RE C.A. PACIFIC FINANCE LTD (in Liquidation)

HCCW36/98, 37/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) ACTIONS NO. 36 and 37 OF 1998

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DECISION
on applications for remuneration
for administration of trust assets
from 11 June 1998 to 30 June 2011 

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Hon Yuen JA:

Background

1. The collapse of CA Pacific Securities (“CAPS”) and CA Pacific Finance (“CAPF”) and its aftermath has been recorded in a number of earlier judgments.  On the application of the Securities and Futures Commission (“SFC”), accountants from PricewaterhouseCoopers (“PWC”) were appointed provisional liquidators on 19 January 1998.  The companies were wound up on 4 June 1998 and the same persons were appointed liquidators.  At the time of collapse, CAPS was one of the largest securities brokers in Hong Kong, and CAPF provided margin finance facilities to CAPS clients who wished to have them.  Some securities were placed under the control of CAPF which in turn pledged them with a number of banks (these banks have been referred to as “the lenders”).  At first it was thought that there were about 13,000 clients (later verified at 3,900), holding one or more account(s), and the securities portfolio comprised nearly 1,000 lines of shares and warrants, with a total value of $1,145m.  At the time of collapse, there was also cash of about $484m gross.  The unexpected manner in which these companies failed, the shortfall in the securities left in their custody, the difficulties in the share-tracing exercise caused by unnumbered securities held in the Central Clearing And Settlement System (“CCASS”) the market system of Hong Kong Exchanges and Clearing Ltd (“HK Ex”), complications caused by the involvement of lenders and of some companies associated with CAPS and CAPF, the large number of aggrieved clients with conflicted interests, and the magnitude of the sums of money involved were unprecedented in this jurisdiction. 

Title to securities

2. It was determined by the court in December 1998 in proceedings (which have been called “the Title Application”) that clients who had acquired securities through CAPS were entitled to the beneficial interest in those securities, with the result that the securities (and funds associated with those securities) were not part of the broker’s assets. In other words, the broker held the securities on trust for the clients.  This feature made this case different from liquidations of other types of companies. 

“Trust assets”

3. The “trust assets” comprised securities held on trust at the date of the companies’ collapse (19 January 1998), additional securities returned between 19 January 1998 and 30 June 2003 from the lenders (who  had sold part of the securities pledged with them), and cash held on trust for the clients.   

4. It was further determined by the court that by reason of the nature of property held on trust, the securities themselves should be delivered to the clients, unless the clients gave instructions for sales to be made on their behalf.  The more difficult issue was when a shortfall in the securities was encountered, giving rise to conflicts between the clients.  It was determined in proceedings in December 2000 that where a shortfall was encountered in the distribution, priority should be given to cash clients before margin clients, and that as between those clients themselves, allocation of shortfall securities should be made pari passu (these proceedings have been called “the Share Application”).  This required an investigation of each account to see whether in relation to each line of securities, the account holder was a cash client or a margin client, what was the state of his account with the broker, and in respect of that line, the quantum of securities to be allocated to the individual client after calculating the claims of other clients with the same standard of entitlement. 

Liquidators’ appointment

5. Due to these factual and legal complexities, the tasks referred to above had to be undertaken by professional accountants with a sufficiently large work force, directed by persons with appropriate ability and experience. I append a table showing PWC’s staff levels and their hourly rates through the years.  

6. As I have said earlier, accountants from PWC were appointed by the court as provisional liquidators on the application of the SFC as a matter of urgency.  They were later appointed as liquidators.  (As there were changes in the identities of the individuals due to retirement, I shall refer to them collectively as “the liquidators”).

7. This decision is concerned with the remuneration for the liquidators in respect of their administration of the trust assets. It should first be said that the liquidators in this case have performed their tasks in a most able and professional manner and have been of great assistance to the court.  Of course the services they have provided must come at a price, and the question to be determined in this decision is what is the fair price to pay.

8. I shall first set out some relevant background.

Provisional liquidation

9. The period of provisional liquidation was 4½ months (19 January 1998 to 4 June 1998).  In accordance with the normal procedure governing provisional liquidation, the provisional liquidators’ remuneration was subject to the court’s approval. 

10. The liquidators had originally sought a sum of slightly more than $21m for their remuneration.  There were subsequent reductions and in a judgment given on 17 July 2001, I sanctioned payment of $13.5m as remuneration and $340,000 as disbursements for the period up to 10 June 1998.  (The end date is 6 days later than the winding-up order/the end of the provisional liquidation, but this is of no significance). 

11. This remuneration was for the period when the liquidators were first brought into the case as a matter of urgency and had to be fully engaged in taking over the offices of CAPS and CAPF (including branch offices), ascertaining the identities and whereabouts of assets, ascertaining the quantum of liabilities, dealing with clients’ enquiries on a large scale, dealing with the lenders and the SFC, identifying assets with CCASS, and a host of other pressing tasks which had to be dealt with as a matter of urgency in trying circumstances. 

Administering non-trust assets

12. As far as the liquidations of CAPS and CAPF themselves were concerned, the liquidators’ claims for remuneration for the period after winding-up have been scrutinized by the Committees of Inspection of the respective companies.  (I should add that, unless necessary to draw a distinction, I have referred to both companies together as the affairs of both companies were so inter-twined.  This decision specifically relates to  the remuneration of the liquidators for the administration of trust assets, in whichever name they were held).    

13. According to the liquidators, the Committees of Inspection have sanctioned remuneration for them in the sum of more than $55m for the period from 11 June 1998 to 30 June 2007 for dealing with the two companies’ own assets with a total book value of $385m, of which the liquidators realised about $177m.  In other words, the remuneration approved by the Committees of Inspection was more than 30% of the value of the realised assets. 

Remuneration - for administering trust assets

14. As the trust assets belonged to the clients and not the companies however, the liquidators’ remuneration for administering the trust assets did not fall to be determined by the Committees of Inspection. The question arose as to how the liquidators were to be remunerated for their work in administering the trust assets.  

15. The court heard submissions on this issue from the liquidators and from legal representatives appointed by the court to protect the interests of clients. (I should add that after this hearing, legal representation appointed by the court for the clients was not continued to avoid incurring further costs, and none of the clients appointed lawyers thereafter).

16. In Re Berkeley Applegate Ltd (No.2) [1989] 1 Ch 32, it was held that where a person (ie a client) seeks to enforce a claim to an equitable interest in property (ie the trust assets), the court may order, as a condition for giving effect to that equitable interest, that an allowance be made for skill and labour expended and costs incurred in connection with the administration of the property.

17. Following the approach in that case, the court made an orderon 8 April 1999 that the liquidators may take their proper costs out of the property before handing over the trust assets to the clients. 

