Hebbel Constructions Pty Ltd v Bitar Pty Ltd

[2021] NSWSC 810

Supreme Court

New South Wales

Medium Neutral Citation:

Hebbel Constructions Pty Ltd v Bitar Pty Ltd [2021] NSWSC 810

Hearing dates:

4 and 5 May and 25 June 2021

Date of orders:

25 June 2021

Decision date:

04 July 2021

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

i.   Court passes receiver’s accounts and approves receiver’s remuneration.

ii.   Receiver entitled to indemnity as to disbursements, subject to assessment process as to the Disputed Costs and Disbursements as defined.

iii.   Receiver’s remuneration to be paid from monies still held by Partnership and those previously paid into Court.

iv.   First Respondent to pay costs of Applicant and Second Respondent of this application up to and including 26 April.

v.   Order for release and discharge of receiver made, where proceedings not commenced against receiver within specified time.

Catchwords:

CORPORATIONS — Receivers and managers — Passing of accounts.

CORPORATIONS — Receivers and managers — Appointment by Court — Application for approval of remuneration — Whether remuneration “fair and reasonable” — Indemnity in respect of partnership assets — Question of proportionality — Where claimed remuneration increased by multiple challenges to receiver’s conduct.

CORPORATIONS — Receivers and managers — Appointment by Court — Claim for indemnity out of partnership assets in respect of disbursements — Question of costs of this application.

CORPORATIONS — Receivers and managers — Appointment by Court — Application for release and discharge as receiver.

Cases Cited:

- Adsett v Berlouis (1992) 37 FCR 201; (1992) 109 ALR 100

- Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 33 ACSR 288; [1999] VSC 500

- Gandangara Local Aboriginal Land Council v Gandangara Services Ltd [2015] NSWSC 2011

- Ide v Ide (2004) 184 FLR 44; (2004) 50 ACSR 324; [2004] NSWSC 751

- Kardos v Sarbutt (No 2) [2006] NSWCA 206

Lunn v Savage [2006] NSWSC 240

- Mead v Watson (2005) 23 ACLC 718; [2005] NSWCA 133

- Re Angel's Castle Pre-School Pty Ltd (in liq) (No 2) [2012] FCA 57

- Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2017] NSWSC 540

- Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2018] NSWSC 229

- Re Beddoe; Downes v Cottam [1893] 1 Ch 547

- Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund (2016) 115 ACSR 581; [2016] NSWSC 1292

- Re Independent Contractor Services (Aust) Pty Ltd (in liq) (No 2) [2016] NSWSC 106

- Re Metal Storm Ltd [2015] NSWSC 1699

- Re Primespace Property Investment Ltd (in liq) [2016] NSWSC 1821

- Re Say Enterprises Pty Ltd [2018] NSWSC 396

- Re Wine National Pty Ltd [2016] NSWSC 4

- Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; (2017) 118 ACSR 333; [2017] NSWCA 38

- Sprowles, Re Triumph N Triumph Pty Ltd (in liq) (No 2) [2021] FCA 405

- Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545; [2015] FCAFC 137

Texts Cited:

- O’Donovan’s Company Receivers and Administrators, [25.510] (Online Version)]

Category:

Procedural rulings

Parties:

Hebbel Constructions Pty Ltd (Plaintiff/Second Respondent)
Bitar Pty Limited (First Defendant/First Respondent)
Hebbel Constructions Pty Ltd & Bitar Pty Ltd (Second Defendant)
Daniel Frisken – Court-Appointed Receiver (Applicant)

Representation:

Counsel:
Mr S Golledge SC/Mr F Tao (Applicant)
Mr M W Sneddon (First Defendant/First Respondent)
Mr D Klineberg (Plaintiff/Second Respondent)

Solicitors:
Yates Beaggi Lawyers (Applicant)
Sydney Commercial Lawyers (First Defendant/First Respondent)
Speed & Stracey (Plaintiff/Second Respondent)

File Number(s):

2014/269117

Judgment

Nature of the application

1. By Amended Notice of Motion filed on 5 May 2021, Mr Daniel Frisken as Court-appointed receiver (“Receiver”) of a partnership (“Partnership”) between Hebbel Constructions Pty Ltd (“Hebbel”) and Bitar Pty Ltd (“Bitar”) seeks an order, under r 26.5(2) of the Uniform Civil Procedure Rules (“UCPR”) passing his accounts or, alternatively, an order under UCPR 26.5(3) dispensing with the passing of his accounts. He also seeks an order that he be allowed remuneration for the period from 4 July 2017 to the determination of the Amended Notice of Motion and be entitled to pay such remuneration and out-of-pocket expenses from the Partnership assets the subject of the receivership, and an additional order that he be allowed future remuneration from 7 May 2021 to the date of his anticipated retirement as Court-appointed receiver.

2. Bitar had initially indicated that it would attack substantial aspects of the conduct of the receivership in this application and I therefore made orders on 15 February 2021 for the filing of Points of Claim and Points of Opposition. The Receiver relied on his Points of Claim dated 15 February 2021 and I will refer to aspects of that Points of Claim below. Hebbel relied on its Points of Opposition dated 8 March 2021. Bitar did not comply with the Court’s order to file Points of Opposition. It first indicated the narrower basis on which it now opposes in written submissions filed on 30 April 2021 by its newly retained Counsel, Mr Sneddon. Bitar belatedly filed Points of Opposition on 17 May 2021, between the second and third days of the hearing of this application.

3. The application was then adjourned, after the second day of the hearing, when it became apparent that there was likely to be a substantial dispute as to the amount of the Receiver’s legal costs in respect of this application. The scale of that dispute was confirmed when the Receiver, Hebbel and Bitar served expert evidence in respect of that issue; I note that Bitar may well not have been granted leave to rely on its expert evidence under UCPR 31.28, where it was both very late and extended beyond the scope of the Court’s order permitting expert evidence. The parties did not seek to read or tender that evidence, after the Receiver made an open offer to resolve the issue as to those costs by referring them to an assessment where Hebbel and Bitar would have the opportunity to contest those costs, and the Receiver and his solicitor also offered an undertaking to the Court and the parties which would be of real advantage to Bitar and Hebbel if that process was adopted. The parties agreed that the Court should initially determine whether that process should be adopted, and I have determined that that process should be adopted rather than the Court itself determining the reasonableness of those costs. I also determined all other issues in that application. I made orders giving effect to that determination at the conclusion of the hearing on 25 June 2021. These are my reasons for doing so.

The parties’ Points of Claim and Points of Defence, background facts and affidavit evidence

4. I first set out aspects of the factual background as identified by the parties’ Points of Claim and Points of Defence. By paragraphs 1-19 of his Points of Claim, the Receiver identified the parties to the application, the business carried on by the Partnership and the circumstances of his appointment as Court-appointed receiver. By its Points of Opposition, Hebbel admitted or did not take issue with these matters. By its Points of Claim, Bitar admitted some aspects of this claim and did not admit others. By paragraphs 20-31 of his Points of Claim, the Receiver identifies the work he undertook in respect of the receivership under several categories, including securing, preserving and selling properties, dealings with the Australian Taxation Office (“ATO”) and related tax matters, administration, preparation of accounts, communications and litigation and disputes. By paragraphs 32-59 of his Points of Claim, the Receiver identified several allegations that were previously made by Bitar and determined by the Court, largely or entirely in the Receiver’s favour. By its Points of Opposition, Hebbel admitted or did not take issue with these matters. Bitar largely did not admit these matters, notwithstanding that it had been party to the various applications and plainly knew of their outcome, and also contended that all previous costs orders against Bitar were the subject of an agreement between Bitar and Hebbel, were quantified in a compromised sum and were to be applied towards Bitar’s liability on the taking of Partnership accounts between Bitar and Hebbel, and that Hebbel was liable to Bitar in respect of the costs of an earlier decision of Rein J which led to the appointment of the Receivers.

