135 As explained above, these costs are the subject of the QB4 Parties' claim for declaratory relief. Furthermore, in the First Cross-Claim, Guardian seeks orders for invoice 0451, which remains outstanding, to be repaid by trustees of FT1 and FT2 or, alternatively, by Fundus.
136 These invoices cause me considerable disquiet. Mr Maarbani's affidavit evidence is said to explain the relevant work that was undertaken in relation to the Yamanto Property, the Griffin Mews Project, and the Wattlebird Project, and charged in the Guardian Invoices: Maarbani Affidavit 21 July 2021 (at [21]-[48]). By way of a broad overview of these invoices, Mr Maarbani states (at [52]):
As is apparent from the description I have provided above, much of the work under these three invoices involved review and consideration of legal documents, preparation of detailed correspondence in relation to Guardian's rights (in its capacity as responsible entity of PIF and ELF) in respect of QB4 Capital and GM8, consideration of the provisions of the Corporations Act 2001 and preparation of notices of meetings and explanatory statements for unitholders.
137 The process for recording the work completed by the staff working at VCPA and VCSA (including Mr Maarbani) was to record their time spent on this work for the ELF and PIF on a centralised "Google Sheets" document in reference to specific "work streams", such as "Audit Property Portfolio", "Manage Security", "Cashflow Management", "Investor Management", "Borrower Management", and "General Admin".
138 The Receivers reviewed these invoices, including the descriptions of the relevant work streams, and provided their findings in the Second Receivers' Report. The Receivers stated the information available to them to assess the propriety of the Guardian Invoices was insufficient because "Guardian and VentureCrowd had not provided any substantive detail as to the time or costs incurred to undertake an assessment of these fees charged." The deficiencies as to the information regarding the Guardian Invoices were identified in the Second Receivers' Report (at 45-46) as follows:
There is insufficient detail on the invoices to support the work Guardian and VentureCrowd claim to have carried out. We have not been provided with detailed timesheets which explain in detail the work performed to accrue these fees.
The timesheets provided do not correspond with the invoices issues in respect to that time.
The timesheets provided to us simply set out:
• Date work carried out;
• Name and position of employee;
• Which fund work was attributed to; and
• Total weekly hours allocated to each of 6 categories comprising Audit Investment Management terms and Agreement, Manage Security, Cashflow Management, Investor Management, Borrower Management, and General Admin.
The level of detail provided by Guardian and VentureCrowd to evidence the work undertaken by their staff is not sufficient to appropriately assess:
• The individual tasks performed within each of the 6 categories of work undertaken;
• The time taken by each staff member to complete each individual task;
• That staff with the appropriate level of seniority and expertise were allocated to undertake each individual task; and
• That appropriate management oversight was provided to staff allocated to undertake the tasks performed.
While it is acknowledged that the work undertaken by Guardian and VentureCrowd is not considered professional legal or accounting services, there is no apparent time cost recording system or software used by Guardian or VentureCrowd to accurately record the units of time spent on particular tasks such as what would be expected of a professional service firm like a legal or accounting practice. …
Detailed timesheets, such as what would be produced by a legal or accounting practice, would allow for a thorough costs assessment process to be undertaken on the time spent. There is no possibility of conducting a costs assessment on the timesheets produced as they are grossly deficient for that purpose.
It is not clear that a time-based charging approach was the most appropriate method of charging for the work completed in the circumstances.
…
While the invoices provided do categorise the costs to broadly defined categories of services, sufficient information does not appear to exist to substantiate the time spent dealing with the tasks.
Whilst Guardian argue that the substance of the work performed may be gleaned from the numerous documents which were produced, any assessment on this basis would be far too objective [sic] to reasonably support the amount claimed. Further, in order to measure specific output from the service provided, it would need to be clear from the various documents provided by Guardian, how many of those were produced specifically by Guardian and VentureCrowd rather than just relied on to complete their assessment.
The value of the work undertaken by Guardian and VentureCrowd is unable to be assessed objectively.
It is unclear who benefited most from the work undertaken by Guardian and VentureCrowd, whether it is Guardian, VentureCrowd, QB4, or the Unitholders.
It is unclear whether Guardian should have been aware of all of the issues investigated in the due diligence review already, by virtue of its role as Responsible Entity of the funds.
We are not able to determine whether it might have been possible to obtain the services provided from an independent third party as there is no engagement documentation between Guardian and VentureCrowd and there is no detailed supporting documentation to evidence the actual tasks undertaken by Guardian and VentureCrowd when providing the services.
139 The Receivers concluded (at 45) that, although Guardian had an entitlement to recover fund expenses from the assets of the trust, due to the insufficient detail provided, the Receivers were unable to form a reasonable view of the services provided and whether they were properly incurred. I raised this at the hearing during the cross-examination of Mr Wengel (T139.46 -140.11):
HIS HONOUR: What do you mean by that? You have an insufficient basis upon the material that has been provided to you in order to form a view of whether they've been properly charged?---Yes, that's right. There wasn't sufficient evidence presented to me to satisfy me that these expenses had been properly incurred and were properly - and were completely justifiable.
