RE LEHMAN BROTHERS SECURITIES ASIA LTD

HCCW 437/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 437 OF 2008

____________

____________

AND

HCCW 438/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 438 OF 2008

____________

____________

AND

HCCW 441/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 441 OF 2008

____________

____________

AND

HCCW 442/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 442 OF 2008

____________

____________

AND

HCCW 443/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 443 OF 2008

____________

____________

AND

HCCW 452/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 452 OF 2008

____________

____________

AND

HCCW 463/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 463 OF 2008

____________

____________

AND

HCCW 464/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 464 OF 2008

____________

____________

(Heard Together)

_____________________________________________

REASONS  FOR  DECISION

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INTRODUCTION

1.  This was the second hearing in relation to the summons for directions issued on 24 March 2009 by the Provisional Liquidators of the eight Lehman Brothers group Hong Kong companies referred to in my earlier decision of 26 May 2009, reasons for which were handed down on 24 August 2009. The background to the application was set out in those reasons, and I do not propose to repeat it here. For convenience, I shall use the same abbreviations as were there used.

2.  The principal purpose of this hearing was to consider the mode by which the assessment of the remuneration of the Provisional Liquidators and their agents should be conducted. This required consideration of a number of issues, including:-

(1) the relevant regime governing such assessments – in particular, whether such assessments fell to be conducted by the court under its inherent jurisdiction, or whether they were governed by the provisions of the Companies Ordinance (Cap. 32) and the Winding Up Rules (Cap. 32H);

(2) the relevance (or otherwise) of the Procedural Guides mentioned in paragraph 8 of the reasons for my 26 May 2009 decision;

(3) the point in time at which the provisional liquidations of the Companies came to an end – in particular, whether this took place on the resolution by meetings of creditors and contributories to appoint the Provisional Liquidators as liquidators, or on the subsequent order of the court appointing them to be liquidators; and

(4) whether or not an assessor could and should be appointed to assist the court.

3.  At this hearing, Mr Ashley Burns S.C. represented the Provisional Liquidators, while the Official Receiver was represented by Mr Jenkin Suen. Both filed extensive written submissions, which were supplemented by oral submissions at the hearing. I would like at the outset to record my appreciation for the thoroughness of their research and the clarity of their submissions, which has enabled me to deal with the issues of statutory construction that arise in this context.

ORDERS MADE

4.  At the conclusion of the hearing, I decided that I would conduct the assessment of the Provisional Liquidators’ claims to remuneration and reimbursement for their agents’ fees and other disbursements myself, and appointed Mr Peter Graham Horrocks as assessor to provide assistance to the court in relation to four matters arising in each of the liquidations, namely:-

(1) determining the remuneration of the Provisional Liquidators, in each case for the period from the date of the order appointing them until the date of the order appointing them as liquidators of the company concerned;

(2) determining whether, in the context of each of the provisional liquidations, the Billing Tasks performed by the Provisional Liquidators went beyond the purely administrative tasks usually performed by provisional liquidators when seeking remuneration for their services, and are tasks for which they should be remunerated;

(3) determining the remuneration of the Provisional Liquidators in respect of the Billing Tasks; and

(4) determining whether the Provisional Liquidators’ decisions to appoint agents were reasonable and whether they had adequately scrutinised the fees and expenses claimed by their agents.

5.  I went on to give directions for the further progress of the assessment, by directing that the matters referred to in subparagraphs (2) and (4) above should be considered first by Mr Horrocks, and that the matters referred to in subparagraphs (1) and (3) above should be considered at a later stage, and by setting a timetable under which Mr Horrocks was to deliver an interim report in relation to each of these two stages, and which provided an opportunity for the Provisional Liquidators and the Official Receiver to serve submissions in reply, which Mr Horrocks was to consider before preparing and filing his final report in respect of each stage. Provision was also made in my order for Mr Horrocks’ remuneration.

6.  The Provisional Liquidators were also given leave to seek further directions (including directions for further interim payments), as it was envisaged that it might be necessary to have a further hearing to finally resolve the application after Mr Horrocks’ final reports were delivered, particularly if the Provisional Liquidators did not accept such recommendations as he might make, and wished to make submissions to the court in respect of them.

