Flamboyant Indian billionaire Pankaj Oswal is emerging as the unlikely hero for victims of the insolvency profession, thanks to an inquiry in a Perth court into one the biggest and fastest fee grabs in Australian corporate history.
The hearing of the judicial inquiry by Justice Antony Siopis into the fees and charges of Ian Carson, Simon Theobold and David McEvoy of PPB Advisory, as receivers of the Burrup Fertiliser Group, has wrapped up in the Federal Court of Australia.
PPB, law firms Herbert Smith Freehills and Minter Ellison, and a host of consultants and merchant bankers managed to rip out fees of $56 million during the course of a receivership that lasted just over 13 months.
The inquiry came about as a result of wealthy petrochemical entrepreneur Pankaj Oswal successfully petitioning the court for an inquiry into PPB fees and charges. This was after Oswal’s well-publicised falling out with Burrup financier ANZ.
Few victims of insolvency have the resources to challenge the practices of the lawyers and liquidators working for Australia’s big banks, but Oswal does.
Oswal’s lawyers pored over PPB invoices and timesheets, which had the receivers and their lawyers bill close to $34 million in fees and expenses.
A taste of the billing was the claim by Oswal and his wife, Radhika, that PPB spent 48 hours filling out a form (a “second form 524”) and charged $19,240. Further high charges were incurred for the filling out of another form (a “third form 524”), a task that apparently endured for 19 hours, though, according to the allegations, the form was still not filled out correctly.
The thousands of pages of documents, however, reveal more-serious mischief, according to Oswals lawyers. They show radical amendments to work-in-progress (WIP) reports in which previously non-billable items were transformed to billable entries.
When giving evidence, the three receivers were unable to assist the court in explaining this creative accounting, although Theobold indicated that one of PBB’s employees who ultimately did not give evidence at the inquiry may have had an input.
Oswal claims that PPB overbilled, mismanaged the receivership, inaccurately reported to ASIC and inappropriately resourced the appointment.
The defendants say they acted at all times in accordance with the law and professional standards.
The appointment of staff on the east coast, and associated travel costs to Perth, were a focal point of the inquiry.
No documents, though, were discovered by the receivers showing any consideration was given to this issue before the appointment.
Under cross-examination, Carson explained that there are two possible models. Under the first model his staff could be seconded to the Perth office. The downside to this is that PPB must meet the cost of travel and accommodation.
The other, more attractive, model is that staff are flown to Perth every Monday with Mr Oswal footing the bill of travel and accommodation of PPB staff, wives and girlfriends and even children.
The fee-gleaning aspect of this is that PPB did not have to show or justify any of these expenses to its client, ANZ or the regulator, ASIC. These costs, including a bill for an empty hotel room for several months, were simply charged to Burrup.
The receivers maintain at all times their conduct was appropriate and legal.
Oswals lawyers tried to get PPB’s instructor, ANZ’s former chief risk officer Chris Page, to give evidence at the inquiry but his lawyers, Herbert Smith Freehills, also acting for PPB, would not accept service of a subpoena on his behalf.
The famous file note recording Page’s instructions to PPB to “get dirt on Oswal” might have made for interesting cross-examination.
In addition to his complaints of having to foot the bill for pre-appointment fees (PPB staff being on “standby”), Oswal is complaining loudly about the fees billed in the final six weeks of the receivership. In this time, PPB billed $2.2 million to manage a solvent and lucrative company in the death throes of receivership.
PPB and the receivers say they behaved properly in relation to pre-appointment fees and deny any impropriety.
Oswal claims the $650,000 incurred in investigations and the $1.5 million it incurred in legal fees had no legitimate purpose. He particularly objects to being charged for PPB’s time in soliciting Burrup’s new owner, Apache, for the contract for managing the plant.
Carson concedes PPB did not do a “perfect” job and more specifically, there were issues of accuracy with his own time entries. However, he said any mistakes the receivers made would be corrected, and PPB would “be addressing the court in that regard”.
“There … there were some mistakes made, which I regret.
“… you can’t get everything perfect in everything,” he told the court.
It remains to be seen what the consequences will be forthcoming for the receivers from PPB, if any.
The bigger question, however, is why an aggrieved banking customer has to spend several millions of dollars to have the conduct of receivers examined.
As is the case with most epic David-and-Goliath battles between big banks and their customers or victims, the Oswals were given almost no change by the receivers following the sale of their shares in the fertiliser plant to the Apache Group.
Oversight of insolvency falls to regulator ASIC. Pankaj Oswal complained to ASIC, APRA and Insolvency Practitioners Association of Australia. Not one entity has agreed to investigate the matter.
In an unusual move, Oswal has managed to establish himself as a “third-party payer” under the Legal Profession Act to have the many millions billed by Herbert Smith Freehills and Minter Ellison assessed by the court.