5. By way of background, the Partnership developed a building comprising residential units and commercial shops in Petersham, New South Wales. By about October 2014, a dispute arose between Hebbel and Bitar in relation to the Partnership, a company named Hebbel & Bitar Pty Ltd (“HBPL”) and the development, which was the subject of subsequent proceedings in the Commercial List. On 4 July 2017, Rein J ordered that the Partnership be dissolved under s 35 of the Partnership Act 1892 (NSW) and appointed Mr Frisken as receiver of the Partnership’s assets and the shares in HBPL without security and with specified powers. Rein J also appointed a referee to determine several questions arising from the dissolution of the Partnership including the amount of monies owed by or to Hebbel and Bitar.

6. Bitar subsequently brought several applications, largely unsuccessful, in respect of conduct of the receivership. For example, by my judgment delivered on 25 May 2018 ([2018] NSWSC 758), I dismissed an application brought by Bitar for the discharge of Mr Frisken as the receiver appointed by the Court to the assets of the Partnership and the shares in HBPL and also declined to order an interim distribution which Bitar then sought to have made by the Receiver. By my judgment delivered on 8 June 2018 ([2018] NSWSC 859), I ordered that Bitar pay the Court-appointed receiver’s costs of and incidental to that motion on an indemnity basis, and also pay Hebbel’s costs of and incidental to the motion on the ordinary basis. By my further judgment delivered on 19 June 2018 ([2018] NSWSC 1089), I held that an attempt by Bitar to reagitate these issues by the exercise of liberty to apply was outside the scope of that liberty and declined to hear it. A successful application was subsequently brought by Hebbel in April 2019 which resulted in orders that the Receiver pay monies into Court and certain sums be paid out to Hebbel and Bitar respectively. The amount of $5.5 million has subsequently been paid to Hebbel and Bitar and into Court, pursuant to those orders from the realisation of Partnership property.

7. Turning now to the affidavit evidence, it was not necessary for the Receiver to read, and he did not read, several previous affidavits which had been read in earlier applications, where Bitar did not pursue its foreshadowed attack on the conduct of the receivership generally. He now relies on his affidavit dated 6 October 2020, which sets out the work carried out in the receivership, including the sale of residential and commercial units in the property, dealings with the ATO and related matters, and addresses numerous other issues in respect of the receivership. The Receiver there observes that, although the receivership had been delayed by the associated litigation, it is now substantially complete; all residential units and commercial units have been sold; and distributions have been made to the partners and remaining funds had been paid into Court, with the exception of an amount which is now held subject to orders in respect of his remuneration (Frisken 6.10.20 [33]-[34]).

8. Mr Frisken also gave evidence of the several persons who have worked on the receivership and their experience, and expressed the view that the hourly rates charged by the levels of staff were reasonable and comparable to industry standards, and quantified his claim to remuneration for the period 5 July 2017 to 30 September 2020 in the amount of $336,008.75. Mr Frisken left the firm of BPS Recovery in December 2018 and became a partner of another firm, OBP, and the records supporting his remuneration deal with work done at BPS and subsequently with work done at OBP. Mr Frisken’s evidence (Frisken 6.10.20 [57]) as to the persons who worked on the receivership, at BPS and OBP, allows an assessment of the extent to which the matter was leveraged, by use of junior staff as appropriate, to average down the costs incurred.

9. Mr Frisken also gave evidence of the costs incurred by the solicitors which acted for him in respect of the receivership and the surrounding litigation (“YBL”) and refers to his experience as to the hourly rates charged by that firm and by Counsel, and to steps which he had taken in mid and late 2019 to obtain a review of that firm’s costs by a costs assessor to satisfy himself as to the reasonableness of those costs. Mr Frisken also refers to the practice that he adopted in dealing with invoices from that firm, namely that he checked those invoices at the time that they were issued and he, or staff members under his supervision, reviewed the detailed narrations to make sure the work was reasonably necessary in light of issues arising in the receivership, and had reasonably been carried out, and he checked that firm’s costs were calculated in accordance with the letter of engagement (Frisken 6.10.20 [45]). He notes that he was in regular contact with that firm because of the repeated Court applications brought by Bitar during the course of the receivership and was able to monitor what that firm was doing and that, having regard to his experience and his understanding of market rates, he considered that the hourly rates and total fees charged by that firm and Counsel were within the range charged by commercial firms for that type of work (Frisken 6.10.20 [46]-[47]). There appears to be little reason to doubt that proposition for work done prior to this application, although there is greater difficulty in respect of the costs billed by that firm to Mr Frisken in respect of this application.

10. Mr Frisken also notes that the receivership had been the subject of extensive and costly litigation in respect of the proceedings, numerous interlocutory applications during them, largely brought by Bitar, and associated appeals, and he refers to his successful defence of the several applications and appeals, including Bitar’s application to remove him as receiver and manager, an application by Bitar to reagitate that matter on exercising a liberty to apply; an application for leave to appeal from that decision, and an application made to a duty judge to set aside consent orders in respect of a distribution to the parties (Frisken 6.10.20 [49]-[50]). Mr Frisken reasonably noted (Frisken 6.10.20 [51]) that:

“The costs of the Receivership have been substantially inflated by reason of the matters referred to … both in terms of the legal costs and disbursements I have incurred as evidenced in the [YBL’s’] invoices, and the time which I and my staff have had to allocate in dealing with these matters.”

11. Mr Frisken also observed that he was satisfied that the costs and disbursements described in invoices issued by YBL were necessary and appropriate to be incurred in order to carry out the receivership (Frisken 6.10.20 [52]). I address the question of those costs below. YBL’s engagement letter dated 10 July 2017 is also in evidence (Ex DF8, 939).

12. By a further affidavit dated 2 November 2020, Mr Frisken provided further evidence in support of his claim for remuneration and an updated listing of receipts and payments and other documentation in support for the application to pass his accounts. Mr Frisken’s affidavit evidence also exhibited schedules of staff remuneration at OBP for the period from 1 January 2019 to 30 September 2020 organised by person working on the matter, and by reference to the ARITA categories of work undertaken, recording the remuneration incurred in the several categories and by person. I have had regard to that document in considering the distribution of work across categories and between persons, although the remuneration and costs incurred in this matter are again increased by the extent of dispute between the parties (Ex DF 9, 266).

13. By a further affidavit dated 4 May 2021, Mr Frisken provided an updated listing of receipts and payments in respect of the partnership to 2 May 2021, and a further spreadsheet outlining work done by Mr Frisken and his staff. Mr Frisken there indicated that his claim for remuneration up to and including 2 May 2021 was $359,981.25 inclusive of GST, and his estimated remuneration to his retirement was in the amount of $55,000 inclusive of GST, on the basis that this application would require a three-day hearing, as it ultimately did dispute the reduction in the scope of the issues that Bitar had threatened to agitate. That affidavit annexed an updated schedule of receipts and payments, further invoices from YBL, and a statement of the financial position of the Partnership as at 2 May 2021, and also annexed an email provided by YBL estimating the costs and disbursements for 2 and alternatively 3 days of this hearing.

