By Georgina King a Senior Associate of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group
A 5 member Full Court of the Supreme Court of NSW Court of Appeal has unanimously overturned the decision of Brereton, J in the much anticipated Sakr Nominees Pty Ltd (In Liquidation) insolvency practitioner remuneration appeal.
Justice Brereton had limited the remuneration of the liquidator, Clifford Sanderson, for work he had undertaken in the final stages of a liquidation, to $20,000 (including GST). This was only a portion of the total remuneration sought to be approved ($63,577.80). In reaching this decision, His Honour relied heavily on the fact that remuneration may be by way of commission (a proportion of assets realised or distributed) rather than time based and a view that in smaller liquidations “questions of proportionality, value and risk loom large, and liquidators cannot expect to be rewarded for their time at the same hourly rate as would be justifiable when more property is available.”
In its decision handed down on 9 March 2017 in Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr  NSWCA 38, the Court of Appeal has overturned Brereton’s first instance decision, finding that in focusing solely on the issue of proportionality, His Honour failed to carry out the task required of a Court in determining reasonable remuneration. In particular, although a Court may ultimately determine that remuneration calculated as a particular proportion of assets recovered or distributed is reasonable in a particular case, in reaching that conclusion it must first take into account the work done, whether it was reasonable, and the appropriateness of the amount charged for it. This remains the case for all liquidations including those falling within the category of smaller liquidations (notwithstanding that issues of proportionality have some relevance to the overall assessment to be made).
In recognition of the realities liquidators face in the course of their appointments, Bathurst CJ (with whom the other judges agreed) noted that:
- merely because work performed does not lead to an increase in the funds available for distribution does not of itself mean that a liquidator is not entitled to be remunerated for it, particularly given that the work may have nonetheless been necessary.
- commonly, work is undertaken in an unsuccessful attempt to recover assets and provided the work and amount charged for it is reasonable there is no reason for the liquidator not to be remunerated for it.
As can be seen from these examples, the decision of the Court of Appeal in Sakr is an important development for insolvency practitioners because it supports a more realistic and holistic approach to assessing reasonable remuneration with no one factor, namely proportionality, overriding other matters that are to be taken into account.
Determination of the liquidator’s remuneration has been remitted by the Court of Appeal to a judge of the Equity Division of the Supreme Court for rehearing.
Read the judgment here
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Georgina King on (02) 9806 7485 or firstname.lastname@example.org or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or email@example.com
Stephen Mullette on (02) 9806 7459 or firstname.lastname@example.org.