The liquidators' submissions as to the quantum of remuneration and the applicable legal principles
- The liquidators rely on s 601EE(2) of the Corporations Act to found their application for an order for their remuneration. That section provides, inter alia, that ASIC may apply to the Court to have a managed investment scheme that is operated in contravention of s 601ED(5) of the Corporations Act wound up, and that the Court may make such orders as it considers appropriate for the winding up of the schemes.
- Mr Lim submits, and I accept, that an order for remuneration can be made under s 601EE(2) of the Corporations Act, and such an order would ordinarily be made by reference to the principles that are applied in respect of the remuneration of court-appointed receivers or liquidators appointed to a company, including the statutory provisions dealing with the fixing of a receiver's remuneration under s 425 of the Corporations Act and a liquidator's remuneration under s 473 of the Corporations Act. Those sections identify factors to which the Court must have regard in determining whether such remuneration is reasonable including, relevantly, the extent to which work performed or likely to be performed was or is likely to be reasonably necessary; the period during which the work was or is likely to be performed; the quality of the work performed or likely to be performed; the complexity (or otherwise) of that work; the extent to which the insolvency practitioner was, or is likely to be, required to deal with extraordinary issues; the extent to which the insolvency practitioner was, or is likely to be, required to accept a higher level of risk or responsibility than is usually the case; the value and nature of any property dealt with, or likely to be dealt with, by the insolvency practitioner; whether the insolvency practitioner was, or is likely to be, required to deal with specified other persons; the number, attributes and behaviour, or likely number, attributes and behaviour, of the entity's creditors; and, where remuneration is ascertained, in whole or in part, on a time basis, the time properly taken, or likely to be properly taken, in performing the work and whether the total remuneration payable is capped.
- The ARITA Code of Professional Practice also includes several principles relevant to the remuneration of insolvency practitioners. Principle 10 provides that a practitioner is entitled to claim remuneration and disbursements in respect of necessary work, properly performed in an administration, and explains those concepts. Principle 11 of the ARITA Code of Professional Practice in turn deals with disclosure of remuneration and provides that:
"A claim by a Practitioner for Remuneration must provide sufficient, meaningful, open and clear disclosure to the Approving Body so as to allow that body to make an informed decision as to whether the proposed Remuneration is reasonable."
The ARITA Code of Professional Practice also identifies several possible bases of calculation of remuneration, namely time-based charging; prospective fee approval, subject to a cap to a nominated limit; and a fixed fee or a "percentage of a particular factor", usually assets disclosed or assets realised. The ARITA Code of Professional Practice also seeks to mitigate several risks of time-based costing, to which I refer below, by providing (in paragraph 14.6) that:
"[i]n time-based charging, the Practitioner must ensure that the number and qualifications of staff allocated to an Administration is appropriate for the nature of the work being performed so that the Administration is completed in the most efficient and effective manner."
Paragraph 14.7 in turn provides that the practitioner should, in time-based charging, "ensure that appropriate hourly rates are set for the Administration".
- Mr Lim submits that, in this case, it is appropriate for the Court to approve the liquidators' remuneration as calculated on a time-charging basis; that the winding up of the schemes was not of a small or straightforward character as to which some other approach to remuneration should be adopted; and that the Court should be guided by the professional scale of charges determined by Mr Taylor's firm "in a competitive commercial environment". Mr Lim also submits that the Court should be guided by the bills of costs and work in progress statements in evidence, which disclose the work performed and the seniority of the person performing that work, but will need to be satisfied that the work in fact performed was reasonably necessary in the circumstances. Mr Lim submits that that question should be assessed having regard to the significant sums proposed to be written off and the complexity of the winding up of the schemes. Mr Lim also recognises the importance of proportionality in a claim for remuneration of this character and submits that the remuneration claimed is here proportionate to the sums recovered and now available for distribution. Mr Lim submits that it is relevant, in this respect:
"to consider the value to investors of the Liquidators' work. The Liquidators have successfully recovered monies for the benefit of investors and determined the appropriate distribution of Scheme funds to investors. It is unlikely that those recoveries and proposed distributions could have been achieved without the detailed factual investigations and other actions undertaken."
