By Interlocutory Process filed on 13 December 2019, the Applicant, Mr Vincent Pirina, applies for orders approving his remuneration as Court-appointed receiver to certain trust assets in respect of three periods. Mr Pirina's application is not opposed by Ms McCall, the Plaintiff in the proceedings or by Mr Jeffrey Sharp, the Second Defendant, who have the economic interest in the trust. Nonetheless, before making orders approving Mr Pirina's remuneration, the Court must be satisfied that those orders have a proper basis.
By way of background, Messrs Iannuzzi and Pirina were initially appointed without security as receivers and managers of the assets of the JOG Unit Trust, of which JSMOT Pty Ltd is trustee, by orders made by the Court on 20 November 2017. Mr Iannuzzi was discharged as receiver and manager of those assets by an order of the Court on 27 August 2019 and Mr Pirina continued in that role. Mr Pirina now seeks an order that his remuneration for the period 20 November 2017 to 25 January 2018 be fixed by the Court in the amount of $52,738 exclusive of GST. Second, he seeks an order that his remuneration for the period 31 January 2018 to 29 November 2019 be fixed by the Court in the amount of $162,847 exclusive of GST. Third, he seeks an order that his remuneration from 30 November 2019 to 17 April 2020 be fixed at $40,898 exclusive of GST. He initially also sought orders approving payment of his expenses, but the Court does not ordinarily undertake a review of such expenses and those orders were not pressed. He also seeks an order, which would follow from the approval of his remuneration, allowing him to draw that remuneration from the funds of the relevant trust.
The application is supported by an affidavit dated 12 December 2019 of Mr Chun Law, who is a manager with the relevant firm. Mr Law gave that evidence in circumstances that Mr Pirina was then in transit returning from overseas. Mr Pirina also relies on his affidavit dated 13 February 2020 which also refers to his appointment as receiver and manager of the assets and undertaking of the JOG Unit Trust and to subsequent steps to realise the assets of the trust. By a second affidavit dated 21 April 2020, Mr Pirina set out circumstances which had led to a delay in a sale of a property which is the primary asset of the trust; referred to a dispute in respect of the ownership of certain assets which Mr Sharp had sold, which has arisen since the Interlocutory Process seeking approval of Mr Pirina's remuneration was filed; and lead evidence in respect of his claim for remuneration in the third period.
Dealing first with the remuneration claimed for the first period, from 20 November 2017 to 25 January 2018, Mr Law's affidavit referred to the consent of Ms McCall and Mr Smart to payment of remuneration in the amount claimed of $52,738 plus GST for that period. That consent would not in itself have been sufficient to support the order sought and Mr Law did not lead further evidence to seek to establish the basis of the claim for remuneration for that period. Mr Pirina's 13 February 2020 affidavit exhibited a summary of work done during that first period which had previously been provided to the legal representatives for Ms McCall and Mr Smart. He expressed the view that the work performed by his office within those categories was reasonably necessary having regard to the nature and object of the appointment. While his opinion of that matter is plainly not conclusive, it is relevant to the Court's determination. Mr Pirina also expressed the view that the amount claimed was proportionate to the work performed, and to the value of the assets of the JOG unit trust, although it seems to me that the most significant issue in assessing that work is the complexity and contested character of the receivership. I have reviewed the records of work done in this period in a broad way, without undertaking a line by line assessment of them, in accordance with the authorities.
Turning now to the remuneration claimed for the second period, from 31 January 2018 to 29 November 2019, Mr Law set out the categories of work done in that period, referable to the total claim for that period of $162,847 exclusive of GST. Mr Law also outlined the nature of work done within those categories, and exhibited time records supporting that work. Mr Pirina also addressed the categories of work done for the second period, between 31 January 2018 and 29 November 2019, and referred to the use of a time-based approach in calculating the total remuneration claimed, and also provided a table summarising remuneration by each of the work categories and a spreadsheet detailing time entries within those categories. He again expressed the view that the amount claimed for remuneration was proportionate to the work performed during the relevant period, and expanded on the nature of work done within each category. I have also reviewed the records of work done in this period in a broad way, without undertaking a line by line assessment of them, in accordance with the authorities.
I turn now to the third period in which Mr Pirina claims remuneration, from 30 November 2019 to 17 April 2020, the third period for which remuneration was claimed. Again, he referred to the remuneration sought for work done within several categories, and the nature of the work done within those categories. Again, I have had regard to the supporting evidence, including timesheets recording the work done and fees charged, in determining this application. I have also reviewed the records of work done in this period in a broad way, without undertaking a line by line assessment of them, in accordance with the authorities.
