Anthony Spicer &c V. Anthony Cliff Spicer+stephen Robert Cork Formerly Joint Liquidators Of Echelon Wealth Management Ltd (in Liq) For Rumneration
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Neutral Citation | [2011] CSOH 87 |
| Date | 17 May 2011 |
| Docket Number | P1681/09 |
| Court | Court of Session |
| Published date | 17 May 2011 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 87 | |
| P1681/09 | OPINION OF LORD GLENNIE in the Note by ANTHONY CLIFF SPICER and STEPHEN ROBERT CORK, formerly joint liquidators of Echelon Wealth Management Ltd (in liquidation) Noters; for remuneration ________________ |
Noters: Martin QC, McIlvride; Lindsays WS
Respondents: Sellar QC, Ms Ower; Halliday Campbell WS
17 May 2011
[1] The noters are the former joint liquidators of Echelon Wealth Management Limited ("the company"). They were appointed joint interim liquidators on 11 November 2008 and joint liquidators at a meeting of the creditors of the company on 16 December 2008. At a creditors' meeting on 22 July 2009, the noters were removed from office as joint liquidators, and the respondents, Annette Menzies and Eileen Lightbrown, were appointed as joint liquidators in their place. The removal of the noters from office and their replacement by the respondents occurred in light of a failure by the noters and the creditors of the company to reach agreement as to the remuneration and outlays properly payable to the noters in respect of the first accounting period in the liquidation.
[2] By their Note, the noters seek a waiver of their failure to comply with the statutory provisions concerning the lodging of their claim for remuneration; a remit to a Reporter and to the Auditor; and, thereafter, payment of such remuneration as may be adjudged suitable. A waiver was granted and a remit was duly made to a Reporter and to the Auditor. They have both reported, and the noters have been paid the recommended sum, subject to a deduction in respect of the only outstanding matter in dispute. That is the dispute dealt with in this Opinion.
[3] Part 4 of the Insolvency (Scotland) Rules 1986 ("the Rules") deals with Winding Up by the Court. Chapter 1 thereof deals with the role of the provisional liquidator. Rule 4.5 deals with his remuneration. I shall return to consider this Rule in due course. The position of the liquidator is dealt with in Chapter 6. Rules 4.32 to 4.35 are concerned with the liquidator's outlays and remuneration. As is well known, those Rules include a reference to certain provisions of the Bankruptcy Act 1985. It was in respect of their failure to comply with these Rules that the noters sought a waiver; and it was under these Rules too that they sought and seek payment.
[4] The Rules expressly contemplate that a liquidator may be removed and replaced by another liquidator, as happened in the present case. The relevant Rule is Rule 4.21. This provides as follows:
4.21 Hand-over of assets to liquidator
(1) This Rule applies where a person appointed as liquidator ("the succeeding liquidator") succeeds a previous liquidator ("the former liquidator") as the liquidator.
(2) When the succeeding liquidator's appointment takes effect, the former liquidator shall forthwith do all that is required for putting the succeeding liquidator into possession of the assets.
(3) The former liquidator shall give to the succeeding liquidator all such information, relating to the affairs of the company and the course of the winding up, as the succeeding liquidator considers to be reasonably required for the effective discharge by him of his duties as such and shall hand over all books, accounts, statements of affairs, statements of claim and other records and documents in his possession relating to the affairs of the company and its winding up."
[5] In the present case, when the noters were removed as liquidators and the respondents appointed in their place, in compliance with Rule 4.21(2) they handed over to the respondents all the assets of the company which were within their possession, but with one exception. That exception was this: they withheld a sum of just over £400,000, that being the sum claimed by them by way of remuneration and outlays and in respect of which they were in dispute with the company's creditors.
[6] In opposing the noters' claim to be paid the full amount of the remuneration recommended by the Reporter and the Auditor, the respondents contend that, by withholding this sum, the noters were in breach of the Rules. They say that this has caused loss and damage to the company; and they contend that the remuneration awarded to the noters should be reduced from that recommended by the Reporter and the Auditor so as to "reflect" the consequences of that breach of the Rules.
