Re Independent Insurance Company Ltd (in provisional liquidation) (No 1)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Ferris |
| Judgment Date | 25 July 2002 |
| Neutral Citation | [2002] EWHC 1577 (Ch) |
| Docket Number | Case No: 3827 of 2001 |
| Court | Chancery Division |
| Date | 25 July 2002 |
[2002] EWHC 1577 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Ferris
Case No: 3827 of 2001
Mr Anthony Mann QC Instructed by Messrs Herbert Smith for the Joint Provisional Liquidators.
Hearing date: 10th May 2002
APPROVED JUDGMENT
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon Mr Justice Ferris
I have before me two applications, dated respectively 7th December 2001 and 7 th May 2002, concerning the remuneration of the joint provisional liquidators ("the JPLs") of Independent Insurance Company Limited ("the company") and the payment of certain other outgoings. In form the applications seek authority for the JPLs to pay certain specified sums in respect of their remunerations and disbursements. As the applications have developed, however, I am asked at this stage to do no more than give certain directions intended to lead to the making of substantive orders in due course.
The JPLs, both of whom are partners in the firm of PricewaterhouseCoopers ("PwC"), were appointed provisional liquidators of the company by an order made by me on Sunday 17th June 2001. The order was made as a matter of urgency in advance of the presentation of a winding-up petition. The urgency arose from the substantial insolvency of the company and the need to preserve its assets and achieve an orderly run-off or disposal of its insurance business. A winding-up petition was presented on 18th June 2001. This has been adjourned from time to time.
If the company had not been an insurance company it would probably have been most appropriate to deal with its predicament by means of an administration order. However an administration order could not at the relevant time be made in respect of an insurance company (see section 8(4)(a) of the Insolvency Act 1986). Accordingly the appointment of provisional liquidators was the most appropriate insolvency mechanism to deal with the situation. (The position changed as at 31 st May 2002 by means of the Financial Services and Markets Act 2000 (Administration Orders Relating to Insurers) Order 2002, S. 1 2002 No. 1242, but this does not affect orders already made).
The remuneration of provisional liquidators is provided for by Insolvency Rule 4.30 which, so far as material, reads as follows:
"(1) The remuneration of the provisional liquidator (other than the official receiver) shall be fixed by the court from time to time on his application.
(2) In fixing his remuneration, the court shall take into account —
(a) the time properly given by him (as provisional liquidator) and his staff in attending to the company's affairs;
(b) the complexity (or otherwise) of the case;
(c) any respects in which, in connection with the company's affairs, there falls on the provisional liquidator any responsibility of an exceptional kind or degree;
(d) the effectiveness, with which the provisional liquidator appears to be carrying out, or to have carried out, his duties; and
(e) the value and nature of the property with which he has to deal."
Having regard to this provision it was not necessary for the order appointing the JPLs to provide for the remuneration of the JPLs and it did not do so.
In view of this I am somewhat surprised to see that on 19th June 2001 the JPLs applied to Mr Registrar Buckley for their remuneration to be provided for. The order which was made by Mr Registrar Buckley reads as follows"
"The remuneration of Dan Yoram Schwarzmann and Mark Charles Batten, the joint provisional liquidators of the Company ("the Joint Provisional Liquidators"), be fixed by reference to the time spent by the Joint Provisional Liquidators and their staff on the basis of PricewaterhouseCooper's usual hourly rates for the type of work involved which are from time to time in effect, but subject to the fixing of such remuneration from time to time by the court."
I do not see what useful purpose this order was intended to serve. Without the words "subject to the fixing of such remuneration from time to time by the court" it might be supposed that it would have enabled the JPLs to retain remuneration calculated in accordance with PwC's usual hourly rates without future reference to the court. The additional words, which seem to have been inserted at the instance of Mr Registrar Buckley, negative this. But the question which then arises is whether the earlier words displace the criteria in Rule 4.30. Before me the intention to do this was disclaimed. But if they do not do this, what do they do?
In my judgment the order of Mr Registrar Buckley made on 19th June 2001 was unnecessary and should not have been asked for or made.