7.  In the light of the fact that I had directed that Mr Horrocks should provide assistance in relation to the practice of insolvency practitioners in respect of the recovery of remuneration for the Billing Tasks, I adjourned the Provisional Liquidators’ applications for interim payments in respect of their remuneration and disbursements in respect of the Billing Tasks sine die.

8.  Finally, I allowed the payment out of the assets of the Companies of the costs of Messrs O’Melveny & Myers, the solicitors acting for the Provisional Liquidators, in respect of this application, and of the Official Receiver’s costs in the sum of HK$10,125.

9.  When giving those directions and orders, I indicated that I would give my reasons for doing so, in which I would also deal with the question of the appropriate procedural regime for the assessment of the Provisional Liquidators’ remuneration and their agents’ fees, in due course. This I now do.

ON WHAT BASIS IS THE PROVISIONAL LIQUIDATORS’ REMUNERATION TO BE ASSESSED?

The legislative history

10.  I think that it is necessary to consider first what principles and statutory provisions apply to the assessment of the remuneration of the Provisional Liquidators. When doing so, it is necessary to appreciate that where provisional liquidators are appointed in respect of a company which eventually goes into liquidation with liquidators appointed thereafter, there are three periods that are relevant:-

(1) The first is the period between the presentation of the petition and the making of a winding up order. During this period, a provisional liquidator may be appointed in respect of a company pursuant to section 193 of the Ordinance.

(2) The second period is that between the making of a winding up order, and the appointment of a liquidator following meetings of the creditors and contributories of the company, and the court making an order of appointment. During this period, as the winding up order has been made, it is necessary for there to be a liquidator in place. However, since the views of the creditors and contributories will not yet have been ascertained, any person who takes up that office will do so on a provisional basis, pending the appointment of a liquidator to the company. At this stage too, the office holder is referred to as the provisional liquidator, although the nature of his position is different in some respects from that of a pre-winding up order provisional liquidator.

(3) The third period is that after a liquidator has been appointed.

11.  In this application, we are concerned with the first two of these periods, and not the third.

12.  Prior to 10 February 1997, the position was as follows:-

(1) During the first period, a provisional liquidator could be appointed under section 193 of the Ordinance. Such a provisional liquidator would usually be an insolvency practitioner in private practice, and not the Official Receiver.

(2) On the making of a winding up order, the Official Receiver became the provisional liquidator by virtue of his office, pursuant to section 194(1)(a) of the Ordinance, and would continue to act as such until he or another person became liquidator and was capable of acting as such. The provisional liquidator appointed pursuant to section 193 would thereby be displaced, and would have to vacate his office.

(3) The Official Receiver, as provisional liquidator, would then summon meetings of the creditors and contributories to determine whether or not an application should be made to the court for appointing a liquidator in his place, pursuant to section 194(1)(b). Under section 194(1)(c), the court had power to make an appointment to give effect to the determinations of the creditors and contributories, or to resolve any difference between them. If the court did not appoint a liquidator, the Official Receiver would continue as liquidator of the company.

13.  So far as remuneration was concerned, this was governed by section 196. Prior to 10 February 1997, section 196(2) provided that where a person other than the Official Receiver was appointed liquidator, he should receive such remuneration as was determined by agreement between himself and the committee of inspection if there was one, but if there was no committee of inspection, or there was no agreement between the committee and himself as to his remuneration, he would receive such remuneration as was determined by the court.

14.  The Ordinance was (and still is) silent as to the basis on which a provisional liquidator appointed under section 193 was to be remunerated.

15.  Where the Official Receiver acted as provisional liquidator or liquidator, he was paid an amount based on the scale of fees and percentages payable on realisations and distributions by him as liquidator contained in the Companies (Fees and Percentages) Order (Cap. 32C).

16.  Although the Ordinance did not provide expressly for remuneration of a provisional liquidator appointed under section 193, the court had the inherent power, when appointing provisional liquidators, to specify how they should be remunerated. Even where the court did not make an express order in relation to this, it would, under its inherent jurisdiction, allow the provisional liquidator to retain his proper remuneration and expenses out of the assets he administered (see Re Peregrine Investments Holdings Ltd (No. 1) [1998] 2 HKLRD 670, per Le Pichon J (as she then was) at p. 678E-F).