Assessing liquidators’ remuneration for administering trust assets

18. Proceedings were held in October and November 2001 to determine how the liquidators’ remuneration for administering trust assets was to be assessed.  Legal representatives from the liquidators, the SFC, and the Official Receiver (“OR”) made submissions.  For reasons given in a Decision dated 27 November 2001, it was held, after consideration of the Ferris Report (www.open.gov.uk/lcd/civil/ferris.htm), that the court would assess the liquidators’ remuneration either by appointing a taxing master with accountancy and insolvency practice qualifications, or with the assistance of an assessor. 

Appointment of Assessor

19. No taxing master with the requisite qualifications was available.  Fortunately in 2002 Mr Thomas Brian Stevenson, a retired accountant with extensive insolvency experience, was prepared to act as assessor at no expense.  Notice of the assessor’s appointment was given to clients in 2002.  I would like to express the court’s gratitude for the assessor’s time, advice and contribution. It must be recognized however that in the future, if there are to be what have been called colloquially “mega-insolvencies”, the stakeholders (liquidators and creditors) will have to accept that it would be necessary for one or even two assessors to be appointed, even though the assessment process would be rendered more elaborate and expensive (Re Independent Insurance Co Ltd (in provisional liquidation) [2004] BCC 919).  The responsibility for the assessment remains of course that of the court. 

20. The court has dealt with the assessment of the liquidators’ remuneration for administering the trust assets more or less in the same way that courts normally deal with applications to approve provisional liquidators’ remuneration, but with the added input of the assessor.  The OR has throughout been served with the papers in all oral hearings and paper applications, and regular reports have been made by the liquidators to the clients.

Data for claims for remuneration

21. In support of their claim for remuneration for administering trust assets, the liquidators have provided reports which have been called Trust Fees Memoranda (“TFM”) for the period from 11 June 1998 to 30 June 2011.  TFM1 covered the 34-month period from 11 June 1998 to 31 March 2001.  TFM2 covered the 26-month period between 1 April 2001 to 30 June 2003.  Each of the 8 following TFMs covered the 12-month period between 1 July and 30 June (ie from 1 July 2003 until 30 June 2011).  The first two TFM were overly-detailed, perhaps prepared in an abundance of caution in light of previous judgments in other cases where liquidators have been criticized for providing inadequate data for  the court to scrutinize their claims. Subsequently the liquidators have been requested to present the TFM in a less elaborate way.  Some inquiries made by the court and by the assessor directly were answered in correspondence.  

Approach to assessment

22. I have approached the assessment in the following way.

-    Where items require accounting expertise in assessment, for TFM1 and TFM2 I have adopted the percentage of reduction proposed by the assessor.  During these periods (TFM1 and TFM2), each category of work (as set out in para. 34 below) was undertaken, the securities portfolio had the highest value ($508m and $538.5m respectively) and the claims for remuneration were largest ($31.3m and $24.7m respectively).  For subsequent periods (TFM3 - TFM10), Iassessed remuneration having considered the assessor’s views on TFM1 and TFM2, but also paying particular attention to the value of the securities portfolio during each subsequent period. 

-  Where items are of a nature not requiring accounting expertise in assessment, I have undertaken the assessment for all the TFM periods in the light of the court’s knowledge of the way in which this case developed. 

-    Whatever the items, the criteria set out in the Ferris Report have been applied.

23. It should be noted that an assessment such as this is not in the nature of an audit of the liquidators’ charges, and figures applied are not necessarily references to specific rates.  In fact in most assessments of provisional liquidators’ remuneration, no reasons are given for the court’s exercise of discretion in awarding a particular sum.  As will be seen below, the question is not simply whether one accepts that the liquidators and their staff have truly worked a particular number of hours which they genuinely believed was necessary, but also whether the “return” to the clients was worth the entirety of the liquidators’ effort.  

Global view of remuneration 

24. It may first be helpful to step back and view the claims for remuneration in context.  The total sum of remuneration sought is about $99.4m for the 13 years from June 1998 to June 2011.  The total sum of disbursements sought for the same period is about $2.5m.  The value of the trust assets at the start of the period was in the region of nearly $1,630m comprising about $1,145m in the securities portfolio, and the rest in cash.  Viewing the figures globally, the remuneration claimed by the liquidators for administering the trust assets is about 6% of the value of those assets, but of course the administration of cash was much easier than that of the securities portfolio by reason of the nature of the latter asset.

Provisional payments

25. Since the liquidators commenced their claims for remuneration for administering the trust assets, I have ordered some interim payments to be made, on the liquidators’ undertaking to refund any sums subsequently disallowed.  For reasons set out in Reasons for Decision handed down on 27 November 2001, a provisional “processing fee” set at 14% of the value of the securities (as at the date of liquidation) has been held back before each distribution of shares to each client.  The figure of 14% was derived from the estimated total sum of liquidators’ remuneration and legal costs as a percentage of the value of the total securities portfolio.

Criteria for assessment

26. In the Report of Mr Justice Ferris’ Working Party on the Remuneration of Office Holders, the following factors were considered relevant in the assessment of remuneration of provisional liquidators:

(1)   value and nature of the property dealt with;

(2)   time spent;

(3)   exceptional responsibility assumed;

(4)   complexity;

(5)   effectiveness of performance.

As was held in MGN v Maxwell [1998] BCC 324, “remuneration should be fixed so as to reward value, not so as to indemnify against cost”.  The guiding spirit throughout is “value for money”. I have also taken into account Ferris J’s judgment in Re Independent Insurance.  Although we are dealing with trust assets in the present case, and not a provisional liquidation, the criteria set out above similarly apply, because both provisional liquidators and the administrators of trust assets are fiduciaries.  These have therefore been the guidelines followed in considering the reasonableness of remuneration claimed. 

27. The liquidators were for all practical purposes trustees of the trust assets and they must be able to justify that it was prudent from the point of view of the clients to expend cost on the task in hand.  The fact that some of the work was done pursuant to court order is of course relevant, but discretion still had to be exercised by the liquidators as to the methodology to be adopted in going about a task, and the choice of personnel to perform it.  Furthermore, if at any stage it became apparent to the liquidators that implementation of any order in any way would not have been of benefit to the clients, in that the expense that has been or may be incurred outweighed the benefit to be achieved, then it was their duty to come back to the court and to bring that to its attention.

28. On the other hand, one must be fair to the liquidators and avoid challenges or criticism made only with the benefit of hindsight. Especially in the immediate aftermath of the collapse of the companies, exceptional responsibilities had to be assumed by the liquidators. A large work force had to be mobilized at short notice to deal with many anxious (and sometimes agitated) clients.  Further, it is not only the value of the trust assets that is relevant, but also its nature.  The nature of the trust assets in this case was complex - legally, factually and logistically.  Apart from the original securities portfolio, there were also ongoing corporate actions, such as warrants, bonus issues and rights issues. 

