Insolvency Practitioners (IPs) commonly adopt time-based costing for the calculation of their remuneration, primarily on the basis that it ensures that the IP is only remunerated for the work actually undertaken and it ensures that remuneration reflects the simplicity or complexity of particular tasks. Three other ways in which remuneration are common calculated are ‘fixed fee’, ‘percentage’ (such as in respect of recoveries/realisations) and ‘contingency’ bases.

Creditors can, and commonly do, approve IPs’ remuneration, but if those fees are not approved IPs are able to obtain orders from the Court. IPs, among others, also have certain rights of review in terms of decisions made by creditors.

Applications to Court to consider IPs’ remuneration are regulated by the Corporations Act 2001 (the Act), and the Supreme Court (Corporation) Rules 1999. Both s.504 (which relates to creditors’ voluntary windings up) and s.473 (in relation to windings up in insolvency or by the Court) set out an identical list of facts which the Court is required to have regard to in considering IPs’ remuneration. Those matters include:

  • the extent to which the work performed by the liquidator was reasonably necessary;
  • the quality of the work performed, or likely to be performed, by the liquidator;
  • the complexity (or otherwise) of the work performed, or likely to be performed, by the liquidator;
  • the value and nature of any property dealt with, or likely to be dealt with, by the liquidator;

The Act also requires the Court to consider “any other relevant matter”.

Whilst the factors to be considered by the Court involve questions of necessity, complexity and so on, the overriding principle is that the remuneration must be “reasonable”.


Applications for remuneration are well-trodden and usually straight-forward, particularly where remuneration is calculated on the basis of time spent and the work undertaken has been captured and described properly, and where an IP is able to justify time spent or complexities encountered in a particular appointment.

However, the issue of remuneration has come under increasing scrutiny by the courts in recent times. In a series of cases, determined by Justice Brereton, the Supreme Court of New South Wales has emphasised the importance of liquidator remuneration being proportionate to the realisations in the external administration. The recent decision in David Lewis Clout in his capacity as Liquidator of Mainz Developments Pty Ltd (in liquidation) [2016] NSWSC 1146 (Mainz) sheds light on this trend.

The case of Mainz

David Clout (Clout) was appointed the liquidator of Mainz Developments Pty Ltd (the Company). The Company was the registered owner of a property in North Sydney. Clout entered into a contract for the sale of land to sell the property at the price of $240,000.

After settlement, but prior to exchange, a number of unsecured creditors of the Company registered caveats over the property which prevented the sale to proceed. Following a lengthy negotiation process between Clout and the creditors, the creditors agreed to withdraw their caveats in exchange for the balance of the proceeds of sale being paid to the court pending determination over the competing claims for the funds.

After the mortgage was discharged and all other fees from the sale were paid, proceeds from the sale were $47,000. Clout filed a motion seeking that the entire amount be paid to him on account of his remuneration and expenses, totalling approximately $60,000. The creditors opposed the motion stating that Clout should only be entitled to a specific percentage of the realised value of the property, that being 2% or a mere $4,800.

In reaching this number the creditors had seized upon the Brereton J decision In the matter of Independent Contractor Services (Aust) Pty Ltd ACN 119 186 971 (in liq) (No 2) [2016] NSWSC 106, where it was stated, following a discussion concerning the importance of proportionality as a factor in determining remuneration, that:

Indicatively, I would be inclined to allow 2% on realisations, reflecting the very limited work done by the Liquidator in respect of realisations.”

In Mainz, Robb J was not convinced to apply this figure as the creditors had failed to reconcile the fact that, ultimately in Independent Contractor Services, Brereton J allowed 14% of gross realisations for the whole of the winding up (where the 2% cited related to the realisation of a particular asset), and the creditors had further failed to address a number of other recent cases where considerably different percentages had been applied (discussed below).

Robb J stated that the process in determining a proportionate figure “does not involve the direct adoption of any particular proportion or percentage”, rather a number of discretionary factors need to be considered with other cases to be used as a “guide”. His Honour said:

“It is not correct to say that the process by which the court determines the amount of remuneration to be allowed to liquidators has evolved to the point where the determination involves the selection of a percentage, divorced from all of the other relevant circumstances of the winding up.”