14. At the hearing on 25 June 2021, the Receiver read his further affidavit dated 24 June 2021 which provided an updated account as to the receivership which listed further receipts and payments for the period from 3 May 2021 to 23 June 2021, including payments to YBL. He also provided information as to work carried out by himself and his staff in that period, which largely related to his work in respect of this application. He updated his claim to remuneration for the period to 23 June 2021 to $369,857.05, and estimated he would incur further remuneration of $33,000 from 23 June 2021 to the date of his proposed retirement as receiver of the Partnership, including remuneration relating to one further hearing day of this application. Mr Frisken also set out his updated calculations as to the estimated final distribution to Hebbel and Bitar from Partnership assets. He indicated that he sought to retain an amount by way of security for costs, but that was not pressed given the manner in which the hearing developed.

15. The Receiver also relied on the affidavit dated 12 April 2021 of Mr Odgers, a solicitor now acting for him in the proceedings, who only took up conduct of the matter from August 2020 after another solicitor left YBL. Mr Odgers estimated the amount of costs recoverable by the Receiver from Bitar in respect of its several applications as nearly $113,000, inclusive of GST, an amount less than Ms Mossman’s calculation to which I refer below. Mr Odgers fairly recognised that, if the Receiver were to seek to enforce any judgment against Bitar in respect of the costs, there would likely be associated costs and delays and the efficacy of enforcement would depend upon the assets which Bitar had available to satisfy any judgment against it.

16. The Receiver also relied on a report dated 26 June 2019 of a costs assessor, Ms Mossman of DGT Costs Lawyers which reviewed the costs he had incurred in several categories, and the costs likely to be recoverable under the costs orders made in his favour against Bitar. Ms Mossman had reviewed YBL’s and Counsel’s invoices, the retainer letter and also had access to the file held by YBL in relation to the work undertaken by that firm. Ms Mossman undertook a calculation of the costs incurred in respect of the several categories of work done by YBL and, on her calculation, costs of about $190,000 were incurred by the Receiver in respect of the several applications brought by Bitar. That calculation exceeds Mr Odgers’ assessment of recoverable costs to which I referred above. Ms Mossman was also asked to provide an opinion whether the legal costs and disbursements that the Receiver had incurred, to the date of that report, complied with legal principles entitling a Court-appointed receiver and manager to charge against partnership assets on an indemnity basis and had been charged in accordance with the retainer agreement. She concluded that the work done by YBL had been charged in accordance with the retainer agreement and subsequent notices of increases to chargeable rates; that the rates charged by YBL fell within the range of rates routinely charged and were fair and reasonable given the issues and complexity of the matter; the breakdown of work between fee earners within that firm then appeared to be fair and reasonable; and there was nothing in her inspection of the work done that raised any issues as to the quality of the work performed. Ms Mossman’s report provides support for the claim for legal costs in that period, prior to the hearing of this application.

11. By a second report dated 2 December 2019, Ms Mossman reviewed invoices issued by YBL for the period December 2018 to 2 October 2019, when this application was brought, and noted the Court applications and issues which arose in that period. She noted the amount of time spent by YBL in responding to criticisms of delay and the Receiver’s conduct of the receivership; to lengthy negotiations and work relating to an interim distribution and an application for Court approval of that distribution; and to further applications in which the Receiver was party or was necessarily involved, and observed that there did not appear to be anything unreasonable as to the manner in which the Receiver had instructed YBL to perform work as required. That report provides support for the Receiver’s claim for legal costs in that later period to 2 October 2019.

12. The Receiver also served a further affidavit of Ms Mossman dated 26 May 2021 and her associated report addressing the reasonableness of the costs incurred in this application from 3 September 2019 to 30 April 2021. Ms Mossman’s report indicated that those costs were very substantial, in the amount of approximately $448,000 for professional fees, inclusive of GST, and expressed the view that some reduction in the legal costs charged by the solicitors to the Receiver would be appropriate, in the order of 10-15%, reducing those costs by an amount between about $48,800 and about $67,200. That report was not read, as events developed, and I do not need to determine that question, which will be addressed by an assessment of those costs initiated by the Receiver, under the orders that I will make below.

13. Hebbel in turn relies on the affidavit dated 8 March 2021 of its solicitor, Mr Speed, who has only acted for Hebbel since late February 2021. Mr Speed refers to correspondence with YBL in April 2019 recording that Hebbel did not then object to his legal costs, but that Bitar objected to those legal costs, and to an indication then given by YBL that, if Bitar remained the only objecting party on the legal costs, the Receiver would seek his costs of any expert report and evidence filed on the reasonableness of legal costs from Bitar only, on a full indemnity basis. Mr Speed also referred to a spreadsheet provided by the Receiver detailing receipts and payments of the Partnership to 18 January 2021, which records additional costs and disbursements payable to YBL. Hebbel also tendered the Receiver’s affidavit dated 23 August 2019, which set out the position in respect of then Partnership assets and liabilities, and anticipated that, after the Receiver’s remuneration was approved and his accounts were paid, he would apply to the Court for leave to retire as receiver and for release and, with an optimism that has now been disappointed, estimated that the costs of that application would be approximately $10,000.

14. Prior to the hearing on 25 June, Hebbel also served, but did not read, an affidavit and report of Ms Solomon dated 23 June 2021. Ms Solomon expressed the view that the amount charged by YBL to the Receiver was excessive by a substantial amount, challenging both the hourly rates charged by a partner and a senior solicitor acting on the matter and the percentage of work undertaken by senior staff in respect of the matter, which she considered reflected a lack of appropriate delegation of work to junior staff. Ms Solomon reviewed a sample of the relevant invoices, amounting to about two-thirds of the professional costs claimed, and suggested that the reduction she considered was appropriate in respect of those invoices should be extended to other invoices. She also challenged the level of photocopying costs charged in respect of the matter. Ms Solomon expressed the view that the amount properly charged by YBL would be $241,571.90, substantially less than the amount claimed or the reduced amount that Ms Mossman considered would be reasonable. Mr Golledge indicated that Ms Solomon would have been required for cross-examination, had her report been read, and advanced substantive criticisms of her approach in his submissions. It is also not necessary to address those criticisms, given this issue will be addressed by the assessment of those costs to be initiated by the Receiver, under the orders that I will make.

15. On 24 June 2021, the day before the hearing on 25 June, Bitar served an expert report, which the Court had ordered be served by 16 June 2021, in a form that extended well beyond Court’s orders permitting expert evidence within a specified scope. I have noted above that there was a real question whether the Court would have granted leave for Bitar to rely on that report under UCPR 31.28, had it sought to do so. As events developed, it also did not rely on that report.

Passing of the Receiver’s accounts

22. As I noted above, the Receiver initially sought an order for the passing of his accounts, or that those accounts be dispensed with. In Ide v Ide (2004) 50 ACSR 324; [2004] NSWSC 751 at [22] – [29], Young CJ in Eq, in discussing the circumstances in which that requirement can be dispensed with, noted the importance of adhering to the process of passing accounts in cases involving substantial assets, and those which his Honour described as “ranging from the middle to the higher end of the financial scale”; see also Re Angel’s Castle Pre-School Pty Ltd (in liq) (No 2) [2012] FCA 57 at [5] –[8]; Gandangara Local Aboriginal Land Council v Gandangara Services Ltd [2015] NSWSC 2011 at [12]. In Sprowles, in the matter of Triumph N Triumph Pty Ltd (in liq) (No 2) [2021] FCA 405 at [13], Yates J observed that the object of passing accounts is to verify that all amounts received in the course of the receivership are accounted for and that all payments made in the course of the receivership have been properly made and are evidenced, and also noted that Courts have readily made orders dispensing with this requirement.

