Approval of a court appointed receiver’s remuneration: sufficiency of evidence in support of the remuneration claim

A court-appointed receiver needs court approval for the payment of their remuneration. The receiver has the onus of establishing the reasonableness of the work performed and of the remuneration sought.

In the recent case of Palmer v Palmer [2023] QSC 278, Cooper Grace Ward acted for the court-appointed receivers who successfully obtained approval for their remuneration. The receivers had been appointed to the assets of a partnership, which included a cattle station and hotel. The gross realisations of the receivership exceeded $26M.

The decision in Palmer is very illuminating, as it highlights the legal principles that are applied in considering a receiver’s remuneration application, the evidence needed from the receiver and the type of detailed analysis undertaken by the court when assessing a receiver’s claim in the particular circumstances of the receivership.

Information provided by the receivers

The extensive information provided by the receivers in Palmer included:

• detailed information regarding the receiver’s work practices and procedures, file management, their basis for charging fees and their review processes
• extensive information regarding the actual work undertaken by reference to the receivership assets and workstreams (type of work undertaken)
• explanations as to the complexities, difficulties and disputes encountered during the receivership and why that necessitated the work performed
• information regarding the basis for and decisions made to trade on the hotel for an extended period
• a work stream summary report containing a comprehensive summary of the work performed in each workstream together with an explanation of significant issues or complexities encountered in performing the work in the workstream
• an ‘all entries time cost report’ that contained details of a description of the work undertaken; the person who undertook the work; a work description and number in respect of the work performed (i.e. the category in to which the work falls); and the date, time spent and cost of undertaking the work
• a master staff time report showing each of the persons who worked on the receivership, including details of their position, average hourly rate, total hours worked and the total dollar amount charged for the time they worked on the matter
• an analysis of the dollar amount charged to each workstream and the percentage the amount charged in respect of the workstream represented as against the total remuneration.

The legal principles

In Palmer, the Court applied the general principles stated in Re Say Enterprises Pty Ltd [2018] NSWSC 396, and other authorities.

There were many disputes on the hearing of the remuneration application. One of the central issues in dispute was whether the receivers had provided sufficient information and material to enable the Court to assess their remuneration claim.

A partner (who contested the application) argued that the receivers had failed to provide sufficient information and relied on the statement of Shepherdson J in Re Solfire Pty Ltd (No 2) [1999] 2 QdR 182, that was applied in Lancet Pty Ltd v Olholm Developments Pty Ltd (2001) 1 QdR 22, a receivership case.

The statement in Solfire said, in part:

when a provisional liquidator seeks to have his remuneration determined by the court he should provide a document not dissimilar in form to the Bill of Costs in taxable form provided by a solicitor to his client …

He should identify the person or persons and the grade or grades of the person or persons engaged in the particular task concerning the provisional liquidation, he should identify that task and dates on which time was spent on it, the amount of time spent on it and he should identify the relevant rate, according to the grade of the person or persons performing the work.

I also consider that he should require the person performing the work to keep reasonably detailed diary notes and time sheets which documents should be open to inspection by persons entitled to see them.

The receivers argued that the correct statement of principle was articulated by the Full Court of the Supreme Court of Western Australia in Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96. In Venetian, the Court stated in respect of Shepherdson’s J’s statement in Solfire :

In our opinion, however, it is, with respect, unnecessary to lay down an absolute rule, in such detailed terms, concerning the statement of account to be provided by a provisional liquidator. It may well be that in a particular case information particularised as suggested by Shepherdson J would be appropriate. In other cases less detailed information may be required. Every case depends on its own circumstances. But the overriding principle remains: sufficient information must be provided to the court to enable it to perform its function …

In Palmer, Justice Crowley held the correct statement of general principle is as stated in Venetian. His Honour did not consider the statement of Shepherdson J to be wrong. Rather, as the Court concluded in Venetian, while the particularity suggested in Solfire may be required in a particular case, it is not necessarily required in every case.

Comments

Proportionality is an important matter when considering the reasonableness of the remuneration sought. This is assessed based on the evidence before the court and based on the facts of the receivership.

The onus is upon the receiver to provide adequate information and material to enable the court to consider the remuneration claim, including the reasonableness and proportionality of the remuneration sought.

It is apparent from Palmer that substantial and specific information was provided by the receivers. The information provided was crucial in enabling the Court to assess the receiver’s successful remuneration claim.

The case also provides helpful guidance for receivers on a range of issues that may be encountered during a difficult receivership.

If you would like more information about these issues, please contact partner Graham Roberts on +61 7 3231 2404.