of those interim certificates has been a process of inquiry emanating from one of the partners – a Mr Garry Palmer – which features a recurring theme.

Is the work being done by the receivers and their staff necessary and have the partners been provided with sufficient information to evaluate the receivers remuneration claims?

As the receivers have sought to satisfy the concerns Garry Palmer became aware of the existence of Worrells’ Workbench system, which records the details of tasks and activities undertaken by the receivers and their staff.

Workbench also has a time cost function allowing it to record completed work under relevant charge codes that are nominated for that type of work.

In the case of the Palmer partnership a separate entry was created for each completed task and each entry included a description of the work or activity completed with time recorded in one-minute intervals.

The time cost function was also able to generate a report known as an ‘All Entries Time Cost Report’ (‘AETCR’), which collated all the time cost entries recorded in relation to the receivership for any given period.

The AETCR contained a description of the work undertaken; identified who undertook the work; provided a work type description and number in respect of the work performed (i.e. the category into which the work falls); and the date, time spent and cost of undertaking the work.

Cook and Khatri relied on the AETCRs a a means of keeping the partnership beneficiaries informed about how they were calculating the remuneration amounts claimed in their interim certificates but as Judge Crowley explained, Palmer decided he needed more detail.

“Although various reports and copies of the AECTRs were provided to Mr Palmer in response to his requests, he was not entirely satisfied that the information provided contained sufficient details of the work being performed by the receivers to justify the necessity of that work and the basis of their charges for doing the work,” the judge said.

“As a result, Mr Palmer requested access to Worrells’ Workbench electronic file management system.

“He wished to have the consultancy firm KPMG access the system on his behalf, so they could interrogate it and report on their analysis,” he said.

Unsurprisingly, Cook and Khatri refused. There’s no amount of fox Worrells is going allow into its own hen house.

In response to that refusal Palmer made an application seeking orders permitting access to Workbench and on 7 May 2021, the Court dismissed the application.

But Palmer didn’t give up and with the no doubt enthusiastic support of his lawyers turned to the tried and tested method of engaging an expert to find fault with how Cook and Khatri had conducted themselves.

That expert was Queensland insolvency veteran David Clout, who as it turned agreed with his client that the Worrells’ duo had dawdled in respect of winding up the partnership and concluded that the work performed and the invoices rendered by the receivers had not been subject to adequate review and adjustment by the receivers prior to the invoices being submitted to and paid by the partnership.

Further Judge Crowley said that Clout found that the invoices issued by the receivers included charges for work that was not necessary or not properly performed, and that because of these shortcomings Clout “was unable to form an opinion as to the precise value of the receivers’ work because of an absence of relevant supporting documents. Nevertheless, he considers the amount charged exceeds what is reasonable”.

Judge Crowley found otherwise.

“In my opinion, the material the receivers have provided to the Court is sufficient to enable me to generally determine the reasonableness of the remuneration they claim,” he said.

“I am satisfied that the work done with respect to the receivership for which Mr Khatri and Mr Cook were appointed was necessary, performed properly and their claim for remuneration is supported by sufficient information and material.”

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