In the matter of Banksia Securities Ltd (in liq) (receivers and managers appointed) [2017] NSWSC 540

Supreme Court of NSW|2017-04-28|Before: Gleeson JA, Black J

Background

An understanding of the present applications is assisted by a brief outline of the background, nature and purpose of the appointment of the special purpose receivers. The following summary is largely taken from the helpful submissions of counsel for the special purpose receivers.
Until its collapse in 2012, Banksia was a non-bank property lender offering debenture investments to the public and lending funds to third party borrowers, primarily for property and development purposes. The Trust Company (Nominees) Ltd (Trust Co) was the trustee for the debenture holders of Banksia for the purposes of Ch 2L of the Corporations Act and pursuant to the trust deed with Banksia dated 12 December 1994 (as amended from time to time).
On 25 October 2012, Trust Co appointed receivers over Banksia's assets and undertakings following Banksia's collapse. Subsequently, on 24 June 2014, a winding up order was made and Mr Lindholm and Mr McCluskey were appointed liquidators of Banksia.
The collapse of Banksia gave rise to various claims which became the subject of three proceedings in the Supreme Court of Victoria. In broad terms, the allegations in those proceedings arise out of the amalgamation in early 2009 of Banksia with another, larger, mortgage fund debenture-issuer, Statewide Secure Investments Pty Ltd (Statewide) in respect of which Trust Co was also the trustee (the Amalgamation). The Banksia proceedings comprise the following: 1. Bolitho proceeding (class action): this involves a claim by a debenture holder, Mr Lawrence Bolitho, commenced in December 2012 in a group proceeding against Banksia, Trust Co and the directors and auditors of Banksia. This proceeding has now settled as against the directors and auditors. The claim against Banksia is continuing and involves a claim under ss 728 and 1041E of the Corporations Act for issuing misleading and deceptive prospectus, and under s 283F of the Corporations Act for breaches of the trust deed and the failure to conduct its business in a proper and efficient manner. Banksia has brought a cross-claim against its insurance broker for failure to give proper advice and guidance to Banksia about the adequacy of its insurance arrangements; 2. BSL proceeding: this involves a claim by Banksia, commenced by its receivers in November 2014, against Banksia's directors and officers, auditors and solicitors. After mediations in July/August 2014 and April 2015, this proceeding settled in principle in December 2015, and was discontinued following approval of the settlement given by Robson J on 26 August 2016. The settlement sum received by the special purpose receivers was $8,050,000; 3. BSL Trust Co proceeding: this involves a claim by Banksia which was commenced by the liquidators against Trust Co in March 2015. The conduct of this proceeding was taken over by the special purpose receivers in February 2016 pursuant to the February orders. The claim involves alleged breaches by Trust Co of ss 283AC and 283DA(f) of the Corporations Act, as well as a general law duty of care, for failing to inform Banksia that it was in a position of conflict and could no longer act as trustee for both Banksia and Statewide consistently with s 283AC.

Notification to ASIC and absence of a contradictor

Notice of the applications has been given to the Australian Securities and Investments Commission (ASIC). There is affidavit evidence from Mr Samuel Kingston, the solicitor for the special purpose receivers, of a telephone conversation with an officer of ASIC on 31 March 2017 indicating that ASIC had no objection to the relief sought in the first interlocutory process and would not be appearing at the hearing. ASIC did, however, request certain further documents referred to in Mr Lindholm's first affidavit, including a summary of receipts and payments of the special purpose receivership. Those documents were provided to ASIC on 5 April 2017 and, it may be inferred from ASIC's non-appearance, that such material has not caused it to change its position.
Further, by email dated 28 April 2017, ASIC advised the solicitors for the special purpose receivers that it did not oppose the relief sought in the further interlocutory process and did not intend to appear at the hearing.
The special purpose receivers have not joined a representative of the debenture holders as a contradictor on the present applications. Although that possibility seems to have been contemplated previously (see April reasons of Black J at [41]), I do not consider that the special purpose receivers ought to be required to take that course.
First, the Court has the benefit of evidence that the committee of inspection has given its approval of the three amounts of remuneration claimed by the special purpose receivers. The committee of inspection comprised 7 members, 6 of whom were representatives of debenture holders. Their approval can be taken as a reasonable indication of the position of debenture holders generally.
Second, there is the difficulty that appointing a contradictor would obviously involve additional expense which would need to be borne by the SPR Litigation Fund, reducing the amount ultimately available to debenture holders without any certainty that there would be a benefit to debenture holders arising from any significant reduction in the amount of remuneration allowed to the special purpose receivers.
Third, the Court can draw an inference based on ASIC's position (and its non-appearance), that nothing in the material provided to it has caused it to form the view that any aspect of the special purpose receivers' claim for remuneration requires regulatory intervention or warrants the making of submissions before the Court: see the remarks of Black J in Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund and Others [2016] NSWSC 1292 at [6] where ASIC adopted a similar position.

