IpsofactoJ.com: International Cases [2007] Part 10 Case 4 [PC]


THE PRIVY COUNCIL

(from the Court of Appeal, Cayman Islands)

Coram

Attorney General

- vs -

James Cleaver & Co

(as liquidators of Liberty Capital Ltd and Sun Holding Ltd)

LORD BINGHAM OF CORNHILL

LORD CLYDE

LORD HOPE OF CRAIGHEAD

LORD CARSWELL

LORD MANCE

6 JUNE 2006


Judgment

Lord Mance

(delivered the judgment of the Board)

INTRODUCTION

  1. On 18th October 2002 the Grand Court of the Cayman Islands sat unprecedentedly in a three-man constitution (Smellie CJ and Sanderson and Henderson JJ) to hear applications by joint official liquidators for orders providing for their remuneration by the four companies of which they had been appointed official liquidators by order of Sanderson J on 27th September 2002. In its judgment dated 20th December 2002 the Grand Court set guidelines for fee rates and gave further directions regarding the fees, costs and time chargeable and the procedures to be followed in winding up and liquidation proceedings. The directions provided that the liquidators would submit their fees, calculated in the light of the guidelines, with appropriate information to creditors’ committees where these existed, that the Court would place considerable weight on the views of such committees, but that the liquidators’ fees should thereafter be submitted to the Grand Court for approval.

  2. The liquidators appealed to the Court of Appeal of the Cayman Islands. No-one appeared or sought to intervene when the appeal was heard on 29th April 2003. On 30th April 2003 the Court of Appeal gave a short oral judgment allowing the appeals and set aside the judgment of the Grand Court in its entirety. On 1st August 2003 the Court of Appeal gave a fuller written judgment. The Court held that the procedure for fixing the remuneration of Cayman Island liquidators is governed by the English Insolvency Rules 1986 (SI 1986/1925) as provided by those Rules, no recourse to the Court is required and no requirement exists for a liquidator to apply to the Court to sanction fees approved by a liquidation committee or creditors’ resolution, although he may do so if he wishes.

  3. In April 2004 the Attorney General of the Cayman Islands sought the Court of Appeal’s leave to intervene and to appeal to the Privy Council. The application was refused on the ground that it was out of time and the Court had no jurisdiction to extend time. In June 2004 the Attorney General sought the Board’s leave to intervene and appeal, on the ground that the Court of Appeal’s decision was “wrong and is likely to have been based on an incomplete understanding of the relevant legislative history” and the matter is “one of particular public importance in the Cayman Islands”. On 9th February 2005 Her Majesty in Council approved a report by the Board advising that special leave should be given to the Attorney General to enter and prosecute an appeal, subject to the reservation of the question of his standing to do so as a preliminary issue at the hearing of the appeal. On this basis the matter came before the Board on 27th and 28th March 2006.

  4. The background to the Grand Court’s decision to sit en banc was judicial concern to ensure that the fees charged by insolvency practitioners in Cayman Island insolvencies and liquidations were and could be seen to fair and reasonable - having regard, as the Grand Court explained, to the Cayman Islands’ position as one of the world’s largest financial centres containing the registered offices of thousands of off-shore companies, the significant number of corporate liquidations in the Cayman Islands, the limited number of accounting firms undertaking almost all the available liquidation work, the absence of any competition legislation to prevent them setting the same or similar hourly rates and the virtually tax-free nature of the income so generated.

  5. In the case of three companies, Liberty Capital Ltd, Integrity Capital Ltd and Sun Holding Ltd, the liquidator was Mr. James Cleaver and remuneration was sought at specified hourly rates ranging from US$450 per hour for a partner to US$95 for an administrative assistant. In the case of the fourth company, Waterford Insurance Ltd, the joint liquidators were Mr. Christopher Johnson and Mr. Nicholas Freeland of PricewaterhouseCoopers, and remuneration was sought “at their usual customary rates, such fees and expenses to be approved by the Court”; this, it appeared, would involve US$475 to US$500 per hour for a partner.

  6. No formal order was drawn up following the Grand Court’s judgment on 20th December 2002. But it is common ground that the judgment contained in effect nine separate orders, as listed in the judgment given on appeal by the Court of Appeal on 1st August 2003. First, the Grand Court set guidelines for fee rates in winding up and liquidation proceedings based on fee-earners’ years of experience, with the highest rate (unless there were exceptional circumstances) being set at US$400 per hour for the most senior and experienced person engaged in the most complex matters and a guideline of between US$100 and US$150 for those of one to three years’ experience. These rates were to be reviewed from time to time by reference to the Government cost of living indices and any other factors deemed appropriate by the Court. The eight further orders were as follows:

    (2)

    No separate fees should be allowed for official liquidators’ non-professional support staff save where there is a significant and identifiable task more complex or onerous than usual.

    (3)

    Such non-professional support staff may charge fees, if applicable, at a rate of $50.00 per hour.

    (4)

    Costs associated with applications for obtaining approval of fees will not be approved by the Court for payment out of the liquidation estate.

    (5)

    Time records of official liquidators and their staff must be recorded at minimum intervals of 0.10 per hour.

    (6)

    When considering the reasonableness of fees charged by official liquidators and their staff, the relevant creditors’ committee, if constituted, should do so on the basis of the prescribed guidelines laid down by the Court ....

    (7)

    Pre-approved international fee protocols accepted by a foreign court and presented for approval by the Grand Court must show evidence of the foreign court’s informed consideration of the issues raised in the judgment.

    (8)

    Current time rates generally adopted by insolvency practitioners for similar types of work are not accepted as a criterion for setting appropriate rates of remuneration for liquidators and their staff.

    (9)

    Fees charged by liquidators and their staff are to be submitted to court for approval.

  7. The Court of Appeal summarised its conclusions in its written judgment as follows:

    (1)

    The English Insolvency Rules 1986 particularly Rules 4.127, 4.128, 4.129, 4.130 and 4.131 are the applicable rules in the Cayman Islands for fixing the remuneration of liquidators.