Recording of time and rates of charges

29. As far as the recording of time worked is concerned, there is nothing to indicate that the liquidators’ records are inaccurate.  The first TFM has set out in detail the way in which fees are recorded.  The liquidators’ staff were required to maintain daily summaries of the work performed (by way of time sheets for junior staff and additional diaries for senior staff).  Work codes were allocated to record the type of work done by each individual.  The assessor has confirmed that the systems of recording time costs were in accordance with general accountancy firm practices.  There is no reason to doubt the integrity of the liquidators or their staff.  Having said that, the court must also consider whether the numbers and seniority of staff assigned were proportionate to the value of the work undertaken.  

30. As far as the rates of charges are concerned, the court order for the appointment of liquidators (both provisional and full) provided that they would be remunerated at the OR’s approved hourly rates.  Their rates have been set out in the appended Table of Staff Levels and Hourly Rates.  The liquidators have referred to a “rates discount” which is the difference between their own rates and those approved by the OR, but that is not a relevant consideration as the court order for their appointment restricted the rates to those approved by the OR.  I should mention as a matter of completeness that the liquidators’ firm at times had 8 levels of seniority whereas the OR had 9, but the assessor has confirmed that no specific adjustment is needed for this.  

Relevance of recovery rate?

31. The assessor has drawn attention to the high “recovery rate”  claimed by the liquidators.  I understand the liquidators’ response that since they were dealing with trust assets pursuant to court orders, the assessor’s suggested “commercial” approach of applying a lower “recovery rate” across the board is not appropriate, and I note that a similar approach was not accepted by Ferris J regarding the “utilisation rate” argument for the provisional liquidation in Re Independent Insurance.  For that reason, although the liquidators have subsequently provided information on their “recovery rate”, I have not applied an overall “across the board” percentage reduction.

32. As for the percentage of reduction proposed by the assessor for the charges in TFM1 and TFM2 which I have applied to the items requiring accountancy expertise, the liquidators accepted the percentage reduction because they considered that to be more cost-effective than answering queries on individual items from the court.  However this does not mean that the court cannot or should not examine charges for other  items, or for subsequent periods, to arrive at an appropriate figure.  I have started from the time costs charged and then taken into account the criteria listed above, in particular the criterion of what the work was worth in terms of the “return” to the clients.

Disbursements

33. I have no reason to doubt the disbursements claimed.  The assessor had raised only one point about disbursements, which is that the cost of photocopying should be reduced from $4 a copy as per the OR’s rates to $3 a copy as per solicitors’ rates on taxation, following the judgment in Re Aquality Engineering Co Ltd, HCCW1023/2001 unrep. 12 March 2003. The liquidators have applied the lower rate starting from the TFM3 period (1 July 2003).  Since it was only a period of 3 months between the handing down of that judgment and the start of TFM3, I do not consider it cost-efficient to attempt to re-calculate the disbursements to reflect the difference of only $1 for that short period prior to TFM3, and so I would allow the disbursements in full.

Categories of work

34. It would be helpful to first set out the different categories into which the liquidators have divided their work (to avoid further lengthening this Decision, the work involved under each category has not been set out in full, and the descriptions of work are for the assistance of the general reader only):

A.  Title Application -  

   involvement in court proceedings determining clients’ entitlement to the trust assets;

B1.   Managing trust assets -

   (1)reconciling records with CCASS and the lenders;   and

   (2) monitoring corporate actions eg warrants, bonus    issues, etc;

B2.   Determining clients’ claims -  

(1)& (2) creating, verifying and updating a client database;

(3)dealing with inquiries from regulators, press and clients; and

(4)classifying clients as cash clients or margin clients.

B3.   Compensation Fund -

   assisting with SFC and HKEx compensation payments for clients; 

C.  Claims for securities and proof of debt -

   calling for and verifying clients’ claims;

D1.   Lenders’ return of shares -

   securing return of surplus pledged securities;

D2.   Masterise and Inviting -

   investigating the possibility of proceedings relating to these companies;

E.  Share Application and (after 2001) Processing Fee -

   involvement in court proceedings determining allocation of shortfall securities to clients;

   and after 2001, 

   calculating sums to be withheld as provisional processing fees;

F.  Delivery of Shares -

   distributing securities and cash;

G.  General administration.

I have hived off as a separate category:

R.  Review of legal fees.

Analysis of claims for remuneration by reference to time

35. In terms of time, the table entitled “Analysis of Claims for Remuneration by reference to Periods” attached to this Decision shows that the largest claim (per month) is for the period of TFM3 (01/07/03-30/06/04) followed by the periods for TFM1 (11/06/98-31/03/01) and TFM2 (01/04/01-30/06/03).  Of course the levels of importance and difficulty of each category of work varied according to the time at which the work was undertaken.  I have already referred to the period of provisional liquidation. The liquidators have received $13.5m remuneration for this most difficult period of 4½ months.  In the years that followed, there were important milestones in the administration of the trust assets, but as most of the securities were distributed to clients as securities or in cash by 2004 (end of TFM3), particular attention must be paid to the claims for remuneration for the subsequent periods to see if the value achieved by the clients was worth the expense.

Analysis of claims for remuneration by reference to types of work

36. As far as the types of work undertaken were concerned, it is clear from the matters previously set out in judgments of the court and from the TFM that the most complex work were:

-   identifying, reconciling and retrieving trust assets from CCASS and the lender banks; and

-   implementing the distribution of trust assets.

It would be fair to say that some categories of work, such as the court proceedings for the Title Application and the Share Application, were more “lawyer-driven” with the liquidators only in the role of professional lay clients, and some categories of work were predominantly clerical in nature, such as the creation of a database of clients.  It will be seen from the table entitled “Court’s Schedule” that the largest claim for remuneration is for Category F (“Delivery of Shares”) at $45m, followed by Category B2 (“Determining Clients’ Claims”) at $14m and Category E (“Share Application & Processing Fee”) at nearly $12m. (For completeness, figures for “Rates discount” and “Write-offs” as provided by the liquidators have been included in the “Court’s Schedule” but they have not been subject to examination).   

Assessment

Category A - Title Application

37. Starting with the Title Application, this was unique to the TFM1 period.  This is a matter on which the court has more experience as it involves legal proceedings. 

