The New South Wales Supreme Court of Appeal's decision in Sanderson as Liquidator of Sakr Nominees  has given cause for optimism amongst insolvency practitioners. The decision confirms that the correct approach was taken by the Court in Idylic Solutions , bucking a trend in recent years of limiting or reducing practitioner remuneration by reference to a proportion of the funds recovered.
This decision follows the outcome in Idylic Solutions, in which Black J of the Supreme Court of New South Wales re-affirmed that time-cost charging is an appropriate method of calculating remuneration in circumstances where there is sufficient evidence to justify the remuneration sought. Danielle Funston, Partner acted for the liquidators in Idylic Solutions, which also set out the high level of evidential detail that may be required to succeed in seeking remuneration on a time-cost basis. The decision in Sakr Nominees follows the findings reached in Idylic Solutions, overruling the use of percentage-based remuneration by the primary judge at first instance.
In Sakr Nominees, the liquidator was able to challenge a reduction in the remuneration sought on the grounds that the primary judge had erred by focusing solely on the proportionality of the work undertaken compared to the size and complexity of the liquidation. The decision emphasises the importance of:
After reviewing the findings of the primary judge, submissions made on behalf of the liquidator, submissions made on behalf of the Australian Securities and Investments Commission in support of the primary judge and on behalf of the Australian Restructuring Insolvency and Turnaround Association (ARITA) in support of the liquidator, Bathurst CJ reached the conclusion that:
On the evidence, Bathurst CJ held that the primary judge erred in assessing remuneration solely on a consideration of proportionality of the work undertaken and the size of the liquidation. His Honour was of the view that the primary judge failed to properly assess the work that was actually undertaken by the liquidator and whether the remuneration sought was proportionate to the difficulty and complexity of that work.
Beazley P, Gleeson AJA, Barrett AJA and Beach AJA agreed with Bathurst CJ. The Court allowed the liquidator's appeal and remitted the matter to a judge of the Equity Division of the Supreme Court for rehearing.
This decision has come at a time when the trend of court judgments in recent years has emphasised the importance of proportionality when assessing whether remuneration sought by a liquidator is reasonable. The Court's decision in this case moves against this trend by affirming that while the requirement of proportionality is an important element of assessing remuneration, it does not automatically preclude the use of time-cost charging in smaller or less complex liquidations.
Further, the conclusions reached by the Court affirm that remuneration may still be reasonable, even in small liquidations, where it relates to work undertaken which did not augment the total recoveries available for distribution to creditors and shareholders. It is only necessary that the remuneration is reasonable according to the factors under s 473(10) of the Act.
This decision will no doubt assist insolvency practitioners and their lawyers by confirming that the use of time-cost charging in liquidations of any size or level of complexity is an acceptable basis for determining remuneration, provided the remuneration sought is reasonable.
---- Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr  NSWCA 38  In the matter of Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund and others  NSWSC 1292  In the matter of Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund and others  NSWSC 1292 at 
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