[3]
Applicable principles and submissions
Turning now to submissions, Mr Nathan, who appears for Mr Pirina, referred to several authorities dealing with the approval of remuneration for a Court-appointed receiver, including Ide v Ide [2004] NSWSC 751; (2004) 184 FLR 44 and Re Australasian Barristers Chambers Pty Ltd [2019] NSWSC 799, where Brereton J summarised the applicable principles at [19]-[21], and to my observations as to those principles in Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2019] NSWSC 136 at [10]-[12].
In Re Say Enterprises Pty Ltd [2018] NSWSC 396 at [6], Brereton J summarised the relevant principles as follows:
"The remuneration of court-appointed receivers is provided for by (NSW) Uniform Civil Procedure Rules 2005, r 26.4, which provides that a receiver is to be allowed such remuneration (if any) as may be fixed by the Court. Founding on what Young CJ in Eq said in Ide v Ide, but drawing on the qualifications expressed in later cases, the relevant principles may be restated as follows:
(1) A receiver is entitled to the costs, charges and expenses properly incurred in the discharge of the receiver's ordinary duties, or in the performance of extraordinary services that have been sanctioned by the Court.
(2) The ultimate question is what amount of remuneration is 'reasonable', and this involves considering whether the work in respect of which remuneration is claimed was reasonably undertaken in the due course of the receivership, and whether the amount claimed for it is a fair and reasonable reward for it. The objective is to award a sum or devise a formula which will reasonably and fairly compensate the receiver for the time and trouble expended in the execution of his or her duties and the responsibility he or she has assumed.
(3) The receiver bears the onus of justifying the reasonableness and prudence of the tasks undertaken for which remuneration is sought, and the reasonableness of the remuneration claimed for them.
(4) Remuneration may be allowed on the basis of a fixed salary, a commission on receipts, or a quantum meruit having regard to the time, trouble and responsibility involved. It is a matter for the Court to determine what basis is appropriate in the particular case, having regard to the principle that the remuneration must be reasonable.
(5) If a time-based approach is adopted, the Court is guided by professional scales of charges, with emphasis on the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work. The Court will usually act on time sheets created in the receiver's office, provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff.
(6) By analogy, the task involves consideration of the matters referred to in Corporations Act, s 425(8), which applies to receivers appointed under an instrument, namely:
(a) the extent to which the work performed by the receiver was reasonably necessary;
(b) the extent to which the work likely to be performed by the receiver is likely to be reasonably necessary;
(c) the period during which the work was, or is likely to be, performed by the receiver;
(d) the quality of the work performed, or likely to be performed, by the receiver;
(e) the complexity (or otherwise) of the work performed, or likely to be performed, by the receiver;
(f) the extent (if any) to which the receiver was, or is likely to be, required to deal with extraordinary issues;
(g) the extent (if any) to which the receiver was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h) the value and nature of any property dealt with, or likely to be dealt with, by the receiver;
(i) whether the receiver was, or is likely to be, required to deal with:
(i) one or more other receivers; or
(ii) one or more receivers and managers; or
(iii) one or more liquidators; or
(iv) one or more administrators; or
(v) one or more administrators of deeds of company arrangement;
(j) the number, attributes and behaviour, or the likely number, attributes and behaviour, of the company's creditors;
(k) if the remuneration is ascertained, in whole or in part, on a time basis:
(i) the time properly taken, or likely to be properly taken, by the receiver in performing the work; and
(ii) whether the total remuneration payable to the receiver is capped;
(l) any other relevant matters.
(7) Many of those factors - in particular, pars (d)-(e) and (g)-(h) - have as their unifying theme the concept of proportionality (being the relationship of the work done and the remuneration claimed to the value of the estate), which is an important consideration in determining reasonableness.
(8) It will rarely be appropriate for a Judge to review a decision of a Registrar on remuneration on an item-by-item basis.
(9) In respect of disbursements, no Court approval or specific order is necessary in the absence of a challenge, although receivers should scrutinise them to ensure that they are reasonable and properly payable, and the Court has an inherent jurisdiction to review receivers' disbursements as they are officers of the Court. However, a receiver may seek a direction that he would be justified in paying certain disbursements in order to obtain prior protection in respect of such a disbursement." [footnotes omitted]
The principles relevant to an application of this kind were also summarised by Gleeson JA in Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540 ("Banksia 3") above, which I applied in Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2018] NSWSC 229 ("Banksia 4"). His Honour there noted that common bases for calculation of remuneration included time-based charging and a commission based on percentage of recoveries, and that the approach to be adopted is directed to securing reasonable remuneration in the circumstances. His Honour referred (at [39]) to the observations of Young CJ in Eq in Ide v Ide above as to the role of the Court in dealing with such an application, and to the further observations of Branson J in Wenkart v Pantzer [2005] FCA 1572 and of Barrett J in Mohamed v Hurstville Tower Medical Clinic Pty Ltd (in liq) [2006] NSWSC 4 at [9]. His Honour also noted the analogy with the factors specified in s 425 of the Corporations Act as relevant to the Court's power to fix the remuneration of a person appointed as a receiver of a corporation's property under a power contained in an instrument.
