Derek Achong
High Court Judge Kevin Ramcharan will have to reconsider his decision to approve the significant fees claimed by the joint liquidators of CL Financial (CLF) for the work they did in 2019.
Delivering a judgment on Tuesday, five Law Lords of the United Kingdom-based Privy Council dismissed an appeal from the holding company, which has been under the control of liquidators Hugh Dickson and David Holukoff, of international accounting firm Grant Thornton, since 2017.
While they found that the Court of Appeal made errors when it overturned Justice Ramcharan’s decision to uphold the fees claimed by the liquidators, they still upheld the order of the local courts to direct that the decision be reconsidered, based on detailed guidance they provided on determining such claims.
The appeal centred around Ramcharan’s decision in July 2021 to approve a remuneration and expenses application brought by Dickson and Holukoff.
In the application, the duo claimed US$3,175,492.39 for the services they provided between January and December 2019. They also claimed US$43,641.95 for payroll and tax services, as well as US$312,738.33 for fees and services of Grant Thornton corporate directors between October 2018 and December 2020.
The quoted fees included discounts applied by Grant Thornton.
The AG’s office challenged the claim on the basis that the duo was required to provide further particulars of their work to justify the fees claimed, but the application was still approved by Justice Ramcharan in an email decision.
Although Justice Ramcharan eventually provided a detailed written ruling explaining his decision before the company’s appeal came up for hearing before the Appeal Court, it was not considered by Appellate Judges Prakash Moosai and Charmaine Pemberton.
In December 2022, the judges upheld the company’s appeal, in which it claimed that the High Court Judge mishandled the application as the duo’s claim lacked pertinent details about the services performed during the period.
It pointed out that while the duo claimed approximately US$21 million in fees between September 2017 and December 2018, the fees claimed for 2019 were higher for a shorter period.
In its review of the case, the Privy Council criticised the Appeal Court for failing to consider the written decision.
“Very regrettably, the Court of Appeal overlooked the High Court judgment,” Lord David Richards, who wrote the Board’s judgment, said.
He also stated that the Appeal Court was wrong to have strongly considered that the Government, which initiated the liquidation process to recoup the remainder of the billions of dollars it advanced to bailout CLF in 2009, was in a special position as it had to account for how public funds are spent.
“In dealing with the Government as a creditor, the court and liquidators must treat it in the same way as other creditors. There is no basis in law for according a special position to the Government as a creditor,” Lord Richards said.
Stating that the remuneration of liquidators and similar officeholders, such as administrators, receivers and trustees in bankruptcy, has caused “considerable problems of principle and practice,” Lord Richards considered how the issue was dealt with by courts in various Commonwealth jurisdictions to provide guidance on the sufficiency of supporting information required for such applications.
“This cannot be reduced to a single formula and will always be dictated by the circumstances of the particular case,” he said.
“The two high-level principles are, first, that there must be sufficient information to enable the court to have a clear view of what the officeholder has done and, secondly, that the information should be proportionate to the size of the insolvency and to the cost of preparing the information,” he added.
Dealing specifically with CLF’s ongoing liquidation being overseen by Justice Ramcharan, Lord Richards noted that the information that was presented before him was insufficient.
“First, contrary to the judge’s view, the board would accept the Government’s submission that more detail is, or is likely to be, required in a complex liquidation, and that it is certainly required in this liquidation,” he said.
However, he ruled that the information provided does not need to be as detailed as provided by lawyers in their bills of costs.
“Secondly, there is no question that liquidators should be required to provide details of every phone call or email,” Lord Richards said.
“Thirdly, the Judge was right to say that the court may require a liquidator to provide more detailed information in order to assess the reasonableness of specific charges, but that pre-supposes a sufficient amount of information has been initially provided to enable the court to see if some items require closer scrutiny,” he added.
As part of its judgment, the board ruled that the Court of Appeal was wrong to have overturned Justice Ramcharan’s decision to order that the liquidators be paid their legal costs for bringing the application and order them to pay the State’s legal fees for the appeal.
While Lord Richards ruled that the Government should not be required to pay the liquidators for challenging its position on their fees, he noted that they were still justified in their objection.
“The Board considers that the just order in these circumstances is that half of the costs incurred by the liquidators at first instance and in the Court of Appeal should be paid as expenses of the liquidation,” Lord Richards said.
He also recommended that Justice Ramcharan consider using costs orders to assist in his continued management of the liquidation process.
