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Grounds publishedDecided 14 Oct 2015
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High Court

Kao Chai-Chau Linda v Fong Wai Lyn Carolyn and others

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[2015] SGHC 260Case no. Summons No 4976 of 2014 in Suit No 428 of 2010

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  1. Steven Chong J:

  2. Introduction

  3. [2] As the fees of the insolvency practitioner usually require the court’s sanction, applications are brought on a regular basis. However, there is usually no consensus as to what the proper level of fees should be. Insolvency practitioners, having put in the hours, see no reason why they should not be allowed to bill according to the hourly market rate which they would charge their private clients. Creditors invariably oppose the quantum of fees as it has a direct financial bearing on their recovery rate. The insolvent company also has every incentive to seek a reduction of the fees in order not to worsen its already dire financial position.

  4. [5] Legislative intervention is clearly desirable. However that process will inevitably take time. In the meantime, this state of affairs should not be allowed to continue. When the challenges over fees are closely examined, it is apparent that the sources of disagreement typically relate to the same issues: the scope and necessity of the work, allegations of over-manning and duplicity of work, disagreement over the division of the work between the lawyers and the insolvency practitioner, the justifications proffered for the time spent, and the applicable rates. These are issues which should more sensibly be the subject of a negotiated agreement at the time of appointment, rather than the loci of discord several months on. It seems to me that an altogether more sensible approach would be to take pre-emptive measures and address the problem at source: ie, to lay down guidelines at the start rather than deal with the problem after the fact. In the general dissatisfaction over the subject of fees, it can frequently be overlooked that insolvency practitioners play a pivotal role in the rehabilitation or winding down of companies. For their contributions, they should receive fair and reasonable remuneration which is properly due without concern that the sums sought may be subject to “arbitrary” adjustments. The introduction of clear upfront guidelines would ensure that they are fairly and justly rewarded for their services.

  5. The facts

  6. [7] Airtrust was set up by the late Mr Peter Fong in 1972. The plaintiff is a shareholder of Airtrust and was its managing director. The first and second defendants, Carolyn Fong Wai Lyn (Mr Peter Fong’s eldest daughter) and Anthony Craig Stiefel, are both directors of Airtrust. The third defendant, Mr Alvin Hong, is a minority shareholder with a 2% stake in Airtrust. For ease of reference, I will refer to them collectively as “the respondents” since they were all united in opposition to the application filed by the R&M.

  7. [8] Following Mr Fong’s passing in 2008, a number of legal actions were commenced against members of the late Mr Fong’s family, against Airtrust, and also by Airtrust against others (see, eg, Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda and another suit [2014] 2 SLR 673; Fong Wai Lyn Carolyn v Airtrust (Singapore) Pte Ltd and another [2011] 3 SLR 980). One of these proceedings is the present suit — Suit No 428 of 2010 — wherein the plaintiff sought to restrain the defendants from holding an Extraordinary General Meeting to remove her from her position as managing director and director of Airtrust.

  8. [9] On 17 January 2012, the parties to the present action reached an agreement to place Airtrust into receivership pending a negotiated settlement of the outstanding legal suits in which Airtrust was involved. This was achieved by way of a consent order dated the same day. The R&M were to “manage and carry on the business of [Airtrust] in place of its Board of Directors until further order” and their terms of reference included, but were not limited to, the management of Airtrust’s bank account and its existing employment contracts.

  9. The previous bills of costs

  10. (a) On 8 June 2012, they filed Summons No 2855 of 2012 to seek remuneration of $2.1m for three months’ work performed between 17 January 2012 and 13 April 2012 (“the First Bill”). The R&M offered a discount of 30%. When the matter came before Choo Han Teck J on 4 September 2012, he applied a further 12% reduction on top of the 30% discount offered (making for a final reduction of 42% from the original figure) and approved a sum of $1.21m.

  11. (b) On 8 February 2013, they filed Summons No 760 of 2013 in respect of the bill of costs for three months’ work performed between 14 April 2012 and 20 July 2012 (“the Second Bill”). The proposed remuneration was again $2m but no discount was offered in this instance. Lee Seiu Kin J awarded a sum of $1.24m, a reduction of 38% from the initial sum proposed.