The evidence

The evidence in support of the applications comprises two affidavits of Mr Lindholm. The first, sworn on 3 March 2017, deals with the two six month periods from 6 October 2015 to 30 September 2016. The second affidavit, sworn on 26 April 2017, deals with the six month period 1 October 2016 to 31 March 2017. In each affidavit Mr Lindholm describes the work done by the special purpose receivers during those periods. There are also detailed remuneration reports covering each of the six month periods and narratives showing each entry of time comprising the claim for remuneration and a description of the work involved.
The special purpose receivers have calculated their remuneration on a time cost basis. Mr Lindholm expressed the opinion that he considered time charging to be the most appropriate basis of calculating the remuneration in the present case. He gave the following reasons. First, the appointment primarily involves the conduct of litigation which in his experience is inherently unpredictable and it is very difficult to assess in advance the work and time that will be necessary to effectively manage the litigation. Second, time based charging results in remuneration that accurately reflects the actual time spent on the matter at an hourly rate applicable to staff experience. Third, since the special purpose receivers hold a concurrent appointment as liquidators of Banksia, it allows time to be effectively allocated and divided between tasks relevant to the special purpose receivership and time revocable to liquidation. Fourth, the Banksia proceedings involve claims well in excess of $100 million and given realisations to date and further significant realisations expected, the special purpose receivers do not consider that a percentage basis is appropriate, noting that that is expected to yield a far higher amount.
The remuneration reports contain an explanation of the hourly rates for the special purpose receivers and their staff which are calculated in accordance with Ferrier Hodgson's schedule of hourly rates. Mr Lindholm gave evidence that those rates are reasonable, in line with market rates of firms of a similar size and capability to Ferrier Hodgson and accurately reflect the experience, seniority and capability of each staff member which have been allocated to five categories.
Mr Lindholm explained in his first affidavit that time is charged in six-minute intervals and entered into an electronic time recording system under the following categories: 1. Investigations - this generally covers investigations necessary for preparing evidence in the Banksia proceedings, attendances relating to settlement discussions for the Banksia proceedings and managing and supervising the Banksia proceedings; 2. Creditors - this involves reporting to, corresponding with, dealing with enquiries from, and arranging meetings of the committee of debenture holders; 3. Trade-On - this refers to processing of receipts and payments in the SPRs' Litigation Fund; 4. Dividend - this involves work in processing creditors' claims and calculating and distributing a dividend to debenture holders (including as a result of the settlement of the BSL proceeding); 5. Administration - this involves general attendances incidental to the appointment of the special purpose receivers and the Banksia proceedings, including correspondence, internal meetings, statutory reports and planning.
Mr Lindholm deposed that the vast majority of the work falls under the categories of Investigations and Creditors, and relates to the prosecution of the Banksia proceedings and dealings with the committee of inspection.
