Cayman Islands: Creditors Back in the Driving Seat Over Liquidators’ Remuneration: U.K. Insolvency Rules Apply

An attempt by the Grand Court sitting ‘en banc’ to impose a schedule of rates on insolvency professionals and prescribed guidelines for the approval of remuneration of Official Liquidators and their staff was rejected by the Court of Appeal in its entirety by a decision handed down on 29 April 2003.

Whilst no full reasons are yet available at press time, the Court of Appeal held that, since the UK Insolvency Rules 1996 apply to the Cayman Islands by virtue of the Grand Court Rules Order 102 Rule 17, the issue of the remuneration of Official Liquidators should therefore be governed by the relevant Insolvency Rules 4.129 and 4.131.

In a nutshell, these rules provide that the Liquidators must first agree their remuneration with the Liquidation Committee or the Creditors and thereafter apply to the Court if they are dissatisfied with the creditors’ decision. The established practice in Cayman has until now been for every Winding up Order to provide that Official Liquidators must seek court approval prior to any payment of fees, and for hourly rates of remuneration to be set out in a tariff in the Winding Up Order. It was in this context that the Court’s attempt to fix rates, irrespective of prior creditor approval, arose.

This judgement provides welcome clarification in an area of the law that had become increasingly uncertain, with different judges of the Grand Court adopting diverse approaches to approving the Liquidators’ remuneration. There had previously been instances where the court had declined to approve the Liquidators’ fees even though these had previously been approved by the body of creditors. The previous en banc Ruling of the Grand Court (which has now been set aside) had been greeted with widespread concern, in particular since the rates which the Judges had attempted to fix for official liquidators were some 10% to 15% below market rates. It is now clear that remuneration is in the hands of creditors, and the Court has only an appellate or adjudicatory function.

Hunter & Hunter represented the Appellants, the Cayman Islands Society of Professional Accountants.