Mohamed & Anor v Hurstville Tower Medical Clinic Pty Ltd

CATCHWORDS : RECEIVERS - receivers appointed by court - remuneration - principles governing determination of remuneration - application of principles to the particular case

CASES CITED : Ide v Ide (2004) 184 FLR 44 Wenkart v Pantzer [2005] FCA 1572

Ismail Mohamed - First Plaintiff Medical Centre 2000 - Second Plaintiff Hurstville Tower Medical Clinic Pty Limited (in liquidation) - First Defendant Southern Sydney Medical Centre Pty Limited (in liquidation) - Second Defendant Sonzan Pty Limited (in liquidation) - Third Defendant Bharathi Madadi Reddy - Fourth Defendant PARTIES : Michael Mihajlov - Fifth Defendant Ahmed Mohamed - Sixth Defendant Cedric Teo - Seventh Defendant Barclitus Pty Limited - Eight Defendant Souther Sydney Medical Centre Pty Limited (in liquidation) as Trustee of the Southern Sydney Medical Centre Trust - Ninth Defendant K M Mihajlov Pty Limited - Tenth Defendant Maxwell William Prentice as Receiver of the Southern Sydney Medical Centre Trust - Applicant

COUNSEL : Dr I. Mohamed - First Plaintiff in person Mr J.W.J. Stevenson SC - Receiver of First, Second, Third and Ninth Defendants - Applicant

SOLICITORS : Dr I. Mohamed - First Plaintiff in person Gray & Perkins - Receiver of First, Second, Third and Ninth Defendants - Applicant

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

3880/01 ISMAIL MOHAMED & ANOR v HURSTVILLE TOWER MEDICAL CLINIC PTY LIMITED (IN LIQUIDATION) & 9 ORS; MAXWELL WILLIAM PRENTICE AS RECEIVER OF THE SOUTHERN SYDNEY MEDICAL CENTRE TRUST - APPLICANT JUDGMENT 1 Mr Prentice was, in November 2001, appointed by the court to be the receiver and manager of property held upon trust by Southern Sydney Medical Centre Pty Limited as trustee of the Southern Sydney Medical Centre Trust. He was also appointed liquidator of that company in respect of which a winding up order was made. These orders were made as part of a compromise subscribed to by the trust beneficiaries (or unit holders), being three companies each of which was associated with a medical practitioner. The main item of trust property was a medical centre at Hurstville at which the three medical practitioners conducted their professional activities. 2 Mr Prentice also became the liquidator of other companies associated with the medical centre operations. It is unnecessary to go into detail. It is sufficient to record that Mr Prentice has, in his various capacities, realised assets and performed his various functions to a point where, as receiver of the trust property, he now seeks an order approving his remuneration, an order dispensing with the filing of accounts and an order that he be discharged as receiver. 3 In relation to remuneration, Mr Prentice asks that the court approve, by order, the payment to him of a sum of $182,014.91 being so much of a somewhat larger sum ($189,799.67) detailed in a tax invoice dated 30 June 2005 exhibited to his affidavit dated 9 September 2005 as relates to the period up to the making of orders on 6 December 2004. Mr Prentice accepts that that is a fair cut-off point. 4 The three doctors who effectively represent the three beneficiaries - being Dr Reddy, Dr I. Mohamed and Dr A. Mohamed - have written to the court objecting to remuneration of such an amount. Mr Prentice has tendered copies of the letters. One of the doctors (Dr I. Mohamed) appeared on the hearing of Mr Prentice's application to express his opposition. The beneficiaries' opposition, I note, relates only to the quantum of remuneration. There is no suggestion that Mr Prentice is not entitled to be remunerated or that a time-based approach by reference to the hourly rates actually adopted is inappropriate (they being rates which, on the evidence, are in line with prevailing practice). Nor is there opposition to the proposal that the filing of accounts be dispensed with or that Mr Prentice be discharged as receiver. 5 The complaints of the beneficiaries are similar. In their letters, the three doctors say that there has been undue delay in the completion of the administration which, as I have said, commenced some four years ago. They say that the protracted administration involved them in unnecessary accounting and legal costs. They also say that the work involved in the administration became "redundant and repetitive" (to use words found in Dr I. Mohamed's letter to the court) or "repetitive and unnecessary" (to quote Dr A. Mohamed's letter). Dr Reddy's letter refers specifically to the need for a Mr Ayres in the receiver's office to "repeat the work of Mr Jason Porter". 6 One particular matter (expanded upon by Dr I. Mohamed when he made oral submissions) concerns a need to make an adjustment for $53,000 of expenses that the receiver had failed to take into account in formulating a basis of distribution among beneficiaries. The original basis formed part of an agreement by all beneficiaries. That agreement was embodied in a deed. When the need for the adjustment emerged, there was a dispute as to how the adjustment should be made and, I think, some resentment that the adjustment meant that two of the unitholders ended up participating on a basis less favourable than originally agreed. But, in the long run, there was again agreement. A further deed was entered into but the evidence shows that there was a good deal of negotiation and discussion before it was settled. Dr I. Mohamed also complained that there had been effectively two years of inactivity. 7 The submissions made on behalf of the receiver make it clear that the sum of $182,014.19 sought as remuneration, being a time-based amount, does not cover work done after 6 December 2004, with the result that no claim is made for anything attributable to the anomaly discovered after the original compromise was approved by the court. 8 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. 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. 9 The first of these principles was the subject of comment by Branson J in Wenkart v Pantzer [2005] FCA 1572. 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. 10 The material placed before the court by Mr Prentice includes a break-down of the total figure of $189,799.67 shown in the tax invoice of 30 June 2005. The break-down refers to persons within Mr Prentice's firm of various levels of seniority to whom different hourly charge-out rates are attributed. There are in fact 26 levels or grades, each with a different hourly rate ranging from $377.00 for the highest of four levels of partner to $56.00 for "Office Junior". A number of hours is given in respect of each person identified by grade or classification and the total of $189,799.67 then follows as a simple matter of multiplication and addition. 11 Also included in the materials put before the court is a series of documents, each of which relates to one of the staff grades or classifications and sets out, by date, brief particulars and number of hours, the work done by the person within the relevant grade or classification. Thus, to take an easy example, there is a document containing entries for 0.2 hours, 0.6 hours and 1.5 hours for "Jamie Lang - Intermediate 2 ($130 per hour)" which makes up a total of 2.9 hours being, at $130 per hour, $377.00, which corresponds with the item "Intermediate 2" at an hourly rate of $130 on the tax invoice. 12 On the face of things, therefore, Mr Prentice has furnished to the court, in an open and informative way, an explanation of the time spent, work done and charging rate in such a way as to show the various components of the total of $189,799.67 in the tax invoice. The information is supplemented by Mr Ayres's affidavit detailing aspects of difficulty and complexity. It is against that background that the complaints of the beneficiaries must be addressed. 13 The particular complaint of Dr Reddy is explicit, referring to repetition by Mr Ayres of work done by Mr Jason Porter. This aspect is reviewable on the materials that have been provided. The detailed timesheet information in evidence shows entries for Mr Porter from 7 November 2001 to 3 July 2003. There are 540 entries in all. The entries for Mr Ayres start on 28 June 2004. The only apparent overlap which warrants attention is found in the later entries of Mr Porter. The entries are: 1. "Conference Ayres regarding strategy on file and handover" - 0.75 hours on 25 June 2003. 2. "Preparation of job status memorandum for Ayres and Prentice" - 0.25 hours on 30 June 2003.

