Guernsey: Fee Estimates In Liquidation: The Importance Of Getting In Early

The recent decision from the Guernsey Royal Court of DM Property Holdings (Guernsey) Limited (in Liquidation)1 is of fundamental importance to Guernsey insolvency practitioners ("IP") as it provides cautionary guidance on the practical implications of Practice Direction No. 3 of 2015 ("Practice Direction").  This Practice Direction provides for the submission of fee estimates by liquidators and administrators in advance of applications to wind up companies or place them into administration and for those estimates to be varied if additional information comes to light.  The implications are that an accurate revised fee estimate must be submitted in a timely manner if such fees are to be recoverable where there is information or circumstances which was previously unknown or "out of the ordinary".  If the information or circumstances could have been envisaged or was already known by the Liquidator/Administrator then there is a danger that the Court will not permit the revised estimate of fees.

Facts

At first blush, the scope of work to the liquidator appointed over DM Property Holdings (Guernsey) Limited ("Company") appeared to be a relatively straightforward exercise. The Company's primary asset was the residential home of the directors of the Company. 

An initial cost cap of £15,000 was set with liberty to apply.  A second application for an increase to the cost cap was granted to £36,851.50, on the basis that the liquidator incurred additional fees to evict the occupiers from their residence.  Those fees had not and could not have been foreseen by the liquidator at the time of appointment.  On preparation of the final report, the professional fees incurred had exceeded the revised cap and the total stood at £55,193.  The justification advanced by the liquidator for not having approached the Court to seek a further increase to the cost cap, before these fees were incurred, was an effort to save fees.  Several months after the final report was submitted, the liquidator then sought to revise the fee cap.  The Court declined the increase and awarded fees in the reduced amount of £45,000.

Comment

 The Court suggested that the very circumstances that the liquidator relied upon to justify the increase, should have been foreseeable, particularly at the time of the application of the revised fee estimate. 

The guidance offered by the Court in relation to the Practice Direction is that it may, in its judicial discretion to restrict fees, introduce a "level of discipline" into a liquidation (or administration process as the case may be).  The practical lesson to take away from the decision is that in circumstances where an IP is faced with circumstances that appear to be out of the ordinary and especially where they could not have been within the reasonable contemplation of the IP at the outset of the appointment, then a pragmatic and pro-active approach must be followed to seek an increase to the cost cap as soon as possible.

In those circumstances, not only should the IP set out a detailed and comprehensive affidavit for those additional and unforeseen fees, but it should apply for the fee increase before they are incurred.  Failure to bring this to the Court's attention may not be a total bar to obtaining future anticipated fees, but invariably the Court has given guidance that it may create an otherwise avoidable level of difficulty for their recovery, particularly if bought late in the day and in circumstances where there has already been a previous application for an increase.  It should also be born in mind that even if the creditors agree to an office- holder's fees this is not determinative for the Court as it is settled law that that such office-holders owe duties to the Court which will override the creditors agreement to the level of fees.

During the course of an insolvency process an IP may uncover a myriad of information which previously may not have been readily available.  That information may lead to supplementary causes of action, it may shed light on entities related to the structure or it may point the finger at an officer of the company which previously had not been tainted.  Under those circumstances and on a full and comprehensive explanation to the Court to justify an increase to the fee estimate pursuant to the Practice Direction, we consider that there should be a good prospect of such an increase being granted by the Court.

As is well known there are fairly well advanced plans to introduce a revised insolvency law into Guernsey legislation.  Such plans include developing a new set of insolvency rules similar to that in place in the UK albeit not as extensive.  Thought should be given to incorporating into the Guernsey insolvency rules some of the UK provisions on the methods by which fees are approved by creditors and the information needed for approval.  It should be noted that in the UK there is no need to seek approval of the Court unless the creditors will not agree to the level of fees.  It might be thought that where sophisticated corporate creditors are involved they are the best judges of whether an office-holders' fees are acceptable.

Footnotes

1 Judgment 1/2017

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
 
In association with
Related Topics
 
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions