Australian Securities and Investments Commission v Marco

Federal Court of Australia|2021-04-19|Before: McKerracher J

Fixing of Receivers' remuneration for the period 7 December 2020 to 5 March 2021

A Registrar of the Court is to review and fix the remuneration to which the Receivers are properly entitled for the period from 7 December 2020 to 5 March 2021 under orders 5, 6, 7 and 10 of the orders made on 7 December 2020.
The Registrar will advise the Receivers if the Registrar requires further information to fix the remuneration the subject of the application and copies of any such further information provided to the Registrar must also be provided to ASIC.
If the Registrar requests further information to fix the remuneration the subject of the application, the Receivers must provide such further information within 14 days of receipt of the Registrar's request.
As soon as reasonably practicable after receipt of any further information referred to in order 3, the Registrar is to fix the remuneration the subject of the application and deliver short written reasons for their determination.
Within 14 days of the Registrar fixing the remuneration and delivering their written reasons under order 4, the Receivers or any other party may apply to the Court to review the Registrar's determination and the Court may review the Registrar's determination and fix the remuneration the subject of the application.

Interim payment of claimed remuneration by Receivers

Subject to the following, the remuneration of the Receivers for the period from 7 December 2020 to 5 March 2021 in the amount equivalent to 85% of $182,100 is approved for payment on an interim basis: (a) if the amount paid on an interim basis under this order is greater than the amount determined by the Registrar under orders 1 or 4 or any subsequent determination by the Court under order 5, the Receivers are to refund the difference together with interest at the Westpac six month business term deposit rate applicable at the time of drawdown of the interim remuneration amount; and (b) if the Registrar or Court determines that the Receivers were entitled to recover any amount greater than the amount paid on an interim basis under this order, then the Receivers may drawdown such an amount upon the Registrar or Court making orders reflecting the determination.
Until further order, upon the drawdown of any funds for the purposes of payment of the Receivers' interim remuneration under order 6, the Receivers are to file with the Court a Certificate in the form at Annexure A to these orders.

Interim payment of claimed remuneration by Interim Receivers

Further to the orders made on 28 January 2021, and subject to the following, the remuneration of the Interim Receivers for the period from 27 May 2020 to 6 December 2020 in the amount equivalent to 85% of $531,703.68 is approved for payment on an interim basis: (a) if the amount paid on an interim basis under this order is greater than the amount determined by the Registrar under orders 5 or 9 of the orders made on 28 January 2021, or any subsequent determination by the Court under order 10 of those orders, the Interim Receivers are to refund the difference together with interest at the Westpac 6 month business term deposit rate applicable at the time of drawdown of the interim remuneration amount; and (b) if the Registrar or Court determines that the Interim Receivers were entitled to recover any amount greater than the amount paid on an interim basis under this order, then the Interim Receivers may drawdown such an amount upon the Registrar or Court making orders reflecting the determination.
Until further order, upon the drawdown of any funds for the purposes of payment of the Interim Receivers' interim remuneration under order 8, the Interim Receivers are to file with the Court a Certificate in the form at Annexure A to these orders.

The costs of this application be costs in the receivership.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure A Certificate in respect of the [Receivers' / Interim Receivers'] remuneration application No. WAD 481 of 2018 Federal Court of Australia District Registry: Western Australia Division: General Division AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff CHRIS MARCO and others named in the schedule Defendants To: The Registrar Federal Court of Australia Western Australia Registry Peter Durack Commonwealth Law Courts Building 1 Victoria Avenue Perth WA 6000 Fax: (08) 9268 7208 NOTE: Terms defined in the orders made by McKerracher J on 7 December 2020 have the same meaning when used in this Certificate. On [insert date] the amount of $[X] was paid to the [Interim Receivers / Receivers] from the Property as interim remuneration pursuant to order [6 / 8] of the orders made by McKerracher J on [insert date] 2021. Signed: ………………………… Date: ……………………