So you asked them for the material?---I did.
But by the end of your report you formed the view that you had been provided with insufficient material to justify it; would that be a fair characterisation of your position?---That's correct, yes.
All right, thank you?---And I did ask multiple times.
140 On this basis, the QB4 Parties argue that it is improper for Guardian to have not taken the opportunity to inform the Receivers properly of the matters to sustain any claim to the payments, and to hold back the necessary information to be dealt with now in relation to the Guardian Invoices. Alternatively, to the extent that, as Mr Maarbani's evidence suggests, the materials provided to the Receivers were identical to that relied upon by Guardian to support its current indemnity claim, it is abusive for it to re-litigate the question before the Court.
141 This last submission makes no sense and can be put to one side. No question of re-litigation arises.
142 Returning to issues of significance, although written in a more expansive narrative form, it appears that much of the information contained in Mr Maarbani's affidavit was also before the Receivers when drafting the Second Receivers' Report, including the timesheets for the work that was undertaken by VSCA and VCPA. Perhaps this is why I have come to a similar view as the Receivers: it is not presently explicable on the evidence in Mr Maarbani's affidavit (or in other evidentiary material) how the fees were properly incurred. For the following reasons, on the state of the evidence adduced, I am affirmatively satisfied that only a proportion of the claimed fees were claimed properly.
143 First, the evidence regarding the Guardian Invoices does not provide real insight into the work that was performed or its propriety. The Receivers indicated that they were unable to form a reasonable view of the services provided by VentureCrowd and Mr Maarbani and whether they were properly incurred because of the insufficient details as to the work that was performed, including the fact that there is no information as to the time that was spent on each task, the specific tasks that were performed, or whether staff at an appropriate level of seniority and expertise were allocated to undertake each individual task: Second Receivers' Report (at 46). To my mind, given the nature of the work performed and the activities that one would expect to be undertaken, to the extent that the contents of Mr Maarbani's affidavit do provide evidence that was not provided to the Receivers, it does not adequately address the deficiencies identified in the Second Receivers' Report. Mr Maarbani's description of the general nature of the work that was performed is merely a high-level summary and does not specify the tasks performed, the time spent on those specific tasks, or how that work relates to the amounts charged. It is exceedingly difficult to reconcile the work that is said to have been performed with the amounts charged. Although I note that when one calculates the hours worked by each employee at their individual hourly rate during the relevant periods in the timesheets, there appears to be some alignment between the amounts charged in the invoices and the hours recorded in the timesheet, much of the work that was charged for in the invoices that were issued (including the disbursements) does not correspond with the work that was recorded in the timesheets.
144 Secondly, there are unsettling inaccuracies between the amounts charged in the relevant invoices, the times recorded in the timesheets, and the evidence of Mr Maarbani. For example, Mr Maarbani's affidavit provides that Mr Hasenkam, Mr Walker, Mr Walters, and Mr Withnall undertook work with assistance from VCSA staff that was the subject of the time charged in invoice 0451: see Maarbani Affidavit 21 July 2021 (at [46]-[48]). However, only Ms Taylor, Mr Walker and Ms Milne (all of whom are employees of VCPA) appear to have recorded any time during the relevant period and no charge is made for work performed by VCSA staff apart from that of Mr Maarbani. Furthermore, the timesheets do not record that Mr Maarbani worked any hours during the period of 28 September 2020 to 2 December 2020. Despite this, Mr Maarbani has charged for 159.5 hours (calculated based on his hourly rate of $375) in invoice 0451 for legal work undertaken by him from 28 September 2020 to 2 December 2020. Accordingly, the evidence upon which the fees were said to have been calculated appears obscure and, in some respects, inconsistent.
145 Thirdly, the amount being charged to the trust in the Guardian Invoices appears excessive when regard is had to the similar fees being charged to the ELF and PIF during the relevant period. In the Second Receivers' Report, Cowell Clarke opined (at 8 [4.33]):
Given the substantial amounts of those invoices overall, the claim by [Guardian] for Management Fees for the same period and the related party nature of [Guardian] and VCPA, we consider that the invoices contain insufficient detail for [Guardian] to properly assess the services that is the subject of the invoices and the amounts claimed.
146 Further, given that Mr Maarbani's work, and his hourly rate, were justified on the basis of his legal knowledge, there appears to have been a substantial duplication of the legal work performed and charged in the relevant invoices. At the time, AG Edwards was acting for Guardian and appeared to be performing substantive amounts of work relating to the charges in the Guardian Invoices at the instruction of Mr Maarbani: see, e.g. Affidavit of Mr Maarbani sworn 18 November 2020 (at [83]-[100]); Maarbani Affidavit 21 July 2021 (at [51]-[52]). It is also far from clear what overlap there was between the work charged for under the Guardian Invoices and other fees charged by Guardian during the course of discharging its duties as the responsible entity: see Second Receivers' Report (at 46).
