Judge criticises Hall Chadwick’s ‘excessive and unreasonable’ bill
The Federal Court has ruled the amounts claimed for work conducted by the firm’s administrators were disproportionate to the benefit derived.
In a judgment handed down on Wednesday, a Federal Court judge found the amounts claimed for work carried out by Hall Chadwick administrators were “excessive and unreasonable.”
“I cannot accept that any prudent businessperson, spending his or her own money, would have embarked on work of the nature and extent the administrators performed,” wrote Justice Michael Feutrill.
The case revolved around the administrators’ claim for remuneration and costs associated with work performed for AMS Holdings Pty Ltd.
In 2020, ASIC secured a judgment against AMS which found the company had operated an unregistered management investment scheme.
Cameron Shaw and Marcus Watters, partners at Hall Chadwick, along with specialist adviser Richard Albarran were appointed as administrators that same year.
In the case, they sought a determination from the Federal Court that they were entitled to remuneration of $982,885.53 and costs amounting to $313,208.92 for work carried out over 10 weeks in late 2020.
The administrators applied a 15 per cent discount to the remuneration amount “in recognition of the manner in which the work was performed.”
It was carried out with “layers of supervision of increasingly junior staff” while “constant re-working was required as information/ideas changed in the course of the administration,” they said.
The administrators were not in control of any assets of AMS during the administration and its liquidators opposed the sums claimed by the administrators.
Regarding their claim for remuneration – as separate from their claim concerning disbursements – the court had to determine whether the work performed was “necessary and reasonable.”
Beyond the three administrators, approximately 40 additional Hall Chadwick staff performed work related to the administration, according to the judgment.
A total of 739.7 hours were spent preparing creditor reports, 496.3 hours were spent adjudicating proofs of debt, 354.1 hours on creditor meetings, 120.3 hours on deed of company arrangement (DOCA) work, 98.9 hours investigating assets, and 141.4 hours investigating investments and PPPs.
“The administrators have not demonstrated that the time and amount claimed for the work (even with a 15 per cent discount) represents the ‘value’ of the services rendered to the creditors,” said Justice Feutrill.
“All that work was performed in respect of a company that had no assets available to discharge its liabilities to creditors and in circumstances where there was a very significant risk that, if the creditors voted in favour of it, the DOCA would not be performed.”
The court detailed four main categories of work carried out by the administrators, all of which it felt were unnecessary in scope.
Firstly, the court found the administrator’s investigations into the “business, property, affairs and financial circumstances of the scheme” went beyond the scope of their obligations.
“In my view, the administrators misconceived the extent of their statutory duties and functions…insofar as they performed work aimed at providing creditors with their opinion as to the likely return under a winding up of the alleged scheme,” said Justice Feutrill.
Secondly, the administrators carried out work relating to three proposed DOCAs, none of which were used following ASIC enforcement.
While the court accepted that the administrators were correct to determine whether a DOCA would be in the interests of the creditors, it added “That does not mean that all work forming that opinion was necessary and (or) reasonable.”
The DOCA work, said Feutrill, was “excessive and unreasonable.”
Thirdly, with the administrators’ investigation of AMS and its owner, the court was “also not satisfied that … it was necessary or reasonable.”
Finally, the court also found that 496.2 hours and $200,653.50 spent on adjudicating proofs of debt were excessive.
The administrators also claimed they should be reimbursed for disbursements including legal fees, room hire fees, transcription fees, and property appraisals.
All disbursements and costs were allowed in the amount claimed, except for legal fees – the majority of which, the court said the administrators had failed to establish as “necessary and reasonable.”
The Hall Chadwick administrators did not respond to a request for comment.