- I will return to the approach for which Mr Lim contends below, by reference to the position in respect of each of the schemes. Before doing so, I should first address several wider issues as to the remuneration of insolvency practitioners. I will refer to the relevant case law in some detail, since potentially differing approaches have been adopted in recent case law. In dealing with these issues, I have drawn in part on Mr Lim's submissions and in part on a paper delivered, extra-judicially, at the Corporations Law Conference of the Law Council of Australia and the Federal Court of Australia in August 2016. I afforded the liquidators an opportunity to make submissions as to the matters addressed in that paper.
- The courts have, at different times and in different cases, allowed remuneration of insolvency practitioners on either a percentage of recoveries or time-based approach, approaches which are also recognised in the ARITA Code of Professional Practice as I noted above. The case law has long recognised an issue as to the appropriateness of time-charging and that issue has recently received renewed focus in decisions of this Court in respect of the approval of liquidator's remuneration, to which I will refer below.
- In Re Carton Ltd (1923) 39 TLR 194, the Court fixed a liquidator's fees as a percentage of the value of assets under the liquidator's control. In Mirror Group Newspapers Plc v Maxwell (No 2) [1998] 1 BCLC 638 ("Mirror Group Newspapers"), Ferris J (at 652) observed that time-based remuneration paid no regard to complexity, exceptional responsibility, the effectiveness of the work done or the value or nature of the property dealt with. His Honour also noted (at 652) that:
"… time spent represents a measure not of the value of the service rendered but of the cost of rendering it. Remuneration should be fixed so as to reward value, not so as to indemnify against cost. Second, time spent is only one of a number of relevant factors … The giving of proper weight to these factors is an essential part of the process of assessing the value, as distinct from the cost, of what has been done. Third, it follows from the first two points that, as the task is to assess value rather than cost, the tribunal which fixes remuneration needs to be supplied with full information on all the factors which I have mentioned."
- In Korda, Re Stockford Ltd [2004] FCA 1682; (2004) 140 FCR 424, Finkelstein J quoted the observations of Ferris J in Mirror Group Newspapers above with apparent approval. Finkelstein J there noted (at [2]) that insolvency practitioners' fees have been examined or subject to critical comment in several reports between 1988 and 2004, and I add that such criticism has continued in recent years. His Honour also referred to Re Carton Ltd above and noted (at [26]) that the practice that a liquidator's fee was either a fixed amount or a percentage of assets under the liquidator's control changed in the 1950s and 1960s and remuneration of liquidators began to be fixed on a time basis in complicated liquidations. His Honour observed (at [38]) that earlier English case law, fixing a liquidator's fees in a specific amount or a percentage of the estate, was "based on the notion of conservation of the estate and economy of administration" and recognised that:
"The other view is simply to allow the market to operate in the normal way: insolvency practitioners should be entitled to charge their usual hourly rates which, at least to a degree, are likely to be competitive."
His Honour also noted (at [39]) that the "conservation approach" may lead insolvency practitioners to forsake liquidations and administrations if they can earn higher incomes in other fields. While that risk could readily be overstated, there is plainly room for such a concern in respect of lower value or more complex insolvencies.
- His Honour also recognised, by reference to United States case law, the difficulties with hourly rates as an incentive to over-servicing, and observed (at [40]) that:
"It seems to me that some balance must be struck between the two opposing views. The balance must achieve some moderation in fees to protect the fund so that creditors can achieve the largest possible return, but not be so moderate as to discourage competent practitioners from providing their important services."
His Honour identified several factors relevant to the assessment of remuneration, including the time properly given to attending to the company's affairs, the complexity of the case, any responsibility of an exceptional kind or degree in the particular case, the effectiveness with which the liquidator carried out his duties and the value and nature of the property with which he had to deal. Those factors have since been reflected in the statutory provisions to which I referred above. His Honour also recognised (at [42]) that it was inevitable that insolvency practitioners would wish to have their fees calculated on a time basis in complex or large administrations and that:
"The Courts have endorsed this approach for so long … that it is now impossible to reverse the trend."