    (2)

    In the absence of any challenge to the process set by the Insolvency Rules by the official liquidator or stakeholders under those rules, no recourse to the Court is required.

    (3)

    There is, therefore, no requirement for the liquidator to make applications to the Court for approval of fees where the fees are approved by a liquidation committee or by a resolution of the creditors. They may, however, if they wish, make such an application to the Court. (Section 107(2) The Companies Law).

    (4)

    The matters to considered by the committee are set out in Rule 4.127(4) of the Insolvency Rules 1986. Where there is no liquidation committee and the fees are approved by a resolution of a meeting of creditors, Rule 4.127(4) also applies.

    (5)

    Where the committee has approved the fees but, nevertheless, the liquidator seeks the approval of the Court, an affidavit from the committee to the effect that the committee has approved the fees, should be filed with the application.

    (6)

    Applications to the Court may be made by either the liquidator or the creditors if a dispute arises as to the amount of the fees to be paid to the liquidators.

    (7)

    Where the Court is required to fix the fees, the market rates as charged in the Cayman Islands should be taken into account. The Court should be provided with expert evidence and should only fix the fees based on evidence before the Court.

    (8)

    The remuneration of provisional liquidators shall be fixed by the Court on the application of the liquidator.

    (9)

    Where applications are made by the liquidator to the Court for the approval of fees, costs may be awarded to the liquidator out of the assets.

    THE LEGISLATION

  8. The Grand Court relied for its jurisdiction upon section 107(2) of the Companies Law of the Cayman Islands (2002 Revision):

    There shall be paid to the official liquidator such salary or remuneration, by way of percentage or otherwise, as the Court may direct, and if more liquidators than one are appointed such remuneration shall be distributed amongst them in such proportions as the Court directs.

  9. The application of the English Insolvency Rules 1986 in Cayman Island liquidations is provided by The Grand Court Rules, 1995 Order 102 Rule 17 in the following terms:

    Unless and until any rules are made under Section 174 of the Law, all applications to the Court made pursuant to Sections 49, 79 and Part V of the Law and all proceedings concerning or arising out of the liquidation of any company shall, so far as practicable, be made in accordance with The Insolvency Rules 1986 (SI 1986/1925), insofar as such rules are not inconsistent with the Law or such other rules as may be applied to the proceeding in question.

  10. The power to make Grand Court Rules is conferred by section 19 of the Grand Court Law (1995 Revision) upon a Rules Committee consisting of the Chief Justice, the Attorney General and two legal practitioners appointed by the Chief Justice after consultation with the Law Society. The Chief Justice and one other constitute a quorum. Such Rules may under section 19(3) be made for specified purposes including

    (a)

    regulating pleading, practice and procedure in respect of the conduct of criminal business and civil business before the Court .... And

    ....

    (j)

     

    generally, providing for such other matters as may be reasonably necessary for or incidental to the administration of this Law.

    Section 19(5) further provides that Rules so made

    may .... apply any Rules of the Supreme Court in England which regulate the practice and procedure in the High Court in England.

  11. The English Insolvency Rules 1986 include the following provisions:

    4.127

    Fixing of Remuneration

    (1)

    The liquidator is entitled to receive remuneration for his services as such.

    (2)

    The remuneration shall be fixed either-

    (a)

    as a percentage of the value of the assets ..., or

    (b)

    by reference to the time properly given .... in attending to matters arising in the winding up.

    (3)

    Where the liquidator is other than the official receiver, it is for the liquidation committee (if there is one) to determine whether the remuneration is to be fixed under paragraph 2(a) or (b) and, if under paragraph 2(a), to determine any percentage to be applied as there mentioned.

    (5)

    If there is no liquidation committee, or the committee does not make the requisite determination, the liquidator’s remuneration may be fixed (in accordance with paragraph (2)) by a resolution of a meeting of creditors ....

    (6)

    If not fixed as above, the liquidator’s remuneration shall be in accordance with the scale laid down for the official receiver by general regulations.

    4.130

    Recourse to the court

    (1)

    If the liquidator considers that the remuneration fixed for him by the liquidation committee, or by resolution of the creditors, or as under Rule 4.127(6), is insufficient, he may apply to the court for an order increasing its amount or rate.

    4.131

    Creditors’ claim that remuneration is excessive

    (1)

    Any creditor of the company may, with the concurrence of at least 25 per cent in value of the creditors (including himself), apply to the court for an order that the liquidator’s remuneration be reduced, on the grounds that it is, in all the circumstances, excessive.

  12. Before the Grand Court, the liquidators placed no reliance on the 1986 Insolvency Rules. For reasons which the Grand Court noted were unexplained, they referred instead to the previous, differently worded 1949 Rules, according to which “The remuneration of a Liquidator, unless the Court shall otherwise order, shall be fixed by the Committee of Inspection ....” and the Board of Trade, if of opinion that the remuneration so fixed is unnecessarily large, “may apply to the Court, and thereupon the Court shall fix the amount of the remuneration ....” (see rule 159 of the Companies (Winding up) Rules 1949). Before the Court of Appeal the liquidators deployed the 1986 Rules, and, in its initial oral judgment, the Court referred only to those Rules and made no mention of section 107 of the Cayman Islands Companies Law. In its written judgment the Court recited both s.107 and the 1986 Rules.

    THE ISSUES

  13. Before the Board there was disagreement as to the correct analysis of the Court of Appeal’s reasons for setting aside the Grand Court’s judgment in its entirety, and, in particular, as to whether the Court of Appeal took a more limited view than the Grand Court regarding the existence and scope (as opposed to the manner of exercise) of the Grand Court’s jurisdiction over liquidators’ remuneration. This disagreement bears not only on the substantive issues on any appeal, but also on the preliminary question whether the Attorney General should have leave to intervene and pursue an appeal. The Attorney General’s application is made on the basis that the appeal raises a general issue of public importance relating to the effect and application of section 107(2) of the Companies Law and the Grand Court’s powers in respect of the remuneration of court-appointed liquidators. He submits that the Court of Appeal erred fundamentally in its approach to this issue, and that he has, in his quasi-judicial role as the guardian of the public interest, a sufficient interest to justify the grant of leave to intervene to correct the Court of Appeal’s error.