38. The following assessment has been performed on the basis of the time and effort that would be expected from a lay client charging at professional rates in such proceedings.  There were 11 hearings during that period.  I consider that the liquidators should be remunerated for each hearing (on the basis of 5 hrs per hearing) for attendance in court and an additional 2 days (on the basis of 8 hrs a day) for pre-hearing preparation and post-hearing consideration of the court orders.  Although it is appreciated that the liquidators must have expended quite some time earlier in the proceedings on briefing lawyers on problems they encountered, it should also be noted that not all hearings were of equal length or complexity or importance.  The sum under this head is $1,007,160 ([11x5+22x8]x$4,360, the last figure being a partner’s average hourly rate at that time). 

39. As the issues were more legal or conceptual, and given that the liquidators themselves had been involved, I do not see the need for additional involvement at senior manager level.  That said, I accept that managerial level assistance was required for the liquidators in their preparation for the hearings and consideration of implementation of court orders.  I would assess managerial level remuneration at $482,240 (22x8x$2,740, taking the higher of the manager 3^rd year’s rate). 

40. The total remuneration for category A is therefore $1,489,400.  I am aware that this is a greater reduction than that proposed by the assessor on an “across the board” percentage basis, and it is also substantially less than the taxed costs of the legal representatives for the parties, but it must be recognized that for this category, it was the legal representatives (rather than the liquidators) who had the main conduct of the proceedings. 

Category B1 - Managing Trust assets

41. This category comprised tasks in the following 2 parts:

(1)   reconciling shares between the companies’ records and those kept by CCASS and the lenders;

(2)   monitoring corporate actions after the companies’ collapse, such as rights issues, bonus issues, warrants, dividends, etc.

I shall first set out some relevant background.

(1) Reconciliation of records

42. Part (1) refers to the reconciliation work that had to be done between the companies’ records with those of CCASS and the 14 lenders.  Also it was necessary to reconcile the companies’ records as a whole with the records of individual accounts.  These tasks were rendered more difficult and complex by a number of factors: (a) errors and omissions found in the companies’ computer records by the time of their collapse, (b) the lenders’ sale of some of the pledged securities, (c) CCASS’ close-out procedures, (d) the involvement of a related company Pui Hang Enterprises, and (e) the refusal of key IT personnel of the companies to co-operate with the liquidators’ staff. 

43. The reconciliation work was one of the most important and productive tasks undertaken by the liquidators for the benefit of the clients.  As noted in previous judgments, securities held at CCASS are not numbered, and therefore tracing the movement of individual securities by reference to the numbers of share certificates in the traditional way was not possible.  The reconciliation work done by the liquidators led to the reconciliation of records with CCASS, and the recovery from lenders of securities surplus to the lenders’ entitlements. 

44. Having said that, the involvement of senior personnel was necessary only at the earlier stages of the 13-year period from 1998 to 2011 when deciding what courses of action to take, for establishing the procedures for such reconciliations, and for directions to be given to junior personnel when unexpected problems occurred. In the TFM1 period, 9 of the 14 lenders returned surplus securities and cash. In the TFM2 period, the remaining 5 lenders did the same.  So by the time of TFM3 (2003-2004), all the reconciliation work with the lenders had been completed.

(2) Monitoring corporate actions

45. As for part (2), the companies’ collapse affected not only the securities they were holding for clients but also corporate actions such as warrants, bonus issues, rights issues, dividends, etc.  Upon the termination of CAPS’ participation in CCASS on 19 January 1998 following its default, CCASS terminated access to its entitlement information.  Accordingly when the liquidators took over, they had to track corporate actions manually at first. 

46. This work would have started during the period of provisional liquidation.  Indeed Jardine Fleming was appointed during the period of provisional liquidation to advise on specific issues relating to the sale, disposal or exercise of warrants.  They also undertook the sale of warrants.  HSBC was appointed custodian of the securities portfolio as from January 1999 and Hang Seng Bank from November 2003.  On their appointment, the involvement of the liquidators and their staff in monitoring corporate actions would have been reduced, although not completely eliminated as HSBC reported only to the liquidators and not to individual clients since that would have been more costly.  According to the liquidators’ calculation, had individual accounts been opened, the estimated cost of transfers would have been about $9.9m.  

47. In any event however, the quantum of securities reduced substantially after the bulk of securities was distributed to clients in 2003-2004 (by “distribution” I include sales made on behalf of clients).  Applying the principle of proportionality, this should lead to a commensurate reduction in the remuneration charged. So much for the relevant background. 

48. Coming to the assessment of remuneration for this category of work which required accountancy expertise, the assessor proposed that a 10.8% reduction be made to the remuneration charged in TFM1, on a broad-brush approach rather than one based on examining the details of individual charges. Although the liquidators were initially opposed to that approach, they subsequently accepted that it would be less cost-effective to seek to answer queries subsequently raised by the court on specific items.  Consequently, applying the assessor’s percentage of reduction to Category B1, I would assess the remuneration for the 34 months covered by TFM1 at $5,371,109 up to 31/03/2001.  Similarly, on the assessor’s reduction of 11.2% on the remuneration charged in TFM2 which was accepted by the liquidators, I would assess the remuneration for 01/04/2001 – 30/06/2003 (26 months) at $2,216,779.

49. To underline the relevance of the proportionality consideration, which impacts on the assessment for this category for the subsequent periods, the following table shows the value of the securities portfolio, the assessment by the assessor for TFM1 and TFM2, and the charges for the subsequent periods for this category.

Period	Value of portfolio	Charges for Cat B(1)
(98/01) TFM1	$508m	$5,371,109 (assessed) [$1,895,685 average p.a.]
(01-03) TFM2	$538.5m	$2,216,779 (assessed) [1,023,128 average p.a.]
(03-04) TFM3	$19.1m	$540,211 (claimed)
(04-05) TFM4	$28m	$128,649 (claimed)
(05-06) TFM5	$35.2m	$210,886 (claimed)
(06-07) TFM6	$1.1m	$104,338 (claimed)
(07-08) TFM7	$0.9m	$21,703 (claimed)
(08-09) TFM8	$0.1m	$11,987 (claimed)
(09-10) TFM9	$0	$4,719 (claimed)
(10-11) TFM10	$0	$16,036 (claimed)

50. As noted above, one of the relevant factors in assessing remuneration is proportionality. By 2004, all the lenders had returned the surplus securities and cash to the liquidators, and the bulk of the securities had been distributed to clients.  Although I accept that the liquidators’ staff still had to reconcile corporate actions returned by the lenders, which was labour-consuming, the work could have been left to the most junior staff since procedures had been established in the earlier years.

51. The remuneration assessed by the assessor for TFM1 was 1.1% of the value of the portfolio, and that for TFM2, about 0.4%.  I am prepared to accept the figure claimed for TFM3 ($540,211), although it comes up to 2.8% of the value of the portfolio, because more work would have had to be done that year in preparation for distribution of the securities.