- His Honour (at [47]) supported the adoption of a "lodestar" approach, drawn from United States case law, which first derives a working figure from time costs, as adjusted by reference to appropriate rates and whether the time is reasonably spent and work is adequately supported by evidence, and then further adjusts that figure to the extent that any particular heads of claim are disallowed or a wider further percentage reduction is imposed. The second stage of that approach allows the possibility of discretionary reductions made by the courts in determining whether to approve remuneration of liquidators on a time-based basis.
- In Ide v Ide [2004] NSWSC 751; (2004) 50 ACSR 324 at [39]ff, in dealing with a receiver's claim for remuneration, Young CJ in Eq observed:
"First, the court constituted by a judge, never considers a review of quantum, but only matters of principle.
Second … a receiver is entitled to have his costs, charges and expenses properly incurred in the discharge of his ordinary duties, or in the performance of extraordinary services which have been sanctioned by the court.
Third …:
The receiver must justify the reasonableness and prudence of the tasks undertaken for which remuneration is sought, in the same way as he must justify the reasonableness and prudence of incurring disbursements for which he seeks allowance and reimbursement.
Thus, as with a falsification of accounts, the relevant onus is on the receiver.
Fourth, it must always be remembered that a receiver's remuneration is not in the same category as costs … The receiver is making application for a fair recompense for what he or she has properly done. The award is in the discretion of the court according to well known guidelines …
Fifth, the court's objective is to award a sum or devise a formula which will reasonably compensate the receiver for the time and trouble expended in the execution of his duties and, to some extent, the responsibility he has assumed … the vital question is what is the value to the estate of the work done by the receiver ...
Sixth, the court will usually work off time sheets created in the receiver's office provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff …
Seventh, the court is guided by professional scales of charges … What is important is the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work." [Citations omitted]
- In Wenkart v Pantzer [2005] FCA 1572; (2005) 223 ALR 384, Branson J noted that Young CJ in Eq may have expressed the first principle noted above too strongly and that it was "sufficient to note that it will rarely, if ever, be appropriate for the Court to review a decision of a taxing officer on a line by line basis". The approach in Ide v Ide above was generally approved by Barrett J in Mohamed v Hurstville Tower Medical Clinic Pty Ltd (in liq) [2006] NSWSC 4 at [9], although his Honour also noted the observation of Branson J in Wenkart v Pantzer above.
- In Conlan v Adams [2008] WASCA 61; (2008) 65 ACSR 521, McLure JA (as her Honour then was) referred to the earlier decision in Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 and summarised the principles that emerged from it as follows (at [28]):
"A liquidator is entitled to remuneration that is fair and reasonable and the liquidator carries the onus of establishing that entitlement. The court also said that in determining the remuneration to which a liquidator is entitled:
● a summary procedure is involved, not unlike that applicable to the taxation of solicitors' costs, which is not necessarily subject to all the rules that would apply in an action;
● it is the function of the court to determine the remuneration by considering the material proffered and bringing an independent mind to bear on the relevant issues, the initial task being to consider whether, prima facie, the liquidator has made out a case for the determination of the amounts claimed. The court must make an independent assessment even in the absence of objectors, appropriately detailed objections or arguable objections …"
Her Honour also there noted (at [39]) the disadvantages associated with a time-based approach, which the parties had there adopted, and also emphasised (at [47]) the importance of proportionality. Those observations were approved by Brereton J in Re AAA Financial Intelligence Ltd (in liq) (No 2) [2014] NSWSC 1270 ("Re AAA Financial Intelligence Ltd"), to which I will refer below.