  14. Lord Lester of Herne Hill QC, representing the liquidators in their opposition to the Attorney General’s application, accepts the general propositions in paragraph 87 of the Attorney General’s Case that the Attorney General has standing to apply to intervene “where he has a sufficient interest in his capacity as guardian of the public interest”, and that “It is neither necessary nor appropriate to mark out any precise limitations to this role”. It is common ground that this does not give the Attorney General standing to intervene whenever he thinks a court has reached a wrong decision. Lord Lester also accepts that, if an appellate court wrongly ousts a first instance court’s jurisdiction to do justice, the Attorney General may have cause to apply to intervene. But he submits, in common with Mr. Gabriel Moss QC, who has presented the remainder of the liquidators’ submissions, that the Court of Appeal’s present decision involved no question of jurisdiction or public importance, merely a question of practice and evidence. It being in dispute whether the appeal raises any general issue of public importance, the Board concluded that, before determining the preliminary question of standing, it should also hear argument on the substantive issues involved in the appeal. The Board turns therefore in more detail to the parties’ respective submissions on those issues.

  15. Mr. Ali Malek QC for the Attorney General advances the following analysis. Section 107(2) represents a primary provision, giving the Grand Court power to make such provision regarding the remuneration of any liquidator as it may conclude to be appropriate, and in that connection it was open to the Grand Court to lay down in a guideline judgment principles or rules which should be regarded as generally applicable. The Cayman Islands Companies Law (2003 Revision) is a re-enactment of Law 3 of 1961, which followed the Companies Law of Jamaica of 1864, which was in turn modelled on the English Companies Act 1862. The equivalent provision to section 107 of the Cayman Islands Companies Law was s.93 of the English 1862 Act in effectively identical terms. Mr. Malek also points out, and Mr. Gabriel Moss QC accepts, that the Court has at common law a parallel inherent jurisdiction (not mentioned in either Court below) to fix the remuneration of a liquidator, being one of its officers: cf p. James (1874) LR 9 Ch 609; Upton v. Taylor [1999] BPIR 168 and In re Associated Travel Leisure and Services Ltd. [1978] 1 WLR 547.

  16. As to the English Insolvency Rules, by section 26(1) of the Companies (Winding Up) Act 1890 the Lord Chancellor with the concurrence of the President of the Board of Trade was empowered to “make general rules for carrying into effect the objects of this Act”. Pursuant to that power the Companies (Winding Up) Rules 1890 were made. Rule 154(1) provided that “The remuneration of a Liquidator shall, unless the Court otherwise order, be fixed by the Committee of Inspection ....” The ultimate successor to section 93 of the 1862 Act became the similarly worded section 242(2) of the English Companies Act 1948, while Rule 154(1) of the 1890 Rules was superseded in identical terms by Rule 159 of the Companies (Winding Up) Rules 1949, to which the Grand Court was referred.

  17. However, by the English Insolvency Act 1985, replaced by the Insolvency Act 1986, the English primary legislative scheme was significantly changed. Section 242(2) was repealed and not replaced. Parts IV to VI of the 1986 Act provided for winding up of companies without making any provision for liquidators’ remuneration. But section 411 of the 1986 Act enabled the Lord Chancellor with the concurrence of the Secretary of State to make rules “for the purpose of giving effect to Parts I to VII of the Act” and the 1986 Rules filled the gap, by introducing a new regime for the fixing liquidators’ fees by creditors without any approval to the Court, together with a residual mechanism for review by the Court on the application of a liquidator or of 25% in value of the creditors.

  18. Mr. Malek thus submits that the Cayman Islands and English statutory schemes are in stark contrast. In the Cayman Islands scheme the Court retains a primary statutory power over liquidators’ fees under section 107(2), which it no longer has under the English statutory scheme. The power to make Rules was, under section 19(3)(j) of the Grand Court Law (1995 Revision), limited to the purposes of regulating civil business or “generally, providing for .... other matters as may be reasonably necessary for or incidental to the administration of this Law”. The 1986 Rules could not therefore be incorporated in such a way as to alter the primacy of the Court’s power under section 107(2). Reflecting that limitation, Order 102 Rule 17 did no more than provide that all proceedings arising out of the liquidation of any company should “so far as practicable” be made in accordance with the Insolvency Rules 1986 “insofar as such applications are not inconsistent with the Law ....” Paragraph 55 of the Attorney General’s Case before the Board suggests that Rules 4.127 to 4.131 of the 1986 Rules are “plainly inconsistent with the Companies Law”. But in his oral submissions Mr. Malek did not press an argument that those Rules fall outside the power provided by the Grand Court Law or are in character so inconsistent with section 107(2) as to be in their entirety inapplicable or incapable of application. Accepting that they can and should be read and applied so far as practicable in conjunction with section 107(2), his submission is that they cannot undermine or limit the primary power afforded to the Court by that subsection.

  19. On that basis, Mr. Malek submits that the Grand Court had jurisdiction to set guidelines for liquidators’ remuneration, and to make the orders it did. The one qualification he makes is to acknowledge that Grand Court erred in making the order which the Court of Appeal numbered (4). If the Grand Court required liquidators to obtain Court approval of their fees, then costs associated with any application for such approval should be recoverable out of the assets of the company in liquidation. It follows, Mr. Malek submits, that the liquidators’ grounds of appeal to the Court of Appeal were themselves misconceived in complaining that the Grand Court erred in failing

    1. to apply “the basic principle ensconced in rules 4.127 to 4.131 .... that stakeholders .... should primarily decide the quantum of remuneration” and

    2. to “appreciate that on a true construction of section 107(2) and rules 4.127 to 4.131 the Judges of the Grand Court merely have a residual jurisdiction”.

    There was also no basis for the liquidators’ joint written submission to the Court of Appeal that Rules 4.127-131 represented the primary process, and that section 107(2) simply conferred on the Court a permissive power which the liquidators had a “residual right” to invoke.

