Isle of Man: Insolvency Update: Court Guidance On Provisional Liquidators' Fees

In October 2014, the Isle of Man High Court issued useful guidance on the procedure and principles applicable to payment of provisional liquidators' fees in a protracted winding up case. In Exclusiva General Inc v Vintage Holdings, the Court was asked to decide on the procedure for the payment of provisional liquidators' fees where there is an anticipated lengthy duration of their appointment due to matters awaiting trial relating to a potential winding up order.

Background

A without notice order was granted on 19 March 2014 at the request of Exclusiva General Inc ("Exclusiva") for the appointment of provisional joint liquidators to Vintage Holdings Limited ( the "Company") of which Exclusiva is a creditor.

The principal issue for the eventual winding up hearing will be whether there was a valid assignment of the Company's debt to Exclusiva by Exclusiva to Vorko (an alleged creditor of the Company). It is claimed that the purported assignment of the debt is a forgery.

The present application was made by the joint provisional liquidators ("JPLs") for an order that their fees and disbursements be assessed and paid from the assets of the Company and that, pending such assessment, they may pay themselves, by way of account, 80% of their fees and disbursements out of the assets of the Company.

Legal Issues

The JPLs applied on the basis that there would likely be an extended duration of their appointment, so it would be appropriate for them to be remunerated in the usual manner, out of the assets of the Company, rather than pursuant to an indemnity from the petitioning creditor (Exclusiva).

They also requested the appointment of an assessor to assist the Court in assessing and determining their remuneration. They cited the case of Re Independent Insurance Co Ltd [2004] BCC 919 as followed in Re Kaupthing Singer & Friedlander (Isle of Man) Ltd 2009 MLR 516, which confirmed that the Court can refer the matter of fixing remuneration to assessors.

The JPLs submitted that the starting point was Rule 21 of the Companies (Winding-Up) Rules 1934 (the "Winding Up Rules"), which states that if there is no winding up order then the liquidator's costs are normally paid out of the assets of the company and, unless the Court otherwise directs, there is a right to retain from those assets sufficient sums that are required to meet the liquidator's remuneration and expenses.

The authorities suggest that the Court has the discretion to order that the unsuccessful petitioner should replenish the assets from which the provisional liquidators have been remunerated, but this will not be the ordinary position.

The payment of remuneration is defined in the Winding Up Rules and is not dependent on the success or failure of the winding up claim (which in this case could extend until 2015) and the Court could not make an order for costs until that point.

Vintage submitted that any payment on account forthwith should be two thirds of the JPLs fees, not 80%, and that the appointment of an assessor is not necessary in this case.

Decision

Deemster Doyle confirmed that the usual position is that applications such as this, as a rule, are brought without notice. Notice was given in this case and submissions opposing the application were allowed, but the Deemster stated this was not the norm:

"An application by provisional liquidators for the Court to assess and determine their remuneration is, in effect, a matter between the provisional liquidators and the Court. Moreover, the parties may seek such orders as to costs as they see fit following the determination of the Issue [whether the assignment was a forgery]."

The Court referred to Rule 21(3) of the Winding Up Rules which provides for the payment of all costs, charges and expenses properly incurred by a provisional liquidator out of the property of the company where no order for the winding-up of the company is made upon the application.

The English Insolvency Rules 1986 provide at Rule 4.30 that the remuneration of a provisional liquidator shall be paid out of the property of the company if a winding-up order is not made or in the prescribed order of priority if a winding-up order is made.

The Court shall fix the remuneration taking into account:

  • the time properly given by him (as provisional liquidator) and his staff in attending to the company's affairs;
  • the complexity (or otherwise) of the case;
  • any respects in which, in connection with the company's affairs, there falls on the provisional liquidator any responsibility of an exceptional kind or degree;
  • the effectiveness with which the provisional liquidator appears to be carrying out, or to have carried out, his duties; and
  • the value and nature of the property with which he has to deal.

The Court noted that the substance of the relevant English provisions is similar to the Isle of Man provisions in the Winding Up Rules.

The Court followed the English decision in Re U O C Corporation [1998] B.C.C. 191 and Deemster Doyle noted that Carnwath J (as he was then) "put the position well" where it was held that the Court has the power to direct the provisional liquidator's expenses be met out of the company's assets.

The Court concluded that any payment on account should be on the basis of two thirds rather than 80% of the sums claimed and that appointing an assessor was not necessary in the circumstances of the case. The Court could assess the JPLs' remuneration following the outcome of the case, either the winding up of the Company or the dismissal of the winding up application.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Tom Maher
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.