- In Thackray v Gunns Plantations Ltd above at [63], Davies J observed that the reasonableness of remuneration may be established by evidence of an appropriate benchmark for comparative work by persons with the relevant skills and qualifications and justification of the time spent, and could be adjusted up and down to reflect other factors including unusual complexity of the work or the novelty and difficulties of the issues and the ultimate outcome obtained by the insolvency practitioner. Her Honour also noted (at [64]) that:
"Excessive charging may be indicated if there is a lack of proportionality between the cost of the work done relative to the value of the services provided. But there is no universal approach applicable in all circumstances by which the "reasonableness" of remuneration claimed or expenses incurred should be measured. The size, importance and complexity of the tasks performed are all factors to be taken into account. What is needed is sufficient information for the Court and any objector to have a clear view about what was done so that an assessment can be made about the reasonableness of the claim." [Citations omitted.]
- In Warner, Re GTL Tradeup Pty Ltd (in liq) [2015] FCA 323; (2015) 104 ACSR 633, Farrell J also noted (at [70]) community concern as to cases where there was little return to creditors after a liquidator's remuneration, but also recognised that liquidators may be unlikely to take on work which would bring about positive results for creditors without reasonable remuneration. Her Honour noted (at [71]) that whether remuneration was reasonable was not to be assessed solely by time costing or as a percentage of return, and that the value of the work would have to be assessed not only by the return to creditors but also by whether it was necessary to be done, even if it did not generate a return to creditors. Her Honour also referred, with apparent approval, to the factors relevant to the assessment of "reasonable remuneration" identified by Brereton J in Re AAA Financial Intelligence Ltd (in liq) [2014] NSWSC 1004. Mr Lim also refers to my decision in Re Metal Storm [2015] NSWSC 1699 at [11] as recognising that the court's ability to appoint insolvency practitioners as receivers depends, at least in part, on its ability to make orders for their remuneration.
- The importance of proportionality was also emphasised in Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545 (on appeal from the decision in Australian Securities and Investments Commission v Letten (No 23) above), where the Full Court of the Federal Court rejected (at [26]) a contention that whether a court-appointed receiver's remuneration was reasonable could be determined solely by whether the time spent was reasonable and the application of fixed rates to that time. The Court observed (at [26]-[35]) that the question of proportionality, involving a comparison of the claim to remuneration with the property or activity that was the subject of the insolvency administration or the benefit or gain to be obtained, was an important consideration in determining the overall reasonableness of remuneration. The Court also observed (at [30]) that:
"[T]he question of proportionality is an anterior question to consider in order to determine whether time was reasonably spent. If the relevant work plan underpinning the actual time spent and the allocation of personnel at the requisite level of seniority was disproportionate to the nature, importance and complexity of the task and the benefit to be achieved from the task, then it might be said that the time spent on the task was not time reasonably spent."
- The Court noted (at [34]) that a lack of proportionality between the cost of the work done and the value of the services provided may support a conclusion of overcharging or excessive remuneration. The Court also recognised (at [60]) that a court could appropriately apply a discount to a claim, after making findings as to whether work was necessary and appropriate to be done, and whether it had been done by an appropriate level of staff and efficiently, although their Honours allowed an appeal against the discount that had been applied in that case.
- Several other decisions in the State Supreme Courts and in the Federal Court of Australia have also 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: Hayes, Re Henry Walker Eltin Group Ltd (in liq) (No 4) [2015] FCA 656; Re Traditional Values Management Ltd (in liq) (No 2) [2015] VSC 126; Re Hewitt [2015] VSC 338; Macks v Maka [2015] SASC 200; Re Koori Employment Enterprises Co-Operative Ltd (in liq) [2016] VSC 245; Re Smith (in his capacity as former provisional liquidator of Australian Global Capital Pty Ltd (in liq)) [2016] FCA 644.
- On the other hand, in several recent decisions, Brereton J has emphasised the significance of the percentage that a liquidator's remuneration bears to the level of asset realisations achieved in the liquidation. In Re AAA Financial Intelligence Ltd above, his Honour referred to Korda, Re Stockford Ltd above and also expressed scepticism as to the ability of market forces to control liquidator's remuneration and noted (at [41]) that "creditors are rarely in a position robustly to negotiate a liquidator's remuneration" and that "comparative cost is rarely a factor in selection of a liquidator". His Honour observed (at [45]) that:
"In my view, reasonable remuneration cannot be assessed solely by the application of the liquidator's quoted standard hourly rates to the time reasonably spent."
