A senior Judge has approved the remuneration of a liquidator in full based upon the principles set out in the recent appeal decision in Sakr Nominees. In fact, the Judge, Justice Fabian Gleeson, of the NSW Court of Appeal, as on the appeal bench in Sakr.
The liquidation
It was a members’ voluntary liquidation but the general remuneration principles applied: In the matter of ACN 074 962 628 (formerly Colonial Staff Super) [2017] NSWSC 370, 10 April 2017. The liquidation principally involved monitoring a litigation claim which was successful against the company at trial but overturned on appeal: Commonwealth Bank Officers Superannuation v Beck: [2016] NSWCA 218.
Gleeson JA derived three relevant principles from Sakr:
- First, the onus is on the liquidator to establish that the remuneration claimed is reasonable and it is for the Court to determine that remuneration according to the statutory criteria.
- Second, certain statutory criteria have as their unifying theme the concept of proportionality.
- Third, the mere fact that the work performed does not lead to augmentation of the funds available for distribution does not mean the liquidator is not entitled to be remunerated for it. Provided it was reasonable to carry out the work and the amount charged is reasonable, there is no reason a liquidator should not recover remuneration for undertaking the work. The last matter was particularly apposite in this case in that the liquidation was primarily defensive of the company’s interests in the legal proceedings.
Evidence
The Judge said it was
“unnecessary to refer to the detail of the liquidator’s evidence. The evidence establishes that the work was carried out by persons with the appropriate level of seniority, whose charge-out rate was proportional to the level of the complexity of the work that was performed. This was established by the time ledgers … The liquidator expressed the opinion that the hourly rates … are reasonable and commercially competitive. Having reviewed those charge-out rates, I accept that evidence”.
Factors in favour of approval
First, the remuneration claim for $19,404 (inclusive of GST) was “modest” for the winding up of the company, since its reinstatement, of over a four years.
Second, although the liquidation principally was defensive, rather than realising property for the benefit of creditors or members, the legal proceedings were substantial and involved complex issues arising from the conduct of the company as trustee.
Third, the new trustee’s agreement to pay a settlement sum to the company was
“highly significant. As the party ultimately responsible for paying the liquidator’s remuneration, [it] had a “clear and direct interest in ensuring that only reasonable remuneration is allowed”: MINMXT Holdings [2017] NSWSC 156, at [32] (Barrett AJA)”.
Justice Barrett was also on the appeal bench in Sakr.
Fourth and importantly, as a practical matter the liquidator would receive only about 80% of his claim because he had to first deduct from the settlement sum the costs and disbursements of this application and his legal expenses, under terms of the settlement.
Time costing
The liquidator’s remuneration was determined on a time-charging basis.
“Plainly, an ad valorem basis is not appropriate given the nature of the liquidation was essentially defensive of the claim against the company”.
Legal costs
The legal costs of the application were $4,378 (inclusive of GST), which the court said was also modest, limited to counsels’ fees and the filing fee.
A trustee company
The liquidator had regarded the settlement sum as trust property, and any remuneration determination was not to be under the Corporations Act but involved the exercise of the court’s inherent equitable jurisdiction to allow a trustee remuneration, costs and expenses out of trust assets, referring to cases such as AAA Financial Intelligence [2014] NSWSC 1004.
Justice Gleeson did not agree.
“The settlement sum received by the liquidator on behalf of the company was not received by the company qua trustee. The company ceased to be trustee of the Old Colonial Fund in about July 1998. Nor is the settlement sum trust property. The company had an express right of indemnity against SBSBS with respect to any liability that arose in connection with the Old Colonial Fund. SBSBS in turn had an equivalent express right of indemnity against CBOSC, which would include any liability of SBSBS to the company under the 1997 Indemnity Deed”.
The Corporations Act therefore applied.
ILRA 2016
In a forthcoming article, I assess how this sort of case will be dealt with under the new law, commencing on 1 September 2017.
Details will follow.
