The court process for determining a liquidator’s remuneration is relatively straightforward. The liquidator submits his accounts to the court who then appoints a court reporter (i.e. an independent accountant, typically an insolvency practitioner) to examine and audit the accounts. The reporter then reports back to the court on a suitable remuneration for the liquidator. Seems simple! But what exactly is the role of the reporter and how does he or she determine what is a suitable remuneration?
Until very recently, there was little or no guidance for reporters. Fortunately, Sheriff Jamieson at Dumfries Sheriff Court has issued a note which seems to clarify the role of a court reporter, and of the court itself.
Having failed to reach agreement with the liquidation committee as to their remuneration, the Joint Liquidators of S&M Livestock Limited lodged a note with the court seeking remuneration of £142,653.60 to cover a period of over four years of the liquidation.
The Sheriff remitted the Joint Liquidators’ accounts to a court reporter, who, after carrying out an extensive review suggested a significant reduction in the remuneration sought.
The Sheriff’s Note
After receiving written submissions from the reporter and the Joint Liquidator, the Sheriff issued his note in which he took issue with the approach taken by the reporter, and the liquidation committee. The Sheriff did not think the reporter required to carry out the extensive review of the case that he did. The Sheriff frames this view in terms of his earlier interlocutor which stated that the reporter was to ‘audit’ the Joint Liquidators’ account.
In the Sheriff’s mind, this means that the reporter was simply to determine if the Joint Liquidators’ time charges were justified by the records of the case. The Sheriff is of the view that it is not the place of a reporter, or the court, to second guess a Liquidator’s actings in a case. A Liquidator is appointed by the court and his actings should be considered to be carried out properly unless proven otherwise.
In essence, what the Sheriff is saying is that the process of reporting on a liquidator’s remuneration is not an opportunity to re-run the liquidation and to question the manner in which a liquidator has conducted a case.
The role of the reporter is to audit the liquidator’s accounts and to report back to the court with a suggested remuneration. In this case, the Sheriff took the view that the ‘labourer is worthy of his hire’, and that there is nothing to suggest that the Joint Liquidators’ conduct, or classification of the case as complex, require to be questioned.
The case provides some useful guidance not only to court reporters but to liquidators seeking to have their remuneration fixed by the court and will hopefully remove some of the uncertainty associated with the process.