His Honour also noted (at [45]) that the application of standard hourly rates would not (or, I interpolate, would not necessarily) reflect several of the factors specified in s 504(2) of the Corporations Act, particularly the quality of work performed, the degree of risk and responsibility and the value and nature of the property involved.
- His Honour also identified (at [45]) a wider criticism of time costing, of a similar character to that previously made in Mirror Group Newspapers above, that it:
"does not reward liquidators for value, but indemnifies them against costs. It disregards considerations of proportionality. … This must mean that it is wrong to assess 'reasonable remuneration' by reference only to time reasonably spent at standard rates. … [W]hile time reasonably spent at standard hourly rates is a relevant consideration, it is only one of several, should not be regarded as the default position or dominant factor, and is to be considered in the context of other factors, including the risk assumed, the value generated, and proportionality."
His Honour's reference to the need to consider those other factors reflects the statutory requirements of ss 473 and 504 of the Corporations Act. It seems to me that there can be little room for controversy as to the relevance of those factors, although views may differ as to how they are to be addressed. His Honour also recognised (at [47]) that ad valorem remuneration, based on a percentage of realisations, also had shortcomings, but observed that it was proportionate and incentivised the creation of value.
- In that case, his Honour allowed the liquidator remuneration of $36,000, amounting to total remuneration of about 20% of total realisations. In arriving at that amount, his Honour took into account that debt collection had been outsourced by that liquidator, so as to reduce the risk and responsibility borne by the liquidator and noted that, absent a reduction in the liquidator's remuneration, the liquidator's claim for remuneration and expenses would have exhausted the recovered funds. I note that the issues to be addressed by the liquidator in that case were substantially less complex than those facing the liquidators in the winding up of these schemes.
- Brereton J has taken a similar approach in several subsequent cases. In Re Hellion Protection Pty Ltd (in liq) [2014] NSWSC 1299, Brereton J indicated that he would have approved a lesser amount than had been approved by the creditors, on a basis of 10% of the first $50,000 of recoveries, broadly equating to the statutory starting point of $5,000, and 5% on GEERS realisations although they were not strictly recoveries in the liquidation. In Re Gramarkerr Pty Ltd (No 2) [2014] NSWSC 1405, Brereton J approached remuneration by reference to a proportion of the funds realised, noting that he would have been inclined to allow 10% of the first $100,000 of realisations and 5% on the balance, which was a slightly higher amount than the liquidator's revised claim in that case. In Re Independent Contractor Services (Aust) Pty Ltd (in liq) (No 2) [2016] NSWSC 106 ("Re Independent Contractor Services (Aust) Pty Ltd"), a large part of the liquidator's claim for remuneration was referrable to an application for directions that had been made to the Court. Brereton J accepted that the liquidator was entitled to remuneration for activities relating to that application, although his Honour also noted that the risk of that issue had been (at least to some extent) shifted to legal practitioners. His Honour recognised (at [47]) the importance of not discouraging liquidators from conducting small but difficult liquidations, and allowed 2% on realisations (where little work was done by the liquidator) and 15% on distributions, approximating to remuneration of about 14% of gross realisations in that case.
- In Re Sakr Nominees Pty Ltd [2016] NSWSC 709, Brereton J also noted (at [22]) that, where an ad valorem approach is adopted, then:
"[N]ormally, the larger the liquidation, the lower the rate of commission will be: rates of commission will decline, as the amount of assets increase, on a sliding scale."
His Honour there noted that an allowance of commission at the rates in Re Gramarkerr Pty Ltd (No 2) above, of 10% on the first $100,000 and 5% on the balance, would be generous in those circumstances, although he allowed additional remuneration for additional work that the liquidator had been required to undertake. An appeal has been brought from that decision.