147 Fourthly, in addition to having little confidence in the affidavit evidence (such as it was), Mr Maarbani's oral evidence to the extent it related to the issue of the work performed did not provide any further detail or leave me with any feeling of confidence that the amount charged reflected a proper scope of work or the time required to do the work. When cross-examined as to whether he saw a potential for a conflict of interest between Guardian and VCPA, Mr Maarbani stated "of course" (T60.26) and that they "were absolutely in a position of conflict" (T66.45-47) but nevertheless concluded that "at the end of the day we were best placed to do that work": T60.38-39. I share the concern expressed in the Cowell Clarke report that insufficient detail was provided to Guardian to assess for themselves, at arm's length, the services for which were being charged, given the substantial amounts of the Guardian Invoices overall, the claim by Guardian for management fees for the same period, and the related party nature of Guardian and VCPA. It is a significant concern that, despite multiple requests, sufficient detail was not provided to the Receivers or the Court to assess properly the services that are the subject of the Guardian Invoices and other fees charged.
148 There is one further issue to address regarding the Guardian Invoices. Both parties sought to deploy the termination of the IM Agreement in support of their case regarding the Guardian Invoices. For the reasons I will explain, I do not find either argument convincing.
149 First, the QB4 Parties submit that Guardian's "purported" termination of the IM Agreement was unlawful and invalid and, as such, Guardian exposed itself to liability in damages and engaged in self-dealing by purporting to do the work formerly done by QB4 that QB4 was ready, willing and able to perform. In my view, this submission misses the point. The issue of whether the IM Agreement was validly terminated is something of a red herring. Whether QB4 was strictly in breach of the IM Agreement, and whether the IM Agreement was validly terminated, are issues between QB4 and Guardian. They do not relate to the relevant analysis; that is, whether the charges for the work performed were expenses that were properly incurred with respect to the interests of the beneficiaries. The fact that Guardian assumed the investment management role for itself, and shut QB4 out, does not, in and of itself, justify a conclusion as to the propriety of that work in relation to the Guardian Invoices.
150 Secondly, the Guardian Parties advance an argument that, to the extent that Guardian is not entitled to indemnity for the expenses it has incurred from the assets of the ELF and/or PIF, the un-indemnified amount represents expenses that have been incurred by Guardian arising from QB4's breach of various contractual obligations under the IM Agreement and RE Agreement. These are said to include, by way of a general overview, obligations to provide monthly, quarterly, and annual reports, including valuation reports of all assets held by the trust and compliance reports, to Guardian. Further, QB4 was said to be obligated to provide records relating to the ELF and PIF upon request, within a reasonable amount of time, and upon the termination of the IM Agreements. There is significant dispute as to whether QB4 breached these obligations. Guardian claims that, due to the supposed breaches of the IM and RE Agreement, the Guardian Parties were required to perform the work instead of QB4, which was charged for in invoices 0419, 0434, and 0451. On this basis, Guardian claims it is entitled to the difference between the amount of invoices 0419, 0434 and 0451 and the aggregate amount to which Guardian is ultimately held to be entitled by way of indemnity from FT1 and FT2.
151 This claim should fail for similar reasons. The only damage that is claimed is the amount that Guardian is found not to be entitled to by way of indemnification. The crux of this claim is that Guardian has not been indemnified for work that was "reasonably necessary having regard to Guardian's obligations as responsible entity and trustee of the PIF and the ELF": see Guardian Parties written submissions (at [104]). However, for the reasons outlined above, the work said to be performed does not align with the work that was reasonably necessary to be performed, and that Guardian is not entitled to be indemnified for the full amount of the Guardian Invoices. Those reasons are entirely divorced from any conduct of QB4, and relate only to the propriety and necessity of the work that was conducted by Mr Maarbani, VCPA and VCSA.
152 Ultimately, although I am satisfied that Guardian has a right to be indemnified for most of the work charged in the Guardian Invoices, I have reached an affirmative state of satisfaction that the total amount of those invoices was not properly incurred in relation to the trust. Given the nature and extent of the necessary and proper work to be performed as explained by the Receivers, the imprecise evidence upon which the fund expenses were charged, the inconsistencies between the explanations for the work performed and the invoices that were charged to the fund, and the significant fees that were being paid at the time for similar work, I consider that the charges should be significantly discounted. Precisely how much this discount should be cannot, on the present state of the evidence, be an exercise in precision and necessarily involves taking a broad brush view as to where the just result lies informed by an assessment of the evidence as to what work was necessary and the other charges that were incurred. It seems to me, doing the best I can, that 60 per cent of the amount charged should be regarded as being properly incurred. Given a just amount will be retained in relation to payments already made to discharge the Guardian Invoices, I do not consider it necessary to consider the alternative quantum meruit claim.