In brief - Courts differ on how to assess remuneration
Cases involving insolvency practitioner's remuneration have
shown that the superior courts are not always aligned in how they
apply the concept of proportionality, differing in how much
emphasis should be given to the value of realisations.
New South Wales Supreme Court considers administrator's
entitlement to fees
In case you find yourself appointed as an external administrator
and you need to seek court approval for the payment of your fees,
what follows may come in handy.
We recently acted on behalf of administrators appointed at the
eleventh hour to a company where winding up proceedings had already
commenced. We were able to get an adjournment of the wind up
application, brought by a determined creditor, sufficient for the
439A Report to be prepared but prior to the second meeting of
creditors. No Deed of Company Arrangement proposal was put up and
consequently the Court put the company into liquidation and
appointed the plaintiff's nominee (relatively common practice,
particularly in the New South Wales Supreme Court).
The question arose as to the administrator's entitlement to
fees which could no longer be approved by the creditors as he had
ceased to be the administrator.
Courts differ on emphasis paid to realisations and
distributions when considering concept of proportionality
Whilst the Supreme and Federal Courts both have power to deal
with the issue of an administrator's fees, over recent times a
difference in approach to administrator's remuneration between
the two courts has become discernible.
Applying that approach to our client's particular
circumstances would likely have resulted in a very modest recovery
of fees, likely far less than most Sydney CBD insolvency
practitioners would require to even meet the expenses on such an
The Full Bench of the Federal Court in Templeton v Australian Securities and Investments
Commission  FCAFC 137 has maintained the position
that considering proportionality as a concept in remuneration is
just one of the factors that should be taken into account when the
court is exercising its discretion to approve an external
administrator's remuneration. The Federal Court does not,
however, place the same close emphasis on realisations as seen in
the AAA approach.
In our case, the application was filed in the Federal Court and
the application was dealt with in Chambers and was wholly
Sakr Nominees appeal case may show whether courts are
aligning their approaches to insolvency issues
It is generally considered appropriate for superior courts to be
aligned in relation to insolvency issues and there can be few
issues more important to the survival of the insolvency
practitioner's business than remuneration, so it will be
interesting to see whether the apparent difference in the
approaches adopted by the two Courts will align over time.
Relevantly, the matter of Sakr Nominees (in which the
AAA approach was adopted) is presently under appeal by
another one of our clients to the New South Wales Court of
A recent NSW decision has implications for liquidators of trustee companies dealing with trust funds and priority debts.
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