Black clips Kerr over staff and hours charges

RSM's David Kerr to produce more detail on fee applicationToo many worker bees can spell trouble for applications to the courts for approval of fees.
David Kerr

RSM Australia’s David Kerr: judge wants more detail before approving fees.

RSM Australia partner David Kerr is the latest practitioner to learn that a truly painstaking accounting of the nature of work done, why it was done, why staff of certain seniority were allocated to do it and a detailed justification of the hours spent are the new normal for insolvency professionals seeking fee approval from the courts.

In the matter of Hunter Valley Dental Surgery Pty Ltd (in liquidation) [2017] NSWSC 691 (2 June 2017) Justice Ashley Black of the NSW Supreme Court has declined Kerr’s application seeking to have his fees approved in the sum of $356,046.40 exclusive of GST sought whilst a hearing on an application to terminate the liquidation is pending.

The judge has instead left the way open for Kerr to provide fresh justification for why he should be paid his fees in full.

“The amount of remuneration claimed by Mr Kerr is large, for a liquidation of a proprietary company of a relatively small scale, notwithstanding the period for which the liquidation has extended,” the judge said in delivering judgment last week.

“It seems to me that the evidence and time recording information on which Mr Kerr relies identify the time that was spent, and to some extent the work that was done, but provide limited assistance in an assessment of its necessity or proportionality.”

Proportionality? If the insolvency profession thought that that genie had been returned to its bottle in the wake of the Court of Appeal’s decision on  Sakr Nominees a reading of Justice Black’s recent commentary on the topic will vanquish that notion.

Justice Black, who late last month approved Sakr liquidator Cliff Sanderson’s renewed remuneration application in the wake of the Court of Appeal decision, is mindful that since Sakr, applications for fees based on the principle of time-based costing must satisfy a higher evidentiary standard, particularly when a liquidation is deemed to be “small”.

As last week’s judgment shows, Kerr RSVP’d to an earlier invitation from the judge to provide a more detailed breakdown of charges but not it seems, in a manner sufficient to satisfy his honour.

“Remuneration is claimed in respect of work done by four partners, a principal, three persons designated “manager 1”, an assistant manager, three persons designated “senior analyst 1”, seven juniors, two treasury staff, an accountant, a person designated “analyst 2”, three further senior analysts and two personal assistants, although I recognise that the substantial bulk of the work on the liquidation was done by Mr Kerr, one “manager 1”, an assistant manager, an “analyst 2” and one of the juniors and lesser amounts of time were recorded by other persons,” Justice Black said.

“It seems to me that, notwithstanding Mr Kerr’s evidence, further explanation is required as to how the liquidation required 140 hours of his time; 365 hours of that manager 1’s time; 152 hours of that assistant manager’s time; 208 hours of the analyst’s time; and the use of numerous other staff members recording time in lesser amounts.

“I have no doubt that Mr Kerr is entitled to remuneration in a substantial amount. However, the evidence as it stands does not leave me with any state of satisfaction that the amount claimed is justifiable in full or allow any rational basis for me to determine another amount that would be justifiable.

“The only order that I will make at this stage is to stand the matter over against the contingency that Mr Kerr will wish to seek leave to reopen and lead further evidence.”

About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

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