In the recent case of Australian Securities & Investments Commission v A One Multi Services Pty Ltd (No 2)1, the Federal Court considered an application brought by Court appointed receivers seeking approval for their remuneration in respect of past and prospective or future work.
Downes J approved the claim for remuneration for work already performed. However, while Her Honour accepted that the Court has power to approve remuneration for prospective work, she declined to approve the claim in this case.
The decision provides a useful summary of the key considerations the Court will take into account when fixing remuneration generally and the matters the Court will take into account when an insolvency practitioner seeks provisional approval for remuneration for future work.
On 21 October 2021 the applicants were appointed by the Court as joint and several receivers and managers (Receivers) of the property (Property) of A One Multi Services Pty Ltd (A One), Aryn Hala (A One’s director and shareholder) and Heidi Walters (a shareholder and former director of A One) (collectively, Defendants), on the application of ASIC2.
The appointment arose following an ASIC investigation into allegations that A One was operating an unlicensed financial services business, with Mr Hala and Ms Walters providing unlicensed financial advice to investors. Investors were allegedly informed that they could receive annual investment returns in excess of 20% by transferring their superannuation into a self‑managed superannuation fund (SMSF), with the SMSF then lending its funds to A One for investment.
ASIC’s preliminary investigations indicated that:
Given Mr Hala possessed the codes necessary to transfer all of the cryptocurrency under his control, and the apparent lack of returns to investors and SMSFs, the Court appointed the Receivers to identify, collect and preserve the Property of the Defendants, investigate the receipt and application of investor funds, and pursue recovery of those funds if required.
Approximately 9 months after their appointment, the Receivers applied to the Court for approval of, among other things:
The governing principle for the Court when exercising its power to approve remuneration is that it should only allow such remuneration as is fair and reasonable. In determining what is fair and reasonable, the same general principles apply to remuneration sought by Court appointed receivers as to other external administrators3, including the matters referred to in section 425(8) of the Corporations Act 2001 (Cth) in respect of privately appointed receivers, and the proportionality of the remuneration sought having regard to the work done and remuneration claimed compared to the value of the estate.
Importantly, the power extends to approving prospective remuneration for work the receivers anticipate will be required during the receivership. In particular, the Court may approve prospective remuneration where4:
In this case, Downes J was satisfied on the evidence that the work performed by the Receivers had been undertaken in a reasonable and proper manner and that the amount claimed for that work was a fair and reasonable amount. Accordingly, her Honour approved the remuneration sought in respect of work already performed, despite the opposition of the Defendants.
However, Her Honour was not prepared to make an order allowing the Receivers to draw interim prospective remuneration as proposed or at all.
In terms of the factors listed above:
In declining the orders for prospective remuneration, Downes J also gave weight to the fact that ASIC opposed the order, as well as ASIC’s submission that it was not appropriate for the Receivers to draw their remuneration in advance from property that may ultimately be held in trust for the benefit of the investors and SMSFs.
The Receivers argued that interim approval of prospective remuneration would minimise the time and expense of multiple approval applications. However, her Honour noted that at least one more application would be required in any event and overall, the potential efficiencies did not outweigh the Court’s concerns noted above.
This case provides a useful summary of the general principles for Court approval of receiver remuneration whether it is sought in respect of past or future work, and the factors that the Court will take into account.
If you have any questions about the remuneration of receivers or any other form of external administrator or controller, the experienced Lavan team is here to help.
 Australian Securities & Investments Commission v A One Multi Services Pty Ltd (No 2)  FCA 1100.
 Australian Securities & Investments Commission v A One Multi Services Pty Ltd  FCA 1297.
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