52. The charges claimed for TFM4 ($128,649) is 0.5% of the value of the portfolio, and that for TFM5 ($210,886), 0.6% of the portfolio, which are acceptable.  However for TFM6 and TFM7, it is difficult to see the justification for the much higher percentage rate of charges to the value of the portfolio (see the table at para. 49 above).  I am prepared to accept that there would be a minimum level of work done even though the value of the portfolio has been reduced, so taking the figure ($11,987) claimed for TFM8 (when the portfolio still contained some active securities), I would assess the remuneration for TFM6, TFM7 and TFM8 at $11,987 each. 

53. As for TFM9 and TFM10, the periods where the securities had no value eg because they related to delisted companies, I accept that staff still had to keep records up to date until an application to court could be made to relinquish the title to those securities, and although an order has been obtained, the implementation of relinquishment procedures had to be done by the custodians. I accept the remuneration charged for TFM9 at $4,719.  As for TFM10, an increase in “Manager 3^rd year” participation for that period has not been justified and I would therefore assess the remuneration at the same figure.

54. The total remuneration for Category B1 is therefore assessed at $5,371,109 + 2,216,779 + 540,211+ 128,649 + 210,886 +11,987 +11,987 +11,987 +4,719+4,719 = $8,513,033.

Category B2 - Determining clients’ claims

55. The claim for this category is the second largest, at $14m for the 13-year period.

56. This category comprised the following tasks:

(1)   creating a database of clients;

(2)   verifying the same;

(3)   dealing with inquiries from regulators, press and clients; and

(4)   classifying clients as cash clients or margin clients.

Some of these tasks required accountancy expertise but some did not, depending on what tasks were done and when.   

57. I shall deal first with the TFM1 period.  Considering the tasks that were performed during this period, I do not consider accountancy expertise to be necessary for assessment.  To perform the assessment, I have tested the total figure claimed against what I consider to have been reasonable charges for each task during that period. 

58. As far as tasks (1) and (2) are concerned, I accept that the liquidators and more senior personnel would have been required at the outset to establish the methodology for (1) the creation and (2) verification of the database.  But whilst the database was essential, and the mechanics for its creation and verification would have been time-consuming, it  would only have needed junior staff, as it involved clerical rather than professional accountancy work.  It should be noted that this category did not include verifying clients’ claims about the accuracy of their accounts (this is under a separate category, viz Cat. C). 

59. I would therefore take an assumed basis of 0.2 hour per client for an associate (at average $565/hr) for collating client details and inputting them into the database, and 0.1 hour per client for a senior associate 2^nd year (at the higher rate of $1,090/hr) for verification work.  That would give a total sum of say $222 per client, and on the basis of 3,900 clients, the total sum would be $865,800.  As for the initial work in establishing a methodology for the creation and verification of the database, I would assess this at 3 hours each of liquidator time (at $4,240/hr) and manager time (average between manager 2^nd year and 3^rd year at $2,300/hr),  which would give a further $19,620 or a total of $885,420 ($865,800+ 19,620) for the creation and verification of the database.  Updating work carried out thereafter (eg due to changes of addresses) would take very little time and could be undertaken by junior staff.  I would round up the figure relating to the tasks of (1) creating and (2) verifying and updating of the database of clients in the TFM1 period to $900,000. 

60. Before dealing with task (3), I shall deal first with task (4) ie. classification of clients.  This was an important preparatory step for the Share Application. The work started at the end of 2000 and finished in February 2001.  Put succinctly, each client’s account records were  reviewed to see if the client had signed a “memorandum of deposit”.  If he had, that account would be classified as a margin account.  There were 5,500 securities accounts, and on the basis that it took an associate (at $565/hr) 0.1 hr to review each account and note down the result, and 0.1 hr for a senior associate 2^nd year (at $1,090/hr) to verify it, this would come up to $165 per account, and for 5,500 accounts, a total of $907,500.  As the method of determination by reference to the memorandum of deposit was directed in court proceedings, the liquidators should also be remunerated for preparing for and attending those proceedings, and I would assess this at 10 hrs of liquidators time in the TFM1 period i.e. $44,800, for a total under task (4) of $952,300.  

61. Dealing now with task (3), ie. dealing with inquiries from  regulators, press and clients, the companies’ collapse left many clients understandably confused and aggrieved, and the liquidators became one of the focal points for agitation.  I also accept that this was a high-profile company collapse, and the liquidators received inquiries from the press and regulators. 

62. However, one must at the same time bear in mind the fact that the companies underwent provisional liquidation for nearly 5 months after the initial throes of the collapse, and the liquidators have already been remunerated for their work in the provisional liquidation. 

63. One must also bear in mind that the liquidators are now claiming professional fees for the administration of trust assets, and generally speaking, time spent on what one might describe as public relations should not attract compensation on the basis that professional accountancy work was being undertaken.  Whilst I accept that the liquidators were required to address inquiries from regulators as part of their work in administering the trust assets, I am not persuaded that answering questions from the press should be included, given that press releases should have been adequate.  In the absence of particulars as to how much time was spent by the liquidators dealing with regulators, as distinct from clients, I would assess remuneration under this head at $304,640 (0.5x4x34x$4,480) on the basis of 0.5 hr a week every month throughout the TFM1 period when there were events such as the Title Application and the Share Application which would have attracted the regulators’ interest.  Of course there would have been periods when contact was more frequent, but at the same time, it has not been suggested that there was any requirement for fixed-interval contacts. 

64. Pausing there, I have accepted that the following claims for Cat.  B2 for TFM1 were justified: for tasks (1) and (2), the sum of $900,000; for task (4) $951,980; and for the regulators part of task (3), $304,640.  The total of these figures is $2,156,620.  The balance of the claim under this category for the part of task (3), for dealing with the clients only, would therefore be $4,357,548 (ie $6,514,168- $2,156,620).  

65. I accept that as part of the administration, it was necessary for the liquidators to inform the clients of the way in which the matter was proceeding and for their staff to deal with legitimate individual inquiries.  However general administrative costs such as costs incurred in translation should be absorbed in the liquidators’ general office overheads.  Moreover since the liquidators had regularly released general information, time should only have been spent on productive individual inquiries, even at the risk of unfavourable client relations.  Having earlier noted that the liquidators are charging on the basis of performing professional work, it would not be fair for the liquidators to charge for time spent on unproductive dealings with unreasonable clients at the expense of the reasonable ones. 

66. Taking all these matters into account, I am not persuaded that the balance of Category B2 of $4,357,548 would be justified by reference to the criterion of “value for money”.  That would amount to $128,163 per month which seems to me to be an unreasonable sum for answering inquiries from clients only.  Whilst I recognize that some objections to classifications would have been received during that period, it would be noted that objections to classifications would only have started in the last month of that period (March 2001) as the letters of classification were only sent out in the last week of February and the deadline for objections had not expired.  I shall deal with these objection inquiries in the TFM2 period.

