Are the fees of agents appointed by s.193 provisional liquidators (“PLs”) subject to taxation? It appears that two recent judgments have produced conflicting decisions. So what is the latest position?
Taking a step back, how are the PLs appointed under s.193 remunerated? The CO is silent in this regard and as a result the Court has traditionally exercised its inherent jurisdiction to assess the PL’s remuneration up to the date of the order appointing liquidators.
In Re Lehman Brothers Securities Asia Limited (No 2) , the Honourable Mr Justice Barma (as he was then) was of the view that the definition of “liquidator” extends to PLs appointed under s.194(1A) but does not include PLs appointed under s.193 who continue in office pursuant to s.194(1)(aa) after the winding-up order has been made.
Looking at the bills of the PLs’ agents, rr 169 to 179 of the Companies (Winding-up) Rules (“CWUR”) in relation to taxation of costs are not applicable to the bills of agents employed by the PLs appointed under s.193. The Court said that PLs have a contractual relationship with the agents they employ and should exercise proper and stringent scrutiny of the bills of their agents before settling them. The Court’s involvement should be minimal unless there is a challenge raised in respect of the payments made. Any assessment should apply the “Maxwell Principles” which were set out in Mirror Group Newspapers v Maxwell (No. 2) . Indeed, the agents’ bills in the Lehman Brotherscases were assessed by the Honourable Mr Justice Barma, but with assistance of an assessor. Nevertheless, it was understood, following his decision that the agents’ bills did not need to be taxed. Indeed, a number of the bills of PLs’ agents were returned to those PLs by the Masters’ Office, for their own disposal.
However, this understanding has been overturned by the decision of The Honourable Mr Justice Harris in Re MF Global HK Ltd (No 2)  where he explicitly stated in (para. 15)
“I am told that the Taxing Masters have read Barma J’s decision as no longer requiring them to tax the fees of agents of provisional liquidators appointed under section 193 or continuing in office by virtue of section 194(1)(aa). This is incorrect and in future such costs and expenses should be taxed.”
Despite the fact that the relevant rules do not apply to the bills of agents employed by the PLs appointed under s.193, there is no authority preventing the Court requiring the submission of those bills for taxation as if they were the bills of the liquidators’ agents submitting pursuant to rule 176. The intention is to protect the interests of the creditors when paying costs and expenses out of the assets of an insolvent company.
In the circumstances, the MF Global case has given clear guidance that taxation is the ultimate fate of the bills of the PL’s agents.
By: Rosenna Mak & Rene Law