- Mr Lim submitted that the reasoning in Re AAA Financial Intelligence Ltd above and Re Independent Contractor Services (Aust) Pty Ltd above was particularly directed to the position in smaller liquidations. I recognise that Brereton J had referred, for example, in AAA Financial Intelligence Ltd above at [37] to the fact that the shortcomings of time-based costing as the basis of remuneration, particularly in smaller liquidations, have been highlighted in a number of cases. His Honour had also drawn attention to the small size of the fund in Re Independent Contractor Services (Aust) Pty Ltd above at [47]. However, I do not understand his Honour's observations as to the extent of a competitive market in setting liquidator's remuneration, or as to the incentives created by time-based remuneration, to have been limited only to smaller liquidations. I do accept that the case for time-based remuneration will be significantly stronger in complex insolvencies, and the difficulties involved with time-based remuneration, particularly at standard hourly rates, will be more acute in smaller liquidations.
- Mr Lim also submitted that a potential inconsistency could arise between the approach of Brereton J in Re AAA Financial Intelligence Ltd above and the approach of the Full Court of the Federal Court in Templeton v Australian Securities and Investments Commission above, at least in a case where the remuneration claimed reflected work that was reasonably and properly undertaken, but payment of that remuneration would nonetheless result in a disproportionate outcome when compared with the value of the assets realised. (Such an inconsistency should generally not arise if the liquidator's claim for remuneration reflects work reasonably done and charged at a reasonable rate, and the outcome is proportionate to the value of the assets realised, when it would likely be approved on either a time costing or percentage of assets realised basis; or if the amount claimed does not reflect work reasonably done or is not charged at an appropriate hourly rate, when it would likely not be approved on either a time costing or a percentage of assets realised basis). Mr Lim submitted that, if such an inconsistency arose, the approach adopted by the Full Court of the Federal Court in Templeton v Australian Securities and Investments Commission above should be adopted and the costs of the liquidator's work would be allowed, with a possible consequence that there would be no distribution to creditors of the relevant entity. Mr Lim submits that that course should be taken because the decision in Templeton v Australian Securities and Investments Commission above is one of an intermediate appellate court, and because the Court would have difficulty in appointing insolvency administrators, in complex administrations, if they were left at risk that such appointments would generally be unprofitable.
- The evidence to which I will refer below indicates that that issue does not need to be determined in this case. However, I will make several tentative observations given the significance of the issue. I accept that a case could arise where work was reasonably done, for example because it was necessary so as to allow a rational basis for distribution to investors, but the costs of it, charged at reasonable hourly rates, will nonetheless exhaust or substantially exhaust the assets of the relevant entity that would have been available for distribution to investors if (contrary to the hypothesis) a distribution could have been made without that work being done. There may also be some cases where the complexity of the issues in an insolvency, or the scarcity of assets, are such that the insolvency practitioner's remuneration for work that is reasonably necessary to address those issues, if charged at his or her ordinary rates, and costs and disbursements, would exhaust or substantially dissipate the assets of the insolvent company, extinguishing or significantly reducing any return to creditors. That difficulty cannot always be resolved by a suggestion that the insolvency practitioner should not undertake that work, because that work may be required by statutory requirements, or because assets may not be recoverable, or a distribution to creditors may not be possible on any reasonable basis, without undertaking that work.
- A case of this character will always be a hard case which will need to be addressed on its merits and on the basis of appropriate evidence. Relevant factors may well include that fairness, and necessity, require that insolvency practitioners are reasonably remunerated for their work. As Mr Lim noted, absent a position where insolvency practitioners are bound to accept appointment in smaller or more complex insolvencies, parties would potentially have difficulty in obtaining insolvency practitioners' consents to such appointments, and courts would have consequential difficulty in making such appointments, if those appointments were generally unprofitable for insolvency practitioners and their firms. However, it does not necessarily follow that a liquidator should be entitled to recover his or her full hourly rates in every case. In a fully informed and competitive market, a discount of those rates might well have been negotiated to reflect the particular circumstances of the liquidation and allow at least some return to creditors. The case law to which I have referred above at least leaves open the possibility that the quantum of that remuneration may have to be discounted or a percentage of realisations approach adopted to achieve proportionality.