  20. More importantly, Mr. Malek submits that the Court of Appeal erred in a similar way, by treating the Rules as the primary process (although adding in their written judgment that a liquidator who “wishes .... may apply to the Court to have his remuneration approved” under section 107(2)). The Court of Appeal’s written judgment made clear its basic view that the Court was no more than a “review body” or an “appellate court rather than a court to fix the remuneration of liquidators in the first instance”; and, further, although it did not spell this out, its references to applications to the court by the liquidator or the creditors if a dispute arose were clearly made with reference to the procedures identified in rules 4.130 and 4.131, under which a creditors’ application could only be made with the concurrence of at least 25% in value of the creditors.

  21. In answer, Mr. Gabriel Moss QC submits that the Court of Appeal’s decision turned solely on questions of evidence and practice, and involved no significant point of jurisdiction. The liquidators in their Case and Mr. Moss in his oral submissions accept that the Grand Court has jurisdiction to set or approve liquidators’ remuneration which is “primary” in the sense of not being a subordinate or residual jurisdiction; they further accept that such jurisdiction may in appropriate circumstances be exercised on the Grand Court’s own initiative and used to lay down guidelines. They submit that it would be an error to read the Court of Appeal’s judgment as in any way abrogating or denying this jurisdiction, and they argue that all that the Court of Appeal was saying was that the Insolvency Rules provide an alternative route which liquidators should in practice normally adopt, obviating any need for further Court sanction of their fees. Mr. Moss submits that the Court of Appeal rightly concluded that the Grand Court had failed to recognise or give effect to appropriate liquidation practice under modern conditions, and had acted on views and introduced guidelines for which there was no proper evidential basis.

    ANALYSIS

  22. The Board is unable to accept that the Court of Appeal only intervened because it thought that the Grand Court had erred as a matter of practice and had lacked sufficient evidence to justify the orders it made. In the Board’s opinion the Court of Appeal was responding to and accepting the liquidators’ unopposed submissions to it that the Grand Court had erred in failing to apply “the basic principle ensconced in rules 4.127 to 4.131 .... that stakeholders .... should primarily decide the quantum of remuneration” and to “appreciate that on a true construction of Section 107(2) and Rules 4.127-131 the Judges of the Grand Court merely have a residual jurisdiction”. As the Board has noted, the Court of Appeal’s initial oral judgment made no reference to section 107(2) which confers a primary jurisdiction which the Insolvency Rules could not affect. The Court of Appeal’s written judgment mentioned section 107(2) but did not analyse its relationship with the Rules. While the Court of Appeal referred to a liquidator who “wishes” being able to apply to the Court to have his remuneration approved under section 107(2), it appears to the Board that the Court of Appeal did not recognise the jurisdiction under section 107(2) which Mr. Moss now accepts that the Grand Court has - even of its own initiative - to set guidelines and to require court sanction even after any approval of liquidators’ fees by creditors or a creditors’ committee.

  23. In these circumstances, the Board accepts the Attorney General’s submission that the Court of Appeal’s decision to set aside the Grand Court’s judgment in its entirety was reached on the basis of a misreading of the statutory scheme. Further, once it is concluded that the Grand Court had jurisdiction to set guidelines and give directions regarding procedures, then it appears to the Board that the day-to-day experience of liquidation matters acquired by the Grand Court’s judicial members at first instance made the Grand Court well-placed to identify problems that in a Cayman Islands context merited the Grand Court’s attention. The Board considers that the Court of Appeal should have been cautious about forming and giving effect to any radically opposed view. That does not mean that the Grand Court judgment is not open to some more detailed criticisms.

  24. The Board turns in that light to the Attorney General’s application for leave to intervene. The most fundamental question is the standing of the Attorney General to apply to intervene in a civil case of this character. No authority precisely in point was cited to the Board, but reliance was placed on the general statements of principle identified in paragraph 13 above, on which there was, as the Board has noted, substantial common ground. It is nonetheless relevant to consider certain authorities. In Attorney General of the Gambia v. N’Jie [1961] AC 617, 634-635, the Attorney General had brought a disciplinary complaint against a lawyer before a court consisting of a deputy judge, who upheld the complaint. The West African Court of Appeal set aside the decision on the ground that a deputy judge had no jurisdiction to hear such a complaint. The Board rejected a submission that the Attorney General had no standing to appeal to it. Lord Denning giving the Board’s judgment said, at pp 634-635:

  25. “The Attorney-General in a colony represents the Crown as the guardian of the public interest. It is his duty to bring before the judge any misconduct of a barrister or a solicitor which is of sufficient gravity to warrant disciplinary action. True it is that if the judge acquits the practitioner of misconduct, no appeal is open to the Attorney-General. He has done his duty and is not aggrieved. But if the judge finds the practitioner guilty of professional misconduct, and a Court of Appeal reverses the decision on a ground which goes to the jurisdiction of the judge, or is otherwise a point in which the public interest is concerned, the Attorney-General is a “person aggrieved” by the decision and can properly petition Her Majesty for special leave to appeal.”

  26. The role of the Attorney General in respect of liquidations was considered in a first instance decision in the Equity Division of the Supreme Court of New South Wales, In re Nuhan Ltd. (1980) 5 ACLR 69. The Attorney General there had petitioned successfully for the company’s winding up, but an issue arose with the only creditors who appeared as to whether the court should appoint the provisional liquidators as liquidators. The creditors suggested, at p 74, that the Attorney’s interest “as representing the members of the public to have the companies stopped trading” had ceased once the winding up order was made, and that he had no further interest in the identity of the liquidator provided that he or she was a person of reputation and someone whom the court would otherwise appoint. Needham J disagreed, at p 75, saying that the Attorney General “has a legitimate interest in the appointment as the guardian of the public interest”.

