Kordas duo retain right to $2 mill success fee

Right to success fee falls to receiversJudge backs receivers definition of stocktake for purposes of $2 million success fee.
Right to success fee validated by court

Rahul right to laugh: judge orders KordaMentha pair entitled to $2 mill success fee.

Pending any appeal from Tasmanian millionaire Jan Cameron, KordaMentha partners Rahul Goyal and David Winterbottom have won the right to a $2 million success fee which formed part of the remuneration they agreed to with Cameron when she appointed the receivers of DSG Holdings.

In Bicheno Investments Pty Ltd v David John Winterbottom [2017] NSWSC 536 (9 May 2017) Justice Robert McDougall yesterday dismissed Cameron’s application for an order that the success fee, currently held by Goyal and Winterbottom, be returned to her, along with interest.

Cameron had argued that under the wording contained in the fee deed laying out the terms of the receiver’s pay, Goyal and Winterbottom had failed to fulfil their obligations to undertake a stocktake of the DSG Holdings. Justice McDougall begged to differ.

“In this case, the receivers did make the requisite determination. They satisfied themselves of the material accuracy of DSG’s stock listing as at 30 June 2014. That listing, printed out, was in evidence,” he said.

“It occupied about 770 pages in volumes 2 and 3 of the court book, in which were listed, by number and value, the number of units in various locations of such essential or desirable products as “healthy pet treat puppy porky clod bone”, “epoxy gel stickers ladybirds”, “drumstick pop van maple” and many thousands of other items of irresistible consumer appeal.”

Even FTI Consulting’s Quentin Olde – brought in by Cameron’s legal team as an expert witness to explain why the term stock take meant a physical count of stock – could not convince the judge that by relying on DSG Holding’s records alone, Goyal and Winterbottom had fallen short of the obligations they needed to fulfil to qualify for the success fee.

“Mr Olde gave further evidence to the effect that it was standard or normal practice for a receiver appointed to a retail business to conduct a physical stocktake of all stores, as an incident of performance of the receivership. Mr Olde expressed the opinion that it was insufficient, and inappropriate, to rely upon the inventory records of the business,” Justice McDougall said.

“There was a wealth of evidence to suggest that DSG’s stocktaking procedures were rigorous (its recent stocktakes had been supervised by internal, and occasionally external, auditors), and were accurate to within less than two per cent,” he said.

“In my view, when the receivers satisfied themselves as to the material accuracy of those stock records, and determined that DSG’s stock on hand as at 30 June 2014 comprised the millions of items so painstakingly listed, they performed the task of determination for which the definition of Appointment Stock calls.”

Further reading:

Cameron Sues Kordas Duo Over $2 Mill Success Fee

About the Author

Peter Gosnell

Sydney Insolvency News illuminates the practice of insolvency in Australia’s largest city, highlighting the triumphs and failures of Sydney’s registered practitioners and the accounting and legal professionals who work with them. SiN is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation’s highest profile bankruptcies and the investigations and prosecutions arising from Australia’s most notorious instances of white collar crime.

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