  12. (c) On 18 September 2013, they filed Summons No 6009 of 2013 to seek a sum of $1.6m for six months’ work performed between 1 July 2012 and 31 December 2012 (“the Third Bill”). A discount of 10% was offered at the time of the hearing. Lee Kim Shin JC applied a further discount and approved a final sum of $1m (a total reduction of 38% from the initial figure proposed).

  13. [11] I note that the reductions were applied to the professional fees charged, and not the disbursements (which, in any case, only made up a small fraction of the total bills). This approach is correct. A claim for disbursements is a claim to be reimbursed for expenses reasonably incurred in the performance of a stipulated task. As long as they were reasonably incurred (and there was no suggestion that they were not), there should be no reason that the R&M should not be reimbursed in full.

  14. The present application

  15. [12] On 12 August 2014, the R&M’s solicitors wrote to the respondents to inform them that professional fees and disbursements in the sum of $3.1m had been incurred for work done between 1 January 2013 and 31 December 2013 (“the Applicable Period”). The R&M offered a discount of 30% on the professional fees (taking the final figure down to $2.18m) and proposed that this revised figure be presented to court for approval by agreement. The respondents replied separately, each taking issue both with the quantum of the fees and with the level of detail provided in support of the fees claimed.

  16. [13] Despite being unable to secure the respondents’ agreement, the R&M went ahead and filed Summons No 4976 of 2014 on 3 October 2014 seeking approval for a sum of $3.1m. Accompanying the application was an affidavit sworn by Mr Aaron Loh Cheng Lee (one of the R&M) which contained (a) the accounts of Airtrust for the applicable period and (b) a spreadsheet detailing the hours logged by the R&M for the applicable period.

  17. [14] Parties first attended before me on 12 January 2015. On that occasion, the third defendant and the plaintiff both argued that the supporting affidavit did not contain an adequate level of detail, leaving them “handicapped” and unable to properly assess whether the quantum of fees claimed was reasonable. The plaintiff pointed out that the supporting affidavit for the Third Bill contained a detailed breakdown of the time spent by each fee earner for each category of work claimed and requested that a similar level of detail be provided here. I agreed that this was sensible and adjourned the application to allow a supplementary affidavit to be filed.

  18. [15] On 2 February 2015, Mr Aaron Loh filed a supplementary affidavit containing the requested information. Following that, each of the respondents wrote to the R&M, taking issue with specific items in the timesheets and requested for further information. The additional information was duly provided by way of yet another affidavit filed by Mr Aaron Loh on 4 March 2015 wherein he provided responses to each of the queries raised.

  19. [16] When the parties attended before me on 9 March 2015, the respondents continued to indicate their unease with the level of fees charged and pointed to perceived inefficiencies in the R&M’s work processes and the possibility of a duplication of work. The R&M responded to each of the respondent’s arguments and contended that their offer of a 30% discount ought to be sufficient to deal with any concerns over inefficiencies in their work.

  20. [17] After hearing the parties, I reduced the quantum of professional fees sought by 40% (ie, a further 10% above the 30% discount offered) to $1.8m but allowed the disbursements of $30,000 as charged.

  21. The law on the remuneration of court-appointed receivers

  22. [18] Before I give the detailed reasons for my decision, I think it is useful to set out the principles which guide the exercise of the court’s discretion in this area. This section will be divided into three parts. First, I will begin with the role and function of court-appointed receivers. Second, I will examine the principles that guide the court in its determination of a receiver’s remuneration. Third, I will explain the methodology applied by the courts in assessing what the appropriate remuneration ought to be. Before going further, I make three important clarifications.

  23. [19] First, I note that, historically, there was a distinction made between “receivers” on the one hand and “managers” on the other. The former were confined only to the collection and securing of the rents, income and profits whereas the latter were empowered also to buy, sell, and manage the business as a going concern (see Re Manchester and Milford Railway Company ex parte Cambrian Railway Company (1880) 14 Ch D 645 at 653). However, it appears that this distinction is not often drawn today (see Hubert Picarda, The Law Relating To Receivers, Managers and Administrators, (Tottel Publishing, 4th Ed, 2006) (“Picarda”) at pp 5 and 6). Order 1 r 4(1) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”) explicitly provides that any reference to “’receiver’ includes a manager or consignee.” For the remainder of this judgment, therefore, I will refer to both receivers and managers as “receivers” simpliciter and to the law governing their appointment, duties, and remuneration as the “law of receivership”.

