Australian Securities and Investments Commission v Marco

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 These reasons address orders made in these proceedings on 14 July 2021. 2 As has been noted in various judgments in these proceedings to date, Messrs Robert Kirman and Robert Brauer of McGrathNicol were appointed as Final Receivers and Liquidators 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). 3 Since their appointment as Final Receivers, the Receivers have made applications to the Court for orders to facilitate the fixing of their remuneration for various periods by a registrar, as well as orders authorising immediate payments of amounts equivalent to 85% of the total remuneration claimed for each period, pending determination by a registrar. Orders for the fixing of remuneration for work undertaken as Interim Receivers from 27 May 2020 to 6 December 2020 were made by consent on 28 January 2021. Since then, the plaintiff (ASIC) and the first defendant (Mr Marco) have chosen not to engage with, or be heard on the Receivers' remuneration applications. Such an application was granted in Australian Securities and Investments Commission v Marco (No 7) [2021] FCA 429 in relation to the following periods and amounts: (a) That a registrar fix the Final Receivers' remuneration for the period from 7 December 2020 to 5 March 2021; (b) That the Receivers be entitled to drawdown 85% of $182,100 on an interim basis for the period from 7 December 2020 to 5 March 2021; (c) That the Receivers be entitled to drawdown 85% of $531,703.68 on an interim basis for the period of the interim receivership from 27 May 2020 and 6 December 2020. 4 The Receivers now apply, by an Interlocutory Process dated 9 July 2021, for practically identical orders for the determination of remuneration by a registrar with respect to work undertaken from 6 March 2021 to 4 June 2021, with 85% of $113,124 to be approved for immediate drawdown on an interim basis. 5 For essentially the same reasons as those given in Marco (No 7) as applied to the current circumstances, it is appropriate that orders be made in the terms sought.

FIXING OF RECEIVERS' REMUNERATION 6 Orders 1 to 5 of the Interlocutory Process set out the mechanics for the approval by a registrar of the Court of the amount of remuneration claimed for the period 6 March 2021 to 4 June 2021.

Evidence 7 Since 5 March 2021, the Receivers have continued to undertake a substantial amount of work. 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 to Mr Brauer's affidavit sworn 9 July 2021 (Brauer Affidavit). 8 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 9 ASIC has reviewed the Remuneration Report and expressed no opposition to the amount of remuneration claimed. 10 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. 11 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 Mr Marco 12 Mr Marco, was served with a copy of the Interlocutory Process and the Brauer Affidavit. Mr Marco has since advised that he does not wish to be heard on the application.

No opposition by committee of inspection 13 The Receivers provided members of the committee of inspection for the Scheme (as defined in the 7 December 2020 orders) and AMS Holdings Pty Ltd (receivers and managers appointed) (in liquidation) (Committee) with a copy of the Receivers' Remuneration Report at a meeting held on 24 June 2021. 14 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. 15 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. 16 At the same meeting of the Committee at which the Receivers tabled the Receivers' Remuneration Report, the Committee resolved to approve in full remuneration for the same period claimed by Messrs Kirman and Brauer acting in their capacity 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 would likely have done so in full.

INTERIM PAYMENT OF RECEIVERS' CLAIMED REMUNERATION 17 By orders 6 and 7 of the Interlocutory Process, the 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 (ie. the 85%) were greater than the amount ultimately determined by the registrar (or any subsequent determination by the Court), the Receivers would refund the difference together with interest; and (b) if the registrar or the Court were to ultimately determine that the Receivers were entitled to recover some or all of the balance of 15%, then they could do so. 18 As noted in Marco (No 7) (at [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; [2004] 1 Qd R 591; Australian Securities and Investments Commission v Carey (No 5) [2006]; (2006) FCA 68458 ACSR 6 (at [13]-[24]) and Australian Securities Commission v Aust-Home Investments Ltd (1193) 44 FCR 194 (at 204). 19 Similar forms of interim payment orders to those sought in the Interlocutory Process were made 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. 20 When considering whether such interim payment orders ought to be made, two questions arise: (a) should the 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 (No 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 21 There is little doubt that the Receivers have undertaken a significant amount of work since their appointment. 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. 22 It is not known when the registrar will ultimately fix the remuneration claimed by the Receivers. Approval of remuneration for the periods 27 May 2020 to 6 December 2020, and 7 December 2020 to 5 March 2021 remain under consideration. The same is to be expected for the further period now claimed from 6 March 2021 to 4 June 2021. 23 It is therefore appropriate that the Receivers be entitled to immediate payment of a substantial portion of their claimed remuneration on an interim basis: Marco (No 7) (at [22]). 24 There are more than sufficient available funds in the Scheme to allow payment to be made on an interim basis.

Safeguards 25 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]). 26 In the present case, the appropriate safeguards are: (a) when the interim payment is made, the Receivers will file a certificate in the form of Annexure A to the orders accompanying these reasons confirming that the drawdown 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 amounts 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. 27 I am satisfied, as I was in Marco (No 7) (at [25]) that these safeguards adequately protect the interests of relevant stakeholders.

85% is appropriate 28 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]). 29 The proposed figure of 85% is the same figure adopted in Letten (No 9), Letten (No 19), Letten (No 21) and Letten (No 27), and, for the same reasons as those set out at [28] in Marco (No 7) it is an appropriate figure to adopt in this case.

CONCLUSION 30 The Receivers continue to undertake a substantial body of work in relation to a complex and high value Scheme. As 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 14 July 2021. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice McKerracher.