17.  No question arose as to the remuneration of such a provisional liquidator in the period between the making of the winding up order and the appointment of a liquidator, as he would vacate office and be replaced by the Official Receiver as provisional liquidator once the winding up order was made.

18.  On 10 February 1997, the position changed as the result of the coming into effect of section 41 of the Companies (Amendment) Ordinance 1997. This introduced section 194(1)(aa) into section 194 of the Ordinance. Section 194(1)(aa) provides that where a person other than the Official Receiver has been appointed as provisional liquidator pursuant to section 193, he shall continue to act as the provisional liquidator upon the making of the winding up order until he or another person becomes the liquidator and is capable of acting as such.

19.  Consequential amendments were made to reflect this change. Thus, for example, the references to the Official Receiver in sections 194(1)(b) and (d) were amended to refer to the “provisional liquidator” instead of the Official Receiver.

20.  Thus, from 10 February 1997 onwards a provisional liquidator appointed under section 193 would remain in place even after the making of the winding up order. He would therefore have a role to play in the second of the three periods that I have identified.

21.  However, section 194(1)(aa), like section 193, is silent as to the question of the provisional liquidator’s remuneration. Nor was section 196(2) amended to cover the position of a provisional liquidator continuing to hold office after the making of a winding up order pursuant to section 194(1)(aa). In Re Peregrine Investments Holdings Ltd (No. 4) [1999] 2 HKLRD 722, it was contended that section 196(2) did apply to a provisional liquidator after the making of a winding up order, so that his remuneration after that point was a matter for the committee of inspection, and not the court. This argument was rejected by Le Pichon J, who pointed out (at p.729B) that section 196(2) did not in terms extend to the remuneration of provisional liquidators.

22.  Thus, even after the amendments in 1997, the question of the remuneration of a provisional liquidator appointed under section 193 remained something that was to be dealt with by the court under its inherent jurisdiction.

23.  The position, however, does not rest there. In 2000, there were further amendments to the Ordinance. These were effected by the Companies (Amendment) Ordinance 2000, which came into effect on 1 July 2000. The relevant amendment for present purposes is the introduction of section 194(1A) into the Ordinance. This provides that where the Official Receiver is the provisional liquidator of a company by virtue of section 194(1)(a) (i.e. upon the making of a winding up order), but is of the view that the assets of the company are not likely to exceed HK$200,000 in value, he may appoint others to be provisional liquidators in his place. The reason for the amendment was to enable the Official Receiver to appoint external provisional liquidators in small liquidations, so as to relieve the burden placed on the limited resources available to him. This is apparent from the Standing Committee on Company Law Reform’s 15^th Annual Report (at pp.15-16), the Legislative Council Brief on the Companies (Amendment) Bill 2000 (at paragraph 30 and Annex E, paragraphs 10-12), the Explanatory Memorandum to that Bill (at paragraph 21), and my judgments in Re Bondfield International Ltd (unreported, HCCW 99 & 711/2002, Barma J, 27 January 2005), and more recently Re Sweetmart Garment Works Ltd (unreported, HCCW 755/2005, Barma J, 19 August 2009).

24.  Apart from introducing section 194(1A), the Companies (Amendment) Ordinance 2000 also made a number of other related amendments, all of which were stated, and appear clearly to have been intended, to be simply consequential on the introduction of the new provision. Thus, in paragraph 21 of the Explanatory Memorandum, it was explained that:-

“Clause 30 amends section 194 to empower the Official Receiver, where he is the provisional liquidator of a company, to appoint a person as provisional liquidator in his place. Clause 2(a) consequently amends section 2(1) to add a definition of the term “liquidator” so that the term includes a provisional liquidator holding such office by virtue of section 194 as amended. Other amendments consequential to the amendments made to section 194 are made by clauses 25, 26, 27, 28, 31, 32, 33, 36 and 37.”

25.  The new definition of the term “liquidator” introduced for the first time into section 2(1) of the Ordinance defines liquidator as including “a provisional liquidator holding such office by virtue of section 194”.

