The recent Full Court of the Federal Court of Australia decision of Templeton v Australian Securities and Investment Commission  FCAFC 137 has considered the application of ‘proportionality’ in determining receivers’ remuneration.
It is necessary for receivers and managers appointed pursuant to a court order to apply to the court for approval of their remuneration, pursuant to section 425 of the Corporations Act 2001. Section 425(8) of the Corporations Act 2001 stipulates what the court must consider in determining the reasonable remuneration of receivers; the concept of proportionality is not dealt with in the legislation.
In 2010, several unregistered managed investment schemes were wound up in insolvency. Subsequently, in 2013, the Court appointed Mr Templeton and Mr Hennessy of KPMG as the receivers (Receivers) of those companies.
The Receivers sought approval for their remuneration, costs and expenses in the amount of $4,309,813.79. In March 2014, Registrar Luxton fixed the Receivers’ remuneration, costs and expenses at $3,764,738.39 being a reduction of about 13%. The Receivers sought a review of Registrar Luxton’s decision. On review, Gordon J upheld the Registrar’s decision.
The Receivers appealed the decision of Gordon J to the Full Court of the Federal Court of Australia.
The Receivers’ work, the subject claim was grouped into four categories:
In an unreported decision, Registrar Luxton reduced the Receivers’ remuneration in relation to Investors/Distribution by 20%, reduced all other remuneration and disbursements by 5% and applied a 2.5% reduction to the claim for legal fees.
In approving Registrar Luxton’s determination Gordon J provided the following reasons:
The Receivers raised several grounds on appeal. The key issue considered by the Full Court was the importance of proportionality in assessing reasonable remuneration.
On appeal, the Receivers argued that reasonableness of remuneration ought to be determined solely by the reasonableness of time spent and the rates charged. They further stated that proportionality should not be a consideration in assessing reasonableness.
The Full Federal Court held that the Receivers’ conception of proportionality was too narrow and proportionality should not be excluded.
The court held that:
Although the full Federal Court held that proportionality should be considered in determining reasonable remuneration, it was held that Gordon J erred in her application of proportionality. Her Honour justified the 20% reduction by comparing the $10.9 million in the Investor / Distribution category to the total $4 million claimed. It was held on appeal that her Honour should have compared the distributions made in the Investor/Distribution category to only the amount claimed for that category, being $2,369,274.50. Her Honour therefore did not make a like with like comparison as required by the concept of proportionality.
Successful grounds on appeal
Gordon J reduced the Receivers’ remuneration because of the length of time taken for the proof of claim process to begin. It was held on appeal that the reduction was not justified. Any reduction could only be justified by linking it to an increase in work or an increased level of inefficiency that absent delay would not have been needed or would not have occurred. This link was not made and therefore reduction due to delay should not have been made.
In relation to the adjudication process made for each investment, Gordon J held that the amount claimed was too high and that the adjudication plan (review of each investment as above) should have been kept under review and made more efficient over time. On appeal, it was held that the Gordon J was in error. The Receivers had uncontested evidence as to the methods of adjudication and the reasons for using these methods. There was no evidence of another more efficient method.
Unsuccessful grounds of appeal
Absence of findings
It was asserted by the Receivers that Gordon J erred in finding that the amount claimed for adjudication of claims was too high because she needed to make specific findings about the work necessary and appropriate to be done, the appropriate level of seniority to complete the work and that the work was done efficiently. Although a lack of detail was provided in her reasons even if sufficient detail was provided, there is not a requirement to “drill down and make detailed findings.” This would be “neither sensible nor cost effective for the court.” It is more practical, as her Honour did, to look at the matter more generally.
Receivers 10% voluntary reduction
It was submitted that the 10% reduction should have been given greater significance. The 10% reduction was made to the total of every unit billed to the matter. Gordon J held that a review of work charged to the file is always necessary and although discounts are not discouraged, they should be made on an informed basis after review, identification of the real claim and justification of the amount being claimed.
It was held on appeal that Her Honour did take into account the nature of the time sheets, gave the voluntary discount appropriate weight and was entitled to use the starting point of the claim after the 10% discount had been applied.
The other grounds of the Receivers’ appeal were not considered by the Full Federal Court because it had already been decided that her Honour’s decision was to be set aside.
It is clear from this case that when the courts determine reasonable remuneration of receivers, the concept of proportionality will be applied.
For receivers, this means that all work undertaken must be appropriate having regard to the prospective benefit of the work and the size of the activity. If receivers spend significant amounts of time on an activity that cannot provide a significant return, the courts will likely discount the remuneration sought for that activity.
It is also important that receivers delegate tasks to staff of appropriate seniority and review time entries to ensure they reflect precisely the task undertaken.
Undergoing constant review of time spent on activities will assist receivers in having the majority, if not all, remuneration approved by the courts.
Our insolvency team offers expertise and experience in corporate and personal insolvency. The insolvency team delivers commercially relevant advice to businesses of all sizes, insolvency practitioners and individuals.
The insolvency team prides itself on providing tailored, commercial solutions to insolvency issues, as well as developing strategies for businesses and individuals requiring advice relating to business restructuring, minimising the impact of insolvency and guidance in relation to prospective insolvency.
The team operates to strict client service standards, ensuring that comprehensive advice can be provided in a timely and cost effective manner.
This article was written by Andrew Lacey, Principal, Carl Hagon, Senior Associate and Kate Hollings, Lawyer.
This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice. You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.
In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract. Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed. Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph , Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)." Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter. Judgment At paragraph , Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship. Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph : "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the dictionary.com definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest. What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.
The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane  NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). Ultimately, regarding the primary question of breach of duty, the Court found that: The stadium contained hazards which were utterly familiar and obvious to any spectator, namely, steps which needed to be navigated to get to and to leave from the tiered seating. While the trial judge considered the mandatory requirements required by s5B(2) of the CLA, those matters are not exhaustive and the trial judge failed to pay proper to attention to the fact that: the stadium had been certified as BCA compliant eight years before the incident; there was no evidence of previous falls resulting in injury despite the stairs being used by millions of spectators over the previous eight years; and the horizontal surfaces of the steps were highly slip resistant when wet. In light of the above, the Court of Appeal did not accept a reasonable person in the position of VNSW would not have installed a handrail along the stepped aisle. The burden of taking the complained of precautions includes to address similar risks of harm throughout the stadium, i.e. installing handrails on the other stepped aisles. This was a mandatory consideration under s5C(a) which was not properly taken into account. As to the question of BCA compliance, the Court of Appeal did not consider it necessary to make a firm conclusion of this issue given it did not find a breach of duty. The Court did however indicated it did not consider the stepped aisle would constitute a "stairway" under the BCA. The Court of Appeal also found that there was nothing in the trial judge's reasons explicitly connecting the risk assessment she considered VNSW ought to have carried out, with the installation of handrails on any of the aisles in the stadium and therefore could not lead to any findings regarding breach or causation. As to quantum, the Court of Appeal accepted that the trial judge erred in awarding the plaintiff a "buffer" of $10,000 for past economic loss in circumstances where there was no evidence of any loss of income. The Court of Appeal set aside the orders of the District Court and entered judgment for VNSW with costs. Why this case is important? The case confirms there is no obligation in negligence for owners and operators of public or private venues in NSW to have a handrail on every set of steps. It is also a welcome affirmation of the principles surrounding the assessment of breach of duty under s 5B and s 5C of the CLA, particularly in assessing whether precautions are required to be taken in response to hazards which are familiar and obvious to a reasonable person.
The recent decision in New Aim Pty Ltd v Leung  FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.