Receiverships don’t come cheap, details of Ross Asset case show
"The fees seem as expected. The outrageous fee is the 4.4m pa the owner paid himself."Featured comment
Receivers and their legal counsel for Ross Asset Management discounted their charges but still could not extract their full fees from the liquid assets left in David Ross's group of investment companies, the High Court has been told.
The Financial Markets Authority got High Court approval on November 6 to appoint John Fisk and David Bridgman of PwC as receivers and managers, with the assistance of brokerage First NZ Capital, after complaints from investors about non-payments.
Their work identified only $11 million of the purported $449.6 million of investments managed by Ross.
PwC, law firm Bell Gully and First NZ Capital outlined their schedule of charges in a High Court hearing yesterday where they sought assurance that they could sell property of the Ross Group to recover their fees.
The schedule shows that from November 4-12, PwC charged out 40.8 hours of a partner's time at $450 an hour for a total of $18,360 and 90.3 hours of a PwC director's time at $400/hour, or $36,120.
In addition, there was 4.8 hours of an associate director's time at $350/hour, nine hours for a manager at $300/hour, 50.5 hours of a senior associate's time at $220/hour and 25.7 hours of support services charged out at $110/hour.
Bell Gully racked up 27.5 hours of partner fees at $490 an hour, 41 hours for a senior associate at $350/hour, 1.5 hours for a solicitor at $295/hour and 34 hours for a law clerk at $148/hour. While that adds up to about $33,000, the law firm's overall fee was reduced to $24,625, the schedule shows.
First NZ Capital did not break down its charges, which totalled $9400, plus costs of $565.
Total costs were $153,683, including rent of Ross Asset's offices, travel and accommodation for the receivers and other incidental costs related to the assessment of the group's records.
The FMA wrote to Bruce Tichbon, convenor of a group of more than 50% of the investors in the Ross Group, assuring him that the receivers had been asked to approach the case "in a cost-effective way".
"All parties are cognisant of the costs impacting on investors' interests," FMA head of enforcement Belinda Moffat wrote.
PwC is expected to apply to liquidate the group of companies later this week, though Mr Tichbon asked the High Court yesterday to put the liquidation out to tender so professional fees did not "devour" the remaining assets.
Ms Moffat said in her letter that such a tender process could delay realisation of the assets and give rise to further costs. In deciding on a liquidator, cost was only one of the factors the court took into account.
She suggested the investor group negotiate directly with PwC on a "cost mode" for the work.