  27. In T.D.I Metro Ltd. v. Delap [2000] IESC 53, the Irish Supreme Court granted an application by the Attorney General to intervene in an appeal brought by a County Council against a first instance decision that the County Council had no power to prosecute a particular indictable offence. The Supreme Court cited general statements in prior texts and authorities to the effect that leave could be given to the Attorney General to intervene, in civil as well as criminal proceedings, whenever an issue of considerable or general public interest arose. It granted the application on the basis that (per Denham J, at para 30)

    The decision of the court may have important implications for prosecutions under similar legislation. There is a general public interest in the prosecution of offences. The Attorney General is an appropriate constitutional officer to be heard by the court having regard to his role representing the public interest.

  28. Finally, the Board notes In re McBain, ex p. Australian Catholic Bishops Conference [2002] HCA 16, where the High Court refused an application by the Attorney General of the Commonwealth of Australia to intervene in order to pursue an appeal against a judgment given in first instance proceedings in relation to which no party below had appealed. Dr McBain had in such proceedings claimed that a Victorian statute was contrary to the Commonwealth Sex Discrimination Act 1984, and the defendants to his claim (the State of Victoria, the Minister for Health of the State and the Infertility Treatment Authority) had not formally conceded invalidity, while not addressing any contrary argument. Notice of the proceedings had been given to the Attorneys General for the Commonwealth and all other States, none of whom had appeared below. The judgments in the High Court acknowledge “the traditional duty of the Attorney General to protect public rights and to complain of excesses of power bestowed by law” (cf per Gaudron and Gummow JJ at paragraph 60) and his role as representing the Crown which “as guardian of the public interest, has an interest in seeing that courts, tribunals and public authorities stay within their jurisdiction and that they do justice according to the law” (per McHugh J at paragraph 109). But the Attorney General was refused leave to intervene on the basis that no law of the Commonwealth had been declared invalid and no attempt to administer or apply any such law impeded, and the Victorian authorities had accepted the first instance decision.

  29. As a matter of general principle and in the light of these authorities, the Board accepts that one set of circumstances in which it may be appropriate to grant to the Attorney General, as guardian of the public interest, leave to intervene is where there is an issue of general public importance going to the jurisdiction of lower courts and their consequent ability to do justice according to the law. As the Board has noted, Lord Lester does not challenge this. But, contrary to the liquidators’ submissions, the Board considers that the Court of Appeal’s decision in this case satisfies this test.

  30. The Board therefore accepts that the Attorney General has sufficient standing to apply to intervene and appeal. It does not necessarily follow that it would be appropriate to grant his application. Lord Lester advances a number of weighty objections in the circumstances of this case. They relate to

    1. the fact that there have been proceedings in two lower courts without any application to intervene,

    2. the expiry of the time for seeking to appeal against the Court of Appeal’s final judgment,

    3. the delay in making an application to intervene,

    4. the circumstances in which the Attorney General came to interest himself in the matter,

    5. the reliance placed and fees fixed and earned or expenditure incurred by liquidators and creditors on the basis of the Court of Appeal’s judgment and

    6. the present settled state of the law, which, it is submitted, should only be changed, if at all, by legislative means.

    These objections require consideration of the whole course of events and are to an extent inter-connected.

  31. As to objection (a), when the liquidators’ applications came before the Grand Court, the Attorney General, if he was aware of them, had no reason to anticipate that they would involve any issue of jurisdiction. The Grand Court had identified matters of concern regarding the fixing and level of liquidators’ fees, but was addressing them in a manner consistent with the view of its jurisdiction which the Attorney General now wishes to advance. The 1986 Rules were not even relied upon by the liquidators before the Grand Court. The Grand Court recites in its judgment that during the hearing before it the liquidators at one point suggested, in the light of the Insolvency Rules in their 1949 form, that the Court’s practice of setting liquidators’ charge out rates (which had “developed over many years upon very many applications by lawyers representing the liquidators”) was against such Rules. This suggestion was never sustainable, since the 1949 Rules expressly provided that fees were to be fixed by an inspection committee “unless the Court shall otherwise order”. It is no surprise to see the Grand Court recording that

    when pressed, counsel did, however, concede that the Court was not obliged to rubber stamp the decision of the creditors’ committee but was bound to [e]nsure that the fees charged were fair and reasonable in the circumstances. In effect the argument came down to this: the Court should place great weight on prior approval by the creditors’ committee.

  32. Thus no argument was presented before, and nothing decided by, the Grand Court inconsistent with the Attorney General’s current stance with regard to jurisdiction.

  33. As to the proceedings before the Court of Appeal, there was, the liquidators point out, a fifth appeal (No. 8 of 2003), related to and evidently heard with one of the present appeals, in which the Attorney General did make written representations. In these, he referred to the Memorandum of Grounds of Appeal in the fifth appeal and submitted that the first instance judgment involved a point having “wide-ranging implications for all liquidations”. His concern, discrete from any now in issue, was that the judgment could prevent liquidators from charging as liquidation expenses their fees for and expenses of assisting prosecution or law enforcement agencies. The Memorandum of Grounds of Appeal in the present four appeals were or could presumably also have been available to him, but the Attorney General did not make any written submissions regarding these appeals. There was nothing to concern him in the first instance judgment, but, if he had seen and studied the Memorandum of Grounds of Appeal, it could have raised some concern that the liquidators were seeking to go behind the concession regarding the Grand Court’s jurisdiction which they had made at first instance. That the Attorney General did not at the stage of the appeal to the Court of Appeal notice any such cause for concern is a factor to be borne in mind when considering his application to intervene before the Board. But there is no basis for attributing it to any positive agreement on his part with the propositions regarding jurisdiction which the liquidators advanced in the Memorandum.

