Attorney General of Trinidad and Tobago v CL Financial Ltd (in Liquidation) [2025] UKPC 41
Executive Summary
The Judicial Committee of the Privy Council (“JCPC”) has clarified the approach to be taken by courts considering remuneration applications made by Liquidators (and other Insolvency Officeholders) in its recent decision in Attorney General of Trinidad and Tobago v CL Financial Ltd (in Liquidation).
The Joint Liquidators (the “JLs”) of CL Financial Ltd (in Liquidation) (“CLF”), a Trinidad & Tobago company, applied for approval of their remuneration for 2019. The High Court of Trinidad & Tobago at first instance approved their remuneration, however, the Attorney General of Trinidad and Tobago, on behalf of the Government of the Republic of Trinidad and Tobago (“GORTT”), the largest creditor of CLF, appealed that decision.
The Court of Appeal allowed GORTT’s appeal, and ruled that the application should be remitted to the liquidation judge to be re-heard in accordance with guidance provided by the Court of Appeal. That guidance included directions providing that (a) a line-by-line analysis of the JLs’ remuneration was required; (b) the GORTT was in a special position in view of the responsibility of the State “to account to the people as to how public funds are spent”; and (c) the JLs’ expenses also required approval from the Court and should be subject to the same level of scrutiny as the JLs’ fees.
The JLs appealed to the JCPC, which confirmed that:
- In dealing with the GORTT as a creditor, the court and liquidators must treat it in the same way as other creditors. There is no basis in law for according a special position to the GORTT as a creditor.
- Approval of liquidators’ remuneration on a time-spent basis does not require a line-by-line analysis of the work undertaken by the liquidators and their staff. Courts should avoid burdensome, granular exercises that waste estate resources.
- Liquidators are not required to adduce evidence which contains the level of detail found in a solicitor’s bill of costs.
- Comparisons of liquidators’ remuneration to prior management costs or to other liquidations are of little or no value in determining whether that remuneration should be approved.
- There is no common law requirement that third party expenses incurred by liquidators must be approved by the court. The level of analysis required for expenses will be determined by the applicable Order(s) and Rule(s).
- Where a creditor wishes to challenge a liquidator’s remuneration, they should file specific, itemized objections.
Background
CLF is the holding company of an extremely complex group, with interests throughout Trinidad and Tobago, Europe and the Americas. Prior to its collapse in 2017, the Company and its subsidiaries held assets in over 30 countries with a value exceeding US$14 billion, and CLF was one of the largest privately held corporations in the entire Caribbean. Its liquidation has, necessarily, been both long running and complex. The appeal in this case arose from a decision of Trinidad & Tobago’s Court of Appeal, which overturned the High Court’s approval of the JLs’ remuneration on the principal basis that the liquidation judge did not have sufficient information before him on which he could properly approve the JLs’ fees, and that he should have conducted a line by line analysis of the remuneration sought. Notably, in handing down its decision, the Court of Appeal overlooked the High Court’s written judgment. Accordingly, the JCPC found that the principal ground for the Court of Appeal’s decision was wrong, and it could not be upheld on that ground. Notwithstanding that point, the JCPC held that it did not follow that the liquidation judge’s decision and approach was correct, and it fell to the JCPC to consider the same.
The correct approach to remuneration applications
In a carefully considered judgment, the JCPC first provided a detailed overview of the way office holders seek to be remunerated in various common law jurisdictions around the world, and the way in which courts in those jurisdictions have historically approached applications made by office holders for approval of their remuneration.
The JCPC concluded that that the problems concerning the assessment of remuneration for insolvency officeholders are shared by a wide range of common law jurisdictions and noted that there is a largely common approach to dealing with them. In that regard, the JCPC set out the following principles to be applied when assessing applications for approval of liquidators’ remuneration:
- The question of how much information should be provided to the court in support of a fee-approval application cannot be reduced to a single formula and will always be dictated by the circumstances of the particular case. The two high-level principles are, first, that there must be sufficient information to enable the court to have a clear view of what the officeholder has done and, secondly, that the information should be proportionate to the size of the insolvency and to the cost of preparing the information.
