On 9 March 2017, the New South Wales Court of Appeal delivered its judgment in Sanderson as Liquidator of Sakr Nominees Pty Ltd (in liquidation) v Sakr [2017] NSWCA 38, the appeal of Justice Brereton's 2016 decision in In the matter of Sakr Nominees. It will be recalled that Justice Brereton's decision determined liquidator remuneration by applying principles of proportionality.

The Court of Appeal, constituted by five Judges, overturned the first instance decision and remitted the application for remuneration approval to the Supreme Court for rehearing. In doing so, their Honours held that Brereton J fell into error by focussing solely on the issue of proportionality. In the leading judgment, Chief Justice Bathurst observed that the correct approach was for consideration to be given to the work actually done and whether the amount to be charged for it was proportionate to the difficulty and complexity of the tasks to be performed. 

In the course of reasoning, Bathurst CJ said:

• It would not in my opinion be appropriate to fix remuneration on an ad valorem basis by simply applying a percentage considered appropriate to all liquidations or to a particular class of liquidations without regard to the particular work done or required to be done in the liquidation in question;
• The mere fact that the work performed does not lead to augmentation of the funds available for distribution does not mean the liquidator is not entitled to be remunerated for it; and
• There are commonly cases where work is undertaken in an unsuccessful attempt to recover assets whether at the request of creditors or otherwise. Provided it was reasonable to carry out the work and the amount charged for it was reasonable, there is no reason a liquidator should not recover remuneration for undertaking the work.

Insolvency practitioners seeking remuneration now know that the compulsory application of the principle of proportionality in smaller administrations has been put to rest by the Court of Appeal. However, it will remain necessary for practitioners seeking remuneration approval from the Court to demonstrate that the work undertaken was reasonable in the circumstances of the external administration. Principles of proportionality continue to remain relevant but are not, by themselves, determinative of the remuneration amount.