23. The Receiver led extensive affidavit and documentary evidence to support his accounts, and he was not cross-examined nor was evidence served to the contrary, other than for experts reports directed to the costs of this application, and the wider expert report served late and outside the scope of the Court’s orders by Bitar to which I referred above, and those expert reports were not read. The Receiver now seeks an amended order for the passing of his accounts, excluding the professional fees (other than Counsel’s fees) charged by YBL in specified invoices relating to this application and photocopying charges included in those invoices, recognising the dispute which had arisen as to this matter. In his initial oral submissions, Mr Sneddon indicated that Bitar did not oppose an order that the Court dispense with a requirement to pass the Receiver’s accounts, given the costs which had already been incurred in respect of this application, and that Bitar contested only the question of legal costs and expenses incurred by the Receiver, which I address below. Mr Klineberg, who appears for Hebbel, did not oppose this order in the form now sought by the Receiver. I am satisfied that order is properly made, excluding only the question of the legal costs of this application which will be addressed by the process which I will order below.

The Receiver’s remuneration claim

24. Paragraphs 60-83 of the Receiver’s Points of Claim dealt with the staffing of the receivership and the time recording system adopted by his firm, his remuneration claim and his entitlement to remuneration, and I have referred to his evidence in support of that claim above. By its Points of Opposition, Hebbel admitted or did not take issue with these matters, but contended that the Receiver’s remuneration in connection with and following the filing of this application should be borne by Bitar alone and, to the extent that Bitar’s share of the remaining funds of the Partnership was not sufficient to account for remuneration for which it was liable, that the shortfall should not be deducted out of Hebbel’s share of Partnership funds. By paragraph 4 of its belated Points of Opposition, Bitar largely did not admit or denied these matters (notwithstanding the volume of uncontested evidence supporting them) but indicated that it did not oppose the Receiver’s remuneration claim, subject to the Court being satisfied that it was fair and reasonable, and acknowledged that he ought to be entitled to indemnity out of the Partnership’s assets for his remuneration, in preference to Bitar and Hebbel, on orthodox principles.

25. By their opening submissions in respect of the application, Mr Golledge and Mr Tao, who appeared for the Receiver, outlined the work he had undertaken in respect of the receivership, including the realisation of funds in excess of $7 million from the sale of Partnership properties and the receipt of rental income and the recovery of Partnership funds held by a third party. Mr Golledge points to the multiplicity of applications brought by Bitar in the course of the receivership, and to the failure of the complaints made against the Receiver in those applications, and to their impact in increasing the amount of the remuneration claim and his disbursements for legal costs in respect of the proceedings. Mr Golledge also points out, and I accept, that the receivership would likely have been completed long ago and the balance of Partnership assets would have been distributed to the parties, but for those applications, and, I would add, Bitar’s previous threat to seek to reagitate those issues in this application, a course that it only recently abandoned.

26. Mr Golledge referred to the principles applicable to the determination of a Court-appointed receiver’s remuneration under UCPR r 26.4. The remuneration of a Court-appointed receiver may be approved by the Court which appointed that receiver: Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 33 ACSR 288; [1999] VSC 500. In Ide v Ide above at [39]ff, Young CJ Eq described the Court’s role in determining such an application (omitting authorities) as follows:

“First, the court constituted by a judge, never considers a review of quantum, but only matters of principle.

Secondly … a receiver is entitled to have his costs, charges and expenses properly incurred in the discharge of his ordinary duties, or in the performance of extraordinary services which have been sanctioned by the court.

Thirdly …:

The receiver must justify the reasonableness and prudence of the tasks undertaken for which remuneration is sought, in the same way as he must justify the reasonableness and prudence of incurring disbursements for which he seeks allowance and reimbursement.

Thus, as with a falsification of accounts, the relevant onus is on the receiver.

Fourthly, it must always be remembered that a receiver’s remuneration is not in the same category as costs … The receiver is making application for a fair recompense for what he or she has properly done. The award is in the discretion of the court according to well known guidelines …

Fifthly, the court’s objective is to award a sum or devise a formula which will reasonably compensate the receiver for the time and trouble expended in the execution of his duties and, to some extent, the responsibility he has assumed … the vital question is what is the value to the estate of the work done by the receiver ...

Sixthly, the court will usually work off time sheets created in the receiver’s office provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff ….

Seventhly, the court is guided by professional scales of charges … What is important is the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work.”

27. Mr Golledge also refers to my observations as to the applicable principles in Re Metal Storm Ltd [2015] NSWSC 1699 at [11], where I observed that the relevant principles:

“… include the fact that Court appointed receivers are entitled to remuneration, and indeed their entitlement to remuneration is a necessary feature of the Court's ability to appoint insolvency practitioners to such a position. [Counsel there] notes authority that Court appointed receivers are required to have their remuneration approved by the Court before they are permitted to draw payment. There are many examples of cases where that has occurred including, for example, Re Application of Crouch [2005] NSWSC 1122 and Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd (No 2) [2015] FCA 809. The latter case is useful because it also involved a case where a significant amount of work had to be done by receivers to realise value in shares of which they had been appointed receivers where they had experienced considerable difficulty in selling those shares. In that case, Foster J approved the receivers’ remuneration, observing that he was satisfied they had approached the task entrusted to them with skill and competence and had set out about realising the assets for the benefit of the relevant creditors.

28. I also addressed the applicable principles in Re Wine National Pty Ltd [2016] NSWSC 4 at [13] and, in Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund [2016] NSWSC 1292 at [58], I observed that it is not the Court’s role, as constituted by a judge, to undertake a line by line review of the relevant narratives in an insolvency practitioner’s billing record, but I there reviewed the relevant narratives in a broad way in order to satisfy myself that they supported the other evidence led in respect of the claimed remuneration. Gleeson JA adopted the same approach in Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540 (“Banksia 2017”) at [48] and I also adopted that approach in Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2018] NSWSC 229. Mr Golledge also referred to the observations of the Court of Appeal in Sakr Nominees Pty Ltd (in liq) v Sakr (2017) 93 NSWLR 459; (2017) 118 ACSR 333; [2017] NSWCA 38 (“Sakr”), in the context of a liquidator’s remuneration, as to the matters relevant to determining that remuneration. The Court of Appeal there referred to the relevance of “proportionality” in fixing a practitioner’s remuneration, and to the recognition by the Full Court of the Federal Court in Templeton v ASIC (2015) 108 ACSR 545; [2015] FCAFC 137 that proportionality is to be judged having regard to the complexity of the issues with which an insolvency practitioner had to deal.

29. In Banksia 2017, in dealing with a receiver’s claim for remuneration, Gleeson JA also noted that common bases for calculation of remuneration included time-based charging and a commission based on percentage of recoveries, and that the approach to be adopted is directed to securing reasonable remuneration in the circumstances. His Honour there referred to the Court of Appeal’s decision in Sakr above and summarised the principles which arose from Bathurst CJ’s judgment in that case (at [44]-[46]) as follows:

“First, the onus is on the special purpose receivers to establish that the remuneration claimed is reasonable. It is the function of the Court … to determine the remuneration by considering the material provided and bringing an independent mind to bear on the relevant issues: Sakr at [54].

Second, many of the factors in s 425(8), in particular, pars (d)-(e) and (g)-(h) can be seen to have as their unifying theme the concept of proportionality. The question of proportionality in terms of work done as compared with the size of the property the subject of the insolvency administration or the benefit to be obtained from the work, is an important consideration in determining reasonableness: Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545; (2015) FCAFC 137. The work done must be proportionate to the difficulty and importance of the task in the context in which it needs to be performed. This is what is encompassed in assessing the value of the services rendered: Sakr at [55].

