Smellie J
```html 1 IN THE GRAND COURT OF THE CAYMAN ISLANDS 2 3 CAUSE NO. 436 OF 1991 4 CAUSE NO. 399 OF 1992 5 CAUSE NO. 40 OF 1994 6 CAUSE NO. 41 OF 1995 7 CAUSE NO. 167 OF 1992 8 9 10 11 IN THE MATTER OF CONSOLIDATED 12 APPLICATIONS FOR THE GRANT OF INCREASES 13 IN THE LIQUIDATORS FEES. 14 15 16 17 18 19 20 21 22 23 24 APPEARANCES： 25 26 Mr. Guy Locke of W.S. Walker & Co. for the Liquidators. 27 Ms. Lisa Agard, Crown Counsel, as amicus curiae. 28 29 30 RULING 31 32 33 34 These applications first came on for hearing ex parte, on 15th August 1996, 35 when they were adjourned out at the instance of the Court for lack of 36 supporting material on which to ground them. 37 In matters ting mak tenior p 38 Lybrand and a liquidator in each matter, citing the increased costs of doing 40 business in the Cayman Islands since the respective dates of the 41 commencement of the liquidations. 42 ```
```html 1 In his affidavit in one matter - Cause 40 of 1994 - Mr. Johnson also cited the 2 results of what he described as an “informal survey” of “the charge out rates 3 of the four main firms in this jurisdiction”. This he offered as a benchmark 4 against which to set the increases which are sought in that matter. The 5 affidavit also cross-referred to that “survey” for reliance in the context of 6 the other applications as well. 7 In the same affidavit Mr. Johnson also cited a recent order In the matter of 9 Argentina Income & Growth Fund Limited Cause number 301 of 1996 as 10 precedent for the order sought in the present matters. 12 On the resumed hearing before me, Mr. Locke for the liquidators and Ms. 13 Agard (invited by the Court having regard to the Governor’s role as 14 petitioner in the compulsory liquidation in Cause 40 of 1995) reported the 15 results of further enquiries made of firms within the jurisdiction as to their 16 charge out rates. 18 I was also referred to the Consumer Price Indices for 1985 to 1995 as 19 published in the Government Handbook Annual Report for 1995. 21 Thus, these consolidated applications proceeded on the basis that the Court 22 has an unfettered power to increase the liquidators’ fees, from time to time, 23 by way of ex parte applications brought on their behalf. 25 Mr. Locke also explained to me that part of the rationale behind the 26 applications was to allow the liquidators a uniform charge out rate in respect 27 of all the liquidations. To that end what is sought is a scale of fees setting 28 bands for each category of professional personnel from senior managers 29 down to junior accountants within which the liquidators would be given a 30 discretion to charge, depending on the complexity of the work to be done. 31 That appears to have been the practice, sometimes sanctioned by this court 32 which has been adopted by the profession in this jurisdiction. 33 In t of the firm ly of the su s I was ed ted they 34 firmly of the view for the reasons which follow that I might not accede to 37 the applications as they presently stand. 38 ```
Three of the matters are voluntary liquidations proceeding under the supervision of the Court. The other two are by virtue of orders for compulsory windings-up. I accept that there is jurisdiction to adjust the rate of remuneration of the liquidators whatever the mode of winding-up. In a winding-up subject to the supervision of the court under Section 153 of the Companies Law, the Court exercises all powers which it might have exercised if an order had been made for winding-up the company altogether by the Court. And specifically on the question of jurisdiction to set and vary the liquidators' fees, that point is dealt with In re Mortimers (London) Limited [1937] 1 Ch. 289. I should also state that no question arises here as to the bona fides of the liquidators or as to the accuracy of their evidence in bringing the application. That however, can be no final arbiter of the appropriate quantum of fees. The fundamental objection I see arises from the ex-parte manner of the application; it does not recognise the right or interest of the creditors or contributories to be heard upon the application. That right and interest is recognised in the Insolvency Rules - and before them in the Companies (winding-up) Rules 1949, rule 159. The Insolvency Rules now apply - by virtue of Grand Court Rules 1995 Order 102 Rule 17 - to proceedings relating to the winding-up of Companies under Part V of the Companies Law (Revised), as are these proceedings. I set out the rules to the extent applicable to the present matters: 4.127 - liquidators receive remuneration for their services as liquidators. (1) The liquidator is entitled to receive such remuneration as the Court may order. (2) The remuneration shall be fixed either - (a) as a percentage of the value of the assets which are