THE RESPECTIVE SUBMISSIONS

26.  In the light of this definition, Mr Suen submitted that it was open to the court to take the view that the effect of the amendments made to the Ordinance in 2000 was to subject the remuneration of a provisional liquidator appointed under section 193, who continued in office after the making of a winding up order under section 194(1)(aa) subject to the same regime as that applicable to liquidators contained in section 196(2). His submission was thus that the amendments had reversed the decision of Le Pichon J in Re Peregrine Investment Holdings Limited (No. 4) (supra).

27.  Mr Suen suggested that this followed from a natural reading of the definition of “liquidator” that had been introduced. He suggested that even though there was no formal appointment under section 194 in the case of a continuing provisional liquidator appointed under section 193, such a continuing provisional liquidator nonetheless held office “by virtue of section 194”, since, absent section 194(1)(aa), he would have had to vacate office in favour of the Official Receiver upon the making of a winding up order.

28.  Mr Burns disagreed with this interpretation of the definition. He submitted that “holding office by virtue of” should be construed so as to require that the office be conferred on the provisional liquidator pursuant to section 194. On this basis, a provisional liquidator appointed under section 193 would have his office conferred upon him not under section 194, but under section 193, and in continuing in office under section 194 would simply be continuing in the office conferred upon him previously by the court’s order made under section 193.

THE PROPER INTERPRETATION OF THE DEFINITION OF “LIQUIDATOR”

29.  It seems to me that both of these interpretations are possible interpretations of the definition of “liquidator”. There is therefore, in my view, an element of ambiguity in relation to the definition, for the purpose of resolving which it is legitimate to have regard to the intention of the legislature, as disclosed by the Explanatory Memorandum. That document makes it clear that the introduction of the new definition (and indeed all the other relevant amendments effected by the Bill) were intended to be purely consequential upon the introduction of section 194(1A). There is nothing in the Explanatory Memorandum or other legislative materials to suggest that it was intended to make any amendment to the previous law relating to the source of the court’s ability to assess the remuneration of provisional liquidators appointed under section 193 and continuing in office under section 194(1)(aa), which Le Pichon had only the year before held to be governed by the court’s inherent jurisdiction, and not by section 196.

30.  Indeed, it seems to me that the terms of paragraph 21 of the Explanatory Memorandum puts the matter beyond doubt, in terms of the intention behind the amendment, as it refers to the definition including “a provisional liquidator holding such office by virtue of section 194 as amended” (my emphasis). The only amendment to section 194 made on this occasion was the introduction of section 194(1A). Section 194(1)(aa) was already present in the unamended version of the Ordinance, and therefore, the definition clearly was not directed at a provisional liquidator continuing in office pursuant to it.

31.  I am therefore of the view that where a provisional liquidator has been appointed under section 193, his remuneration falls to be assessed by the court pursuant to its inherent jurisdiction both before and after the making of the winding up order, until a liquidator has been appointed.

32.  In any event, having regard to the legislative history, it seems to me to be quite clear that the definition section should be read so as to limit the reference therein to “provisional liquidator” to a provisional liquidator holding office by virtue of section 194(1A). Although this involves reading into the definition a limitation that is not expressed in its terms, the situation here appears to me to fall clearly within the ambit of the court’s power to construe legislation so as to correct what is, in my view, an obvious drafting error. That the court has power to do so is made clear by the decision of the House of Lords in Inco Europe Limited v First Choice Distribution [2000] 1 WLR 586, where Lord Nicholls said (at p. 592C-G):-

“It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words. … This power is confined to plain cases of drafting mistakes. … Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and [the legislature] failed to give effect to that purpose in the provision in question; and (3) the substance of the provision [the legislature] would have made, although not necessarily the precise words [it] would have used.”

33.  In the present case, I am quite satisfied that all of these conditions are met, and that it would be right for me to read the definition of “liquidator” in the way in which I have indicated I think it should be read.

34.  I am therefore satisfied that in the present case, the remuneration of the Provisional Liquidators, both in the period before and after the making of the winding up order, is a matter for the court to deal with in the exercise of its inherent jurisdiction.

APPLICABILITY OF THE MAXWELL PRINCIPLES

35.  On that basis, there is no doubt that the remuneration of the Provisional Liquidators should be assessed on the basis of what have become known as the “Maxwell Principles” – i.e. the principles stated by Ferris J in Mirror Group Newspapers v Maxwell (No. 2) [1998] 1 BCLC 638. This was, I think, common ground between Mr Suen and Mr Burns (indeed, Mr Suen contended that the Maxwell Principles should apply even if the court were conducting the assessment on the basis of section 196(2)).

