The firm is acting for one of the partners, in a fight against the receivers and managers of the partnership with respect to their claim for remuneration. The receivers and managers were appointed in August 2019 to wind up the partnership in accordance with a court order. The winding up of the partnership involved:
1. the sale of two significant assets;
2. the sale of two smaller property assets;
3. dividing up a number of shares and other minor assets held by the partnership between the two partners;
4. finalise the accounting of the partnership.
The receivers and managers have claimed in excess of $1 million remuneration. Our client’s claim that the remuneration being sought by the receivers and managers is disproportionate and excessive having regard to the work that was actually performed in the winding up of the partnership.
There are mechanisms in place under the ARITA Code (published by the Australian Restructuring and Insolvency Turnaround Association) which allow creditors to object to the remuneration being sought and apply for review by the Court.
In reviewing a claim for receivers’ remuneration, a court must have regard to whether the remuneration is reasonable, considering the matters set out in the Insolvency Practice Schedule in the Corporations Act 2001, which includes:
· the extent to which the work was necessary and properly performed;
· the complexity of the work performed and the extent to which the external administrator was required to deal with extraordinary issues;
· the number, attributes and conduct of the creditors; and
· the value and nature of any property dealt with by the external administrator.
Receivers and managers are required to be completely transparent and must clearly explain to creditors the basis by which their remuneration can be calculated, must maintain a proper record of the work that was done and maintain a system that records details of the work performed. Importantly, the receiver bears the onus of justifying the reasonableness of its costs.
It is important that creditors are aware of their rights to have a receiver’s remuneration reviewed by the Court.
The matter is likely to be heard later this year and, on our client’s expert evidence, he is expecting to receive a substantial refund from the receivers for overpaid fees.