Attorney General of the Cayman Islands v James Cleaver & Company and Others
| Jurisdiction | UK Non-devolved |
| Judge | Lord Mance |
| Judgment Date | 06 June 2006 |
| Neutral Citation | [2006] UKPC 28 |
| Court | Privy Council |
| Docket Number | Appeal No 20 of 2005 |
| Date | 06 June 2006 |
[2006] UKPC 28
Privy Council
Present at the hearing:-
Lord Bingham of Cornhill
Lord Clyde
Lord Hope of Craighead
Lord Carswell
Lord Mance
[Delivered by Lord Mance]
Introduction
On 18 th 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 27 th September 2002. In its judgment dated 20 th 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.
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 29 th April 2003. On 30 th 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 1 st 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.
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 9 th 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 27 th and 28 th March 2006.
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.
In the case of three companies, Liberty Capital Limited, Integrity Capital Limited and Sun Holding Limited, 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 Limited, 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.
No formal order was drawn up following the Grand Court's judgment on 20 th 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 1 st 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."
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
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."
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."
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...
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