A recent decision of the Federal Court of Australia demonstrates the importance of professional insolvency service providers reviewing their work processes to ensure efficiency and cost-effectiveness, and of being diligent in the recording and claiming of costs.

In Australian Securities and Investments Commission v Letten (No 23) [2014] FCA 985, Justice Gordon dismissed an application made by the Court-appointed Receivers of certain unregistered management investment schemes for review of the Court's decision fixing their remuneration, costs and expenses. The Court held that the discounts applied by Registrar Luxton to the Receivers' claims in the first instance, which ranged between 5 – 20%, were justified, given that:

  • there was insufficient evidence to conclude that the amounts charged were reasonably incurred;
  • there was no indication that any internal review was undertaken of the Receivers' work processes to ensure they were being conducted efficiently – notwithstanding the difficulty and complexity of their task, the Receivers were required in the Court's view to adopt measures to ensure that their work processes were streamlined and cost-effective, and to apply to the Court for direction if necessary; and
  • the amount claimed (approximately $4.3 million) was proportionally large to the amount available to distribute to investors (approximately $10.9 million).

The Court also noted the Registrar's criticism of:

  • narrations which were repetitive and lacking in detail;
  • the completion of relatively simple administrative tasks by senior staff; and
  • the lack of a more active role of senior staff in adjudicating investor claims.

The Court further held that:

  • the Registrar's criticism of the Receivers' maintenance of an investor hotline should be rejected, and such facilities should not be discouraged as a matter of public policy;
  • the Receivers were not justified in claiming costs which could have been recuperated from third parties, such as the cost of responding to subpoenas;
  • there was no error in the approach of the Registrar in taking into account the voluntary 10% discount applied by the Receivers, then identifying further discounts to the discounted (or net) amount, rather than the gross amount of fees claimed; and
  • the Registrar was justified in applying the 2.5% discount to the legal fees.