On 12 November this year Lord Glennie issue a decision on the application of the Joint Liquidators of Park Garden Investments Ltd in which he made some observations in relation to remuneration approval obligations that are likely to be of interest to insolvency practitioners and their advisors.
1. No requirement to remit to a Reporter and/or the Auditor
In terms of the relevant legislation, where there is no
liquidation committee, liquidators are under an obligation to
submit accounts, as well as claims for their fees and outlays, to
the Court at regular intervals. The Court then has the task of
fixing the amount of the outlays and the liquidator's
remuneration. The practice has developed of remitting the accounts
to a Reporter and (at least in the Court of Session) also to the
Auditor of Court, both of whom then report to the Court.
Quite where this practice of remitting to a Reporter and/or the
Auditor of Court has come from is unclear. Lord Glennie has
indicated that it appears to have emerged at the end of the 19th
century and has been followed fairly consistently since then. Lord
Glennie's opinion makes it clear, however, that this practice
is not binding on the Court and there is no requirement for the
Court to remit either to a Reporter or to the Auditor of
Court.
Lord Glennie emphasised, however, that the appropriateness of
dispensing with the usual practice of remitting will depend on all
of the circumstances relating to each particular case. In the
present case, Lord Glennie found three key issues which led him to
conclude that he would depart from that existing practice:-
(b) The unsecured creditors had been unwilling to form a Liquidation Committee in this particular liquidation; and
(c) The level of outlays and remuneration claimed did not on the face of it give rise to any obvious concerns.
2. Further applications in respect of outlays and remuneration can be made by motion
The standard practice as it currently exists is for each
accounting period to be dealt with as a separate matter before the
Court. This entails a separate Note being lodged with the Court on
each occasion. Lord Glennie pointed out that the practice that has
developed over the last year or so in respect of administrations is
to allow for a motion to be made in an existing Note for subsequent
applications for the fixing of outlays and remuneration. In this
case he granted the application by the Liquidators to allow future
applications by way of motion rather than separate Notes so as to
save expense.
It is clear that one of the country's most senior insolvency
judges is willing to facilitate changes where those changes will
save unnecessary expense being incurred. That benefits unsecured
creditors. It is also clear from Lord Glennie's decision that
this is an ongoing process which will be kept under review.
Insolvency Practitioners should take note and should also consider
exploring alternative options with their Lawyers on a case by case
basis as this case is a clear indication that the Scottish courts
are willing to allow new practice to develop.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.