The recent Full Court of the Federal Court of Australia decision of Templeton v Australian Securities and Investment Commission [2015] 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:

  1. Receiver's remuneration of $3,309,239.70. This amount included claims for the following seven categories; Administration and Risk Management, Assets, Creditors, Investigations, Investors/Distribution, Statutory Obligations and Trade On. The category of Investors/Distribution was a majority of this amount, being $2,369,274.50;
  2. Receivers' disbursements of $10,223.04;
  3. Legal fees of $888,502.05; and
  4. Legal disbursements of $101,849.00.

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:

  1. An excessive amount of time was spent on the adjudication of each investor claim and the time entries did not justify the time spent. The narrations in the time entries were repetitive and lacking essential details. It was also found that a substantial amount of time was spent on legal research including on general principles and court rules and procedures and that this time is usually written off.
  2. The Registrar found that the charge out rates for some of the solicitors used by the Receivers were too high (up to $1200 per hour for a partner and $960 for a senior associate). The Registrar held that these charge out rates were excessive and it was incumbent on the Receivers to negotiate more reasonable hourly rates;
  3. The Receivers charged for time spent on other matters of the same client and on tasks where the costs should have been claimed from others. For example, the Receivers claimed the cost of complying with a subpoena in criminal proceedings relating to that client. These costs could and should have been claimed from the person requiring the documents;
  4. Senior staff billed for time spent on administrative tasks. It was submitted by the Receivers that these tasks were ancillary to other work performed by senior staff and was therefore more efficient to be completed by a senior staff member. The Registrar concluded that the specific time spent on such tasks could not be determined from the time records and therefore was insufficient evidence to conclude that the amounts charged were reasonably incurred; and
  5. The amount claimed in relation to the Investor/Distribution category was "large compared with the distribution actually made or the amount available for distribution." There was a total of $10.9 million distributed or to be distributed to the Investor/Distribution category and the claimed remuneration, of approximately $4 million, was disproportionate.


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:

  1. Proportionality is a well-recognised factor when considering reasonableness and is an important consideration;
  2. When applying proportionality, like must be compared with like. The court provided two methods of an appropriate proportionality analysis:
  1. "Compare the total value of that work with the total remuneration claimed for that work over the entire period; or
  2. The value of work performed of that type over the Relevant Period with the remuneration claimed for that work over the Relevant Period."

3. When considering the question of proportionality, it may not be entirely clear when performing some work, what the benefit of that work will be. Therefore, it might be inappropriate, in some circumstances, to use the benefit of hindsight as the prospective outcome to creditors may be unclear when the work is being done. In this situation, actual outcomes should not be looked at, rather the expected realistic return, at the time the work was being carried out should be used as the comparator.

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

1. Delay

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.

2. Inefficiency

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

1. 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.

2. 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.