67. For dealing with client inquiries in the TFM1 period (i.e. not relating to objections), the claim for $128,163 per month amounts to about  $6,400 a day (on the basis of 5 working days a week) continuously for 34 months.  In my view, that would not be justified on the criterion of value for money. 

68. Even if each and every one of the 3,900 clients made general inquiries every quarter every year in the TFM1 period (say 12 times in the TFM1 period), and each inquiry took 0.1 hr for an associate to deal with, that would come to only $2,644,200 (3900 x 12 x 0.1 x $565 average/hr). 

69. For such general inquiries it is unlikely that the liquidators would have to be personally involved but I accept that they needed to deal personally with clients on the initial occasion when some clients behaved in an unruly manner in their office.  Thereafter security measures would have been put in place, and as I indicated earlier, it would not be fair for reasonably-behaved clients to have to pay professional fees to accountants just to placate unreasonably-behaved ones. I would assess the liquidators’  remuneration in this category on the basis that they had to deal personally with general inquiries for 0.5 hr every week throughout the 34-month period of TFM1. This would come up to say $304,640 (0.5x4x34x$4,480).  The sum for the “clients” part of task (3) would therefore be $2,948,840 (2,644,200+ 304,640).

70. The total assessment for Cat. B2 for the TFM1 period is therefore $5,105,780 ie.

tasks (1) + (2): the sum of $900,000;

task (3): $3,253,480 (304,640 for dealing with regulators + 2,948,840 for dealing with clients); and

task (4): $952,300,

or an average of $150,170 a month.

71. For TFM2, I accept that this was a busy time for the liquidators’ staff as this was the period during which clients’ objections to classifications were dealt with.  There were about 400 objections.  The determination of the objections required tracing of records of trades, and of sums of money transferred between accounts.  This required professional accountancy expertise.  Some objections were resolved without the need to go to court.  For those which needed resolution in court, the hearings took 7 days.  The court orders gave rise to further inquiries, and in some cases, new objections from clients.

72. This was also the period during which the Processing Fee application was prepared and heard.  Further, the methods for distribution and allocation of shares to individual clients were ascertained during this period. 

73. The assessor has reduced the liquidators’ claims for remuneration by 11.2% for the TFM2 period.  For this category this would mean a reduced remuneration of $5,686,378 (about $218,706 a month) which I consider to be a fair amount for this important category of work at an important period in the administration.  I am aware that this is a larger sum than that awarded for the same “category” of work during the TFM1 period, but the reason for that is because this is not a true comparison of like for like. The nature of the classification work during the TFM2 period required more accountancy expertise than the work done during the TFM1 period.

74. Not surprisingly, the claim for category B2 dropped substantially in the TFM3 period.  There were however some court hearings which required the liquidators’ input, and I am prepared to accept the claim of $238,643 in its entirety.

75. The claim for the TFM4 period is only $29,311 and I accept it in its entirety.

76. The claim for the TFM5 period however rose to $313,808.  A comparison of the charges in TFM4 and TFM5 shows that in TFM5, 2 senior managers charged for a total of 63.8 hrs whereas the same personnel charged for 2.8 hrs only during the preceding period.  Most of the work would have been the same, except that in the TFM5 period, one of the clients sent lengthy submissions for 2 court hearings held during that period.  However the same client had commenced his complaints during the TFM3 period already, and 1 of the 2 managers had already participated in this category of work then (albeit as manager rather than as senior manager).  Further it is the court’s experience that the submissions from this client tended to be repetitive.  Accordingly it would not have been necessary for 2 senior managers to have been involved for any substantial periods to deal with him.  I accept the senior manager who had prior knowledge of this client’s matters would have had to prepare for and attend the court’s hearings.  On the basis that she would have had to prepare for it for say 2 hrs before each hearing and attend court for 2 hrs for each hearing (making a total of 8 hrs), I would deduct say 55 hrs from senior manager time, resulting in remuneration for the TFM5 period being assessed at $127,358 ($313,808 – [$3,390/hr x 55 hrs]). 

77. For the TFM6 period, the amount claimed is $315,213.  Two progress letters were sent to the clients during this period, but it would appear that these were general rather than specific, and in any event legal representatives were involved in their preparation.  Junior staff were trained to man “hotlines” for clients with inquiries arising therefrom. However it would be seen from the Summary of Time charges that this took less than 45 hrs so there would not have been a large number of inquiries.  During this period, there were also some court proceedings and the senior manager (and to a lesser extent the liquidators) would be involved in preparation and attendance. 

78. However it would be noted that by this period, the value of the securities portfolio had dropped to $1.1m, and so the sum claimed for this category alone is more than 28% of the value of the portfolio.  Given the “value for money” criterion, I would assess the remuneration at no more than say $72,110 (2 hrs of partner time @$4,480/hr, 10 hrs of manager 3^rd year time @$2,740/hr and 50 hrs of associate time @$715/hr, taking the average rate between senior associate 1^st year and associate). 

79. In the TFM7 period, a sum of $102,847 is claimed.  There do not appear to be any substantial events, and it is difficult to evaluate the discussions as to claims conversions without reference to the value of those unsecured claims.  In the circumstances, I would assess the remuneration at the same figure as that for the TFM4 period, ie $29,311. 

80. The claims for the TFM8, TFM9 and TFM10 periods are relatively insignificant, being an average of $2,300 per month and they are allowed in their entirety.

81. The total remuneration for Category B2 is therefore assessed at $5,105,780+ 5,686,378+ 238,643+ 29,311+ 127,358+ 72,110+ 29,311+ 24,829+ 27,995+ 31,361= $11,372,876.

Category B3 - Compensation Fund

82. The liquidators undertook verification work at the request of the SFC and HKEx so as to facilitate the payment of compensation to clients.  I accept that this was part of their work as administrators of the trust assets, and I also accept that this required some professional accountancy work.  The assessor having applied a 10.8% reduction for the TFM1 period, I would assess the remuneration in this category at $800,763, an average of $23,551 a month. 

83. As for the TFM2 period, I note that the liquidators had said in September 2001 that the Compensation Fund had “largely completed” its assessment of client compensation claims, and that the liquidators expected there to be less work of this type.  But it does not seem to have been reflected in the claims for remuneration.  The claim for the 34 months of the TFM1 period was $897,717, an average of $26,403 per month, yet the claim for the 26 months of the TFM2 period (01/04/2001 to 30/06/2003) was $601,550, an average of $23,136 per month.  I am unable to see from TFM2 how the relatively small reduction of 13% is justified, given that the Compensation Fund assessment had been “largely completed”.  Nor can I see the explanation for 233 hrs claimed for senior associate (3^rd yr)’s work in TFM2 when in TFM1, only 1.8 hrs work at that level was claimed.  I appreciate that in TFM1, 76 hrs of senior managers’ work were claimed, compared with 5.3 hrs at that level in TFM2, but as noted above, the substantial work was done during the TFM1 period.  Taking these matters into account, I would assess the remuneration for the TFM2 period at half of the average monthly charge assessed for the TFM1 period, i.e. $306,163 ($23,551x0.5x26). 

