F.1. Relevant principles
49 Pursuant to s 60-5 of the Insolvency Practice Schedule (Corporations) (IPS), being Sch 2 to the Act, an external administrator of a company is entitled to receive remuneration for necessary work properly performed in relation to the external administration of a company, in accordance with a remuneration determination.
50 The Court is empowered to make a remuneration determination under s 60-10(1)(c) of the IPS and in doing so, must have regard to the following factors identified in s 60-12:
60-12 Matters to which the Court must have regard
In making a remuneration determination under paragraph 60-10(1)(c) or (2)(b), or reviewing a remuneration determination under section 60-11, the Court must have regard to whether the remuneration is reasonable, taking into account any or all of the following matters:
(a) the extent to which the work by the external administrator was necessary and properly performed;
(b) the extent to which the work likely to be performed by the external administrator is likely to be necessary and properly performed;
(c) the period during which the work was, or is likely to be, performed by the external administrator;
(d) the quality of the work performed, or likely to be performed, by the external administrator;
(e) the complexity (or otherwise) of the work performed, or likely to be performed, by the external administrator;
(f) the extent (if any) to which the external administrator was, or is likely to be, required to deal with extraordinary issues;
(g) the extent (if any) to which the external administrator was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case;
(h) the value and nature of any property dealt with, or likely to be dealt with, by the external administrator;
(i) the number, attributes and conduct, or the likely number, attributes and conduct, of the creditors;
(j) if the remuneration is worked out wholly or partly on a time-cost basis - the time properly taken, or likely to be properly taken, by the external administrator in performing the work;
(k) whether the external administrator was, or is likely to be, required to deal with one or more controllers, or one or more managing controllers;
(l) if:
(i) a review has been carried out under Subdivision C of Division 90 (review by another registered liquidator) into a matter that relates to the external administration; and
(ii) the matter is, or includes, remuneration of the external administrator;
the contents of the report on the review that relate to that matter;
(m) any other relevant matters.
51 The onus is on the liquidator to establish that the remuneration claimed is reasonable and it is the Court's function to then determine the remuneration by considering the material provided and bringing an independent mind to bear on the relevant issues: Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr (2017) 93 NSWLR 459; [2017] NSWCA 38 at [54] (Bathurst CJ); Morgan, in the matter of Brighton Hall Securities Pty Ltd [2018] FCA 2029 at [17] (McKerracher J); Sallway, in the matter of Mossgreen Pty Ltd (in liq) (Remuneration of Liquidators) [2019] FCA 1771 at [9] (Perram J).
52 In the following passages from In the matter of Sakr Nominees Pty Limited [2017] NSWSC 668, Black J usefully summarised the principles relevant to a remuneration determination under the predecessor provision in s 473 of the Act:
23 A liquidator is entitled to reasonable remuneration for his or her services and the liquidator bears the onus of establishing that the amount of remuneration they seek is fair and reasonable and, in determining a liquidator's reasonable remuneration, the Court will have regard to the factors specified in s 473(10) of the Corporations Act, to which I refer further below. The Court must bring an independent mind to bear on the question whether the remuneration sought by a liquidator is fair and reasonable; the liquidator must lead evidence in sufficient detail that the Court can determine that question; and the Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred by the liquidator … Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the "value" of a liquidator's work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors …
24 Most decisions in both State Supreme Courts and in the Federal Court of Australia have applied time costing as at least the starting point for a calculation of remuneration, although those decisions also emphasise the need for proportionality between the cost of the work done and the value of the services provided…There has been a degree of concern as to time-based remuneration, over a considerable period, although it must be accepted that remuneration on that basis is now more common…Several recent decisions, of which the previous decision of Brereton J in this case was one, have emphasised the significance of the percentage that a liquidator's remuneration bears to the level of asset realisations achieved, and applied percentages of recoveries where time-based calculations would have led to unreasonable results…A percentage of realisations can also be used as a test of whether remuneration claims brought by a liquidator on a time costing basis are reasonable…
(Citations omitted.)
53 In Mossgreen, Perram J concluded at [12] that the relevant principles applicable to a remuneration determination, as summarised in Sakr and Sanderson and as proscribed by s 60-12 of the IPS, may be distilled into three categories:
(1) the necessary and proper connection between the work performed and the external administration: s 60-12(a) and s 60-12(b);
(2) the proportionality between the complexity of the external administration and the costs incurred: s 60-12(c) to s 60-12(i); and
(3) the reasonableness of the billing method of the administrator: s 60-12(j).
54 The meaning of the phrase "necessary and properly performed" has been accepted as importing a requirement of reasonable necessity, in respect of which external administrators are given a "measure of discretion". In Mossgreen, Perram J stated at [15]:
The First Plaintiffs submit that the expression 'necessary and properly performed' in s 60-12(a) of the IPSC should be construed in such a way as to give the external administrators a 'measure of discretion'. They rely on Young J's observation in Burns Philp Investment Pty Ltd v Dickens (No 2) (1993) 31 NSWLR 280 at 285 that the Court must give liquidators 'a fair degree of latitude where they have incurred expense as a result of the exercise of their commercial judgment even if there is a loss to the company by so doing'. Whilst that decision concerned liquidator's expenses, the First Plaintiffs submit that it is equally applicable to administrators and that, accordingly, the phrase in s 60-12(a) ought not be read as requiring that the work should have been absolutely necessary to the minimum discharge of an administrator's statutory duties. I accept that submission.