Australian Executor Trustees Limited v Provident Capital Limited

The basis of the current application 3 Mr Hill swore his principal affidavits in support of the receivers' current application on 11 September 2018, 9 October 2018 and 12 November 2018, and, following the hearing on 13 November 2018, an updating affidavit on 19 November 2018 addressing concerns that I had raised about certain matters. 4 The receivership still has some further issues which the receivers must address in order to finalise their work, including: the realisation of the sale of a property at Burleigh Heads in South East Queensland, of which Provident remains mortgagee-in-possession, in respect of which there is a dispute with the local council about planning approval, which if granted would make the property capable of realising a better price. The receivers expect that that work will be finalised in the next four to 10 months; the need to liaise with the Department of Human Services regarding distributions to debenture holders and the impact on their eligibility for social welfare payments from what has now been realised and is available for distribution; making disclosures as required by Court orders in class action proceedings against the trustee, Australian Executor Trustees Limited; further reporting to the trustee and debenture-holders about the receivership; and hopefully, a final application for their remuneration and retirement. 5 Mr Hill described the work the subject of the current application that the receivers performed in 10 different work streams as follows. There were five indirect work streams, namely: reporting to the trustee and debenture-holders, taking about 180 hours for about $71,566; managing Provident's employees, Provident's ongoing staffing requirements and matters dealing with present and past employees, involving about 40 hours or $12,593 worth of work; the administration of Provident, including preparing for the previous and current remuneration applications, involving 363 hours and $122,303; making arrangements to pay a dividend to debenture-holders, involving about 12 hours and $4355; and Provident's ongoing administration in trading on, involving about 205 hours work worth $66,400. 6 The other group of five major work streams were for the receivers' direct costs, for which they also seek remuneration, namely: asset-management relating to the three major loans that required attention because each loan was in default and the mortgaged property needed realisation (including the Burleigh Heads loan to which I have referred), that involved about 316 hours and a total of $147,230; the management of the loans associated with these matters, which took about 114 hours and involved $38,650 worth of expense; the management of funds that involved about four hours and $1899 worth of work; the finalisation of investigations into Provident's affairs, involving eight hours and $4358 worth of work; and the costs associated with litigation, both brought by Provident or in which it was involved, including in respect of answering subpoenas or other compulsory processes, such as the class action against the trustee, involving 508 hours and $221,822 worth of work. 7 The three major loans in default and the related properties that had to be managed, included in the asset-management claim, concerned the following, first, the Burleigh Heads loan, that initially involved an advance of $4 million, but after a number of deeds of variation, the principal secured increased to a total of $13.5 million. There have been a number of planning issues and complexities that have taken a deal of time and effect on the receivers' part in seeking to realise this property that Mr Hill explained in his affidavits. Secondly, a loan of an initial principal sum of nearly $2 million, secured on a property in North Arm Cove, New South Wales. Ultimately, the debtor's default on that loan led to a consent judgment in March 2015 entitling Provident to a judgment sum of $3.32 million against the debtor whom the trustees subsequently made bankrupt. The property, however, was sold for a little less than $1.3 million. Thirdly, an initial advance of about $1.5 million, secured on a property at Woodlands, New South Wales, that resulted in the sale of the property in July 2017, realising a sum of $1.775 million. 8 At the initial hearing of the current application on 13 November 2018, I raised queries about whether there might have been overlaps between some of the work streams involved in the descriptions that I have just summarised that might have involved duplication of time charged. Mr Hill's affidavit of 19 November 2018 addressed those concerns. He explained that there had not been any duplication. He identified, first, that each time costing computer entry, from which the current claim for remuneration had been calculated, had a unique identifier for the particular category of work performed. He said that, in order to ensure that duplications did not occur, he had relatively senior staff, from his level of partner to senior manager, check the individual entries prior to the receivers' raising a bill for Provident. 9 He explained that, although superficially, the descriptions of work performed, such as bookkeeping and associated activities, particularly in the administration and trade-on work streams, might appear to be similar, in fact, the activities for which the receivers claimed remuneration in each stream were distinct. 10 He also clarified the earlier evidence he had given in his 11 September 2018 affidavit as to the amounts claimed for litigation work. There, he had identified a distinct item of considering and responding to applications, subpoenas and other court orders from participants in the class action proceedings. I had queried whether the degree of work involved may have entitled the receivers, or Provident, to the payment of their reasonable costs of compliance with any such subpoenas or compulsory process under what is now the usual form of court order for the protection and identification of third parties who are subpoenaed to produce documents in other persons' litigation. 11 Mr Hill explained that in the litigation work stream, in fact, only $8448 plus GST of the total of $221,821.50 plus GST, related to time spent by the receivers and their staff responding to notices, subpoenas and all production requests in the litigation, representing less than 4% of the fees charged in that stream. 12 Mr Hill also explained that, following my reduction of the receivers' remuneration in respect of their continuing engagement of Mr Coulter the subject of my earlier reasons (see Provident 125 ACSR at 144-147 [62]-[76]), the receivers had made adjustments to their methodology for what they propose to charge for Mr Coulter's time in the period for which they now seek remuneration. Mr Hill explained that, although Mr Coulter spent significantly less time working in the receivership in the current period than the previous one, he had done so at the higher rate that I considered to be inappropriate in my earlier reasons. Mr Hill observed that in my earlier reasons, I had disallowed effectively about $220,000 or about 63% of the receivers' margin included in their fees that they had charged the estate over and above the cost to them of retaining Mr Coulter's services. 13 In the current period, Mr Coulter had billed fees worth namely, $92,262.50, about 10% of the receivers' previous claim in respect of his services. Mr Hill said that the receivers now sought remuneration or recompense only for $70,590.31 in respect of their expenses on Mr Coulter for the 19 month period, being in the order of about a little less than 10% of the total fees they had charged. Mr Hill explained that, based on the higher rate, as reduced by the proportion of the discount that I had applied to their previous claim, and after writing off about 8.5 hours of Mr Coulter's time, the receivers would earn a total margin of $4,863.57 in the total of $70,590.31 for 302.5 hours for which they sought remuneration. 14 Mr Hill said that he believed, and I accept, that this reduction in the margin reflected the approach that I had taken earlier and that this was now an appropriate method to reduce the amount claimed in respect of Mr Coulter's fees, having regard to the allowances that I had been prepared to accept in my earlier reasons.

Conclusion 15 Having reviewed the receiver's claim for remuneration for the purposes of s 425, and having regard to the principles that I identified in Provident 125 ACSR at 138-139 [28]-[31], I am satisfied that it is appropriate in the circumstances to fix the receivers' remuneration in the sum claimed. 16 For these reasons, I will make orders as the receivers sought. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.