36.  In Hong Kong, these have been summarised by Le Pichon J in Re Peregrine Investments Holdings Ltd (No. 1) in the following terms:-

“(1) Administrators, liquidators, receivers, trustees in bankruptcy or other officers (office-holders) are fiduciaries charged with the duty of protecting, getting in, realising and ultimately passing on to others assets and properties which belong not to themselves but to creditors or beneficiaries of one kind or another. They are appointed because of their professional skills and experience and they are expected to exercise proper commercial judgment in the carrying out of their duties. Their fundamental obligation is a duty to account, both for the way in which they exercise their powers and for the property which they deal with.

(2) The allowance of remuneration to office-holders represents an exception to the rule that a trustee must not profit from his trust which rule applies to all kinds of persons who are in a fiduciary position. This exception inevitably involves a conflict between the interests of the fiduciary who is to receive such remuneration and the interests of those to whom the fiduciary duties are owed, who will bear whatever remuneration is allowed.

(3) It is for the office-holder who wishes to be remunerated at a particular level to justify his claim:-

“(a) Office-holders must give full particulars to justify the amount of any claim for remuneration. Where they seek to be remunerated on the basis of time spent, they must do significantly more than list the total number of hours spent by them or other fee earning members of their staff and multiply this total by a sum claimed to be the charging rate of the individual whose time was spent. They must explain the nature of each main task undertaken, the considerations which led them to embark upon that task or to embark upon that task or to persevere in it. The time spent must be linked to this explanation so that it can be seen what time was devoted to each task.

(b) Office-holders must keep proper records of what they have done and why they have done it. Without contemporaneous records of this kind they will be in difficulty in discharging their duty to account. Retrospective reconstructions are unlikely to be as reliable as contemporaneous records. Office-holders whose records are inadequate are liable to find that doubts are resolved against them because they are unable to fulfil their duty to account for what they have received and to justify their claim to retain part of it for themselves by way of remuneration.

(c) The test is whether a reasonably prudent man, faced with the same circumstances in relation to his own affairs, would lay out or hazard his own money in doing what the office-holders have done. It is not sufficient for office-holders to say that what they have done is within the scope of the duties or powers conferred upon them. They are expected to deploy commercial judgment, not to act regardless of expense. Transactions carried out at a high cost in relation to the benefit received will be subject to close scrutiny.”

37.  That is the approach that will be adopted when the Provisional Liquidators’ claim to remuneration is assessed.

ASSESSMENT OF PROVISIONAL LIQUIDATORS’ AGENTS FEES?

38.  The next question for consideration is what is to be done about the claim in respect of the Provisional Liquidators’ agents’ fees.

39.  At this hearing, Mr Burns submitted that it was not necessary for any directions to be given in relation to this aspect of the matter, as a solicitor or other professional agent employed by a provisional liquidator has a contractual relationship with the provisional liquidator, who is personally bound to pay for the work done and the incurring of liabilities to professional agents is a matter for the provisional liquidator himself, subject to the right of the creditors or the Official Receiver to challenge his decisions on the passing of his accounts in respect of the provisional liquidation. Thus, said Mr Burns, it was for the Provisional Liquidators to decide, acting as commercial men taking such care as they would in respect of their own affairs, and giving proper scrutiny to the charges proposed by their agents, to decide what level of payments should be made. This was not, therefore, a matter that need concern the court, unless a challenge were made in respect of these payments when the time came for the Provisional Liquidators to pass their accounts in respect of the provisional liquidations.

40.  Mr Suen suggested that, on the contrary, rules 169 to 179 of the Winding Up Rules, and in particular rules 169 to 171 required that the bills of agents employed by the Provisional Liquidators should be taxed by the court. Mr Suen relied in particular on the express reference in rule 171 to provisional liquidators. That rule is in the following terms:-

“The bill or charges, if incurred in a winding up by the court prior to the appointment of a liquidator, shall be lodged with the provisional liquidator, and if incurred after the appointment of a liquidator, shall be lodged with the liquidator. The provisional liquidator or the liquidator, as the case may be, shall lodge the bill or charges with the taxing officer.”