Third, the mere fact that the work performed does not lead to augmentation of the funds available for distribution does not mean that the special purpose receivers are not entitled to be remunerated for it. In the present case, the Trustee fee application and the time spent consulting with the committee of creditors on various issues, including obtaining approval of the special purpose receivers’ remuneration will not result in the augmentation of the funds available for distribution. Provided it was reasonable to carry out the work and the amount charged is reasonable, there is no reason a liquidator should not recover remuneration for undertaking the work: Sakr at [57]–[58].

30. Mr Golledge points out that the Receiver claims remuneration on a basis calculated by reference to the amount of time spent and members of his staff in tasks relevant to the receivership and refers to the basis on which the claim for remuneration is calculated. His initial claim for remuneration of $349,413.35 inclusive of GST amounts to approximately 4.6% of total realisations of over $7.4 million and approximately 6.2% of the net realisation, being the total realisation less expenses and disbursements. As I have noted above, the amount of remuneration claimed has undoubtedly been increased by the several unsuccessful applications brought by Bitar in respect of the receivership. The Receiver’s amended claim to remuneration of $369,857.05 for the longer period to 23 June 2021 would be a slightly higher percentage of realisations.

31. Mr Sneddon indicated, in his initial submissions, that Bitar did not oppose the Receiver’s claim for remuneration, subject to the Court being satisfied that it is fair and reasonable, and acknowledged that significant work, labour and effort has been undertaken by the Receiver since he was appointed and he is entitled to reimbursement for that work. That was a late change in Bitar’s position, although the approach now taken is a reasonable one. Mr Sneddon also fairly acknowledged the protracted and disrupted history of the matter and fairly acknowledged that, since the Receiver’s appointment, Bitar had filed numerous applications which had been unsuccessful and there are unpaid costs orders in favour of the Receiver, payable by Bitar in respect of those applications. By his opening written submissions, Mr Klineberg indicated that Hebbel did not dispute that the amount of the remuneration sought by the Receiver was reasonable. In oral opening submissions, Mr Klineberg sought to change that position and indicated that Hebbel did not challenge the Receiver’s remuneration before the filing of this application in September 2019. Hebbel sought to challenge the amount of remuneration claimed by the Receiver since the filing of that application. I am not prepared to entertain that challenge, if it is still maintained, where Hebbel did not give the Receiver fair notice of it, although the Court will nonetheless need to be satisfied that the remuneration claimed is reasonable.

32. In oral submissions, Mr Golledge accepted that it remained a matter for the Court to be satisfied by evidence that the Receiver’s remuneration was reasonable. I am satisfied that, in the very difficult circumstances faced by the Receiver, involving multiple challenges to his conduct by Bitar, the remuneration claimed is reasonable, albeit increased by work referable to Bitar’s several applications, and the work done by the Receiver was reasonably undertaken and the rates charged and distribution of work between staff was reasonable. The criticisms now advanced by Hebbel and Bitar as to the costs charged by YBL in respect of this application, to which I refer below, do not undermine the reasonableness of the Receiver’s and his staff’s claim to remuneration. The amount of the Receiver’s remuneration should be approved. I am also satisfied that the approach proposed by the Receiver in respect of future remuneration is appropriate, in order to avoid the costs of a further application, where supported by the undertaking which he now offers.

The Receiver’s disbursements

33. Paragraphs 75-83 of the Receiver’s Points of Claim dealt with his disbursements and pleaded his entitlement to indemnity for his disbursements. By paragraph 10 of Hebbel’s Points of Opposition, it contended that the legal costs and disbursements incurred by the Receiver in connection with and following the filing of this application should be borne by Bitar alone and, to the extent that Bitar’s share of the remaining funds of the Partnership was not sufficient to account for the costs and disbursements for which it was liable, that the shortfall should not be deducted out of Hebbel’s share of partnership funds. I address that question below. By paragraph 5 of its belated Points of Opposition, Bitar denied these paragraphs of the Receiver’s Points of Claim and particularised that denial by contending that the Receiver’s claim for indemnity out of Partnership assets for legal costs and expenses was excessive and not properly and reasonably incurred and should be reduced to a sum which the Court was satisfied was properly and reasonably incurred.

34. In opening oral submissions, Mr Golledge noted that, in its Points of Opposition, Hebbel did not dispute the reasonableness of the Receiver’s claims for disbursements or expenses, although it took a position that Bitar rather than Hebbel should be responsible for those costs. In oral opening submissions, Mr Klineberg confirmed that Hebbel did not challenge the Receiver’s costs and expenses prior to the filing of this application in September 2019. However, Hebbel then sought to challenge the legal costs incurred claimed by the Receiver since the filing of this application although that issue was not raised in its Points of Opposition. The parties have served further evidence to address that challenge to which I referred above, and the Court in any event needs to be satisfied that those amounts are reasonable.

35. In further submissions at the hearing on 25 June 2021, Mr Golledge pointed out that the Receiver has already drawn funds from the Partnership accounts to pay his legal disbursements, being the YBL invoices and, in the light of Hebbel’s attack on the reasonableness of the legal fees incurred, the Receiver seeks a direction, nunc pro tunc, that he be justified in paying legal fees and disbursements in the amounts invoiced by YBL, or some other amount as the Court considers appropriate.

36. Mr Golledge drew attention to the principles applicable to the assessment of a Court-appointed receiver’s disbursements, as summarised by Brereton J in Re Say Enterprises Pty Ltd [2018] NSWSC 396 at [6] as follows:

“…in respect of disbursements, no Court approval or specific order is necessary in the absence of a challenge, although receivers should scrutinise them to ensure that they are reasonable and properly payable, and the Court has an inherent jurisdiction to review receivers’ disbursements as they are officers of the Court. However, a receiver may seek a direction that he would be justified in paying certain disbursements in order to obtain prior protection in respect of such a disbursement.”

37. Mr Golledge also noted that O’Donovan’s Company Receivers and Administrators at [25.510 (Online Version)] summarises a court appointed receiver’s right of indemnity as follows:

“In the absence of an express provision as to indemnity, the receivers are entitled to claim against the assets included in their appointment a full reimbursement of all expenses and outlays and an indemnity for all liabilities properly incurred in the execution of their duties. Moreover, they hold an equitable lien over the estate as against all persons interested in it.” [Citations omitted]

38. Mr Golledge recognised that there may be an open question as to whether a receiver’s legal fees ought to be quantified on a party/party basis, indemnity basis, solicitor/client basis or other basis, but submitted that all legal expenses and legal disbursements would be allowed by the Court unless they were shown to be unreasonable. He pointed to the context in which those costs have been incurred by the Receiver in respect of this application, where Bitar had previously foreshadowed an attack on the Receiver’s conduct of the receivership as a whole. He also summarised the approach adopted by Ms Mossman and advanced several criticisms of Ms Solomon’s report, to which I have referred above.

39. Mr Sneddon initially indicated that Bitar did not dispute the entirety of the Receiver’s claim in respect of disbursements, but points to the substantial amount of his claim for indemnity out of Partnership assets representing legal costs and expenses. In oral submissions at the initial hearing, Mr Sneddon confirmed (T18) that Bitar did not take issue with costs other than legal costs. Mr Sneddon also pointed to the possibility that the costs of realisation of the sale of the commercial and residential units owned by the partnership and legal costs unrelated to the applications brought by Bitar were in the order of $800,000 or more, and submitted that there was a question as to the reasonableness of those costs. There is no doubt that the legal costs involved are substantial, but the costs incurred in the earlier period have been addressed in Mr Frisken’s evidence and reviewed in Ms Mossman’s reports and I will refer to the absence of contrary evidence below.

