Proportionality principle takes another bite

Promising not to seek fees above an already discounted amount didn’t protect the remuneration claim of Richard Tucker and John Bumbak from some discreet judicial flensing when they brought it before West Australian Supreme Court judge Gary Cobby seeking approval.

“The court has a very wide discretion in allowing and fixing the level and basis of remuneration. In the present case, the proportionality of a partner of the plaintiffs being engaged for such an extensive period of time in dealing with the company’s assets, in circumstances where the plaintiffs retained competent professional advisors in respect of the same subject matter, is not readily apparent.” Justice Gary Cobby.

The KordaMentha duo went to court in respect of work performed in the administration and liquidation of Central City Pty Limited, a property investment holding company that at the time of their appointment on June 13, 2023 owed $4.23 million to eight unsecured creditors and Westpac as the sole secured.

The company was asset rich but required external administrators to manage sales and discharge the debts.

As Justice Cobby recounted this week in Central City Pty Limited (Administrators Appointed) Ex Party Tucker and Hutson as joint and several administrators of Central City PTY LTD [2025] WASC 171 Tucker and Bumbak remuneration was improperly boosted because too much of the sale process was handled by either a KordaMentha partner or KordaMentha staff.

“The bulk of the work giving rise to the amount of $187,242.50 is recorded as having been performed by a partner in the plaintiffs’ firm,” the judge said.

“That individual is recorded as having spent 135.20 hours (the equivalent of 13.5 working days) in connection with dealing with the company’s assets, at an hourly cost of $850.

“A business analyst, charged at $395 an hour (exclusive of GST) is said to have spent a further 91 hours in dealing with the company’s assets.

“I accept that the amounts incurred in respect of dealing with the Company’s creditors, including the secured creditor, statutory tasks, administration and risk management and the bulk of the administration costs to be reasonable given the work that was required and the costs that were incurred,” the judge said.

“I am not satisfied, however, that the charging of administration costs at $395 an hour is reasonable, and have reduced the amount claimed in that respect to $200 an hour, reducing the amount allowed in respect of that work from the $4,187 claimed to $2,120.”

The judge also recounted how in his March 2024 affidavit, Tucker gave inadmissible opinion evidence as to costs savings he claimed to have been achieved by means of the plaintiffs’ staff undertaking work in relation to the marketing of the properties for sale, by way of comparison to costs he said were likely to have been incurred had those tasks been left to the real estate agents retained to act on the sale.

“I infer from that claim that the plaintiffs took a more involved role in the marketing and sale of the company’s properties than might usually be the case, but it is not possible from the evidence to form a precise view as to the extent of the involvement of the plaintiffs and their staff in the process,” the judge said.

“I have not had regard to Mr Tucker’s evidence to the extent that the plaintiffs assert that their costs should be assessed as reasonable by reference to the cost saving Mr Tucker claims was achieved, that evidence being inadmissible due to Mr Tucker’s failure to disclose the bases for his opinions, including (amongst other things) the various agreements with the real estate agents to which Mr Tucker sought to draw favourable comparisons, why the plaintiffs’ staff were qualified to carry out the relevant work, and why their having done so resulted in a lessened cost to the company.

“There was also no explanation as to why the plaintiffs determined it to be appropriate to take what they appear to accept to have been an unusual level of involvement in relation to the valuation and sale of the properties.

“That is particularly so when the plaintiffs have claimed that the costs incurred in the administration were otherwise increased by their dealing with the director and creditor and former shareholder Ms (Lisa-Michelle) Scaffidi in relation to the sale of the company’s assets, a matter which was within the control of the plaintiffs to a degree,” he said.

In applying the razor the judge said he wasn’t satisfied that the claim was fair and reasonable in its entirety and carved off $21,250.

“The court has a very wide discretion in allowing and fixing the level and basis of remuneration,” he said in conclusion.

“In the present case, the proportionality of a partner of the plaintiffs being engaged for such an extensive period of time in dealing with the company’s assets, in circumstances where the plaintiffs retained competent professional advisors in respect of the same subject matter, is not readily apparent, even when regard is had to the individual line item narrations for the work in question.”