INTRODUCTION 1 Messrs Robert Michael Kirman and Robert Conry Brauer of McGrathNicol were appointed as Final Receivers by orders made in these proceedings on 7 December 2020: Australian Securities and Investments Commission v Marco (No 6) [2020] FCA 1781. Prior to that, on 27 May 2020, Messrs Kirman and Brauer had been appointed as Interim Receivers: Australian Securities and Investments Commission v Marco (No 3) [2020] FCA 719 (referred to generally as the Receivers). 2 Under orders 5 to 10 of the orders made in Marco (No 6) on 7 December 2020, the Final Receivers are entitled to reasonable remuneration properly incurred in the performance of their duties, as may be approved by the Court. 3 Similarly, by orders made by consent in these proceedings on 28 January 2021, the Interim Receivers are entitled to reasonable remuneration properly incurred in the performance of their duties, as may be approved by the Court. The consent orders of 28 January 2021 also provided for the quantum of the Interim Receivers' remuneration to be fixed by a registrar with liberty to any party to apply to the Court to review the registrar's decision. For the period of the interim receivership, which ran from 27 May 2020 to 7 December 2020, the Interim Receivers seek remuneration in the sum of $531,703.68. A registrar of this Court is currently in the process of fixing the remuneration of the Interim Receivers. 4 By an Interlocutory Process filed on 7 April 2021, the Final Receivers now seek substantially similar orders to those made in respect of the Interim Receivers on 28 January 2021 for the fixing of their remuneration for the period from 7 December 2020 to 5 March 2021 by a registrar of the Court. For this period, the Final Receivers seek remuneration in the sum of $182,100. Significantly, they also now seek orders for the interim payment of 85% of the sums sought in relation to both the interim receivership and the final receivership pending the determination by a registrar, 5 Since their appointment on 7 December 2021, the Receivers have undertaken a substantial amount of work without payment. The nature of the work, the need to undertake the work, and the issues that have arisen and their complexity are outlined in the 'Receivers' Remuneration Approval Report annexed as part of 'RCB-3' to the affidavit of Mr Brauer sworn 7 April 2021 (Brauer Affidavit). 6 Although the present application has not been brought under Ch 5 of the Corporations Act 2001 (Cth), the Receivers have addressed the relevant factors in s 425(8) of the Corporations Act in their Remuneration Report. As deposed by Mr Brauer, the Report has been prepared with the requisite level of detail and to the standards of the applicable professional body - 'Practice Statement Insolvency 5: Remuneration reporting' issued under the ARITA Code of Professional Practice. The essential question on both this application and an application under Ch 5 of the Corporations Act is whether remuneration for which approval is sought is reasonable, and it is therefore appropriate for the Receivers to have regard to the factors in s 425(8) as they have done: Re Banksia Securities Ltd (in liq) (receivers & managers appointed) [2017] NSWSC 540 (at [41]-[42]).

No opposition by ASIC 7 The Australian Securities and Investments Commission (ASIC) has reviewed the Remuneration Report and expressed no opposition to the amount of remuneration claimed. 8 ASIC was also served with a copy of the Interlocutory Process and the Brauer Affidavit. ASIC has since advised that it does not wish to be heard on the application. 9 The Receivers say that it may be inferred, based on ASIC's position, that nothing in the material provided to it has caused it to form the view that any aspect of the Receivers' claim for remuneration requires regulatory intervention or warrants the making of submissions before the Court: Re Idylic Solutions Pty Ltd [2016] NSWSC 1292; (2016) 11 BFRA 616 (at [6]) as cited in Banksia Securities (at [23]).

No opposition by First Defendant 10 The first defendant, Mr Marco, was served with a copy of the Interlocutory Process and the Brauer Affidavit. Mr Marco has since advised that he does not take issue with or wish to be heard on the application.

No opposition by Committee of Inspection 11 The Receivers provided members of the Committee of Inspection for the Scheme (as defined in the 7 December 2020 orders) and the second defendant, AMS Holdings Pty Ltd (receivers and managers appointed)(in liquidation) (Committee) with a copy of the Remuneration Report. 12 The members of the Committee represent in aggregate 65.6% of the total value of claims made at the first meeting of creditors held on 10 February 2020. 13 As deposed in the Brauer Affidavit, the Committee had no questions about or objections to the amount of remuneration claimed. It may be inferred, based on the Committee's position that a substantial majority by value of all creditors do not wish to raise an objection to the Receivers' claims for remuneration. 14 At the same meeting of the Committee at which the Receivers tabled their Remuneration Report, the Committee resolved to approve in full, remuneration for the same period claimed by Messrs Kirman and Brauer acting in their capacities as 'Liquidators' appointed under order 14 of the orders made on 7 December 2020. The Receivers say that had the Committee been capable of approving the remuneration claimed by the Receivers and been asked to do so, the Committee may have done so in full.