40. Mr Sneddon submitted at the initial hearing that it is not the Court’s role to undertake a line by line review of the invoices issued by YBL to determine whether those costs expenses were fair and reasonable. Mr Sneddon points to a possible difficulty in distinguishing litigation costs and expenses which Bitar is liable to pay and the Receiver’s legal costs and expenses in other aspects of the administration of the receivership. It is not necessary to distinguish the two, where the Receiver should be indemnified against Partnership assets in respect of both, notwithstanding that the former may also be recoverable against Bitar or may be adjusted in a distribution of the remaining partnership funds paid into court between Bitar and Hebbel. Mr Sneddon also points to a difficulty in determining whether or not the Receiver’s legal costs and expenses other than in respect of this application are reasonable, but I am satisfied that is established by the evidence to which I have referred, other than in respect of the costs of this application which are to be referred to assessment under the orders I note below and as to which I express no view. In further submissions for the hearing on 25 June 2021, Mr Sneddon submitted that only the Receiver’s costs and expenses, properly and reasonably incurred, ought to be the subject of indemnity out of the partnership assets: Re Beddoe; Downes v Cottam [1893] 1 Ch 547 at 562; Adsett v Berlousis (1992) 37 FCR 201; (1992) 109 ALR 100; Mead v Watson (2005) ACLC 718; [2005] NSWCA 133 at [12]ff.

41. Mr Sneddon had initially invited the Court to order that the Receiver’s legal costs and expenses (other than in respect of Bitar’s applications) be referred to a costs assessor, reserving all parties’ ability to make objections or submissions to the costs assessor. Bitar then reversed its position at the hearing on 25 June, as I will note below. I was initially not inclined to take that course, where the parties had an opportunity to lead evidence and make such submissions in this application, but I am now persuaded that I should adopt the Receiver’s narrower proposal that he refers the costs of this application only to assessment, in which Bitar and Hebbel will have an opportunity to make submissions as third party payers, as a result of developments between the initial hearing in May and the further hearing on 25 June, to which I now turn.

42. I have referred to Ms Mossman’s and Ms Solomon’s further reports, which were served by the parties but not read, above. It seems to me that significant difficulties would have arisen in respect of the determination of the reasonableness of the costs charged by YBL in respect of this application in a continuance of this hearing. Those difficulties would have arisen in the context that Hebbel contended that, in effect, YBL had charged nearly double the amount that was reasonably payable for legal services in respect of this application. I make no finding as to the merit of that allegation, which is a matter which will now be addressed by a costs assessor. However, that is plainly not a matter which a Court-appointed receiver would have anticipated would occur in the ordinary course. Mr Golledge foreshadowed that, if the reasonableness of the costs charged by YBL was to be determined in this application, then it was likely that the Receiver would need to instruct new solicitors, and potentially bring a cross-claim against YBL in order to recover any amounts overpaid. The Receiver, and YBL if that firm was joined to the proceedings, would need to be given an opportunity to lead evidence in response to the further expert reports on which Hebbel relied, and Bitar sought to rely, if leave was granted under UCPR r 31.28 for it to do so. The proceedings would likely have continued for an additional one-two days, with the result that the Receiver’s claim for remuneration and for disbursements would potentially further increase, placing at risk any potential further recovery for Bitar and Hebbel from the monies held at Court. Mr Golledge rightly points out that, unless the Receiver now retained new solicitors and brought such a cross-claim against YBL, the consequence of the submissions made by Hebbel and Bitar as to the legal costs of this application would only be that the Receiver’s accounts would not be passed, but the Partnership would be no closer to recovery of any unreasonable fees charged by YBL in respect of this application.

43. By contrast, the proposal now put by the Receiver allows the reasonableness of the costs charged by YBL in this application to be determined, by a costs assessment in which Hebbel and Bitar will have the opportunity to be heard as third party payers, without incurring the costs of further hearing days in this application or the costs of reference to a Court-appointed referee. Importantly, that proposal is accompanied by an undertaking offered by the Receiver, and a further undertaking offered by the Receiver and Mr Amirbeaggi of YBL, which have the consequence that any determination that YBL has been overpaid will lead to repayment of the amounts overpaid to the Partnership estate. As I noted above, that result could not be achieved in this application, absent a cross-claim brought by the Receiver against YBL, a consequential change of solicitors and additional hearing time. For these reasons, I was comfortably satisfied that the approach proposed by the Receiver was of significantly greater advantage to the parties, including Hebbel and Bitar, than the alternative of continuing a determination of that issue in the Court.

44. In submissions on 25 June 2021, Mr Klineberg confirmed that Hebbel did not take issue with legal fees incurred by the receiver prior to this application and indicated that Hebbel supported the assessment proposal advanced by Mr Frisken to resolve the question of the reasonableness of his costs of the application (T108). Mr Sneddon, for Bitar, was instructed to oppose that approach, reversing Bitar’s previous position but seemed to me to be unable to articulate any good reason to do so beyond the fact of his instructions. Mr Sneddon alternatively submitted that, if the Receiver’s legal costs of this application were to be referred to a costs assessor for determination, that assessment should be extended to all legal costs incurred in the receivership. I do not accept that submission. Bitar denied the reasonableness of the costs incurred in earlier periods, and Mr Sneddon advanced a challenge to earlier legal costs, which he described as “internal” costs of the receivership, in submissions. However, no material facts were identified by Bitar in its Points of Opposition to support that challenge and Bitar led no evidence to support it. It plainly does not follow from the existence of a dispute as to the reasonableness of legal costs incurred in the circumstances of this application, that there was also difficulty in the level of costs charged by YBL in undertaking prior work in the receivership in different circumstances. Hebbel does not contest the costs of that earlier work, having an interest to do so if there was a proper basis to do so. There seems to me to be no arguable dispute as to those earlier costs raised by the evidence which warrant an order for the assessment of those costs, and I will determine that question on the straightforward basis that there is no reason to doubt Mr Frisken’s unchallenged evidence as to this issue, where Bitar led no evidence to the contrary.

45. I am satisfied that the Receiver is entitled to indemnity as to his disbursements, subject to the assessment process as to the Disputed Legal Costs and Disbursements (as deferred), and should be authorised to pay his approved remuneration and any unpaid disbursements apart from the Disputed Legal Costs and Disbursements from the Partnership assets the subject of the receivership.

Hebbel’s contention that Bitar should bear the liability for remuneration, costs and disbursements

46. Mr Klineberg initially submitted that costs orders made in favour of the Receiver against Bitar and Bitar’s conduct in respect of the several applications that it brought need to be taken into account in assessing liability for aspects of the Receiver’s remuneration, and Mr Klineberg joined in criticisms made by Mr Golledge of the conduct of Bitar in respect of those applications. Mr Klineberg also submitted that the Receiver has the benefit of costs orders made against Bitar in respect of Bitar’s several applications and that those costs have not been recovered from Bitar and submits that, as an incident of his duty to preserve the Partnership assets, the Receiver is obliged to recover the costs paid out of Partnership funds. It seems to me that proposition is much too wide, so far as it asserts an absolute obligation to recover such costs, even if the costs of doing so would significantly exceed the benefit of doing so, having regard to the uncertainty as to whether any amount would practically be recoverable from Bitar.

