Section 473(3) of the Corporations Act 2001 (Cth.) (“the Act”) provides that in a court appointed liquidation, a liquidator may have his or her remuneration determined by agreement between the liquidator and a committee of inspection (if there is one) and if there is no committee of inspection, by resolution of the company’s creditors or if no such resolution is passed, by the court.

In a voluntary winding-up, on the other hand, the position is less clear.  Section 499(3) of the Act provides that a liquidator’s remuneration may be fixed by a committee of inspection (if there is one) and if there is no committee of inspection, by resolution of the company’s creditors. Unlike in the context of a court appointed liquidation, section 499 of the Act does not make provision for the liquidator to apply to the court.

During a voluntary winding up, section 504(1) of the Act permits a liquidator to make an application to the court to have his or her remuneration reviewed. However, this only permits the court to review the quantum of remuneration that has already been determined by either a committee of inspection or by the company’s creditors. A liquidator may not invoke that section of the Act in order to seek that his or her remuneration be determined by a court.  This was made clear by Justice Barrett in Palmer v Harrison [2010] NSWSC 1400 at [8].

In circumstances where a committee of inspection (if there is one) fails to approve the liquidator’s remuneration or alternately where there is no committee and creditors do not approve the liquidator’s remuneration, where does this leave the liquidator in respect of his or her remuneration?

Fortunately, the issue has been the subject of case law over the last ten years, and the Supreme Court of New South Wales decisions of Re Walker and Another (as liqs of ONE.TEL LTD)(in liq) [2005] NSWSC 557, Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120 and Palmer v Harrison [2010] NSWSC 1400 have shed light on the issue.

In order to have their remuneration in respect of work performed in voluntary liquidations determined by the court, the liquidator applicants in each of the above cases invoked the court’s powers contained in section 511(1) of the Act. That section allows a liquidator to make an application to the court: –

1. To determine any question arising in the winding up of a company; or
2. To exercise all or any of the powers that the Court might exercise if the company were being wound up by the Court.

At paragraph [11] of Re Walker and Another (as liqs of ONE.TEL LTD)(in liq) [2005] NSWSC 557, Justice Barrett noted that: –

 “…In a creditors’ voluntary winding up, the function of fixing remuneration is given exclusively to the committee of inspection if there is one and devolves upon the creditors only if there is no committee of inspection…”

 Justice Barrett continued at paragraph 33 (emphasis added): –

 “…If the statutory means of fixing the liquidator’s remuneration prescribed by s 499(3) are ultimately shown to be unworkable…the court will be in a position  where it can, upon appropriate application being made, itself determine the quantum of remuneration pursuant to s 511(1)(a)…”

Justice Barrett’s above reasoning was echoed in the more recent decision of Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120, where at [5] his Honour noted that: –

“…Ordinarily where (as here) there is a committee of inspection, the committee alone has power to fix remuneration; but if it is shown that the mechanism is incapable of operating to determine remuneration, the situation is one in which a question that s 511 allows the court to answer has arisen in the winding up”

It is clear then that in any application of this nature, it will be pivotal for the liquidator to put forward evidence that the mechanism in 499(3) of the Act has proved unworkable, failing which the court will not exercise its powers in section 511(1)(a) of the Act. The liquidator may not bypass the committee of inspection or the company’s creditors and apply directly to the court to have his or her remuneration determined.

Assuming that a liquidator may apply to the court for his or her remuneration in the context of a voluntary liquidation in circumstances where the mechanism of section 499 of the Act have proved unworkable, one question that arises is what evidence and supporting information is required by the liquidator in order for the court to properly determine the quantum of remuneration. In the context of a court appointed winding up, this question may be answered by reference to section 473(10) of the Act and to the Corporations rules of the Supreme and Federal Courts. However, the legislation and court rules do not apply in the context of a voluntary winding up. This question was resolved by Justice Barrett in Onefone Australia Pty Ltd v One.Tel Ltd [2010] NSWSC 1120 where, at [26] his Honour noted: –

“…In performing its task, the court should have regard, by analogy, to the principles set out in s473(10) of the Corporations Act that apply to the fixing or review of the remuneration of a court-appointed liquidator.. ”

As a result, in any application by a liquidator of this nature pursuant to section 511(1)(a) of the Act, the liquidator will be required to put forward evidence of the matters identified in section 473(10) of the Act as if the application was in the context of a court appointed winding up. This would include, inter alia, evidence as to whether the work performed was reasonably necessary, the quality of the work performed, the complexity of the work performed and so forth.

Given the obvious problems that can arise if a liquidator is unable to have their remuneration approved, it is important that competent advice be taken early by liquidators to avoid undue delay in approval of their fees.