- The relationship between a time-based approach and an approach that has regard to percentage of realisations was also recently considered by Robb J in Re Clout (in his capacity as liquidator of Mainz Developments Pty Ltd) (in liq) [2016] NSWSC 1146, and I afforded the liquidators an opportunity to make further submissions as to that decision after I had reserved judgment. In supplementary submissions, Mr Lim noted that Robb J observed (at [131]) that consideration of a proportion of realised assets, in determining remuneration, would take place in the context of, and not in isolation from, "all of the other relevant circumstances of the winding up". His Honour also noted (at [134]) that, in the several cases that have had regard to percentage-based remunerations, liquidators had generally formulated opening claims for a particular amount, based upon time expended and a scale of fees: for example, Re AAA Financial Intelligence Ltd above at [43]; Re Gramarkerr Pty Ltd (No 2) above at [10]; Re Independent Contractor Services (Aust) Pty Ltd above at [37]; Re Sakr Nominees Pty Ltd above at [11]. His Honour observed (at [134]-[135]):
"That [ie the claim on a time-based basis] provided a rational and objective starting point for the liquidator's claim for remuneration, which could be assessed in the context of the other factors made relevant by ss 473(10) or 504(2) of the Act. Thereafter, the court considered in each case specific factors relevant to the work undertaken by the liquidator. Then, having regard to the assets realised and distributed by the liquidator, the court called in aid percentages that appeared reasonable in the particular case to assist the court in judging how to achieve proportionality between the liquidator's remuneration and the value to creditors of the work done.
The process in which the court engages does not involve the direct adoption of any particular proportion or percentage, but, in a process that involves an evaluative assessment of a number of discretionary factors, the court in an appropriate case - more likely where the value of the assets realised is low, or where the remuneration claimed is a substantial proportion or exceeds the value of the assets realised - the court will adopt an appropriate percentage having regard to the court's experience of other cases as a guide to assessing the appropriate remuneration for the liquidator in the particular case."
Mr Lim also referred to Robb J's observation (at [135]) that, particularly in a case where the value of the assets realised were low, the court "will adopt an appropriate percentage having regard to the court's experience of other cases as a guide to assessing the appropriate remuneration" and submitted that approach would largely be adopted in smaller liquidations. It seems to me that his Honour was not limiting the relevance of that approach to smaller liquidations, but recognising its particular significance in that situation.
- Robb J also helpfully referred to several of the cases that have considered time-based claims for remuneration (at [158]ff) and emphasised what may be seen as the overriding consideration, as identified by Barrett J in Re Anderson Group Pty Ltd; Mann v Anderson [2002] NSWSC 764 at [12] that:
"In the ordinary course, the process of determination comes down essentially to ensuring that the work upon which the claim was based was work undertaken in the due course of administration and that the amount claimed for having done that work is a fair and reasonable reward for it."
- It seems to me that the recent case law suggests that a claim for remuneration based on hourly rates should at least be tested by reference to a percentage of realisations and possibly, in an appropriate case, displaced by remuneration on that basis or by a mixed approach. In my view, evidence as to the percentage that remuneration constitutes of realisations will at least provide a measure of objective testing of the proportionality of the remuneration claimed and will identify those cases in which there ought to be real concern in that respect. In this case, the liquidators, properly, also led evidence that allowed their claim for remuneration on a time-based basis to be tested against the result on a percentage of realisations basis, which I will address below.
- For completeness, I should note that Mr Lim also submits that a significant factor weighing in favour of approval of the liquidators' remuneration is that neither ASIC nor any investor has objected to the remuneration claimed. Mr Lim refers, by way of analogy, to the fact that court approval for a liquidator's remuneration is not required where a committee of inspection or resolution of creditors approves that remuneration. It seems to me that that submission requires substantial qualification. First, the absence of objection by ASIC or creditors is not equivalent to the positive act of approval which is involved in the giving of approval to a claim for remuneration by a committee of inspection or resolution of creditors. Second, there is no evidence whether investors have actively engaged in any consideration of the material which has been made available to them, or whether their lack of objection to the liquidators' remuneration claim reflects the fact that they have paid no attention to it. I do proceed on the basis that at least ASIC will have considered the material served upon it before advising that it does not seek to intervene in the proceedings.