Gleeson JA there also referred to the Court of Appeal's decision in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38; (2017) 93 NSWLR 459; (2017) 343 ALR 524; (2017) 118 ACSR 333 and summarised the principles which arose from Bathurst CJ's judgment in that case (at [44]-[46]) as follows:
"First, the onus is on the special purpose receivers to establish that the remuneration claimed is reasonable. It is the function of the Court … to determine the remuneration by considering the material provided and bringing an independent mind to bear on the relevant issues: Sakr at [54].
Second, many of the factors in s 425(8), in particular, pars (d)-(e) and (g)-(h) can be seen to have as their unifying theme the concept of proportionality. The question of proportionality in terms of work done as compared with the size of the property the subject of the insolvency administration or the benefit to be obtained from the work, is an important consideration in determining reasonableness: Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545; (2015) FCAFC 137. The work done must be proportionate to the difficulty and importance of the task in the context in which it needs to be performed. This is what is encompassed in assessing the value of the services rendered: Sakr at [55].
Third, the mere fact that the work performed does not lead to augmentation of the funds available for distribution does not mean that the special purpose receivers are not entitled to be remunerated for it. In the present case, the Trustee fee application and the time spent consulting with the committee of creditors on various issues, including obtaining approval of the special purpose receivers' remuneration will not result in the augmentation of the funds available for distribution. Provided it was reasonable to carry out the work and the amount charged is reasonable, there is no reason a liquidator should not recover remuneration for undertaking the work: Sakr at [57]-[58].
In Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund [2016] NSWSC 1292 at [58], I also observed that it is not the court's role, as constituted by a judge, to undertake a line by line review of the relevant narratives in an insolvency practitioner's billing record, but I there reviewed the relevant narratives in a broad way in order to satisfy myself that they supported the other evidence led in respect of the claimed remuneration. Gleeson JA adopted the same approach in Banksia 3 above at [48] and I also adopted that approach in Banksia 4 above. I have also taken that approach in this case.
Mr Nathan also summarised the history of the receivership and provided a helpful summary of the amounts of remuneration claimed in each category for the three remuneration periods, cross-referencing the remuneration claimed to the evidence in support of that claim. Mr Nathan addressed the nature of the work done by Mr Pirina in the relevant periods and submitted that that work was reasonably necessary, as it was within the scope of the Court's orders appointing the receivers and setting out the tasks which they were required to perform. I accept that submission. I also accept Mr Nathan's submission that the quality of the work done was appropriate, where Mr Pirina has ultimately achieved the sale of the trust property at market value or better within difficult circumstances.
Mr Nathan submits, and I accept, that the complexity of the work was significantly increased by the nature of the sale process which was adopted, involving the parties with an interest in the trust making competing bids for the assets, and where there have been a range of Court applications, to which the Mr Pirina has typically been joined, and in some of which he has been required to take an active role. Mr Nathan submits, and I accept, that the appointment had at least a degree of risk, given the parties' approach to the proceedings and the fact that the receiver's approach has frequently been challenged by one or other of the parties to the proceedings.
As I noted above, the amount of remuneration claimed by Mr Pirina is not disproportionate to the value of the trust property or to the period of time in which he has held office or the complexity of the steps he has taken. It also seems to me, although Mr Nathan was circumspect in his submissions in this regard, that the parties' attitudes have significantly increased the costs of the receivership, beyond that which would have been incurred had they adopted a more constructive approach.
[4]
Orders
For these reasons, I am satisfied that the Receivers' application for remuneration in the specified amounts should be approved. I also recognise that neither Ms McCall nor Mr Sharp have opposed Mr Pirina's claim for remuneration in the relevant amounts, in one of the few occasions in which they have taken a common view.
I order that:
An order that the remuneration of the Applicant for the period 20 November 2017 to 25 January 2018 be approved and fixed by the Court in the amount of $52,738 exclusive of GST.
An order that the remuneration of the Applicant for the period 31 January 2018 to 29 November 2019 be approved and fixed by the Court in the amount of $162,847 exclusive of GST.
An order that the remuneration of the Applicant for the period from 30 November 2019 to 17 April 2020 November 2019 be approved and fixed by the Court in the amount of $40,898 exclusive of GST.
Order that the Applicant be authorised to draw remuneration referred to in Orders 1-3 from the funds of the JOG Unit Trust of which JSMOT Pty Ltd is the Trustee.
[5]
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Decision last updated: 12 May 2020