We have previously reported that the Official Receiver retains its entitlement to ad valorem fees on the conversion of a compulsory liquidation to a creditors' voluntary winding-up (CVL).
This entitlement was challenged in the recent matter of Re MF Global Hong Kong Ltd1 in which the Court of Appeal confirmed that ad valorem fees were payable on the conversion of the compulsory liquidations of two MF Global companies to CVLs.
The matter came before the Court of Appeal in the following manner.
The compulsory liquidations of MF Global Hong Kong Limited and MF Global Holdings HK Limited ("Companies") were converted to CVLs by orders made by the Honourable Mr. Justice Harris in October 2012 ("Orders"). The Orders provided for the appointment of the then provisional liquidators (PLs) as liquidators of the Companies and for the realisations made by the PLs up to the date of the conversion to be paid to them as liquidators "without any deduction being made in respect of ad valorem fees pursuant to the Companies (Fees and Percentages) Order, such fees not being payable by a provisional liquidator appointed under section 193 of the [then Companies Ordinance, Cap 32]"2 (emphasis added). The Official Receiver appealed on the basis that it should be entitled to its ad valorem fees. The hearing turned on the question of whether the reference to "liquidator" in each of the relevant statutory provisions which prescribe the Official Receiver's entitlement to ad valorem fees includes provisional liquidators appointed under section 193 of the now Companies (Winding up and Miscellaneous Provisions) Ordinance, Cap 32 (CO).
The argument advanced on behalf of the PLs and which was accepted by Harris J at first instance was that having been appointed under section 193 CO, the PLs were not "liquidators" within the meaning of section 2(1) CO which defines "liquidator" as including "a provisional liquidator holding such office by virtue of section 194". As a consequence, they were not obliged to pay the substantial ad valorem fees on the amounts realised by them while acting as PLs; that obligation was statutorily imposed on "liquidators". The PLs relied on an earlier decision of Barma J (as he then was) in construing the meaning of "liquidators". In the matter of Lehman Brothers Securities Asia Ltd (No.2)3, his Lordship held in the context of an application for payment of interim fees incurred by provisional liquidators appointed under section 193 CO that such provisional liquidators fell outwith the definition of "liquidator" in section 2(1) CO. His Lordship considered those provisional liquidators as not holding their office by virtue of section 1944.
On this occasion, his Lordship reconsidered the interpretation which he placed on section 2(1) CO in Lehman Brothers Securities Asia Ltd (No.2)5 and confirmed that having given the matter much consideration he:
Appeal Justices Yuen and McWalters agreed with Barma JA on this interpretation of section 2(1) CO, affirming that in Hong Kong, provisional liquidators continuing in office after the making of a winding-up order will be treated as "liquidators" for the purpose of the CO.
As a final note, notwithstanding Barma JA's view in this decision on the interpretation of section 2(1) CO, his Lordship did confirm that the result in respect of interim payment of fees in Lehman Brothers Securities Asia Ltd (No.2)7 was correct8.
Please see our legal update on this earlier decision regarding interim payments.
1 unreported,  CACV 251 and 252 of 2012, 2 March 2015.
2 Ibid at §2.
3  1 HKLRD 58.
4 Ibid at pp.68-70.
5  1 HKLRD 58.
6 unreported,  CACV 251 and 252 of 2012, 2 March 2015, at §25, 28 & 29.
7  1 HKLRD 58.
8 unreported,  CACV 251 and 252 of 2012, 2 March 2015, at §27.
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