  34. Turning to objections (b), (c) and (d), the circumstances are unusual. The Court of Appeal’s decision and its written judgment presumably were, and certainly could have been, available to the Attorney General, but they did not of themselves cause him to take any step. After considering the Court of Appeal’s judgment, the Chief Justice issued a Practice Direction No. 2/2003 dated 29th December 2003 to “set out the procedure by which the Court’s responsibility will be discharged following the decision ....", while the Rules Committee issued a Creditors’ Guide to Liquidators’ Fees of the same date signed by all its four members. However, the Chief Justice firmly believed, at the same time, that the Court of Appeal’s decision was wrong, that the 1986 Rules had wrongly been treated as ousting the Grand Court’s jurisdiction to determine the appropriate procedure and that the public interest in the administration of justice in the insolvency field required that the matter be clarified. He thought also that the Court of Appeal’s decision was causing confusion. He recognised that some aspects of the Grand Court’s judgment (such as its conclusion that it could fix rates without expert evidence) might be vulnerable to criticism. But the Court of Appeal had in his view erred in a basic respect, by subordinating the Court’s role in fixing remuneration under section 107 to the Rules, rather than vice versa. He wrote in corresponding terms to the Attorney General on 6th February 2004, saying that the matter should be taken to the Board, if possible. He followed this up with further memoranda on 12th February and 2nd March 2004.

  35. The Attorney General, very sensibly in this highly unusual situation, took counsel’s advice. He instructed Mr. Malek QC and Mr. Adrian Beltrami, who have represented the Attorney General before the Board. They delivered a detailed joint opinion on 16th March 2004, reaching similar conclusions regarding the Court’s role to those which they have advanced as counsel before the Board. They advised that the Attorney General should apply to the Court of Appeal to intervene and to reopen the appeal, or, as an alternative, apply to the Privy Council to intervene and appeal. In April 2004 the Attorney General, again very sensibly, raised with the liquidators’ legal advisers the concerns endorsed by this opinion, and sought their views as to the way forward. Responses were received contesting both his understanding of the Court of Appeal’s decision and the justification for any involvement on his part in what was described in one response as “private litigation”. In these circumstances the Attorney General evidently decided upon the alternative course suggested in the opinion, and applied for leave accordingly - first in April 2004 to the Court of Appeal and then in June 2004 to the Board.

  36. An affidavit sworn on behalf of the Attorney General by Vicki Ann Ellis, Crown Counsel, on 20th May 2004 acknowledges that the Attorney General’s involvement was only triggered by the Chief Justice’s communications, but submits that, having been so triggered, it stands or falls on its own merits. In the Attorney General’s submission these involve a point of sufficient general importance to require consideration and clarification now. At points during the written and oral submissions made by the liquidators before the Board, it was suggested on behalf of the liquidators that the present application amounts in reality to an attempt by the Chief Justice to appeal against an adverse decision reached on appeal from his own judgment, and that this infringes fundamental principles relating to the rule of law and separation of powers. The Board does not accept this description. It will no doubt be very rarely that a judge will himself feel justified in approaching a law officer with concerns about the implications of a successful appeal against one of his own decisions. But, whatever the rights or wrongs of such an approach in this or any particular case, the Attorney General was and is bound to consider such a matter, once raised with him, on its merits. Here, he set about doing so in an entirely independent and neutral manner. The advice he received was followed in the same manner. The Board cannot attach any contrary significance to the fact that the course taken (an application to the Board, rather than to the Court of Appeal) was the alternative course suggested in counsel’s opinion which happened to correspond with that which the Chief Justice had originally suggested. There were, as it seems to the Board, good reasons why that alternative course could be preferred. A request to a court which has already heard an appeal to rehear and re-determine it requires very exceptional justification.

  37. Lord Lester’s next objection, (e), relates to the reliance placed and fees fixed by liquidators and creditors on the basis of the Court of Appeal’s judgment. Since the Court of Appeal’s decision in April 2003, reinforced on 29th December 2003 by the Practice Direction No. 2/2003 and the Rules Committee’s “Creditors’ Guide to Liquidators’ Fees”, liquidators will have acted and their fees will have been approved by creditors and their committees and no doubt paid without any application to or any sanction of the Grand Court. The liquidators submit with evident force that it could be unjust as well as impracticable to envisage restoring the Grand Court’s judgment, even if this judgment could in every other respect be supported as a matter of principle. They rely upon the disturbance and prejudice involved in any change to the present position in these and other liquidations as a strong reason for refusing to permit any intervention by the Attorney General at the present late stage. The Board will return to this objection.

  38. First, however, the Board will address the liquidators’ final and more general objection, (f). Lord Lester and Mr. Moss submit that the Court of Appeal’s decision establishes a clear legal position, any change to which can and should be left to the legislature. Before the Board the liquidators initially put the point even higher, suggesting that the Cayman Islands legislature was about to endorse the Court of Appeal’s decision in fresh legislation. An affidavit was sworn to that effect on 21st March 2006 by Andrew J. Jones QC, one of the counsel representing the liquidators before the Court of Appeal. Mr. Jones had served as chairman of a private sector review committee, which in September 2005, pursuant to request made in 2002 by the Financial Services Secretariat, produced a report on Corporate Insolvency Law and Practice. The report recommended amendment of the Companies Bill “to remove any doubt about the statutory authority for the decision of the Cayman Islands Court of Appeal in [the four appeals presently before the Board] and the related Practice Direction No. 2/03”. It annexed the 8th draft of A Law to Amend The Companies Law (2004 Revision). This would, if enacted, replace section 107 by a section (then numbered 118) reflecting Rules 4.127 and 4.130 - but not 4.130 (although a footnote to the draft states: “It is intended that other details contained in Practice Direction No 2/2003 will be included in the Rules”). Mr. Jones said that the Law Reform Commission had “decided to act on the report”, that it had consulted interested parties without any objection and that he could “confidently” predict that the draft section 118 would be included in the Law Reform Commission’s own draft which was “likely to be formally approved and submitted to the Attorney General on 31st March 200[6] together with a draft bill”. In a reply affidavit sworn 24th March 2006 Mrs Vicki Ellis explained that the Law Reform Commission had in fact received significant adverse comment from one of its own members, Langston R. M Sibblies, that the Commission was therefore unlikely to submit any final report by 31st March 2006, that the Chief Justice had indicated that the judiciary had real misgivings about the draft bill which they had not thought it appropriate to discuss pending the present appeal, that it would be for the Attorney General to decide whether to present any bill to the cabinet which would then have to decide whether to present it to the legislature and that this would be the first ever report of the relatively newly formed Law Reform Commission, so that there was no precedent to indicate how it might be dealt with. In the light of this response, Lord Lester withdrew any reliance on Mr. Jones’s affidavit as advancing the liquidators’ case on this appeal.

