Adam Hinks
Partner
Singapore
Key takeaways
CL Financial Ltd (the "Company"), incorporated in Trinidad and Tobago, is a company that held substantial, indirect interests in a diverse range of businesses in multiple jurisdictions. The Government of Trinidad and Tobago (the "Government") became the Company's largest creditor after providing it with significant financial support to prevent the Company's collapse after 2008.
In 2017, the court wound up the Company upon a petition by the Government and appointed joint liquidators (the "Liquidators"). By the time of the winding up petition, the Company's debt to the Government was over TT$15.5 billion (~US$2.3 billion in today's exchange rate), making the Government the Company's largest creditor.
The Liquidators subsequently sought approval of their remuneration, which was opposed by the Government.
At first instance, the court approved the Liquidators' remuneration and was of the view that the remuneration report went into sufficient detail as to the work done.
The Court of Appeal overturned the first instance judge's decision on a number of grounds. Relevantly, the Court of Appeal suggested that the court must undertake a line-by-line examination of the work done and expenses incurred when liquidators propose to be remunerated on a time spent basis.
One of the key issues before the Privy Council was whether the Liquidators had provided sufficient information to enable the court to approve their remuneration application.
After canvassing the position in England and Wales, Ireland, Australia, New Zealand, Singapore, Hong Kong and Canada, the Privy Council helpfully distilled the "largely common approach" undertaken by those jurisdictions to deal with the assessment of remuneration of insolvency officeholders (for simplicity, we refer only to liquidators in this note):
The Privy Council focused primarily on the third factor (which is usually the most contentious). Whether the time costs were reasonably incurred is subject to the liquidators establishing that the work (i) was reasonably undertaken; and (ii) was performed by a person of appropriate seniority. As to these factors, the following points are relevant:
As a final point of potential interest, the Privy Council also raised a query as to whether the Liquidators' expenses (e.g. legal fees) also need to be approved. This issue was not fully argued before the Privy Council and appeared to be complicated by the particular wording in the relevant court order governing the Liquidators' powers and remuneration.
The Privy Council therefore did not express a view on this issue. It did however note the general principle under English law that a liquidator does not need to seek approval of the payment of third-party expenses, but those expenses may be challenged by a creditor (or, where there may be a surplus, a shareholder).
Decisions from Trinidad and Tobago are not strictly binding on the courts in the Cayman Islands, the British Virgin Islands or Bermuda. However, the Privy Council is also the highest appellate court for the Offshore Jurisdictions, and therefore any decisions delivered by it are highly persuasive. Accordingly, and in circumstances where the Privy Council reached its conclusion after analysing various comparable common law jurisdictions, we would expect the courts in the Offshore Jurisdictions to adopt a similar approach on liquidator remuneration applications going forward.
Liquidators and other similar office holders should therefore pay close attention to the key principles set out in the decision (as summarised above), both in terms of record-keeping and in relation to the level of detail required in the liquidators' remuneration reports.
Authors
Senior Associate/Singapore
Partner/Singapore
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