84. As for TFM3, there were only 20 claims of clients left and it is not suggested that the work was anything other than routine and minimal.  It is difficult to see the justification for a claim for 16 hrs of manager 1^st and 2^nd yr time.  Nor for the 15 hrs of senior associate 3^rd yr time @$1,490/hr which could have been done by junior personnel @ $1,090/hr.  Deducting the claim for 16 hrs manager 1^st and 2^nd year time, and substituting the 15 hrs of senior associate 3^rd yr time with the same amount of senior associate 2^nd yr time, I would assess the remuneration for the TFM3 period at $20,958.

85. As for TFM4, HKEx further admitted 8 claims and advised that all outstanding claims had been finalized.  Again it is difficult to see the justification for a claim for 3.8 hrs of manager 3^rd yr time.  Nor for the 13.7 hrs of manager 1^st and 2^nd (mistyped as 3^rd) yr time.  After deducting the 3.8 hrs of manager 3^rd yr time, and substituting the 13.7 hrs of manager 1^st and  2^nd yr time with the same amount of associate time, I would assess remuneration for the TFM4 period at $10,325.  

86. As for TFM5, there is a claim for $19,491 but in light of the preceding paragraph and as it is not stated that there were any newly admitted claims, it is difficult to see how any sum can be justified.

87. The total remuneration for Category B3 is therefore assessed at $800,763+ 306,163+ 20,958+ 10,325 = $1,138,209.

Category C - Claim to securities and proof of debt

88. This relates to the contesting by some clients of their securities/cash position as shown in their statements of account. When requests for  amendments were made, the liquidators had to carry out investigation work.  I accept that this required professional accountancy work and adopting the assessor’s reduction of 10.8%, I would assess the remuneration for TFM1 at $2,788,849. 

89. For TFM2, adopting the assessors’ reduction of 11.2%, I would assess the remuneration at $75,779.

90. The total remuneration for Category C is therefore assessed at $2,788,849+ 75,779 = $2,864,628.  

Category D1 - Lenders’ return of shares

91. This was an important part of the liquidators’ work.  The 14 lenders had possession of many valuable securities pledged to them.  The liquidators had to ascertain the extent of the lenders’ entitlements, meet with the lenders, press for the return of surplus securities and consider (after consulting legal representatives) the clients’ options for recovering the surplus securities.

92. After applying the assessor’s reductions, I would assess the remuneration for the TFM1 period at $149,153, and that for the TFM2 period, at $97,657.  I would allow the relatively small claim of $33,956 in the TFM3 period in its entirety.

93. The total remuneration for Category D1 is therefore assessed at $149,153+ 97,657+ 33,956 = $280,766.

Category D2 - Masterise and Inviting

94. This concerns litigation against these companies.  By reason of the confidential nature of legal advice given to the liquidators, it is inappropriate to reveal details in this Decision. 

95. I accept that the sums involved were such that initially it would have been appropriate for the liquidators to investigate these matters, even though the documentation was incomplete and the data required a certain degree of reconstruction.

96. After applying the assessor’s reductions, I would assess the remuneration for the TFM1 period at $926,573 and that for the TFM2 period, at $263,185.  I accept the relatively small claim for the TFM3 period at $23,014 in its entirety. 

97. During the TFM4 period, the liquidators instituted s.221 proceedings against a bank in respect of a claim involving Masterise which related to securities worth about $70m.  During the TFM5 period, those proceedings continued, with the liquidators having to review some 1200 transactions.  There was another set of proceedings against another bank in respect of a claim involving Inviting which related to securities worth about $40m. During the TFM7 period (there being no claims for remuneration for the TFM6 period in this category), investigations pursuant to the results of those proceedings continued.  I accept that the work in preparation for the proceedings required substantial analytical skills and I accept the claims of $237,524 (for TFM4), $1,075,784 (for TFM5) and $917,030 (for TFM7) in their entirety.  Unfortunately it transpired that the difficulties and expense of pursuing those proceedings were such that it was considered that no further action should be taken in respect of Masterise and Inviting.

98. During the TFM9 period, the liquidators “revisited” the work in this category.  It seems to me that this was essentially a duplication of work which had been done earlier, albeit by a partner instead of an associate director and I do not see the claim being justified. 

99. The total remuneration for Category D2 is therefore assessed at $926,573+ 263,185+ 23,014+ 237,524+ 1,075,784+ 917,030 =  $3,443,110.

Category E - Share Application and (after 2001) Processing Fee

100. I now come to the Share Application and (after 2001) Processing Fee category.  This included initially the identification of the problems relating to the tracing of specific securities to specific clients, the devising of mechanisms for doing so, and the postulation of alternative solutions.  Although the issues in the Share Application were essentially legal, I accept that the liquidators were required to liaise closely with the legal advisers in order to brief them in detail as to the position on the ground, particularly on the information available from the companies’ operating systems and their internal control procedures. 

101. I accept that this required accountancy expertise and after applying the assessor’s reductions, I would assess the remuneration for TFM1 at $3,125,344. 

102. It would be seen from TFM2 that the work undertaken under this category focussed mainly on the method of charging a provisional processing fee.  It is well established that liquidators are entitled to charge for the time spent in preparing their bills, but it must be recognised that the liquidators had obviously spent some time simply searching for the appropriate methods or procedures for charging the provisional processing  fee which was of course for their benefit.  Taking this into consideration,  I would apply a discount of 20% to reflect the extra time spent in the search for these methods or procedures, and assess the liquidators’ remuneration at 80% of the claim, ie $1,360,284.

103. The same consideration applies to the claim for remuneration under TFM3, which involved the preparation of TFM1 and TFM2, which I have observed were over-detailed.  However I accept that the liquidators conducted a detailed review of all trust expenses incurred and paid over 6 years, a matter which required accountancy expertise, and there were a number of court appearances.  Taking these matters in the round, I would assess the liquidators’ remuneration at 80% of the claim, ie $787,984. 

104. For TFM4, while there were some court hearings, I find it difficult to accept a total of 420 hrs were necessary when by this time, the work of calculating processing fees and preparing TFMs had become more or less settled.  Given the liquidators’ personal involvement in the court hearings and substantial work done by a senior associate 3^rd year, I would deduct the fees claimed for the senior manager, and the two managers 3^rd year. That would result in the assessment for TFM4 being $432,819.

