Re SPhinX Group

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 13 November 2012
• Court: Grand Court (Cayman Islands)
• Date: 13 November 2012

Grand Court, Financial Services Division

(Smellie, C.J.)

IN THE MATTER OF THE SPHINX GROUP

Attorneys: Ritch & Conolly for the joint official liquidators; Turner & Roulstone for the liquidation committee.

Companies-liquidators-remuneration

Joint official liquidators of a company applied for the approval of their fees for a six-month period in 2010. The liquidation committee opposed the application on the grounds that the fees were excessive and unreasonable. This objection was based on the report of an accountant, who had been consensually appointed by the parties, which criticized several elements of the liquidators” fees. The report included several major criticisms, including that (a) there had been an over-involvement of senior employees, who would charge more than junior employees for the same work, for which the report suggested a reduction of $649,082; (b) a report which was created under direction from the court had not been completed to an appropriate depth given its cost ($1.3m.), and that the cost for the work done on the report, as produced, in the relevant period should be reduced by $130,293; and (c) the fact that the liquidation was of a type that would offer full-time work, over a long period of time and with enough assets to guarantee full recovery of the liquidators” costs meant that the liquidators should have applied a 15% discount to their fees, rather than the 5% discount that they had applied. The report also complained of various smaller matters, e.g. the billing practices for travel, the fact that the assets were being managed by a manager rather than a junior accountant and the engagement of temporary staff to assist with the liquidation. The parties had agreed to appoint the accountant as a fees assessor for the liquidation, however the court was asked if it would have the power to order such an appointment on an ongoing basis, despite the fact that there were no local provisions which entitled it to do so.

Held: (1) When the court determined whether it would approve liquidators” fees under s.109(2) of the Companies Law (2010 Revision) and reg. 10 of the Insolvency Practitioners” Regulations 2008, it would ask if the remuneration sought was fair and reasonable in all the circumstances. These included (i) the amount of time worked; (ii) the complexity of the case; (iii) any exceptional responsibilities required; (iv) the effectiveness of the liquidators” operation; and (v) the value and nature of the property...