47. Mr Klineberg also submits that Bitar’s half share of the remaining Partnership funds will not be sufficient to cover the liabilities that Hebbel submits that Bitar owes to the Receiver and that it is “encumbent on the Receiver to recover the indemnity costs from Bitar prior to the discharge of the Receiver, the costs of which are not to be borne out of [Hebbel’s] share of Partnership assets”. I reject that proposition which reduces, here, to a proposition that the Receiver is obliged to undertake proceedings to recover those costs against Bitar, notwithstanding that he would not be fully protected against the costs of doing so, particularly on any insolvency of Bitar, by recourse against the Partnership assets which have been largely distributed to Hebbel and Bitar on Hebbel’s application.

48. Alternatively, Mr Klineberg initially submitted that the costs actually paid out of Partnership assets should be borne by Bitar alone and not by Hebbel and that any costs order should be deducted from what would otherwise be Bitar’s share of the equal distribution of the Partnership assets and that value should be added to Hebbel’s share of those assets. In oral submissions on 5 May 2021, Mr Klineberg retreated from that submission and indicated that Hebbel did not submit that the Receiver should not be paid the remuneration which the Court holds to be fair and reasonably incurred, and that his submissions as to the relative position between Bitar and Hebbel were not directed to establishing that Hebbel should be paid out of Partnership funds in priority to the Receiver. Mr Klineberg indicated that Hebbel did contend that the Court should make a costs order against Bitar, in respect of the conduct of this application, and I address that question below.

49. Mr Klineberg also submitted that the Court should have a power to adjust liabilities in respect of remuneration as between Bitar and Hebbel, with a similar effect to the making of a costs order against Bitar in respect of the conduct of this application. I recognise that the amount of the Receiver’s remuneration has likely increased as a result of Bitar’s conduct in respect of this application and Bitar’s several earlier applications, and that likely has a similarly adverse effect on Hebbel to an increase in his costs and disbursements incurred by reason of that matter. However, it is not apparent to me that the Court has power to make an adjustment of that kind, and Mr Klineberg was unable to draw attention to any authority recognising a power to make such an order. Mr Klineberg submitted that the UCPR did not exclude such an order, but that is not sufficient to establish that it is a proper course for the Court to make that order.

50. Counsel also made submissions as to indemnity for costs and expenses which overlapped with the issue of the Receiver’s right to his remuneration and whether liability for it should be borne by Partnership assets. In oral submissions, Mr Sneddon indicated that Bitar acknowledged that the Receiver’s costs and expenses (and, by extension, his remuneration) so far as they were reasonably and legitimately incurred, should be met from Partnership assets and he rightly recognised that, if the Court were to diminish a Court-appointed receiver’s right of indemnity in respect of reasonable costs and expenses (and, by extension, his remuneration), then it would have difficulty in appointing such receivers (T43). The Receiver in turn seeks orders that he pay the balance of monies held into Court after deducting his remuneration and disbursements, and points out that it will then be open to Hebbel and Bitar to seek orders as to the distribution of those funds. Mr Golledge also submitted that there is no basis to limit the Receiver’s right of indemnity, because it is anticipated that there will later be a shortfall in a distribution to the partners, by reason of costs (and, by extension, remuneration) incurred, which is in some way “unfair” to one or other of those partners. Mr Golledge submits that, absent disqualifying conduct, the Receiver’s entitlement is to his or her right of indemnity from the fund that his or her work has created, at least for reasonable costs and disbursements (T42). It seems to me that that proposition also extends to the Receiver’s remuneration.

51. Mr Klineberg also submits that the delays and increased costs of the application did not result from conduct on Hebbel’s part. While I largely accept that proposition, it would not follow that the Court could properly shift the risk of those costs (and any associated remuneration of the Receiver) from Bitar and Hebbel to the Court-appointed receiver, if Hebbel continued to press for that course. Hebbel did not identify, in oral submissions, the basis in authority to take that course. As a matter of policy and principle, the Court should not take that course, where depriving a Court-appointed receiver of its right to remuneration and indemnity for costs or expenses, or deferring that remuneration and indemnity to the claims of partners in the Partnership, would plainly have an adverse impact on the Court’s ability to appoint such receivers in the future.

52. It also seems to me that there is no basis for Hebbel to insist that the Receiver pursue costs orders against Bitar, where it is an open question whether Bitar has the capacity to meet those costs orders and Hebbel makes no offer to indemnify him for the costs of a fruitless pursuit of Bitar in respect of such costs orders, or to provide an appropriate bank guarantee in support of such an indemnity. I am satisfied that the Receiver is not required to incur further costs, against which he may not be indemnified, in pursuing these claims against Bitar which may be adjusted, to the extent that sufficient assets are available, in determining Hebbel’s and Bitar’s claims against the remaining Partnership funds after they are paid into Court by the Receiver.

46. The Receiver’s remuneration should therefore be borne by the monies still held by the Partnership and the monies previously paid into Court as a result of the realisation of Partnership assets.

Liability for costs of this application prior to 27 April 2021

54. Hebbel initially submitted that all of the Receiver’s legal expenses incurred in connection with and following the filing of this application by the Receiver should be borne by Bitar. Mr Klineberg supports that proposition on the basis that Bitar, rather than Hebbel, initially objected to the Receiver’s claim for remuneration and expenses, although that proposition is now undermined by the fact that Hebbel has joined in that objection to the Receiver’s costs of this application. As I noted above, Mr Klineberg does not identify any authority to support that approach, which is inconsistent with the Receiver’s indemnity against the assets to which he was appointed as receiver, and does not explain why a Court-appointed receiver should be exposed to the risk of whether he can recover that remuneration and expenses relating to this application against Bitar, including the risk of Bitar’s insolvency, rather than against the Partnership assets. By Hebbel’s further submissions for the hearing on 25 June 2021, Mr Klineberg adopted a somewhat different position and accepted, on Hebbel’s behalf, that the amount of legal costs and disbursements which the Court found to have been reasonably incurred should be payable out of the Partnership accounts and contended that a costs order should be made against Bitar, to reflect the additional costs which arose by the manner in which Bitar had conducted the application, at least prior to Mr Sneddon’s retainer.

55. Mr Golledge responds to this submission that Bitar should bear the costs of this application by pointing out that the Receiver, as a Court-appointed receiver, is entitled to remuneration for work performed by him: Re Metal Storm Ltd above at [11]; Re Independent Contractor Services (Aust) Pty Ltd (in liq) (No 2) (2016) 305 FLR 222; [2016] NSWSC 106 at [25]; Re Primespace Property Investments Ltd (in liq) [2016] NSWSC 1821. I accept that submission.

56. Mr Sneddon submits that there is no basis for Bitar to be solely liable for the costs of the present application, where the Receiver’s application was necessary to receive his remuneration and to have the accounts passed, and he also points to the prevailing rule that the costs of both parties of an action for dissolution are paid out of partnership assets, unless there is some good reason to the contrary, or the action is one to try a disputed right: Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [5], [28]. I am satisfied that there is good reason to depart from that position, in respect of the conduct of these proceedings prior to the service of the submissions made by Mr Sneddon on Bitar’s behalf on 27 April 2021. Prior to that date, Bitar foreshadowed a contest to the conduct of the receivership at large, which resulted in numerous directions hearings, numerous orders with which Bitar did not comply, including orders as to the filing of its Points of Opposition to clarify the matters in issue, and delayed this application for many months. It seems to me that Bitar’s conduct of this application, prior to Mr Sneddon’s involvement, was reprehensible and that is sufficient to warrant a departure from the ordinary course and an order for costs against it, on an indemnity basis, in respect of the costs of the Court hearings in this application up to and including the date of Mr Sneddon’s submissions.