- In large or complex liquidations, more detail of the work undertaken by officeholders will usually be required, in contrast to smaller or straightforward liquidations in which less detail may suffice. Moreover, the cases show that although time spent was generally the basis for remuneration, there was an overriding requirement that the remuneration should be fair and reasonable. This not only acts as an overall control, providing some link between time spent and the results achieved, but it may also benefit liquidators in that it may lessen to some extent the level of detail required to support their claims.
- Whilst the authorities show that it is the officeholder who must establish that the hours claimed were indeed worked, that is rarely the issue with a reputable officeholder who has maintained proper time records. Courts should proceed on the basis that officeholders have acted with integrity, unless there is reason to believe otherwise.
- Crucially, an officeholder must establish that the time costs were reasonably incurred. In doing so, they must:
- identify the main tasks or categories of tasks they and their staff have undertaken;
- explain why those tasks or categories of tasks were necessary or beneficial to the company’s estate at the time they were undertaken; and
- link the time spent by the liquidators and their staff to that explanation, so that it can be seen what time was devoted to each task.
- Whether time costs were reasonably incurred depends principally on two factors:
- first, it must be shown that the work in question was reasonably undertaken; this will depend on a number of factors. For example, on the one hand there will be statutory duties which the office holder must perform, whereas on the other, steps that liquidators decide to take to deal with assets forming part of the estate must be reasonable i.e. generally speaking, they must make commercial sense in terms of their potential return for the benefit of the estate. The JCPC emphasised that an officeholder is expected to behave as a prudent person looking to their own commercial interests. It may be reasonable, indeed essential, to investigate possible claims and it does not follow that because in due course those claims fail or are abandoned that it was not reasonable to commence or pursue them (although the officeholder will have to re-examine periodically whether it remains reasonable to continue with them); and
- second, it must be shown that the work was performed by a person of appropriate seniority, with simpler or more routine tasks undertaken by more junior staff. The information provided to the Court must therefore contain details of the grade of staff undertaking particular tasks, though the JCPC noted that it will not ordinarily be necessary to identify the particular individual staff members or the particular dates on which tasks were undertaken or the hours worked on each day.
- Where time spent is the basis of the officeholder’s remuneration, this cannot be assessed simply against the actual outcome. It is the reasonableness of the step when it was taken, rather than the actual outcome, which is relevant.
- The evidence adduced by the officeholder must enable the court or a creditor to satisfy themselves that the remuneration is justified. Critically, the evidence must also enable a stakeholder to identify any areas of concern. The court must always apply its own judgment, and not act as a rubber stamp to officeholders’ applications.
- At the same time, the court should not be burdened with an overwhelming amount of detailed evidence, nor should the estate be burdened with the cost of producing it. The evidence put forward by the officeholder should not contain the level of detail found in a solicitor’s bill of costs, nor will it usually be necessary to provide all the contemporaneous time records.
- The court should not engage in a line by line analysis of the officeholder’s claim. In view of the burden that it would impose on the resources of both the court and the (usually insolvent) estate, this would be a wholly disproportionate way to proceed.
Relevance to other common law jurisdictions
It is clear from the authorities referred to in the JCPC’s judgment that both office holders and courts have repeatedly grappled with the correct approach to adopt when making and/or considering applications for the approval of insolvency practitioners’ remuneration, particularly in large, complex insolvencies. Although the JCPC’s judgment arose from a dispute in Trinidad and Tobago, the principles identified by the JCPC are highly likely to be relevant in other common law jurisdictions, and are likely to be applied by the courts of those jurisdictions for which the JCPC is the final court of appeal. The JCPC’s authoritative guidance in this case is therefore extremely welcome. A copy of the judgment can be found here.
Campbells assisted the JLs with their appeal to the JCPC, in conjunction with Trinidad and London counsel.