41.  However, it seems to me that the position in this respect is the same as that in relation to the question of what regime governs the assessment of the Provisional Liquidators’ own remuneration, having regard to the history of the amendments.

42.  Prior to 1 July 2000, rule 171 did not refer to provisional liquidators at all. Instead, it referred to the Official Receiver in relation to the period before the making of a winding up order. Thus, the rule was directed at a situation in which no provisional liquidator had been appointed under section 193, and in which the Official Receiver had taken office under section 194(1)(a). It did not, in its then form, appear to apply to the situation where a section 193 provisional liquidator continued in office pursuant to section 194(1)(aa).

43.  The introduction of the term “provisional liquidator” in place of “Official Receiver” was one of the amendments made by the Companies (Amendment) Ordinance 2000, which was clearly stated in the Explanatory Memorandum to the relevant Bill to be consequential on the introduction of section 194(1A). That being so, it seems to me that the points which I have made in paragraphs 32 and 33 above apply with equal force here, so that “provisional liquidator” in this context should be read as meaning the Official Receiver or the provisional liquidator appointed by him under section 194(1A), rather than extending the ambit of the rule for the first time to a provisional liquidator under section 193 continuing in office pursuant to section 194(1)(aa).

44.  I therefore consider that in this respect, too, Mr Burns’ submission is to be preferred.

THE PROCEDURAL GUIDES

45.  I turn next to consider briefly the Procedural Guides. Mr Burns submitted that these guides, which were introduced by general direction of Kwan J under rule 6(a) of the Winding Up Rules should not be regarded as applicable in this case. He contended that they effectively purported to extend the rules governing liquidators to provisional liquidators, purported to require the remuneration of provisional liquidators and their agents to be submitted to a Taxing Officer or Master for taxation, and did not appear to apply the Maxwell Principles to the determination of the remuneration and expenses of a provisional liquidator.

46.  With respect, it seems to me that this attributes to the Procedural Guides a character that they were not intended to have. The Guides were promulgated as part of the court’s procedure, and are not intended to be applied inflexibly in every case. They set out the way in which material should be presented to the court in order to enable the court to approach the assessment of remuneration of office holders in the majority of cases. It should be borne in mind that they are no more than they claim to be – guides to the procedure that is to be followed, which can, in an appropriate case, be departed from.

47.  They must necessarily be subject to the legal principles applicable – thus, where (as here) it has been concluded that in certain circumstances the court need not be involved in assessing remuneration (as I have held to be the position in relation to the remuneration of the Provisional Liquidators’ agents, at least until such time as there may be a challenge to the amounts paid or agreed to be paid to them, in the context of the passing of the Provisional Liquidators’ accounts), they will not apply so as to require such bills to be submitted for taxation regardless.

48.  That said, it does not seem to me that the Procedural Guides do not apply the Maxwell Principles – in fact, it seems to me that in setting out the sort of information that should be provided, the objective of the Procedural Guides is to enable the court to be put in possession of the material that it will need to carry out its assessment of the remuneration properly allowable to office-holders under court orders in any particular case, an assessment which will be governed by the Maxwell Principles, which apply not just to provisional liquidators appointed under section 193, but to all office-holders who have similar duties and obligations to discharge.

WHEN DOES THE PROVISIONAL LIQUIDATION PERIOD TERMINATE?

49.  The next issue that required consideration related to the time when the period of provisional liquidation came to an end. In Re Peregrine Investments Holdings Ltd (No. 4) (supra), Le Pichon J appeared to suggest that the period of provisional liquidation might be regarded as coming to an end when the provisional liquidator was confirmed in office by the meetings of creditors and contributories. She suggested that where this happened, there was no need for an application to be made to the court for a liquidator to be appointed (see p. 728I-729A).

50.  Before me, both Mr Burns and Mr Suen submitted that the appropriate date was the date of the court’s order appointing the provisional liquidator as liquidator, which would be some time after the holding of the relevant meetings. They pointed out that in expressing this view (which was obiter) Le Pichon J did not appear to have been referred to rule 45 of the Winding Up Rules, which requires the result of the meetings of creditors and contributories to be reported to the court, which may make “the appointments necessary for giving effect to such resolutions” forthwith where they are in agreement as to the identity of the person to be appointed liquidator, or (in all other cases) hold a hearing to consider and decide the differences.