Mr Lindholm's affidavits contain an outline of the work done in relation to investigations and preparation of the Banksia proceedings; dealing with funding issues which arose in relation to the funding of the special purpose receivers that ultimately led to the February 2016 orders; the protracted negotiations which ultimately led to a partial settlement of some of Banksia's claims in the Banksia proceedings in which Mr Lindholm was personally involved; the settlement approval process before the Supreme Court of Victoria leading to orders made by Robson J on 26 August 2016 approving the settlement of part of the Bolitho proceedings and the BSL proceedings; the work involved in amending Banksia's claim in the BSL Trust Co proceedings following the partial settlement; the trustee fee application by Trust Co involving the construction issue as to whether the trust deed permitted payment of further remuneration to Trust Co in priority to the sums owing to the debenture holders, which was initially heard before Croft J who gave judgment and made orders granting a declaration in the terms sought by the special purpose receivers on 21 June 2016, and the subsequent successful appeal by Trust Co to the Victorian Court of Appeal on 16 December 2016; and his dealings with the committee of inspection which as indicated, the special purpose receivers have consulted in relation to aspects of the conduct of the special purpose receivership.
Mr Lindholm deposed that in the ordinary course prior to issuing invoices, he will review a work-in-progress report. Mr Lindholm said that he would amend such a report if the time claimed is not reasonable for the relevant task or if he considers that the time should otherwise not be charged. There is evidence that a small number of hours have been written off.
Mr Lindholm is a member of the board of ARITA and deposed that he observes the principles and standards of conduct prescribed by the ARITA Code of Professional Practice for Insolvency Practitioners (3rd ed, 2014) (the Code). Mr Lindholm also deposed that in the incurring and charging of remuneration as special purpose receivers he had regard to and observed the principles and standards set out in the Code in respect of remuneration, specifically on Parts 14 and 15 of the Code, which deal with "necessary and proper" remuneration and with the disclosure of remuneration.
Mr Lindholm and Mr McCluskey continue to incur remuneration in their separate capacity as liquidators of Banksia. They have established record keeping processes to separate their claim for remuneration as liquidators from their claim for remuneration as special purpose receivers.
On 15 November 2016 the committee of inspection approved the remuneration of the special purpose receivers for the periods 1 October 2015 to 31 March 2016, and 1 April 2016 to 30 September 2016. On 13 April 2017 the committee of inspection approved the remuneration of the special purpose receivers for the period 1 October 2016 to 31 March 2017.
The summary of receipts and payments of the special purpose receivers for the period 1 October 2015 to 31 March 2017 indicates total receipts of $18,539,001, including the receivers' contribution to the SPR Litigation Fund of $10,000,000 and the settlement funds of $8,050,000, and total payments of $13,773,966, including a dividend to creditors of $8,050,000. The closing balance in the SPR Litigation Fund as at 31 March 2017 is $4,765,035.
On 31 March 2017, the special purpose receivers, together with the receivers, jointly distributed approximately $13,270,000 to debenture holders, resulting in an additional two cents in the dollar distribution to each debenture holder who has not opted out of the Bolitho proceeding. That brings distributions to debenture holders to 82 cents in the dollar. The amount distributed comprised the whole of the settlement sum of $8,050,000 in respect of the BSL proceeding and $5,220,000 from funds held by the receivers.