1 realised or distributed, or of the one value and the other in combination, or 2 (b) by reference to the time properly given by the Insolvency practitioner (as liquidator) and his staff in attending to matters arising the winding-up. (3) Where the liquidator is other than the official receiver [(as here where there is no such office)], it is for the liquidation committee (if there is one) to determine whether the remuneration is to be fixed under paragraph (2) (a) or (b) and, if under paragraph (2)(a), to determine any percentage to be applied as there mentioned. (4) In arriving at that determination the committee shall have regard to the following matters - (a) the complexity (or otherwise) of the case, (b) any respects which, in connection with the winding-up, there falls on the insolvency practitioner (as liquidator) any responsibility of an exceptional kind or degree, (c) The effectiveness with which the insolvency practitioner appears to be carrying out, or to have carried out, his duties as liquidator; and (d) the value and nature of the assets with which the liquidator has to deal. (5) If there is no liquidation committee, or the committee does not make the requisite determination, the liquidators remuneration may be fixed (in accordance with paragraph (2)) by a resolution of a meeting of creditors; and paragraph 35 applies as it does to them the liquidation. (4) applies as it does to committees. (6) If not fixed as above, the liquidators remuneration shall be in accordance with the scale laid down for the official receiver by general
Regulations There is no such scale in the Cayman Islands. #### 4.129 If the liquidator's remuneration has been fixed by the liquidation committee, and he considers the rate or amount to be insufficient, he may request that it be increased by resolution of the creditors. #### 4.130 (1) If the liquidator considers that the remuneration fixed for him by the liquidation committee, or by a resolution of the creditors, [(or as under Rule 4.127(6))], is insufficient, he may apply to the court for an order increasing the amount or rate. (2) The liquidator shall give at least 14 days notice of his application to the members of the liquidation committee, and the committee may nominate one or more members to appear to be represented and to be heard, on the application. (3) If there is no liquidation committee, the liquidator's notice of his application shall be sent to such one or more of the company's creditors as the court may direct, which creditors may nominate one or more of their members to appear or be represented. (4) The court may if it appears to be a proper case, order the costs of the liquidator's application, including the costs of any member of the liquidation committee appearing (or being represented) on it, to be paid out of the assets of the company. It is also significant that Insolvency Rule 4.131 provides for an application by a creditor for reduction in the liquidators fees in the following terms:
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ascertained in relation to the liquidator's services, and not in relation to the
means of the remunerating party, or the fortunes of the liquidation.
The court will consider all the circumstances of the particular case and
determine what, in those circumstances, is a fair remuneration to pay: In re
Amalgamated Syndicates Limited [1901] 2 Ch. 181.
The final observation I make - to the extent that it might assist the extra-
judicial efforts at setting the fee scales - is that Insolvency Rule 4.127(2)(a)
(the fixing of fees as a percentage of the value of the assets) - may not be in
keeping with the established practice within the industry in this jurisdiction.
It follows that in invoking the Rules, I am not to be taken as necessarily
sanctioning or imposing that method as a particular means by which to
arrive at the reasonable rate of remuneration.
Being of the firm view that these applications ought not to have been
brought in their present state, I order that the costs shall not be a charge in
any of the respective liquidations.
A. Smellie Q.C.
Judge of the Grand Court
Dated this day of 1996