In a significant win for insolvency practitioners, the liquidators of ‘wine-in-a-can’ business Barokes Pty Ltd (In Liquidation) have successfully fended off fierce opposition to its remuneration for work performed in winding up the Company.

The case, in which Macpherson Kelley acted for the liquidators, serves as a reminder that, in considering section 60-12 of the Insolvency Practice Schedule (Corporations) (IPS), the Court will not hastily “punish” external administrators for actions that creditors dislike.


At a meeting of creditors, resolutions for the liquidator’s remuneration approval were blocked by the largest creditor and shareholder, Daiwa Can Company. Barokes’ liquidators had no choice but to apply to the Supreme Court of Victoria for approval of their remuneration. The liquidators argued that, under section 60-12(a) of the IPS, the work which they carried out was ‘necessary’ and ‘properly performed’ in the circumstances.

Daiwa objected to the remuneration due to concerns it had about the conduct of the liquidators in undertaking the sale of the Company and in the prosecution of certain international litigation.

The key issue for the Court was to what extent (if at all), the Court must facilitate a process of inquiry into the conduct of external administrators in ascertaining whether remuneration claimed is reasonable.

The decision

Daiwa’s objection to the liquidator’s remuneration was based on alleged unsatisfactory conduct on the part of the liquidators. Namely, Daiwa relied on the following evidence:

  • The ‘Business Information Memorandum’ which contained details of Barokes’ business for the purpose of sale, excluded mention of the current or future claims of Barokes with respect to the infringement of its patents;
  • A responsible liquidator should have reasonably considered Daiwa’s purchase offers in realising value for Barokes (despite Barokes’ liquidators having progressed with another offer);
  • The basis of the rejection of Daiwa’s offer by Barokes’ liquidators was unreasonable, as Daiwa’s final offer was ‘superior’ to any other offer Barokes received; and
  • Despite the liquidators alleging that certain rights over the Company concerning its international litigation were not for sale, the eventual purchaser appeared to have acquired such rights.

For these reasons, Daiwa argued that the liquidators’ remuneration should be deferred pending prior resolution of these matters. However, the Court disagreed.

In considering the reasonableness of the remuneration claimed, Associate Justice Julian Hetyey deliberated whether the words ‘properly performed’ found in section 60-12(a) permit consideration of a liquidator’s conduct, including allegations of misconduct or breach of duty.

In forming his view, His Honour noted that the words ‘properly performed’ address the ‘manner and quality’ of the work undertaken by the external administrators, as opposed to ‘an evaluation of his/her conduct in performing that work’.

Section 60-12(a) does not, therefore, provide creditors with an avenue to discipline liquidators for alleged wrongdoing. Rather, the purpose of the provision is to fix the liquidation costs at a quantum which is reasonable, having regard to the circumstances.

The Court, in dismissing Daiwa’s objections to the liquidator’s remuneration, noted that the requisite proof under section 60-12 is that a liquidator acted in a manner that was ‘unnecessary, inefficient, unsatisfactory or lacking in competence’.

In this matter, Daiwa had failed to convince the Court of any specific work undertaken by the liquidators that could be characterised as such. On this basis, Daiwa’s objection failed.

You can find the decision here.

Key Takeaways

Disgruntled creditors are well advised to refrain from pursuing vindictive proceedings under section 60-12 of the IPS when liquidator decisions don’t go their way.

Equally, it is important for liquidators to understand their obligations and assert their rights when dealing with highly contentious circumstances and/or creditors demanding more than their fair share.