There are no corresponding entries for Mr Ayres who apparently did not record, for charging purposes, time spent on the handover by Mr Porter to him. There should likewise be no charge for time spent by Mr Porter in relation to the handover. There must accordingly be a reduction for the two items I have mentioned, being the equivalent of one hour at Mr Porter's charge-out rate, that is, $255.00. 14 The more general complaint of the beneficiaries that the work involved in the administration became "redundant and repetitive" or "repetitive and unnecessary" is not really explained or elaborated. It is clear that the receivership took a long time to complete. It is also clear that significant time and effort were spent on attempts (which proved successful) to have the administration disposed of on the basis of agreements of the parties, rather than the potentially more costly process of unilateral enforcement by the receiver, probably with challenges from the parties. 15 The beneficiaries are right to complain that additional time and effort were incurred by reason of the need to rectify the situation involving the $53,000. But the basis on which Mr Prentice presents his claim for remuneration involves a cut-off point (December 2004) ensuring that work attributable to that matter is not included. 16 As to Dr I. Mohamed's complaint that there were two years of inactivity, the evidence shows quite clearly that this is not so. 17 The beneficiaries have very properly placed their concerns before the court. Dr I. Mohamed has made helpful oral submissions, In the end, however, I am satisfied that, while the beneficiaries have experienced frustrations (including, in particular, in relation to correction of the $53,000 item) and would have preferred a simpler and quicker resolution, the receiver has discharged the onus of showing the appropriateness and reasonableness of the sum of $182,014.91 claimed (less the $255.00 I have identified as involving duplication). 18 The orders of the court are as follows: 1. Pursuant to Part 26 rule 4 of the Uniform Procedure Rules , the remuneration of Maxwell William Prentice as receiver of the Southern Sydney Medical Centre Trust be fixed at $181,759.91. 2. The filing of accounts by the receiver be dispensed with. 3. The receiver be discharged as receiver of the assets of the Southern Sydney Medical Centre Trust. **********

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