  39. The more general objection remains that it would be open to the legislature to change the law if the Court of Appeal’s decision were felt to be unsatisfactory. One difficulty about this is that it assumes that the legislature would have the time and will to amend the existing statute law, even if it took the view that the Court of Appeal’s decision was wrong. Another difficulty arises from the disagreement which exists about what it is that the Court of Appeal has actually decided. The liquidators’ submission before the Board is that the Court of Appeal decided nothing except a point of practice, leaving it open to the Grand Court in another appropriate case to lay down guidelines and procedures. But Mr. Jones’s affidavit, and an earlier press release dated 23rd August 2003 by Sarah Dobbyn who acted as junior counsel for the liquidators, show that it is not how professionals concerned in this area have presented the position. It is not clear, therefore, how silence or inaction on the part of the legislature should necessarily be interpreted; it is also unsatisfactory that such a difference regarding the legal position should continue unresolved; and it is not inconceivable that it could itself lead to further litigation. It is true that, in determining the issue of standing, the Board has found it necessary to consider the Court of Appeal’s judgment and to express its disagreement with the analysis which (contrary to the liquidators’ submissions to the Board) the Board considers that the Court of Appeal adopted. But, even the status of these conclusions might be open to some debate, unless they were given in the context of an appeal such as the Attorney General seeks leave to pursue. The Board thinks that there are good reasons in the present case why the legal position should now be put established clearly and finally, and this can most satisfactorily be done by permitting the Attorney General to intervene and appeal.

    CONCLUSIONS

  40. In summary, the Board considers that the question whether the Attorney General should have leave to intervene and to pursue this appeal is open to quite finely balanced argument. But, once it is concluded that the Court of Appeal erred in its understanding of the role of the Grand Court under the existing statutory scheme, the Board considers that there is an important public interest in establishing the correct position for the future, provided that an appropriate means can be devised of addressing objection (e) – that is the potential prejudice to those who have, since the Court of Appeal’s decision, justifiably acted upon it. Had the Board felt that a successful appeal would involve undoing all that has happened to date in reliance on the Court of Appeal decision and Practice Direction No. 2/2003, then the delay accompanying the Attorney General’s application to intervene and appeal might have outweighed the other factors favouring the grant of leave. However, it is open to the Court under section 107 to fix liquidators’ remuneration on such a basis as may from time to time be appropriate. Lord Lester accepted that it would be open to the Board to, in effect, leave the position with regard to fees to date untouched and to restore or remit to the Grand Court the position regarding future fees. A distinction between the past and future impact of their decision was drawn by the House of Lords in Royal Bank of Scotland plc v Etridge [2001] UKHL 44, [2002] 2 AC 773, paragraphs 50 and 80 per Lord Nicholls of Birkenhead, with whom all other members of the House agreed, and it is facilitated in this case by the power given to the Court by section 107(2). In the present case the Board’s further conclusions in paragraph 39 below make it appropriate to cater also for the period between the date of the Board’s opinion and the date of such further ruling as the Grand Court may give. The Board considers that the liquidators’ legitimate concerns can be accommodated by

    1. endorsing the fees already fixed under the procedures stated in the Court of Appeal’s conclusions (2) to (7) (cf paragraph 7 above) in respect of work which has been done or may be done during the period which will now elapse before the Grand Court issues further directions covering future procedures, and

    2. permitting further fees to be fixed under the procedures stated in the Court of Appeal’s conclusions (2) to (7) during, and in respect of work done in, the same period; and by requiring no further steps in relation to such fees.

    The same should apply to fees fixed under such procedures in any other liquidations not before the Board. As regards all other fees the Grand Court’s jurisdiction under section 107(2) will enable it, if it thinks appropriate, to set guidelines and procedures for the fixing of liquidators’ remuneration in these and other liquidations.

  41. On this basis, the Board concludes that it is appropriate to grant leave to the Attorney General to intervene and to pursue the present appeal. The Board returns to the substance of the appeal. The Board has concluded that the Court of Appeal based its decision on an erroneous understanding of the role of the Grand Court. The correct view, now accepted even by the liquidators’ counsel, is that the Grand Court had power to set guidelines and procedures for the fixing of liquidators’ remuneration. The Grand Court correctly acknowledged that, in doing this, “the Court should place great weight on prior approval by the creditors’ committees”, where they exist. It was however open to the Grand Court to order that, even after approval by creditors or a creditors’ committee, the liquidators should submit the fees so approved to the court for its final sanction. The Court of Appeal was wrong to conclude the contrary, and was wrong to relegate the Grand Court’s role to that of a pure review or appellate authority. It was also wrong in so far as these errors led it to disregard the Grand Court’s legitimate concerns about the fairness or reasonableness of the fees being charged by liquidators in Cayman Islands liquidations.

  42. That does not, however, mean that there is no relevance in dicta of Hoffmann J (as he was) in In re Potters Oils Ltd. [1986] 1 WLR 201, 207H; [1986] BCLC 98, 104 to which the Court of Appeal drew attention. Hoffmann J said that:

    .... the court is ill-equipped to conduct a detailed investigation of receivers’ charges on an itemised basis. A judge could not do so without being expensively educated by expert evidence.