[7] Two questions arise for decision. First, were the noters in breach of Rule 4.21(2) of the Rules by withholding that sum? And, second, if so, what consequences, if any, should flow from that breach. I take these issues in turn.
[8] Mr Sellar QC, who appeared for the respondents, submitted that there could be no doubt that the noters were in breach of the Rule. The Rule was unambiguous. The former liquidators were obliged, on the appointment of their successors, forthwith to do "all that is required for putting [them] into possession of the assets". That provision did not allow the former liquidators to withhold an amount by way of security for payment of their remuneration. Nor was there any need for such security. He contrasted this with the terms of Rule 4.5 which deal with the remuneration payable to a provisional liquidator. Rule 4.5(3) provides that the provisional liquidator's remuneration should be paid out to him (a) if a winding up order is not made, out of the property of the company, and (b) if a winding up order is made, as an expense of the liquidation. Rule 4.5(4) goes on to say that in a case falling within paragraph (3)(a) above, i.e. a case where a winding up order was not made and therefore the provisional liquidator was to be paid out of the property of the company, then in those circumstances he "may retain out of the company's property such sums or property as are or may be required for meeting his remuneration and expenses." The intention behind the Rule was plainly that where the provisional liquidator has to look to the company to pay him his remuneration, he should be able retain from the assets of the company an amount by way of security for such payment; but there was no need for such security where the company goes into liquidation, since its assets are under the control of the court, through him or a successor acting as provisional liquidator, interim liquidator or liquidator. In the case of Rule 4.21(2), where the former liquidators were replaced as liquidators, and the assets simply had to be handed over to the succeeding liquidators, there was likewise no need for any security and no basis for any right of retention. Mr Sellar accepted, on the authority of Liquidators of Highland Engineering Limited v Thomson 1972 SC 87, that at common law there would be a right of retention. But that case had been decided before the Insolvency (Scotland) Rules 1986 had codified the position. The Rules now superseded the common law in that regard. There was no scope any longer for a right of retention to exist in circumstances such as the present.
[9] For the noters, Mr Martin QC submitted that there was no reason to regard Rule 4.21(2) as having superseded the common law right of retention exemplified in Highland Engineering. The Respondents needed to argue that the Rules required the former liquidators always to hand over the whole of the assets of the company to their successors. But clearly they did not have that effect. For example, if an arrestment were served on the former liquidators, clearly they would not be entitled to hand over the sums arrested to the succeeding liquidators. If the Rule was not as comprehensive as that, why it should be said that it overrode the common law right of retention? He contrasted Rule 4.21(2) with Rule 4.22(4) which, in the context of a liquidator being under an obligation to take possession of the whole assets of the company as soon as may be after his appointment, specifically entitled the liquidator to seek delivery to him of any title deed or other documents notwithstanding that a right of lien was claimed over such documents by a third party. That specifically overrode the third party rights, though the position of the third party was protected by the concluding words of that paragraph. By contrast, he argued, Rule 4.21(2) did not seek to override the common law right of retention. As to Rule 4.5(4), Mr Martin suggested that that was of no assistance. The specific creation of a right of retention when the assets reverted to the company was necessary, since the right would not otherwise exist; by contrast, there was already a common law right to retain where the winding up order was made and the assets under the control of the liquidator. This had been established in Highland Engineering.
[10] I am satisfied that the respondents are correct on this point. Rule 4.21(2) is clear in its terms. The former liquidators must forthwith do all that is required for putting the succeeding liquidator into possession...
To continue reading
Request your trial
-
Note: One Optical Limited (in Liquidation) For Remuneration
...in an appropriate case, to take into account any failings of a liquidator when fixing his remuneration (Re Echelon Wealth Management Ltd [2011] CSOH 87), such a power should only be exercised in circumstances where the liquidator’s conduct is deserving of strong criticism (R D Simpson v Bea......