INTERIM PAYMENT OF RECEIVERS' AND INTERIM RECEIVERS' CLAIMED REMUNERATION 15 By orders 6 to 9 of the Interlocutory Process, the Final Receivers and Interim Receivers seek orders which will allow them, in effect, to obtain interim payment of 85% of their claimed remuneration from the available assets of the Scheme. The interim payment would be made on the basis that: (a) if the interim payment of 85% were greater than the amount determined by the registrar (or any subsequent determination by the Court), the Interim Receivers and/or Final Receivers would refund the difference together with interest; and (b) if the registrar or Court were to ultimately determine that the Interim Receivers and/or Final Receivers were entitled to recover some or all of the balance of 15%, then they could do so. 16 The source of the Court's power to make such orders is not in issue. The source of the power includes s 601EE of the Corporations Act in relation to the Scheme, and the Court's inherent power to control receivers appointed by the court: Australian Securities and Investments Commission v Letten (No 7) [2010] FCA 1231; (2010) 190 FCR 59 (at [269]-[271]); Australian Securities & Investments Commission v Atlantic 3-Financial (Aust) Pty Ltd [2003] QSC 386; Australian Securities and Investments Commission v Carey (No 5) [2006] FCA 684; (2006) 58 ACSR 6 (at [13]-[24]) and ASC v Aust-Home Investments Ltd (1993) 44 FCR 194 (at 204). 17 Similar forms of interim payment orders to those sought in the Interlocutory Process were made by Gordon J in Australian Securities and Investments Commission v Letten (No 9) [2010] FCA 1459 and Australian Securities and Investments Commission v Letten (No 19) [2012] FCA 375. 18 When considering whether such interim payment orders ought to be made, two questions arise: (a) should the Final Receivers and/or the Interim Receivers be entitled to immediate payment of their remuneration on an interim basis; and (b) if so, is 85% the appropriate percentage and what other safeguards should be put in place? (see Letten (No 9) at [11] and Letten (19) at [11]. See also Australian Securities and Investments Commission v Letten (No 21) [2013] FCA 744 and Australian Securities and Investments Commission v Letten (No 27) [2020] FCA 891.)

Entitlement to Interim Payment 19 There is little doubt that the Receivers have undertaken a significant amount of work since their respective interim and final appointments without payment. The issues that have arisen and continue to arise in the receivership are not straightforward and the task is not complete and is unlikely to be so in the near future given the complexity of the Scheme. 20 The remuneration claimed by the Interim Receivers relates to very substantial work undertaken in the period from 27 May 2020 (when they were appointed) to 7 December 2020 (when their interim appointment was terminated). The Interim Receivers have not yet been remunerated for work undertaken up to 10 months ago. 21 While the fixing of the remuneration of the interim receivership is presently before a registrar and the same will shortly be the case for the final receivership remuneration, it is not known when the registrar will ultimately fix the remuneration claimed by both the Interim Receivers and the Final Receivers. 22 It is therefore appropriate that the Final Receivers and Interim Receivers be entitled to immediate payment of a substantial portion of their claimed remuneration on an interim basis in circumstances where there are more than sufficient available funds in the Scheme to allow payment to be made on an interim basis.

Safeguards 23 Any order authorising immediate payment of claimed remuneration on an interim basis must be subject to appropriate safeguards: Letten (No 9) (at [14]) and Letten (No 19) (at [13]). 24 In the present case, the appropriate safeguards are: (a) when the interim payment is made, the Final Receivers and/or Interim Receivers will file a certificate in the form of Annexure A to the orders accompanying these reasons confirming that the drawing is consistent with the orders allowing for the interim payment; (b) a registrar of the Court will review and fix the remuneration to which the Final Receivers and Interim Receivers are properly entitled; (c) the Committee (which represents a substantial majority of creditors by value) has been given and has considered the remuneration claimed and makes no objection; (d) the Receivers will repay any overpayments (with interest) if the amount ultimately determined by the registrar (or the Court) is less than 85% of the amount claimed and paid on an interim basis; and (e) notice of the application was served on ASIC and Mr Marco and neither objects nor seeks to be heard on the orders sought. 25 These safeguards adequately protect the interests of relevant stakeholders, in particular the investors in Mr Marco's Scheme.

85% is appropriate 26 It has been held that fixing interim remuneration requires a broad brush approach because any excess will be recouped and, as a rule of thumb, in most cases the court will be justified in awarding interim remuneration in the order of 80%-85% of the fees claimed: Re Clynton Court Pty Ltd [2005] FCA 543; (2005) 53 ACSR 432 per Finkelstein J (at [21]); Letten (No 9) (at [15]); and Letten (No 19) (at [17]). 27 The proposed figure of 85% is the same figure adopted in Letten (No 9), Letten (No 19), Letten (No 21) and Letten (No 27). 28 In the present case, 85% is appropriate because: (a) the rates to be charged by the Final Receivers/Interim Receivers and their staff were provided for on their appointment by the orders of 7 December 2020 and 28 January 2021. Whether the work ultimately carried out was appropriate to be charged by them is a matter for the registrar; (b) as detailed in their respective remuneration reports, the Final Receivers and Interim Receivers have carefully reviewed and, where appropriate, reduced the fees claimed. Again, whether that ultimately is a relevant consideration is a matter for the registrar.

CONCLUSION 29 In circumstances where a substantial body of work has been undertaken by Court appointed Receivers over a period of time approaching 12 months without payment, and where it is not certain precisely when the registrar will fix the remuneration, an interim payment is the appropriate option. In light of the safeguards provided by the Receivers' proposed orders and the authorities, 85% of the amounts claimed is the appropriate sum. Orders in terms of the Interlocutory Process were made accordingly on 19 April 2021. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.

Corporations Act 2001(Cth)ss 425(8), 601EE, Ch

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