Relevant legal principles

The special purpose receivers are entitled to such remuneration as may be fixed by the Court. No remuneration was fixed by the September 2015 orders. The effect of the February 2016 orders was to authorise drawings on account of remuneration (without specifying the basis of the calculation), to be accounted for at intervals of six months. The Court, in effect, deferred the fixing of remuneration until it was better informed about the nature of the receivership.
The common bases for calculation of remuneration are: (a) time based charging; and (b) a commission based on a percentage of recoveries. It is a matter for the Court to determine what basis of calculation is more appropriate in the particular case having regard to the principle that the remuneration must be reasonable.
Historically, courts were reluctant to award remuneration on the basis of time spent by the receiver and his or her staff. That is no longer the case and time-based remuneration has now become more common. However, time-based remuneration has not been always accepted without criticism and, in some cases, strong criticism: see, eg, the comments of Finkelstein J in Re Korda, Re Stockford Ltd (2004) 140 FCR 424; [2004] FCA 1682. Many of the authorities which have considered the appropriateness of time based charging, including the support of Finkelstein J in Re Korda, Re Stockford Ltd for the adoption of a "loadstar" approach, drawn from United States' authorities, are referred to by Black J in Idylic Solutions at [27]-[50]. It is sufficient to note the following matters.
First, a useful statement of the principles applicable to applications by court-appointed receivers for approval of remuneration is to be found in the judgment of Young CJ in Eq in Ide v Ide (2004) 184 FLR 44; [2004] NSWSC 751. It may be summarised as follows (omitting references to the various authorities cited by his Honour): 1. The court constituted by a judge never considers a review of quantum, but only matters of principle. 2. A receiver is entitled to have his costs, charges and expenses properly incurred in the discharge of his ordinary duties or in the performance of extraordinary services that have been sanctioned by the court. 3. The receiver must justify the reasonableness and prudence of the tasks undertaken for which remuneration is sought. The relevant onus is on the receiver. 4. A receiver's remuneration is not in the same category of costs. The receiver is making application for a fair recompense for what he or she has actually done. 5. The court's objective is to award a sum or devise a formula which will reasonably compensate the receiver for the time and trouble expended in the execution of his duties and, to some extent, the responsibility he has assumed. 6. The court will usually work off 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. 7. 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. However, as Barrett J noted in Mohamed & Anor v Hurstville Tower Medical Clinic Pty Ltd (in liquidation) & 9 Ors [2006] NSWSC 4 at [9], the first of these principles was the subject of comment by Branson J in Wenkart v Pantzer [2005] FCA 1572. Barrett J said: Her Honour referred to the possibility that Young CJ in Eq may have expressed the position too strongly. She considered it "sufficient to note that it will rarely, if ever, be appropriate for the Court to review a decision of a taxing officer on a line by line basis". Analysis on a line by line basis by an appropriate court official was thus recognised as an appropriate approach. I respectfully agree with those observations by Barrett J.
Second, the essential task of the Court, constituted by a judge, when asked to approve remuneration is encapsulated in the following observation by Barrett J in Anderson Group Pty Ltd; Mann v Anderson (2002) 20 ACLC 1607; [2002] NSWSC 764 at [12], in relation to the remuneration of a liquidator: In the ordinary course, the process of determination comes down essentially to ensuring that the work upon which the claim was based was work undertaken in the due course of administration and that the amount claimed for having done that work is a fair and reasonable reward for it.
Third, in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr [2017] NSWCA 38 the Court of Appeal recently considered the question of the proper approach to the determination by the Court of reasonable remuneration of a court-appointed liquidator. Counsel for the special purpose receivers submitted that, although the present applications are not brought under Ch 5 of the Corporations Act governing the remuneration of receivers, administrators and liquidators, the essential question which arises on these applications, as arises under those provisions, is whether the remuneration for which approval is sought is 'reasonable'. That may be accepted.
Counsel further submitted that, by analogy, the Court should have regard to the provisions of relevant factors specified in Corporations Act, in particular, s 425, when determining whether the special purpose receivers' remuneration is reasonable. So much can be accepted insofar as the factors in s 425(8) may be taken as an indication of the types of considerations that inform the question of reasonableness in the present case. Section 425(8), which applies to receivers appointed under an instrument, lists the following relevant factors: (8) In exercising its powers under this section, the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters: (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.
The following propositions can be derived from the reasons of Bathurst CJ in Sakr and adapted to the present case involving a special purpose receivership.
First, the onus is on the special purpose receivers to establish that the remuneration claimed is reasonable. It is the function of the Court, here under s 283HB of the Corporations Act, 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].