51.  It seems to me that the position advocated by Mr Burns and Mr Suen is correct, and that the Ordinance and Rules do envisage a reference to the court in every case in which meetings of creditors and contributories have been held, with the court making the appointments in the light of the result of those meetings. That being so, I agree that the provisional liquidation only comes to an end at such time as the provisional liquidators or some other person are appointed liquidators by the court, and not at any earlier time.

APPOINTMENT OF AN ASSESSOR

52.  The final matter for consideration was the manner in which the assessment of the Provisional Liquidator’s remuneration should take place. Although a number of possibilities were canvassed, I came to the firm view that given the complexities of this case, it would be preferable for the matter to be handled by a judge, rather than being submitted to a Master for assessment as might be appropriate in most cases. Given that I have now acquired some familiarity with the proceedings and the liquidations, I decided that I should carry out the assessment.

53.  However, bearing in mind that it is rare for such assessments to be carried out by a judge, I considered that I would be greatly assisted if an assessor were to be appointed. Both Mr Burns and Mr Suen submitted that I had power to do so, pursuant to section 53 of the High Court Ordinance (Cap. 4). In my view, section 53 clearly provides me with power to appoint an assessor. There can be no doubt that the appointment of an assessor having experience in large-scale insolvencies would be of enormous assistance in the assessment process. I therefore appointed Mr Horrocks as an assessor, to sit with me in the conduct of the assessment of the Provisional Liquidators’ fees. Mr Horrocks has extensive experience as an insolvency practitioner in the United Kingdom, and has sat as an assessor in a number of cases concerning the assessment of the remuneration of provisional liquidators, most notably Independent Insurance (No. 2) [2003] BPIR 577, where his contribution was gratefully acknowledged by Ferris J.

54.  So far as the assessment itself was concerned, Mr Burns sought to persuade me that the remuneration in respect of the Billing Tasks should now be allowed, on the basis that these were undertaken by the Provisional Liquidators in compliance with their obligations under the Maxwell Principles, and were therefore something that they were required to do to comply with their duty as office-holders. Notwithstanding this submission, I remained of the view that it was not necessarily the case that all charges in respect thereof would or should be recoverable – there seems to me to be force in the contention previously made by the Official Receiver, and reiterated by Mr Suen, that such tasks (or at least some of them) might be regarded as being more in the nature of administrative and overhead, which should not be recoverable but should be treated as part of the office-holders costs of earning his remuneration. On the other hand, it may prove to be the case that the steps taken went beyond what a liquidator or other professional would ordinarily do in compiling his bills for submission to his client – if that is so, then recovery of remuneration in respect thereof might well be justified. I therefore directed that Mr Horrocks should consider the question of whether what was done by the Provisional Liquidators by way of the Billing Tasks went beyond the purely administrative tasks usually performed by provisional liquidators when seeking remuneration for their services, and are therefore tasks for which they should be remunerated.

55.  Although, in the light of my conclusion that it is not necessary for the Provisional Liquidators to submit their agents’ fees for assessment, it might be thought unnecessary for Mr Horrocks to consider this aspect of the matter, I also directed that he should report on the adequacy of the scrutiny brought to bear by the Provisional Liquidators in respect of their agents’ fees. It seems to me that since the Provisional Liquidators will be seeking payment (on an interim basis) out of the Companies’ assets of funds to meet such fees, it would be appropriate for the court to be satisfied, to the extent that this could conveniently be done, that they had exercised the appropriate care and had taken the appropriate steps in scrutinising such fees – this would, I think, reduce the risk of a later challenge, and thus reduce the possibility of an interim payment being made in an excessive amount.

56.  As these matters would seem to logically precede the actual assessment of the Provisional Liquidators’ remuneration, I directed that they should be considered first by Mr Horrocks.

COSTS ORDERS

57.  Finally, as all that now remains is for the assessments themselves to be carried out, I made orders dealing ­with the costs of these applications at the end of this hearing, rather than reserving the matter for later consideration.