  24. [20] Second, the law of receivership may be divided into that pertaining to privately appointed and court-appointed receivers (see Picarda at p 1). The appointment of a private receiver flows from the exercise of a creditor’s contractual powers (usually under the terms of a debenture) granted by a company. Thus, the grant of remuneration to private receivers falls to be governed by the terms of the contract which forms the basis of their appointment (see Saheran Suhendran bin Abdullah, Lim Tian Huat, and Edwin Chew, Corporate Receivership: The Law and Practice in Malaysia and Singapore (Butterworths, 1997) (“Corporate Receivership in Malaysia and Singapore”) at p 327). By contrast, curial receivership traces its origins to the practice of the Court of Chancery where a receiver was appointed in a wide variety of situations where the interim protection of property was required (see Capewell v Revenue and Customs Comrs and another [2007] 1 WLR 386 at [19] per Lord Walker). Thus, the principles governing the remuneration of court-appointed receivers still bear an equitable accent. It is the latter — the remuneration of court-appointed receivers — which will be the focus of this decision.

  25. [21] Third, even though the specific issue which is before this court is the remuneration of receivers, the general principles are equally applicable to the remuneration of other insolvency practitioners whose offices also have a fiduciary character (see Re Econ Corp Ltd (in provisional liquidation) [2004] 2 SLR(R) 264 (“Re Econ”) at [45]). Thus, I will draw liberally from cases dealing with the remuneration of other insolvency practitioners (eg, liquidators, judicial managers, trustees/nominees in bankruptcy) where they are relevant, bearing in mind the subtle differences that may exist as a result of differences in the relevant statutory provisions.

  26. The nature, function, and purpose of curial receivership

  27. [22] The appointment of receivers was the exclusive preserve of the Court of Chancery until the fusion of law and equity through the passage of the Judicature acts. Section 25(8) of the Supreme Court of Judicature Act 1873 (c 66) (UK) conferred all divisions of the High Court with the power to appoint a receiver where it appeared to the court to be “just and convenient” to do so (see Corporate Receivership in Malaysia and Singapore at pp 377 and 378).

  28. [23] In Singapore, the power of the High Court to appoint a receiver is statutorily conferred by s 4(10) of the Civil Law Act (Cap 43, 1999 Rev Ed), which provides that a receiver may be appointed “by an interlocutory order of the court, either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient that such order should be made.” Section 18(2) of the Supreme Court of Judicature Act (Cap 322, 2007) (“SCJA”), read with para 5 of the First Schedule, provides that the High Court has the “[p]ower before or after any proceedings are commenced to provide for — (a) the interim preservation of property which is the subject-matter of the proceedings by sale or by injunction or the appointment of receiver … or in any manner whatsoever” [emphasis added].

  29. [24] Despite the differences in wording, the purport of the legislation is clear: the central purpose of receivership is the interim preservation of disputed property pending its final resolution in the main action (see Lee Kuan Yew v Tang Liang Hong and another and other suits [1997] 1 SLR(R) 328 (“LKY v TLH”) at [7]). In discharging this role, receivers act as officers of the court. In Mirror Group Newspapers plc v Maxwell and others (No 2) [1998] 1 BCLC 638 (“Mirror Group”), Ferris J described it the following way (at 648a–c).

  30. [25] This notion of a “duty to account” has both a narrow and a wider dimension. In its narrow sense, it means that receivers must stand ready to explain, in some detail, the actions that they undertook in the discharge of their office. This principle is also embodied in statute. For example, O 30 r 4 of the ROC imposes a duty on receivers to submit accounts on a regular basis. In the wider sense, this duty to account behoves receivers to explain and, if necessary, to account for any reduction in the value of the subject matter of the appointment. This includes sums paid out to them as remuneration, which will necessarily be taken out of the assets of the company they are managing. This has two important implications.