Ultimately, Robb J concluded that the remuneration sought by Clout was too high, as much of it arose from the lengthy negotiation process with the creditors that could have been avoided by agreeing to place the balance of the sale into a fund earlier. However, his Honour was not able to directly quantify a proportionate figure due to a lack of evidence. His Honour simply invited the parties to further consider their positions and suggest directions for further conduct of the dispute.


While in Mainz there was no specific order as to the amount that would be “proportionate” in the circumstances, the decision provides valuable commentary on the trend of courts to consider whether fees charged are proportionate to the liquidator’s realisations rather than accepting hourly rate fees.

Robb J considered a number of judgments delivered by Brereton J over the last two years, and stated that while the percentage of realisations that were found to be proportionate varied significantly (from as low as 2% to as high as 20%), there was no inconsistency between them. This is because of the various circumstances and discretionary factors within each case. His Honour summarised:

“◦(1) In AAA Financial Intelligence Ltd (in liq) (No 2) at [53] the court allowed remuneration of $36,000, which was about 20% of the value of the assets realised.

◦(2) In Re Hellion Protection Pty Ltd (in liq) [2014] NSWSC 1299 at [9] the court allowed 10% for the first $50,000 realised, and 5% for subsequent receipts.

◦(3) In Re Gramarkers Pty Ltd (No 2) [2014] NSWSC 1405 at [10] the court determine the remuneration on the basis of 10% of the first $100,000 realised, and 5% on the balance of the total of $495,000.

◦(4) In Re Sakr Nominees Pty Ltd [2016] NSWSC 709 at [22] the court considered alternative bases to assist it with assessing the appropriate remuneration for the liquidator. First, the court considered the result of allowing 2.5% on realisations of $3.72 million, and 3% on distributions of $3.3 million. That gave a comparable amount to allowing 10% on the first $100,000 of realisations, and then 5% thereafter. However, due to the liquidator’s difficulty in identifying the contributories in that case, the court at [25] allowed an additional $20,000 of remuneration.

◦(5) Finally, in the Independent Contractor Services Pty Ltd case, the court at [48] started with an allowance of 2% on realisations (reflecting very limited work done by the liquidator) plus 15% on distributions. However, the court allowed an uplift (having regard to the totality of the work undertaken and the time expended by the liquidator) to give remuneration of $30,000, which was approximately equal to 14% of gross realisations.”

Of particular note is that of the five decisions of Brereton J considered by Robb J, four of them involved a liquidator that had sought remuneration based on time expended. Robb J noted that the figure calculated by liquidators on that basis is a “rational and objective starting point”, but, inescapably, it is subject to the Court’s consideration of reasonableness in the context of other factors arising from the specific facts. The court will ultimately “adopt an appropriate percentage having regard to the court’s experience of other cases as a guide”.

Where to from here?

The decision of Brereton J in Independent Contractor Services is widely acknowledged as being one of the first of now many watermarks on the issue of proportionality and IPs’ remuneration. Gone are the days (if they ever existed) where IPs could sit comfortably behind their timesheets which comprehensively and accurately recorded time-based tasks.

With proportionality analysis comes a level of uncertainty, with time spent by the liquidator becoming simply a “starting point”. IPs are encouraged to carefully reflect on the amount of remuneration they anticipate might be necessary in respect to proportion of prospective realisations.

As IPs continue to adjust to the recent trends and scrutiny, we believe that there will be a corresponding change to how IPs consider how to approach the realisation of assets, particularly those which have small or speculative value or where there are going to be significant complexities in recovery, such as contested litigation.

Whilst Mainz is a further reminder of the Court’s close scrutiny of remuneration, it confirms that there are no hard and fast rules. Courts will consider the whole of the circumstances in addition to raw figures of realisations.

IPs should be encouraged to obtain appropriate legal advice at an early stage of appointment to assist with an early assessment of an entity’s assets and how best to realise those assets. Advice should also be obtained in relation to the drafting of creditors reports and the disclosure and explanation of remuneration to increase the prospect of obtaining approval from creditors.