IP Briefing: Reporters and Reporting

Introduction

Regular readers of our insolvency briefings will know that we have a particular interest in remuneration applications! In fact, we have advocated the benefits of the Scottish system of peer review internationally.

However, one of the obvious difficulties in our system is determining exactly what the reporter’s remit is. Most practitioners tend to feel that the reporter is simply there to provide a check and balance on rates incurred and time recorded. However, the reality is that some reporters take a different view and feel that it is their duty to comment on strategy. That then leaves the court in a difficult position if the Liquidator’s strategy is called into question. This was obviously the situation in a decision by Sheriff Jamieson in relation to the liquidation of S & M Livestock Limited.

The Decision

In this case the liquidation committee had authorised £25,000 of fees for a period but the Liquidators sought an order from the court increasing this to approximately £92,000 as well as an order for remuneration for a subsequent period for around £51,000. The Sheriff remitted the case to the reporter. The reporter “on his own initiative” conducted an “extensive review” of their files [the Liquidator’s files] “to establish whether same was reasonable at all relevant times”. The Sheriff accepted that rule 4.32(8)(b) of the Insolvency (Scotland) Rules 1986 does have reference to work “reasonably undertaken”. The reporter attacked the Liquidator’s strategy and an argument that the liquidation was complex, and he suggested that the courts should only award £70,000 plus VAT for the periods concerned. The Sheriff did not agree that the reporter had to carry out such an extensive review. He said “in my opinion, neither the reporter nor the court in this kind of process should seek to second guess the actings of the Liquidator. They were appointed by the court and exercise judgement and discretion in matters relating to the winding up… The law presumes that all things are done duly and in the usual manner”.

“On the principle that the labourer is worthy of hire, it is my opinion that the only reasonable and reliable basis for assessing the… remuneration is the time spent by them…”

Interestingly, however, although the Sheriff did not agree with the reporter he allowed his full fee of £15,000 plus VAT, although he acknowledged that fee might be some seven times more than what would be expected.

Practicality

In a line of decisions that have been fairly negative about office holder remuneration applications, we are sure practitioners will welcome the majority of this decision (albeit they may find the decision to award the reporter his full fee difficult to reconcile with the Sheriff’s earlier comments). We would simply caution, however, that although the judgement may be useful to refer to, it is not binding on other judges. It probably does though, illustrate the need for the greater guidance on reporting remits.

BBM Solicitors specialise in advising IP’s in both contentious and non-contentious matters (including transactional work). Contact: Eric Baijal (emb [AT] bbmsolicitors [DOT] co [DOT] uk).This briefing note is current as at 27th November 2017 and is our understanding of the position described at that date. Legal advice ought to be taken before relying on its terms (particularly to ensure the law has not changed).