  31. Burden of proof on receivers to justify their remuneration

  32. [26] The first is that the burden of proof falls on the receiver to justify the quantum of his fees. As explained by Ferris J in Mirror Group at 648c–f, this implication flows as a corollary of the duty to account.

  33. [27] To that end, the receiver must provide full particulars (supported by proper records) to justify his entitlement to be paid the sum sought. Chiefly, this involves explaining (a) what was done; (b) why it had to be done; and (c) why it had to be done in the manner as employed. The level of detail required will be proportionate to the complexity of the receivership (see Mirror Group at 648h). An excellent non-exhaustive list of matters which should be included in any remuneration application may be found at para 21.4.2 of the Practice Direction (Insolvency Proceedings) 2014 [2014] BCC 502 (“UK Insolvency PD 2014”). Some of the important areas of information that must be covered include: the profile and qualifications of the team, the areas of work performed and the time spent, and the receivers’ general policy vis-à-vis the capture of value (eg, steps taken to avoid duplication of work or the steps taken to ensure that work is performed by persons of an appropriate seniority).

  34. (a) “Level 1” — The first spreadsheet was a succinct summary of the work performed by the entire team for the period of assessment presented in a single page. The names of each member of the team were found in separate rows. In respect of each team member, the following information was provided: (i) the period of engagement; (ii) the total number of billable hours spent; (iii) the charge-out rate; and (iv) the total time-cost.

  35. (b) “Level 2” — The second set of spreadsheets focused on the general categories of work done. Each category of work occupied a separate row and for each category of work, the following information was provided in separate columns: (i) a brief description of the work; and (ii) the total time spent on each category by each team member on that category of work.

  36. (c) “Level 3” — The third set of spreadsheets focused on individual tasks. Each task occupied a separate row and for each task, the following information was provided: (i) a brief description of what the task entailed; (ii) whether it was complex or urgent; (iii) detailed comments on problems faced or general remarks on the nature of the task; and (iv) the time spent by each team-member on the task.

  37. [29] I do not expect that every engagement will require this level of detail. The guiding principle is always one of proportionality: the level of detail should be commensurate with the complexity of the task (see [27] above). I also accept that adopting this method entails an inevitable duplication in the information presented since the information in Levels 1 and 2 are simply derivations of the information presented at Level 3. However, to my mind, that is precisely the point: it facilitates both a macroscopic as well as a microscopic examination of the bill, as the situation requires.

  38. Doubts resolved against the receivers

  39. [30] The second implication of the duty to account is that any element of doubt as to the propriety of remuneration should be resolved against the receivers (see Mirror Group at 649b). This is because the award of remuneration to fiduciaries is an exception to the general rule that they are not to make a profit out of their office. Thus, if the receivers do not discharge the burden of proving their case for the remuneration as claimed, they ought not to be entitled to it.

  40. Remuneration must be “proper”

  41. [31] Order 30 r 3(3) of the ROC provides that “[a] person appointed receiver shall be allowed such proper remuneration, if any, as may be fixed by the Court” [emphasis added]. The trouble, however, is that the expression “proper” is the statement of a legal conclusion rather than an aid to analysis. It still begs the question: what is “proper”? In my judgment, “proper” remuneration is one which is a fair, reasonable, and proportionate reflection of the value of the services rendered.

  42. Remuneration is a fair reward of value, not an indemnity against cost

  43. [33] How, then, is “value” to be measured? In Re Econ at [50], V K Rajah JC (as he then was) wrote that the “value” of an insolvency practitioner’s contribution was to be measured in terms of “the difference the insolvency practitioner has made to the matter”. This “difference”, it seems to me, must be assessed in relation to the purpose of the receiver’s appointment. The central inquiry is whether the objectives of the receivership (which are contained in his terms of reference) have been attained. At its core, this means the preservation of the assets of the company (see [24] above). However, where the receivers’ terms of reference provide for broader objectives (as it does in the present), the remit of the inquiry of “value” will concomitantly be wider. Several further useful guiding propositions can be distilled from the cases.