Review of the claim for remuneration

I am satisfied that the special purpose receivers have provided sufficient information for the Court to properly assess the claim for remuneration.
In Idylic Solutions, Black J said at [58] that it is not the role of the Court, constituted by a judge, to undertake a line by line review of the relevant bill narratives of the insolvency practitioner, but his Honour did review them in a broad way and concluded that they support other evidence led in respect of the claim for remuneration. I have adopted that approach in the present case.
Counsel for the special purpose receivers provided detailed written submissions addressing the relevant factors specified in s 425(8). These included whether the work was reasonably necessary; the quality and complexity of the work performed; the extent to which the special purpose receivers were required to deal with extraordinary issues; the level of risk or responsibility undertaken by the special purpose receivers; the proportion of remuneration to the value or nature of the property recovered; the extent to which the special purpose receivers were required to deal with other external administrators; and the time taken to perform the work using time based charging. It is not necessary to refer to the detail of those submissions as they will remain with the papers.
However, some observations should be made in relation to the significant responsibilities undertaken by the special purpose receivers. First, it may be accepted, as counsel for the special purpose receivers submitted, that the Banksia proceedings are complex and interrelated, involving multiple parties and cross claims giving rise to a range of legal and factual issues. The special purpose receivers have been responsible for the conduct of those proceedings since September 2015, and in the case of the BSL Trust Co proceeding, since February 2016. As indicated, the Banksia proceedings involve significant claims which the special purpose receivers estimate to be well in excess of $100,000,000. The special purpose receivers have been required to investigate and oversee preparation of a substantial amount of evidence, particularly expert evidence that relates to issues of causation and quantum or loss.
Second, other discrete issues have arisen which Banksia has been required to address in various separate interlocutory applications in different courts, such as the Trustee fee application brought by Trust Co which ultimately went to the Victorian Court of Appeal.
Third, while the settlement discussions were eventually partially successful, they were protracted and complex and required court approval. As a consequence of the partial settlement, Banksia has substantially amended the pleadings in the BSL Trust Co proceeding to properly reflect the case that it sought to advance at trial (the filing of which was opposed by Trust Co for several months).
Fourth, the special purpose receivers have also negotiated with the receivers and the committee of inspection the payment of a joint dividend to debenture holders from the receipt of the partial settlement and recoveries held by the receivers.
Having reviewed the remuneration reports, together with the detailed narratives of time and work performed, and considered the affidavit evidence of Mr Lindholm, I am satisfied that the work done by the special purpose receivers was reasonable and necessary. I am also satisfied, having regard to the nature and complexity of the work performed, that work was done at an appropriate level of seniority. In particular, it has been necessary for Mr Lindholm or senior members of his staff to carry out a substantial amount of the work, such as the review of the expert reports served by Banksia. In addition, it has been necessary for Mr Lindholm to participate in the mediations and high level settlement negotiations with Mr Bolitho and Trust Co leading to the partial settlement, and with debenture holders and the receivers over payment of a joint dividend to debenture holders. Mr Lindholm has also been directly involved in making strategic and forensic decisions when instructing lawyers in relation to aspects of the litigation strategy.
I accept that it is appropriate, in the circumstances of the present case, that the special purpose receivers' remuneration be determined on a time-charging basis, rather than some other basis. Accepting that a percentage of realisations may provide a useful cross-check, it should be observed that the remuneration claimed is about 5% of realisations to date. Plainly however, an ad valorem basis is not appropriate given the size of the estimated claims in the Banksia proceedings. Assuming a recovery of $100 million, a 4% charge would result in remuneration of $4 million. It is not anticipated that the special purpose receivers' remuneration calculated on a time basis to the end of the special purpose receivership would approach a figure of that order.
I am satisfied that the special purpose receivers' remuneration for each of the six-monthly periods ending 31 March 2016, 30 September 2016 and 31 March 2017 is reasonable and should be determined in the amounts claimed (including GST), which have been approved by the committee of inspection. Although the remuneration approved by the committee of inspection for the six-months ending 30 September 2016 was only $105,178.50 plus GST, I am satisfied that the claim for remuneration of $105,557.50 as sought in the interlocutory process filed 21 March 2017 should be approved.

Orders

Accordingly, I make the following orders: 1. That the remuneration of Mr John Ross Lindholm and Mr Peter Damien McCluskey as the special purpose receivers of Banksia Securities Limited (in liq) (recs and mgrs apptd) for the periods referred to below be approved and fixed in the following sums: 1. for the period 6 October 2015 to 31 March 2016 in the sum of $168,442.50 plus GST; 2. for the period 1 April 2016 to 30 September 2016 in the sum of $105,557.50 plus GST; 3. for the period 1 October 2016 to 31 March 2017 in the sum of $123,961 plus GST. 1. That the Special Purpose Receivers' costs of the interlocutory processes filed on 21 March 2017 and 28 April 2017 be costs in the special purpose receivership.