An overview of the position which faced the JPLs on their appointment was provided by Mr Batten, one of the JPLs, in paragraphs 19 and 20 of his fifth witness statement, made on 7th December 2001. In those paragraphs Mr Batten stated:
"19. By way of background, the Company is a substantial insurance company which had (as at the date of the Order) a workforce of approximately 2,000 employees, a large variety of business written (from business interruption to pet insurance), 600,000 personal lines and 200,000 commercial lines policyholders, 58,000 claims in the process of being handled, an extensive broker network and 14 branches with large operations in London, Cheadle, Edenbridge, Ireland, France, Spain and the Bahamas. The Company also had reported assets of £1.7 billion. Upon the appointment of the Joint Provisional Liquidators, and in order to secure and stabilise the position following the making of the Order, it was necessary to:
19.1 send 70 PwC staff to secure assets and the records, and to gather sensitive information;
19.2 correspond with the policyholders, brokers and the Policyholders' Protection Board ("PPB") to stabilise the position;
19.3 begin the process of transition from "live" insurer to "run-off";
19.4 cancel all policies not capable of transfer;
19.5 set up a run-off company to deal with the Company runoff going forward;
19.6 dispose of businesses where the value depended on retaining skilled staff;
19.7 pursue insurance collections; and
19.8 implement a cost reduction programme.
20. It was also necessary to begin the investigation into the failure of the Company, first in order to establish the "true" financial position, and secondly to assess the areas of potential recovery (namely reinsurance, antecedent transactions and potential claims against professional advisors)."
Mr Batten then went on to describe in greater detail the main issues on which the JPLs had concentrated their efforts. I have no difficulty in accepting his account of these matters.
On 7th September 2001 Mr Registrar Buckley, on the application of the JPLs, made three further orders in respect of the remuneration of the JPLs and kindred matters.The effect of these orders, so far as material to the matters which I have to consider, may be summarised as follows:
a) The remuneration of the JPLs for the period from 18th June 2001 to 15 th July 2001 was authorised in the sum of approximately £1.9 million plus VAT and disbursements of approximately £42,500. These sums were ordered to be paid out of the assets of the company.
b) Payment of the fees of Messrs Herbert Smith, the solicitors instructed by the JPLs, for the period from 18th June 2001 to 15 th July 2001 in the sum of about £711,000 plus VAT and disbursements of about £50,000 were approved by the court and ordered to be paid out of the assets of the company.
c) The fees of PwC and of Herbert Smith and another firm of solicitors in connection with placing the company in provisional liquidation, amounting altogether to about £200,000 plus VAT, and certain disbursements amounting to about £11,500 were ordered to be paid out of the assets of the company.
d) The JPLs were authorised to pay out of the assets of the company on a monthly basis their remuneration and VAT thereon and the expenses incurred in connection with the provisional liquidation. Although the relevant order is silent on the point, the remuneration so paid was presumably to be calculated in accordance with the order of 19th June 2001 which I have previously mentioned. The authority was given subject to the undertaking of the JPLs (i) promptly to inform an informal creditors'committee of the company of the amounts so paid; and (ii) to apply on a three monthly basis for the approval of their remuneration in accordance with the provisions of Rule 4.30; and (iii) to repay to the company so much of their remuneration as is not approved by the court within 14 days of the making of the court's order.
On 7th December 2001 the JPLs made the first of the three monthly applications for approval of their remuneration which were envisaged by the order summarised in paragraph 11(d) above. This asked for an order authorising the remuneration of the JPLs for the period from 16th July 2001 to 15th October 2001. In the alternative, if the court was minded to order a review of the remuneration sought, the application sought the appointment of an assessor to assist the court in this task.
The application of 7th December 2001 was supported by the fifth witness statement of Mr Batten which I have already mentioned. Among the documents exhibited to this witness statement were three detailed summaries, extending altogether to about 140 pages of material. Each of these summaries described the work done and the persons involved, with details of their hours spent, their charging rates and total costs involved in...
To continue reading
Request your trial
- Korda¸ Re Stockford Ltd (Subject to Deed of Company Arrangement)
-
Jacob and another v UIC Insurance Company Ltd and another
...by reference to their rates as partners in Robson Rhodes. This I suspect is a standard form of order see Independent Insurance Co Ltd [2002] 2 BCLC 709 at paragraph 6 where an identical order was made. Somewhat intriguingly Ferris J considered that order was unnecessary as the power to fix ......
-
Flynn v Mccallum HC
...applications involving (what has been termed) a “mega-insolvency”. That term was coined by Ferris J in Re Independent Insurance Co Ltd [2002] EWHC 1577 (ChD); see also Re Independent Insurance Co Ltd (No 2) [2003] EWHC 51 (ChD). The size of that liquidation can be seen from the remuneration......
-
Independent Insurance Company Ltd (in provisional liq) (No 2)
...reason for which I shall explain. 2 The background is described in a judgment which I gave on 25th July 2002 ("my July judgment") ( [2002] EWHC 1577 (Ch); [2002] 2 BCLC 709). I will not repeat it except to the extent that is necessary to enable this judgment to be understood. 3 At the time......