  44. [35] Second, in assessing whether a particular act ought to have been performed, some margin of appreciation should also be extended. While the general principle is that the court will not permit recovery of services which have been performed without prior sanction (see Bristowe v Needham (1847) 2 Ph 190), one should not expect a receiver caught up in the flurry of activity in the marketplace to have the same luxury of calm and dispassionate analysis that is afforded to those called on to assess his acts ex post facto in the confines of the courtroom. As explained by V K Rajah JC (as he then was) in Re Econ at [58]):

  45. [36] For example, in Dovechem, the liquidators had spent a substantial amount of time pursuing a claim in China which eventually turned out to be time-barred. At first instance, the Assistant Registrar disallowed the claim on the basis that this suit should not have been commenced in the first place, ruling that the liquidators ought to have appreciated that it was doomed to fail from the start. On appeal, Judith Prakash J disagreed with the Assistant Registrar’s decision (at [55]–[57]). She found that the liquidators, though familiar with Chinese business regulations, could not reasonably be expected to have been au fait with Chinese laws on limitation periods. Further, she also observed that it was somewhat unfair for the majority shareholders to now oppose the liquidators’ entitlement to be remunerated for this service since they were the ones who had pressed the liquidators to commence the claim in the first place. The majority shareholders had likewise failed to spot the time-bar issue despite being in possession of the loan documents (which formed the basis of the claim) from the outset. In the circumstances, it could not be said that the work done in relation to the matter was wasted and therefore should not be remunerated.

  46. [37] Third, the notion of “value” cannot be construed only in monetary terms (see Dovechem at [33]). The generation of financial benefit is not the only index of value. In many cases, the contributions of a receiver will not manifest in a direct financial benefit to the company and may not easily be quantified (eg, where the objective of receivership is not the generation of profit but, as in the present, the management of the company pending the resolution of its legal disputes). However, it may still be of value and can properly be the subject of a claim for remuneration.

  47. The remuneration must be fair, reasonable and proportionate

  48. [39] In the most general sense, this means that the total sum awarded cannot be out of proportion with the value of the company’s estate. In Mirror Group, for example, the receivers were tasked with asset recovery. They succeeded in realising a sum of £1.6m. However, they then claimed a sum of £745,000 in professional fees and a further £705,000 in legal fees and other disbursements, leaving only a scant £43,428 for the estate. Ferris J found the figures “profoundly shocking” and observed that “[i]f the amounts claimed are allowed in full this receivership will have produced substantial rewards for the receivers and their lawyers and nothing at all for creditors of the estate” (at 645c). Similarly, in Re Peregrine Investments Holdings Ltd & Ors [1998] 3 HKC 1, the provisional liquidators put up a bill of HK$76m for 63 days of work — a sum achieved, in part, because many individuals in the provisional liquidators’ teams had apparently clocked daily billable averages “well into” the double digits on a sustained basis over 30 days and more. Le Pichon J said, with no small amount of understatement, that the overall size of the bill and the sheer number of billable hours involved (which she described at [6] as the product of “apparent marathon feats”) left her “greatly troubled” (at [14]). It goes without saying that bills of this sort must almost certainly be impugned on the basis that they are neither fair nor reasonable nor proportionate when assessed against the benefits obtained.

  49. [40] In assessing whether the sum claimed is a fair, reasonable and proportionate one, I think a good starting point would be the list of factors found at r 69.7 of the English Civil Procedure Rules 1998 (SI 1998 No 3132) (UK), which English courts are required to take into account when determining an appropriate quantum of remuneration:

  50. I observe, parenthetically, that this list is similar to that found in the Insolvency Rules 1986 (SI 1986 No 1925) (UK), which apply to other insolvency practitioners.

  51. The role of the court

  52. [41] The role of the reviewing court is not to scrutinise the minutiae of the bill, but to consider matters of principle (see Ide at [39]). This is a concession both to resource constraints as well as limited institutional competence of the courts in this area. As observed by Hoffmann J in In re Potters Oils Ltd [1986] 1 WLR 201 at 207, “the court is ill-equipped to conduct a detailed investigation of receivers’ charges on an itemised basis. A judge could not do so without being expensively educated by expert evidence”. In other words, the function of the court is to examine the bill to determine if there are material flaws in the methodology of its preparation or any incorrect premises which have been adopted which can properly justify an adjustment of the figures presented.

