Judge cuts EY partner’s “disproportionate” claim

The Sakr Nominees decision aside, IPs should avoid giving judges an excuse to cut.
Disproportionate claim trimmed by$10,000

EY partner Henry Kazar

Henry Kazar received a less than ideal send off to the financial year thanks to Justice John Griffiths, who on June 30 decided that the EY partner’s claim for $64,390.50 was coming it a trifle high given Kazar and his team laboured for years to engineer a land sale that raised all of fifty grand.

Kazar applied to the Federal Court in April of this year to have his fees and costs in excess of a pre-existing cap approved for work done on the liquidation of Caloola Holdings, the assets of which had until recently been unable to be equitably dispersed due to the not uncommon phenomenon of inter-family friction.

Caloola’s assets at the time of Kazar’s appointment in 2011 included $200,000 in cash and two rural small holdings at Majors Creek in the NSW Southern Tablelands.

According to Justice Griffiths, one of Caloola’s four members objected to “each and every item of costs” in Kazar’s application on the ground that all items claimed “are unnecessary, excessive, exaggerated, double-ups from previous items claimed, not incurred and should never [have] been incurred in the proper course of the liquidation. They are unnecessary, frivolous, excessive, in some cases nonexistent and unjustifiable”. It was notable, the judge added, that the claims were not particularised.

“As has been emphasised, the eventual sale price for Lot 192 in mid-2016 was $50,000.00. This figure was achieved after the liquidator and his staff were involved over a period of several years in seeking to address what was perceived by the liquidator to be issues relating to access which affected that asset,” the judge said.

“It is evident from the relevant time sheets that this issue occupied a considerable amount of time by Mr Kazar and those assisting him. It is also apparent that fees were charged in relation to this matter before the period the subject of the current application.

“As to the period 27 August 2013 to 22 July 2016, the liquidator seeks remuneration in respect of a total of 43 hours spent on this issue. This amounts to fees in excess of $20,000 being sought in relation to an asset which was ultimately sold for $50,000.00.”

The judge said the timesheets also showed that of the 43 hours claimed for work on the sale of Lot 192, Kazar claimed 22.5 hours as performed by himself. A further 8.5 hours was undertaken by two EY senior managers.

“Mr Kazar’s hourly rate was the highest hourly rate listed in the schedule of rates for the relevant period and the hourly rate of the two Senior Managers was the third highest,” he said.

“Comparatively little work was conducted by more junior consultants with lower hourly rates, notwithstanding that many of the tasks for which fees were charged were relatively straightforward and involved things like arranging site visits, liaising with real estate agents regarding the property and inquiring as to the status of the matter with various third parties, including government agencies etc.”

“In brief, therefore, it took more than three years for the liquidator to decide to sell the land “as is” and without resolving the access issues which took up so much time over several years. The sale price obtained was the same as the valuation that Mr Kazar originally received some years previously and prior to all the work which was done over a lengthy period in respect of the access issues.

“In my respectful view, and without doubting the accuracy of the time cost reports in relation to this matter, the fees sought by the liquidator in respect of Lot 192 for the relevant period are disproportionate.

“It appears that the matter of access was allowed to drift over several years and has resulted in a claim for remuneration which is significantly disproportionate to the value of the asset. Accordingly, I propose to reduce the liquidator’s fees in relation to this matter by $10,000.00,” Justice Griffiths concluded.

To read the judgment see: Royds v Royds, in the matter of Caloola Holdings Pty Ltd (in liq) [2017] FCA 731 

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.

1 Comment on "Judge cuts EY partner’s “disproportionate” claim"

  1. Jim Johnson | 5 July 2017 at 10:20 am | Reply

    it seems that this particular winding up was a member’s voluntary winding up which was converted into a winding up by an officer of the court.

    The principles that were espoused by the judge are now clear and unambiguous although it is not immediately clear why the costs of the “liquidator” were “disproportionate” other than by reference to the fact that the work could be done by a person at a lower level of charge out rate in the firm. It is not immediately apparent from the terms of the judgement why it was necessary for the liquidator at his higher rate to do the work himself and wait could not be done at the lower level – this is a matter totally consistent with the authorities both in England and Australia as they presently stand.

    The lesson therefore is that a liquidator should ensure that any work that is carried out in any administration is carried out by a person or persons who are at an appropriate level and otherwise acting reasonably with the role of the liquidator being more of a supervisor – even though the liquidator is liable for any of their actions.

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