105. For TFM5, I accept that time was spent by the liquidators and their staff responding to the assessor’s queries and also the review of legal advisers’ bills.  It is difficult however to see how this could have taken more time than the TFM3 period.  I would therefore assess the remuneration for this period as equivalent to that for TFM3 ie $787,984. 

106. It is clear from TFM6 that the work done in this category for this period involved only settled work procedures which could have been performed by junior staff, overseen briefly by someone slightly more senior.  By this time, the work of reviewing legal fees had been hived off to another category.  Further it is important to note that by this period, the value of the securities portfolio had diminished to $1.1m after distributions were made to the clients.  It does not appear to me to be prudent to expend a sum equivalent to 46% of the value of the portfolio as fees for this category only.  Even if processing fees had to be calculated for distributions of corporate actions, the criterion of “value for money” would still have required more attention to be paid to the issue whether some other method of undertaking this work would be more appropriate.  I would therefore assess the remuneration for this period at $282,502 being the same proportion that the approved sum for TFM4 bears to the claimed sum.  That works out at about $23,540 per month which would be adequate for a junior associate essentially updating records, having his work overseen by a more senior associate, and the liquidators’ involvement in more complicated matters. 

107. I would adopt a similar figure for the further TFMs.  Although I note the liquidators’ statement that as a result of the court’s queries, time was spent considering them, the end result was that the liquidators considered it more cost-effective not to respond to detailed queries.  I do not see why the clients would have to pay for time spent by the liquidators discussing and making these essentially strategic decisions on how to proceed with the claims for remuneration.  This is particularly so when the value of the securities portfolio for the last 2 periods was nil.  

108. The total remuneration for Category E is therefore assessed at $3,125,344+ 1,360,284+ 787,984+ 432,819+ 787,984+ 282,502+ 282,502+ 282,502+ 282, 502+ 282,502 = $7,906,925.

Category F - Delivery of shares

109. The delivery of shares is the single largest claim.  It is justifiably so, as it is the final step, and indeed the main objective, of the long process whereby all the clients recovered the securities or cash to which they were entitled (or at least such of the securities as were available in cases of shortfall).

110. I accept that this category of work involved accountancy expertise.  Adopting the assessors’ deductions, I would assess the remuneration for TFM1 at $2,511,997, and for TFM2, at $10,284,637. 

111. For TFM3, the value of the portfolio had by this time been reduced to $19.1m by reason of distributions, but there was the problem of corporate actions, which required time and manpower to manage.  These included dividends in cash or in scrip, bonus shares, bonus rights issues sales proceeds, open offers, bonus warrants sale proceeds, cash dividends declared before liquidation but paid afterwards, surplus funds returned by the lenders and interest earned on the trust funds.  I accept that for this period, time and effort was expended in establishing the methodology of distribution of these corporate entitlements and putting it into practice, but I cannot see how under the “value for money” principle, it would be justified to expend any more than the sum assessed for the previous period, particularly when the TFM2 period was more than twice as long as TFM3.  I would therefore assess the remuneration for TFM3 also at $10,284,637.

112. By the time of the following TFM periods, the methodology would have become established, the procedures developed and the staff experienced.  There should therefore be even more attention paid to the value for money principle.  I am prepared to accept the claim for $4,922,718 for TFM4 which comes up to 17.6% of the value of the portfolio for that period.  Adopting this percentage, I would assess the remuneration for TFM5 at $6,195,200 when the value of the portfolio was approximately $35.2m.  

113. In the TFM6 period, the liquidators arranged the sale of 85 lines of bonus shares worth $40m pursuant to court order.  There was also trust cash which was distributed.  There was some interaction with clients who were divided into 4 different categories.  It was also necessary to make distributions to the SFC in relation to each of the more than 3,000 subrogated clients and there was also distribution of unlisted physical bonus shares. Some 2900 hours of work were claimed for this period, although mainly by junior staff.  Given the magnitude of the task, I am prepared to accept the claim for the TFM6 period of $4,138,794 which is about 10% of the value of the bonus shares. 

114. By the TFM7 period however, the bulk of distributions had been done and the only matters that needed to be dealt with were unclaimed monies and other such relatively insignificant administrative matters.  The value of the portfolio was by now less than $1m with unclaimed trust monies of $19m belonging to about 700 clients.  However, dealing with this unclaimed trust money was essentially a legal matter rather than one requiring the liquidators’ accountancy expertise.  The matter was resolved by an order that the money be paid into court.

115. The claim for TFM7 is equal to the value of the securities portfolio and that for TFM8, substantially more.  The portfolio was not worth anything at all for the remaining two periods TFM9 and TFM10.  I accept that some staff time was used to deal with a re-allocation of sales proceeds which had previously been allocated to a particular corporate client, but in such an exercise there must have been a certain amount of duplication, and the size of the proceeds has not been stated.  Given the tailing off of this category of work after TFM6, I consider 10% of the value of the trust assets would have been adequate. That would amount to $90,000 for TFM7, and no more than half of that or $45,000 for TFM8, TFM9 and TFM10. 

116. The total remuneration for Category F is therefore assessed at $2,511,997+ 10,284,637+ 10,284,637+ 4,922,718+ 6,195,200+ 4,138,794+  90,000+ 45,000+ 45,000+ 45,000 = $38,562,983.

Category G - General Administration

117. I accept the sums claimed for general administration in their entirety.  They come up to a total of $7.3m for 108 months (or less than $68,000 per month) which, considering an administration of this size and complexity, is acceptable.

118. The total remuneration for Category G is therefore $7,304,834.

Category R - Review of legal fees

119. I also accept the fees claimed for the work of reviewing legal fees which are relatively modest.

120. The total remuneration for Category R is therefore $376,189.

Order

121. I would therefore propose to assess the total remuneration for the 13-year period covered by TFM1-10 at $83,252,953.  I accept the sum of disbursements for these periods of $2,543,663 as claimed.  For reference only, these sums totalling $85,796,616 come up to a little more than 84% of the total claims made by the liquidators, and a little more than  5% of the total value of the trust assets, using a very rough figure of $1,630m made up of $1,145m securities and $484m cash. Since I understand from counsel for the liquidators that the total sum of provisional processing fees received by the liquidators is $82,952,156, there should be a balance payable to the liquidators of $2,844,460.  Accordingly I order the Official Receiver to release to the liquidators the sum of $2,844,460 from the account of the provisional processing fees.  

Analysis of Claims for Remunerationby reference to Periods

Table of the Liquidators’ Staff Levels and Hourly Rates

Court's Schedule