  53. [42] It is well established that in performing its task, the court’s inquiry is not limited only to matters over which queries have been raised. As explained by the Supreme Court of Western Australia in Venetian Nominees at 14, the absence of dissentients does not absolve the court of the duty of scrutinising the bills closely. At the end of the day, it is the function of the court to arrive at a determination of what the proper quantum of remuneration ought to be after “considering the material proffered and bringing an independent mind to bear on the relevant issues.”

  54. [43] In Re Stockford Ltd (subject to deed of company arrangement); Korda and Another (as joint and several deed administrators) (2004) ACSR 279 (“Re Korda”), Finkelstein J adopted a two stage approach towards the determination of the appropriate quantum to be awarded (at [47]):

  55. (a) At the first stage, the court has to arrive at a working figure (which he, following the terminology applied in the United States, calls a “lodestar” amount). This figure is usually calculated on a time cost basis (ie, the “number of hours reasonably spent by the insolvency practitioner multiplied by a reasonable hourly rate”). In arriving at this figure, the court is not limited to accepting the figures provided by the applicants at face value. Instead, it has to make necessary adjustments to account for its assessment of whether the hourly rates levied are reasonable, having regard to such information it may have on the standard rates levied by the industry or with reference to previous rates levied by the same professionals. The court should determine whether the hours claimed for were reasonably spent and subtract claims for billable hours which have not been adequately supported by evidence.

  56. (b) At the second stage, the court should adjust this provisional figure. To the extent that any quantifiable adjustments can be made (eg, where specific quantified heads of claim are disallowed), these should first be factored in before a further percentage reduction is applied (once again, applying the usual “broad brush”: see Dovechem at [81] and [84])) to reflect the court’s assessment of what a fair and reasonable sum ought to be.

  57. [45] A further point I will mention is that the courts in other jurisdictions have accepted that it is appropriate, in some cases, for the courts to be assisted by assessors, particularly where the bill is very large and the issues very complex. This was done in Re Independent Insurance Co Ltd (in provisional liquidation) (No 2) [2003] 1 BCLC 640 (“Re Independent Insurance (No 2)” where the appointment of an assessor there was hailed as a “progressive step forward” that provided creditors with a “reliable independent quantification of the office holder remuneration” (see Michael Mulligan and John Tribe, “the remuneration of office holders in corporate insolvency – liquidators, administrators and administrative receivers” (2003) Insolv L 101 at pp 104 and 117).

  58. The key areas of dispute in relation to the remuneration of insolvency practitioners

  59. [47] Before turning to my decision in relation to the present bill, I want to spend some time examining some of the persistent problems that constantly plague this area of law. The purpose of this exercise is two-fold: first, it will explain how the general principles set out above (while easy enough to articulate) are not always easily applied in practice; second, it will demonstrate that this is an area of law which is in urgent need of reform. Given that the law reports are rife with cases featuring disagreements over the remuneration of insolvency practitioners, I will just highlight three of the most intractable points of disagreement.

  60. Time based costing

  61. (a) First, the firm will calculate the level of profit it has to achieve in a particular year. This figure is calculated chiefly with reference to: (i) the level of remuneration it wishes to give to its partners and staff; (ii) the overheads and other operating expenses of the firm; and (iii) the rates levied by its competitors.

  62. (b) Second, it then decides how much each fee earner has to charge per hour (commensurate with their level of experience) in order that the firm may achieve its targeted level of profit. In deriving this figure, the firm first has to ascertain the total number of chargeable hours each fee earner is capable of billing. The total number of chargeable hours is always a fraction of the total hours that each fee earner can be expected to work (this figure, which is usually 70%, is known as the “utilisation rate”). The use of a percentage reflects the reality that not every working hour will be billable: professionals will need to spend time on non-billable work and, further, they are often involved in several briefs at the same time so inevitable inefficiencies are to be expected as they transition from one task to the next.