Amendments 05 May 2017 - (1)(a) - $161,442.50" amended to read $168,442.50 [56] - additional sentence added DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 May 2017

Judgment

GLEESON JA: Application is made by Mr John Lindholm and Mr Peter McCluskey for approval of their remuneration as special purpose receivers of Banksia Securities Ltd (in liq) (receivers and managers appointed) (Banksia). The applicants were appointed as joint and several special purpose receivers of certain property of Banksia by orders made by Black J on 30 September 2015, as varied on 29 February 2016. Those orders were made pursuant to s 283HB of the Corporations Act 2001 (Cth). The property of Banksia to which the special purpose receivers were appointed is the rights and entitlements (including the right to any proceeds realised) of Banksia the subject of the three proceedings referred to at [14] below (the Banksia proceedings). The circumstances leading to the making of those orders and their variation are fully stated in the judgments of Black J in Re Banksia Securities Ltd (in liq) (recievers and managers appointed) [2015] NSWSC 1378 (the September reasons) and Re Banksia Securities Ltd (in liq) (receivers and managers appointed) [2016] NSWSC 357 (the April reasons).
The orders made in September 2015 included order 5 that Mr Lindholm and Mr McCluskey be allowed such remuneration and expenses as may be fixed by the Court or the Supreme Court of Victoria incurred in their capacity as special purpose receivers of the identified assets of Banksia.
The orders made in February 2016 provided for the establishment of a SPR Litigation Fund by the immediate release by the receivers of Banksia of $10,000,000 to the special purpose receivers for the payment of specified remuneration, costs and expenses incurred by the special purpose liquidators in connection with, among others, the Banksia proceedings.
Order 3 of the February 2016 orders provided that, for the avoidance of doubt, the special purpose receivers were entitled immediately to draw on the SPR Litigation Fund for payment of their remuneration and all costs and expenses as and when they are incurred by them in respect of the Banksia proceedings. That order recognised that the special purpose receivers would not be expected to conduct the proceedings contemplated by the September 2015 orders, as extended by the February 2016 orders, unless they were funded to do so: Cape v Redarb Pty Ltd (receiver and manager appointed) (1991) 32 FCR 407 at 420.
In his April reasons at [38], Black J explained the effect of order 3 as follows: … This order permits the Special Purpose Receivers to pay remuneration, on an ongoing basis, notwithstanding that it would ordinarily require prior approval by the court, subject to the requirement in order 4 for a retrospective application by the Special Purpose Receivers for approval of such remuneration by the Court. The authority for the Special Purpose Receivers to draw remuneration on an ongoing basis is, of course, underpinned by their undertaking to the Court that, if the Court determines that any remuneration paid to them is unreasonable and not properly incurred, they must reconstitute the relevant fund within seven days of that determination.
Black J also explained at [40] of his April reasons, the mechanism for approval of the amount of the special purpose receivers' remuneration as follows: By order 4 of the February 2016 orders, I ordered that, every six months, commencing on 1 April 2016, the remuneration of the Special Purpose Receivers drawn from the SPR Litigation Fund (as defined) in the previous six months be approved by the Supreme Court of New South Wales, and before making each application, the Special Purpose Receivers must submit their remuneration for approval by the Committee of Inspection. I also noted the undertaking offered by the Special Purpose Receivers that: If the Court determines that any of the remuneration paid from the SPR Litigation Fund is unreasonable and not properly incurred the Special Purpose Receivers shall reconstitute the SPR Litigation Fund within 7 days of that determination in the amount so determined. The Committee of Inspection, referred to in order 4 of the February 2016 orders, was established by a resolution of a meeting of creditors of Banksia held on 3 December 2015 in respect of the winding up of Banksia, pursuant to the Corporations Act, s 548. In his first affidavit sworn 3 March 2017 Mr Lindholm explained (at par 76) that in addition to its formal role as the committee of inspection in the liquidation, the special purpose receivers have consulted with the committee of inspection in relation to aspects of the conduct of the special purpose receivership, including any settlement of proceedings within that receivership, and the approval of their remuneration as contemplated by order 4: see also April reasons of Black J at [9] and [40].

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