Re Econ Corp Ltd: Determining Remuneration for Provisional Liquidators in Insolvency Cases

In Re Econ Corp Ltd, the Singapore High Court, presided over by V K Rajah JC, addressed an application by former provisional liquidators seeking court determination of their remuneration. The Interim Judicial Managers opposed the application, arguing the claimed fees were excessive. The court outlined principles for assessing insolvency practitioners' remuneration, emphasizing fairness, reasonableness, and value contributed, and ultimately disallowed the application pending further disclosure by the applicants.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Application disallowed pending further disclosure by the applicants.

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The High Court addresses the principles for determining remuneration for provisional liquidators, emphasizing fairness, reasonableness, and value contributed in insolvency practice.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Econ Corporation LimitedRespondentCorporationApplication disallowed pending further disclosure by the applicants.Neutral
Former provisional liquidators of Econ Corporation LimitedApplicantOtherApplication disallowed pending further disclosure by the applicants.Lost

3. Judges

Judge NameTitleDelivered Judgment
V K RajahJudicial CommissionerYes

4. Counsels

4. Facts

  1. The company is the second largest local construction company with liabilities exceeding assets by around $88m.
  2. The directors resolved to place the company under a creditors’ voluntary winding up on 26 November 2003.
  3. The applicants were appointed as provisional liquidators on 26 November 2003.
  4. The applicants were displaced as provisional liquidators on 6 January 2004.
  5. The applicants sought remuneration of $263,705.00 for their services.
  6. The Interim Judicial Managers opposed the application, asserting the remuneration sought was excessive.
  7. The applicants had set aside $564,000 to meet their fees and disbursements.

5. Formal Citations

  1. Re Econ Corp Ltd (in provisional liquidation) (No 2), OS 1791/2003, [2004] SGHC 49

6. Timeline

DateEvent
Court declined to sanction a scheme of arrangement proposed by the company.
Directors resolved to place the company under a creditors’ voluntary winding up and appointed the applicants as provisional liquidators.
Applicants' appointment as provisional liquidators began.
Applicants' appointment as provisional liquidators ended.
Order was made for the appointment of the Interim Judicial Managers, displacing the applicants.
Interim Judicial Managers requested documentation from the applicants.
Interim Judicial Managers requested a detailed breakdown of the summary of work.
Parties first appeared before the court.
Applicants filed their reply affidavit.
Judgment reserved.

7. Legal Issues

  1. Determination of Remuneration for Provisional Liquidators
    • Outcome: The court outlined principles for assessing insolvency practitioners' remuneration, emphasizing fairness, reasonableness, and value contributed, and disallowed the application pending further disclosure.
    • Category: Substantive
    • Sub-Issues:
      • Justification of fees
      • Reasonableness of time costs
      • Value contributed by insolvency practitioner

8. Remedies Sought

  1. Court determination of remuneration
  2. Payment of assessed amount as a priority debt

9. Cause of Actions

  • Application for determination of remuneration

10. Practice Areas

  • Insolvency
  • Liquidation

11. Industries

  • Construction

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Re Econ Corp LtdHigh CourtYes[2004] 1 SLR 273SingaporeCited for the prior unsuccessful scheme of arrangement proposed by the company.
Mirror Group Newspapers plc v Maxwell (No 2)Not specifiedYes[1998] 1 BCLC 638EnglandCited for the principles regarding the remuneration of court-appointed receivers and the fiduciary duty of office-holders to justify their claims.
In re Potters Oils LtdNot specifiedYes[1986] 1 WLR 201EnglandCited for the observation that the court is ill-equipped to conduct a detailed investigation of receivers’ charges on an itemized basis.
Re Peregrine Investments Holdings LtdHong Kong Court of AppealYes[1999] 3 HKC 291Hong KongCited for affirming the principles in Mirror Group Newspapers plc v Maxwell (No 2) regarding the justification of remuneration claims by fiduciaries.
Venetian Nominees Pty Ltd v ConlanFull Court of the Supreme Court of Western AustraliaYes(1998) 16 ACLC 1653AustraliaCited for the principle that the onus is on the provisional liquidator to establish that the remuneration claimed is fair and reasonable.
Re Galdonost Dynamics (NZ) Ltd (In Liquidation)Not specifiedYes[1994] 2 NZLR 605New ZealandCited for the principles applicable to the assessment of a liquidator’s fee, including normal commercial practice and adequate identification of profit rates and overheads.
Re Medforce Healthcare Services Ltd (In Liquidation) (No 2)Not specifiedYes[2001] 3 NZLR 158New ZealandCited for the principle that a key factor for the court’s consideration is to identify the appropriate balance, to ensure that the courts have sufficient information to enable them to reach a conclusion that the fees sought are reasonable, without imposing a cost upon insolvency practitioners that would significantly and adversely affect the returns to creditors.
Chan Ket Teck v SeetNot specifiedYes[1994] 1 SLR 567SingaporeDiscussed and distinguished; the court found that the liquidators were entitled to their fees as there was no evidence to suggest that “they had acted fraudulently or in a manner that disentitled them to charge in accordance with the special resolution to wind up the company”.
Sumitomo Bank Ltd v Kartika Ratna Thahir (No 2)Not specifiedYes[1997] 1 SLR 690SingaporeCited for the principle that the process of assessment of party and party costs is not a matter of mathematical multiplication, with assumed multiplier and multiplicand, nor are time sheets conclusive of the total amount of time which reasonably would have been spent on any particular aspect of the getting-up.
In re Carton, LimitedNot specifiedYes(1923) 39 TLR 194EnglandCited for the principle that the Court as a general rule only fixes remuneration on a time-basis if there is no other method which would operate to give the liquidator a fair remuneration.
In re Nash & SonsNot specifiedYes[1896] 1 QB 13EnglandCited for the court's inherent jurisdiction to direct the official receiver to attend any hearing where such an issue may arise.
Re Trustees Executors & Agency Co LtdNot specifiedYes(1984) 9 ACLR 497AustraliaCited for the principle that the remuneration that an insolvency practitioner can command embraces compensation for the assistance of employees of their firms.

13. Applicable Rules

Rule Name
Insolvency Rules 1986, rr 4.127 to 4.131
Insolvency Rules 1986, Rule 4.130(2)
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), Rule 188
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), Rule 142(1)
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), Rule 142(2)
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), Rule 171
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), Rule 165
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), Rule 173
Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed), rr 4 and 6
Rules of Court (Cap 322, R 5, 1997 Rev Ed), O 32 r 9
Fees (Winding Up of Companies) Order (Cap 106, O 35, 2001 Rev Ed)

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 1994 Rev Ed)Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 268(2)Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 311Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 268(3)Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 328(1)(a)Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 219Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 265Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 227G(5)Singapore
Companies Act (Cap 50, 1994 Rev Ed), Section 227QSingapore
Companies Ordinance (Cap 32), Section 196(2)Hong Kong
Corporations Act 2001, Section 473Australia
Companies Act 1993, Section 276New Zealand
Supreme Court of Judicature Act (Cap 322, 1999 Rev Ed), Section 62Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Provisional liquidator
  • Remuneration
  • Insolvency practitioner
  • Interim judicial manager
  • Time-costing basis
  • Value contributed
  • Fairness
  • Reasonableness
  • Priority debt
  • Winding up

15.2 Keywords

  • Insolvency
  • Liquidation
  • Provisional Liquidator
  • Remuneration
  • Companies Act
  • Singapore
  • High Court

17. Areas of Law

16. Subjects

  • Insolvency
  • Liquidation
  • Remuneration of Insolvency Practitioners