57. Without limiting the Receiver’s right to indemnity for remuneration and disbursements he has incurred, Bitar must pay the Receiver’s and Hebbel’s costs of the application on an indemnity basis up to but not beyond that point and excluding the costs of the Receiver’s preparation of evidence as to his remuneration, which would have been incurred in an application for remuneration in any event, and which are properly recovered as costs of the receivership.

Application for release and discharge

58. Paragraphs 84-90 of the Receiver’s Points of Claim dealt with his application for release and discharge as a receiver. By paragraphs 19ff of Hebbel’s Points of Opposition, it opposed the Receiver’s discharge and release on the basis that it should not occur until he has recovered the costs incurred against Bitar on behalf of the Partnership. I do not accept that he is required to take that course for the reasons set out above. By paragraph 6 of its belated Points of Opposition, Bitar also denied that the Receiver should be released in relation to what it described as the “legal costs and expenses issue”, which I have addressed above.

59. The Receiver seeks the order that he be discharged under UCPR r 26.6(2) and notes that a Court-appointed receiver can be discharged when the object of his or her appointment has been fully implemented: Lunn v Savage [2006] NSWSC 240 at [8]; Re Angel’s Castle Pre-School Pty Ltd (in liq) (No 2) above at [2]; Gandangara Local Aboriginal Land Council v Gandangara Services Ltd above at [9]. Mr Golledge points out that an order for discharge accompanied by an order for a release would protect the Receiver from liability for acts done in the course of his or her duties and that a release may be ordered before the expiry of applicable limitation periods: Re Say Enterprises Pty Ltd [2018] NSWSC 396. In opening oral submissions, Mr Golledge noted that it was the Receiver’s preference that, having sold the Partnership’s property and once provision was made for his remuneration and reimbursement of expenses, he should be discharged and released, so that he would not be drawn into further litigation between the parties after monies were paid out to them and his right of indemnity could no longer be enforced. The order that the Receiver now seeks has been amended to reserve the parties’ ability to commence proceedings against him within a short time. That order has the advantage that, if such proceedings are brought within that time, the Receiver can bring any claim for indemnity against the monies that remain in Court and, if they are not, the partners can then claim those funds without facing a competing claim for indemnity by the Receiver.

60. Mr Sneddon initially indicated in oral submissions (T13) that Bitar did not submit that the Receiver should remain in office in order to determine any remaining questions as to the Partnership accounts, but that Bitar wished the Receiver to remain in place to undertake tasks contemplated by Rein J’s judgment including, apparently, collecting amounts of costs ordered against Bitar itself. This was an extraordinary submission, where Bitar has spent the large part of the receivership unsuccessfully attacking the Receiver’s conduct of it. This proposition also had the obvious practical difficulty that, in that case, the Court would readily direct the Receiver that he would be acting reasonably in pursuing those claims until the remaining funds of the partnership were exhausted but no further, and that would hardly be a sensible result for the parties. However, Bitar now does not oppose the amended order sought by the Receiver, which reserves its ability to commence proceedings within the specified time if, I interpolate, it has a proper basis to do so.

61. The history of applications brought during the receivership provides strong support for the Receiver’s discharge and release, where, following the proposed payment of the Partnership’s remaining funds into Court, he would not have access to partnership assets to meet any claim against him as to which he is properly entitled to indemnity. I am satisfied that the order for release and discharge sought by the Receiver should be made, if proceedings are not commenced by Hebbel or Bitar against the Receiver within the specified time.

Orders

62. For these reasons, at the conclusion of the hearing on 25 June 2021, I noted the undertaking offered by Mr Frisken to the Court and to the parties and the further undertaking offered by Mr Frisken and Mr Amirbeaggi to the Court and to the parties in the form initialled by me and placed in the file, and I made the following orders:

1. Pursuant to UCPR r 26.5(2), the Court certifies the accounts filed by the Receiver apart from

a.   the professional fees, excluding counsel’s fees, charged by the firm Yates Beaggi for the work described in the Invoices described in Schedule A to these Orders; and

b.   the photocopying charges included in those invoices.

(the Disputed Legal Costs and Disbursements)

1. Pursuant to UCPR r 26.4, the Receiver be allowed remuneration for the period from 4 July 2017 to 23 June 2021 in the amount of $369,857.05 inclusive of GST.

2. Upon the Undertaking of the Receiver in the form of Annexure B to these orders, the Court Directs that the Receiver would be justified in paying his remuneration for the period from 24 June 2021 to the completion of the Receivership and his discharge from office in an amount calculated by reference to the same hourly rates as were applied in respect of the work the subject of the Determination in paragraph 2 above but capped, absent any further order of the Court, in the sum of $33,000 inclusive of GST.

3. The Receiver be authorised to pay his approved remuneration and any unpaid disbursements apart from the Disputed Legal Costs and Disbursements, from the partnership assets the subject of the receivership.

4. Upon the Undertaking of the Receiver and Farshad Amirbeaggi/Yates Beaggi in the form of Annexure C to these Orders, the Court gives a direction to the Receiver that he would be justified in paying, in respect of the Disputed Legal Costs and Disbursements, no more than the lesser of:

a. the sum determined upon an assessment of the Disputed Legal Costs and Disbursements which is conducted pursuant to Part 4.3 of the Legal Profession Uniform Law (NSW) 2014 on the solicitor and client basis and with each of the First Plaintiff and the First Defendant to be parties to that application on the basis that they are third party payers within the meaning of s 171 of that Law and that they would have the opportunity to identify and be heard as to any objections to those costs and disbursements in that assessment; or

b.   such other amount as is agreed between the Receiver, the First Plaintiff and the First Defendant.

1. Upon payment of the remuneration, and the Receiver’s outstanding and estimated future legal expenses as identified in the Receiver’s affidavit of 24 June 2021, the Receiver is to pay the balance, if any, of the monies he holds on trust for the partnership into Court in these proceedings or as otherwise directed by the Court.

2. Pursuant to UCPR r 55.11, direct the sum of $373,789.48 from the funds paid into Court in these proceedings be paid out to the Receiver in partial satisfaction of his entitlement to remuneration pursuant to orders 2 and 3 above and his expenses other than the Disputed Legal Costs and Disbursements.

3. With effect upon compliance with the Order in paragraph 6 above, the Receiver forthwith be discharged from his appointment as the Receiver of the partnership between the Plaintiff and the First Defendant.

4. Daniel Frisken be released from any and all claims held by the Plaintiff and the First Defendant and their related parties (including in the case of the First Defendant, Mr Joseph Katter) whatsoever and howsoever arising from his appointment made pursuant to the Orders of 4 July 2017, unless such claim is instituted within three months of the date of this Order, or within such longer period as the Court may on application made before the expiry of that period allow.

9A.   Without limiting the Receiver’s right to indemnity for remuneration and disbursements, the First Defendant pay the Receiver’s and the First Plaintiff’s costs of this application on an indemnity basis up to and including 26 April 2021, excluding the Receiver’s costs of the preparation of evidence as to his remuneration, as agreed or as assessed.

9B.   Reserve the question as to whether any of the Receiver’s legal costs and disbursements incurred after 5 May 2021 should not be chargeable to the partnership estate.

1. Costs (other than costs prior to 27 April 2021 and costs as between Hebbel and Bitar) be otherwise reserved.

2. Reserve liberty to all parties to apply limited to:

(a)   the determination of claims against the monies to be paid into Court;

(b)   if an assessor declines to, or does not, conduct the assessment on the basis contemplated by paragraph 5(a).

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Decision last updated: 06 July 2021