  63. [50] Of particular concern is (b) — the propriety of the hourly rates levied. It is important to remember that what is relevant is not the charge-out rate of the practitioner in question but the general rate levied by a person of the equivalent status and experience (see Jones v Secretary of State for Wales [1997] 1 WLR 1008, which makes this point, albeit in the context of solicitors’ fees). However, the court has no basis for gauging if the charge-out rates represent fair market value since there are no fee guidelines issued by local professional bodies against which the rates charged by individual practitioners may be measured. This problem is exacerbated in long engagements. As explained in Re Independent Insurance (No 2) at [18]–[22], staff members in long term engagements are more akin to persons on long-term secondments and will hence be able to achieve higher utilisation rates (because they will not suffer from the inefficiencies attendant with having to switch from working on one brief to another). Thus, the estimate of a 70% utilisation rate may be too conservative.

  64. [51] I note that it is common for “voluntary” discounts to be offered in long engagements, as was done in the present case (see [12] above). However, it is often the case that the mere offer of a discount without an explanation (as was done in the present case) only serves to cloud the issue rather than clarify it (see Re Econ at [18]). At the end of the day, the principle of the matter is that if the sum claimed is “proper”, there is no reason why the insolvency practitioner should not be entitled to it. Conversely, if the sum claimed was not “proper” to begin with, the offer of a deduction is not a “voluntary discount” in the true sense. The expression suggests that the offer represents a voluntary reduction from an amount which would otherwise rightfully be due. However, if the sum claimed is not “proper” in the first place, then the insolvency practitioner is not even entitled to be paid that sum and the reduction was not his to give.

  65. Over-servicing

  66. [53] One common complaint is that of “over-servicing”. The concept of “over-servicing” is a compendious one and is intended to capture all instances in which work, though intra vires the terms of reference of the receivers, is “unnecessary” in the sense that it ought not to have been incurred, given the size of the company and the benefits which were reaped (see Conlan at [44]). Some examples include:

  67. (a) Where the receivers pursue a costlier and more resource-intensive route of action when a cheaper alternative is readily available. In Dovechem, the liquidators had an obligation to sell the shares held in a subsidiary at “fair market value”. They received an offer from the company’s existing shareholders which accorded with their valuation but nevertheless proceeded to carry out a full open bidding exercise, which cost $322,536. On review, Prakash J held that much of the work done in preparation for the bidding exercise was unnecessary given that the liquidators had already received a reasonable offer.

  68. (b) Where work is performed by persons at an inappropriate level of seniority: eg, where a partner is assigned to perform a simple task (at significantly higher cost) when the work could just as easily have been done by an associate or even by administrative staff (see Re Cabletel Installations Ltd (in liquidation) [2005] BPIR 28).

  69. (c) It may also occur where ancillary charges have unnecessarily been incurred: eg, legal or secretarial assistance. In Re Independent Insurance (No 2), the provisional liquidators levied an additional charge of £130,470 for 10 months’ worth of secretarial services. The liquidators stated that it was their “policy” to charge secretarial time for assignments where large blocks of time are spent on a particular task. Ferris J rejected this argument, explaining (at [30]) that the need for secretarial services is an “ordinary incident of professional life” so any charges incurred thereof should be treated as an overhead cost which is covered by the sum paid to the insolvency practitioner. A separate charge for such services would only be appropriate “for the performance of exceptional duties” for which evidence had to be adduced (at [32]).

  70. [55] It is my view that many disagreements of this nature could be averted if there were clear guidelines or court directions, from the outset, on the scope of the receivers’ involvement in these areas. Matters such as the composition of the persons on the team and the nature of independent professional help that the receivers may engage can more sensibly and profitably be the product of a negotiated agreement at the time of appointment rather than subjects of disagreement ex post facto.

  71. Duplication of work

  72. [56] Another common complaint concerns the duplication of work. This problem is particularly acute in situations in which there are multiple sets of professionals (usually lawyers and insolvency practitioners) engaged in the same matter. This problem typically manifests in two different scenarios.

  73. [60] The observation I made in the previous section on over-servicing applies with equal force here. It seems to me that a more sensible approach would be to secure the agreement of relevant stakeholders, at the time of the receivers’ appointment, on the proper division of work between the insolvency practitioners and the other professionals engaged on the task.

  74. My decision

  75. The parties’ arguments

  76. [62] The respondents pointed chiefly to perceived inefficiencies in the manner in which the R&M carried out their work and argued that there was a possible duplication of work. Their arguments may be divided into two broad categories.