  43. The case before him concerned receivers appointed contractually “upon such terms as to remuneration and otherwise as [the appointor] shall think fit” (see p 206). But the problem regarding the Court’s capacity to assess appropriate fee levels is one which will also face the Grand Court whenever it acts under section 107(2) of the Companies Law. It is not a problem of which the Board thinks that the Grand Court was unaware. Indeed, it was if anything aggravated by one particular condition of Cayman Islands practice which was of concern to the Grand Court, namely the limited number of expert practitioners in the relevant field and the perceived risk that there was no real competition between them on fee levels. The Grand Court sought to address this problem in 2002 by seeking information from liquidators, but met the difficulty that liquidators were not prepared to assist with material that the Grand Court considered relevant. If there is a rehearing before the Grand Court, at which the Attorney General was represented, it may be that either the liquidators or the Attorney General would supply further material to assist the Grand Court to determine whether it was appropriate to set any and if so what guideline fee rates under current conditions. Some assistance may now also be obtained from the fee levels submitted to and approved by creditors’ committees pursuant to the Court of Appeal’s decision and to the Practice Direction No. 2/2003 and the Rules Committee’s Creditors’ Guide to Liquidators’ Fees dated 29th December 2003. The Court of Appeal criticised the Grand Court for setting guideline rates “without any evidence being before the Court as to whether a creditors’ committee in any given circumstances is sophisticated or knowledgeable or properly informed”. Whether or not there was justification for this criticism in 2003, the liquidators should now be able to put before the Grand Court evidence about the composition and nature of any creditors’ committee which has approved fees pursuant to the Court of Appeal’s decision, and the nature and extent of its deliberations. Similar procedures to those set out in the Creditors’ Guide to Liquidators’ Fees may in future also assist the Court to fix appropriate fee levels in the light of creditors’ deliberations regarding proposed fees. The Board is not in a position to express concluded views about the right way forward. That will be for the Grand Court. The guideline fees indicated by the Grand Court’s judgment in 2002 must on any view be out of date. In all the circumstances, the Board has reached the conclusion that, subject to the qualification already indicated in paragraph 37 above, the liquidators’ applications in the present appeals should be remitted to the Grand Court for reconsideration in their entirety at a hearing when both the liquidators and the Attorney General can be heard, and when all options will be open to the Grand Court in the exercise of its powers under section 107.

  44. The Attorney General does not seek to uphold the Grand Court’s fourth order in the list identified by the Court of Appeal. The Board agrees that, if a liquidator is required to apply to the Court for approval of fees, he should ordinarily be entitled to the costs of such application out of the company’s assets. The ninth and last order raises the more basic question whether liquidators generally are obliged to apply to the court for approval of fees. The Grand Court’s order has been criticised for failing to make clear whether or not it is every liquidator’s invariable duty to apply to the court for approval of his fees. It would in the Board’s view be open to the Grand Court so to direct, but it is not clear that its judgment in the present four appeals was to that effect. It may be that the reason why the judgment left this unclear is that it was, prior to the Court of Appeal’s decision, the invariable practice of the Grand Court to require liquidators to apply to the Grand Court for such approval by specific order at the time of their appointment. Sarah Dobbyn in the press release to which the Board has already referred says that it was the “established practice in Cayman .... 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”. The papers before the Board also suggest that at least some liquidators sought, and attached value to, court approval as a means of protecting themselves from subsequent criticism of their fee levels – but this, if so, makes all the more understandable the Grand Court’s concern that any fee levels it set should be fair and reasonable. However that may be, the Board’s present opinion will enable the Grand Court, if it thinks fit, to introduce a practice or revert to any previous practice of requiring liquidators to seek court approval of their fees, even after approval of the same by creditors or any creditors’ committee.

  45. The Board in these circumstances will humbly advise Her Majesty that

    1. the Attorney General’s application for leave to intervene and pursue these appeals should be granted,

    2. the appeals should be allowed,

    3. the liquidators shall be entitled to receive (a) all fees which have already been fixed under the procedures stated in the Court of Appeal’s conclusions (2) to (7) in respect of work which has been done or may be done during the period until the Grand Court issues further directions covering future procedures, and (b) all further fees which may be fixed under the procedures stated in the Court of Appeal’s conclusions (2) to (7) during, and in respect of work done during, the same period,

    4. paragraph (1) and for the future paragraphs (2) to (7) of such conclusions should otherwise be set aside,

    5. the question what further order regarding liquidators’ remuneration should be made in the four liquidations before the Board should, so far as necessary, be remitted to the Grand Court for full rehearing with the Attorney General as intervener and with liberty to the liquidators and the Attorney General to adduce such further evidence as they may be advised,

    6. the parties shall have 14 days to make submissions in writing regarding costs in the light of this opinion.


Cases

p. James (1874) LR 9 Ch 609

Upton v Taylor [1999] BPIR 168

In re Associated Travel Leisure and Services Ltd. [1978] 1 WLR 547

Attorney General of the Gambia v. N’Jie [1961] AC 617

In re Nuhan Ltd. (1980) 5 ACLR 69

T.D.I Metro Ltd. v. Delap [2000] IESC 53

In re McBain, ex p. Australian Catholic Bishops Conference [2002] HCA 16

Royal Bank of Scotland plc v Etridge [2001] UKHL 44, [2002] 2 AC 773

In re Potters Oils Ltd. [1986] 1 WLR 201

Legislations

Companies Act 1862 [Eng]: s.93

Companies Act 1948 [Eng]: s.242

Companies (Winding Up) Act 1890: s.26

Companies (Winding Up) Rules 1890: Rule 154(1)

Companies (Winding Up) Rules 1949: Rule 159

Insolvency Act 1986 [Eng]: s.411

Insolvency Rules 1986 (SI 1986/1925) [Eng]: Rule 4.127, Rule 4.128, Rule 4.129, Rule 4.130, Rule 4.131

Companies Law (2002 Revision): s.107

Companies Law (2003 Revision)

The Grand Court Rules, 1995: Order 102 Rule 17

The Grand Court Law (1995 Revision): s.19

Practice Direction No. 2/2003

Creditors’ Guide to Liquidators’ Fees, Rules Committee (29 Dec 2003)

Authors and other references

Report on Corporate Insolvency Law and Practice, Sept 2005

A Law to Amend The Companies Law (2004 Revision) (8th draft)

Representations

Lord Lester of Herne Hill QC & Gabriel Moss QC, representing the liquidators.

Ali Malek QC for the Attorney General.


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