Attorney General of Trinidad and Tobago v CL Financial Ltd

This appeal concerns the remuneration of the liquidators of an insolvent company. As the authorities from a wide range of jurisdictions cited to the Board make clear, fixing the remuneration of liquidators and similar officeholders, such as administrators, receivers and trustees in bankruptcy, has caused considerable problems of principle and practice. As regards Trinidad and Tobago, the Court of Appeal observed that “this is a novel area in our jurisprudence”.

CL Financial Ltd. (“the Company”), a company incorporated in Trinidad and Tobago, is in compulsory liquidation, having been ordered to be wound up by the High Court in September 2017. It applied to the court for the approval of the remuneration of its liquidators for the calendar year 2019 (“the remuneration application”). The remuneration application was opposed by the Attorney General on behalf of the Government of Trinidad and Tobago (“the Government”), the largest single creditor of the Company. The High Court approved the remuneration, but its decision was reversed by the Court of Appeal. The Company appeals to the Board.

The Company is the holding company of a group of companies with interests in a diverse range of businesses in several countries. Its accounts for 2015 recorded that it had seven sub-holding companies with over 40 subsidiaries, primarily in the insurance, real estate and spirits sectors, but with minor interests in other businesses. It had encountered financial problems in 2008, particularly in its insurance and banking businesses which included one of the largest financial institutions in Trinidad and Tobago. The Government provided financial support in excess of TT$23 billion to prevent its collapse. The Company thereafter embarked on a policy to realise its investments in some subsidiaries, with a view to reducing its liabilities to the Government. Notwithstanding the disposal of some subsidiaries, the group continued to operate in five areas of business in several countries, with some 24 active subsidiaries.

In July 2017, the Government presented a petition to wind up the Company and successfully applied for the appointment of provisional liquidators. At that date, the Company's debt to the Government was over TT$15.5 billion. On the Government's application, provisional liquidators were appointed on terms as to their remuneration which were agreed with the Government. The Company was wound up by the Court on 15 September 2017, on the grounds of insolvency. The court appointed Hugh Dickson and Marcus Wide, who were the provisional liquidators, as the liquidators. David Holukoff was appointed in place of Mr. Wide by order made on 7 January 2019. Mr. Dickson, Mr. Wide and Mr. Holukoff are partners in Grant Thornton (BVI) Ltd, which is based in the British Virgin Islands and is part of the international accounting firm of Grant Thornton. They are insolvency practitioners with very considerable experience of international insolvencies. In this judgment, the Board refers to “the Liquidators” collectively as meaning those persons who were at any particular time in office as the liquidators of the Company, which in this case generally means Mr. Dickson and Mr. Holukoff.

There is no reason to doubt the evidence of Mr. Holukoff, in his second affidavit in support of the remuneration application, that the liquidation of the Company is complex, particularly in view of its large and diversified corporate structure with subsidiaries operating in at least five major sectors in several jurisdictions, and with most group companies having significant liabilities. Since the subsidiaries are the Company's only assets, a principal part of the Liquidators' work has related to their business, assets and liabilities. The Liquidators say, although this is disputed by the Government and it is not a matter on which the Board can reach any view, that most of the subsidiaries had been badly managed over the previous ten years and their businesses and affairs were in substantial disarray, with no overall strategy on the direction the subsidiaries should take. Mr. Holukoff also said that the liquidation was extremely labour intensive and that the Liquidators inherited very substantial litigation that had been commenced by group companies.

The powers of the Liquidators and the basis of their remuneration are set out in an Order dated 12 April 2018 (“the April 2018 Order”) made by Ramcharan J (“the Judge”), the judge assigned to the liquidation. More detailed reference is made to the terms of the April 2018 Order later in this judgment, but at this stage it is sufficient to note that the Liquidators were entitled to draw remuneration each month from the assets of the Company “on the basis of the reasonable time expended by the Liquidator and his staff” at hourly rates for different grades of Grant Thornton personnel set out in the Order and “subject to such amounts being taxed from time to time as the Court may direct”. The hourly rates are the same as had been agreed with the Government before the appointment of the provisional liquidators.

In May 2019, the Company applied to the court for approval of the Liquidators' remuneration, both as provisional liquidators and as liquidators, in total amounts of US$3,160,233 and TT$53,837 and for approval of the direct expenses incurred by them, in respect of the period from 25 July 2017 to 31 December 2018. The application was not opposed, and Ramcharan J approved the remuneration and expenses by an Order dated 27 June 2019.

On 28 July 2020, the Company applied to the court for approval of the Liquidators' remuneration, and of expenses incurred with Grant Thornton entities, for the calendar year 2019 (“the Application”). The Application sought orders in the following terms:

The Application was supported by a short affidavit of Mr. Holukoff to which he exhibited a Remuneration Report giving an account of the work undertaken by the Liquidators during 2019 and some details of the calculation of the remuneration for which approval was sought. Reference is made later in this judgment to the information provided in the Remuneration Report.

The Government strongly disputed the remuneration and expenses claimed by the Liquidators, first in correspondence and then in affidavits put before the court on the Application. A wide range of objections were raised which included: the Company was not an operating company but a holding company with investments in subsidiaries which had management in place; the costs of liquidation far exceeded the Company's management costs prior to liquidation; there was no proper justification for retaining the services of numerous Grant Thornton personnel when any personnel required to assist the Liquidators could instead be employed by them on fixed salaries; there was no evidence of what the Liquidators had described as the “unpicking of at least two decades of mismanagement and potential fraud in a group of over 100 companies”; the appointment of corporate directors to the operating subsidiaries was unnecessary and duplicative of work that the Liquidators were doing or should be doing; there had been a significant increase in the remuneration claimed for 2019 compared with earlier periods, when the expectation would be for activity and hence remuneration and expenses to decline; the remuneration was very substantially higher than in what were said to be comparable liquidations.

It is apparent from the correspondence and the affidavits that there was a mismatch of expectations. The Government appears to have underestimated the amount of work that is inevitably involved in the liquidation of the holding company of a group operating internationally. Not only is it unrealistic to expect that other partners and staff in the Liquidators' firm will not be involved save as employees paid a salary by the liquidators, rather than being charged out by the Liquidators, but the express terms of the Liquidators' appointment provided for them to be charged out at fixed hourly rates as part of the overall remuneration. Comparisons with prior periods or other liquidations are, as the Judge rightly held, of little or no value.

At the same time, the Government was consistently pressing for more information and detail to substantiate the Liquidators' claim for remuneration. In presenting the Government's case in opposition to the application before the Judge, counsel focused principally on the insufficiency of the information provided by the Liquidators in their Remuneration Report, correspondence and evidence.

In addition to the evidence, the Judge received detailed submissions orally and in writing from counsel for both parties. He announced his decision in an email to...