In the recent decision of Custometal Engineering Pty Ltd (in liquidation) [2018] VSC 726, two liquidators incurred almost $7,000 in fees whilst seeking to justify their $34,000 remuneration.
The case ensued after Custometal Engineering Pty Ltd entered voluntary administration on 21 September 2017, with Sam Kaso and Daniel Juratowitch appointed as administrators.
On 11 October 2017, the Supreme Court of Victoria ordered that the administration be terminated, that the Company be wound up and that Kaso and Juratowitch be appointed as joint and several liquidators.
Subsequently, in September 2018 the liquidators sought approval of their remuneration as the Company’s administrators pursuant to s60-10(1)(c) of the Insolvency Practice Schedule for the amount of $33,872.50. They also sought that the costs of the application be costs in the Company’s liquidation, hence bringing the total claim to $40,860.
Accordingly, the court was required to consider whether liquidators had prima facie established a case for remuneration and subsequently whether that remuneration should be approved under r9.2 Supreme Court (Corporations) Rules 2013 (Vic). In doing so, the court was required to consider whether the remuneration being claimed was reasonable.
In determining the reasonableness of the remuneration, Matthews JR considered the following factors:
- Whether there was an appropriate delegation of the work performed;
- Whether the tasks conducted were necessary to have been performed;
- Whether the time taken to complete those tasks, and therefore the amounts charged for them, was reasonable; and
- Whether there was any evidence of unnecessary duplication of work.
Ultimately the court was satisfied to approve the remuneration sought by the liquidators, holding that the liquidator’s costs of application be costs in the Company’s liquidation.
In an era where issues of proportionality are high on the agenda, particularly with the judiciary, this case presents an interesting example of a situation where the costs of making such an application seem disproportionate to the costs being sought and presents yet a further example of why approval of these costs should be facilitated in a different manner, possibly by legislative change as the current law sees many liquidators spending significant resources to justify their remuneration at additional cost to creditors.
