A recent decision of the Grand Court will provide welcome certainty to Cayman Islands liquidators appointed over trust companies or companies that hold trust assets because it has confirmed, in the face of ardent opposition, the principle that liquidators are entitled to be paid by recourse to trust assets where there are no, or a shortfall of, estate assets.


In this case, the liquidators found themselves appointed over a company whose sole function had been the provision of custodial services in relation to assets it held on trust for its numerous customers. The liquidators were required to carry out a significant amount of work in order to ensure the proper return of those assets to the customers and, in the absence of sufficient estate assets to fund their endeavours, sought remuneration equal to less than 1% of the value of those assets for doing so. The liquidators faced opposition from parties who together rejected (a) as a matter of principle, that the liquidators should be paid at all, further contending that they should be required to pay expenses of the liquidation such as overheads and legal fees personally; and (b) the proposed apportionment of fees and expenses incurred by the liquidators as between the company's customers.


In a detailed judgment the Honourable Chief Justice Smellie QC conducted a thorough and helpful analysis of Berkeley Applegate principles in which he confirmed that the jurisdiction was available to assist liquidators in the Cayman Islands; dismissed the arguments presented in opposition; and noted that the liquidators were not to be expected to undertake the work that they had, at their own expense. The Honourable Chief Justice commented that the liquidators were officers of the Grand Court and were "not mere officious inter-meddlers" observing that the work undertaken by them was "necessarily required", had "doubtlessly added value to the [customers' assets]" and "indeed had redounded to the benefit of all [of the company's customers]". The Honourable Chief Justice further observed that the work carried out by the liquidators would have had to have been carried out by some sort of appointee (likely a receiver), if not the liquidators in any event and at likely a higher cost than that proposed by the liquidators.

Since there were a broad range of customers, each with their own unique portfolio of assets (by value and by nature of assets), the liquidators proposed that a simple split of costs as between the customers was neither appropriate nor equitable. As such, they presented a range of mechanisms through which they suggested their fees and expenses could be apportioned and set out their recommendation as to the most equitable method, noting that a perfect allocation of all costs against each customer (as proffered by the respondents) could only be achieved at disproportionate expense. The most equitable approach, they argued, was a mathematical cost-allocation model which produced a proportionate division of total costs as between the customers, subject to certain adjustments which reflected portfolio composition and asset value. The Honourable Chief Justice agreed with the liquidators' proposal noting that, "those who seek the assistance of the Court of equity, must do equity by contributing what is a fair if imprecise share of the overall costs". His Lordship rejected the opposers' argument that an exact account should be provided to each individual customer for scrutiny, because the liquidators were not themselves trustees of the customers' assets and were not therefore subject to the strict accounting approach that the opposers argued they were.

The judgment makes instructive reading for insolvency practitioners and advisors: In the matter of Caledonian Securities Limited (in Official Liquidation), unreported, Grand Court of the Cayman Islands, Smellie CJ, 5 May 2016.

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