  77. (a) First, they questioned the necessity of certain expenditure. Their principal complaint concerned the R&M’s excessive involvement in Suit No 523 of 2011 and Suit No 1015 of 2012 (“Suit 523” and “Suit 1015” respectively and, collectively, “the Suits”), in which Airtrust is the defendant. They pointed out that the bulk of the work would have been done by Airtrust’s solicitors (for which Airtrust would be separately billed) and that the intimate involvement of the R&M raised the possibility of a duplication of labour.

  78. (b) Second, they questioned the efficiency of the R&M’s work processes. The respondents pointed out that the R&M had devoted large amounts of professional time to simple administrative tasks like the performance of keyword searches and the indexing of documents. They argued that these tasks could have been more cost-effectively performed by administrative staff instead of being performed by fee earning associates charging hundreds of dollars an hour.

  79. [63] However, none of the respondents offered any proposal as to what an acceptable quantum of fees ought to be. It is also notable that the plaintiff, who was initially the most trenchant of the objectors, subsequently indicated her acceptance of the discounted fees though she stated that she would leave the question of whether any further discount ought to be applied to the Court.

  80. [64] In reply, the R&M raised three principal points.

  81. (a) First, the offer of a global discount of 30% would more than adequately address any concerns over perceived inefficiencies in their work processes. They pointed out that the total number of hours in dispute (ie, 2,726.75 hours) only represented 54% of the total time costs which were being claimed but that the offer of a discount would be applied on the bill as a whole (ie, 5035.5 hours). They therefore highlighted that, mathematically speaking, the 30% discount offer is equivalent to the R&M foregoing more than 50% of the disputed hours.

  82. (b) Second, the quantum of fees claimed compares favourably with the historical staff costs incurred by Airtrust. It was noted that the staff costs for the financial years ending 2008/2009 came up to more than S$2m, which is the same sum (following the 30% discount) that they sought in this application.

  83. (c) Third, there was a need for them to be actively involved in the conduct of the ongoing suits. Not only did this fall within their terms of reference (which was to manage the company’s daily affairs and to recover its assets), the substance of the Suits also necessitated an analysis of the company’s financial records, which was an area that they would be equipped to assist.

  84. Over-servicing

  85. [65] As noted at para 21.4.2(9) of the UK Insolvency PD 2014, the court should have regard to the past billing practices of the receivers (and the level of remuneration fixed by the court). Therefore, I will begin with a longitudinal comparison of the present bill against the previous ones along several indices:

  86. [66] Several general points stand out for comment:

  87. (a) This was the first time that a bill had been presented in respect of a full year’s worth of work, the previous bills having been put up for either three or six months’ worth of work.

  88. (b) The size of the team had decreased steadily from a high of nearly 40 (in the first year of work) to the present size of 14. Throughout this period, there had also been a concomitant decrease in the amount of time spent on the matter. A total of 8321 hours was spent by the R&M in the first six months of their engagement (the first two bills) but this decreased significantly to 3402 hours (for the second half of 2012). This trend continued in 2013, where 5035 hours of work was recorded for one full year’s worth of work (ie, an average of about 2518 hours for half a year).

  89. (c) The bills of costs were reduced by 35–45% on each occasion by the court.

  90. Was work performed by persons of appropriate seniority?

  91. [68] However, the use of a monthly average threatens to obscure an important detail: the reduction in time spent. The R&M spent, on average, 567 hours per month in the third period of assessment but a much lower average figure of 442 hours in the present period of assessment. Taking this into account, it is curious that the average monthly fees have not gone down. The reason, I think, can be found in the overall increase in the seniority of the persons involved in the matter. The following table, which sets out the proportion of time spent by each grade of employee in respect of each period of assessment, is illustrative:

  92. Should some of the work have been performed by administrative staff?

  93. [71] Without delving into too much detail, my overall impression was that there was some degree of over-servicing. One particular area of concern related to matters which ought to have been performed by administrative or secretarial staff, and not by professionals commanding substantial hourly rates. For example, 207.5 hours were devoted to “indexing and sending ATS documents in the office to store” and on “maintaining records for the R&Ms”. Other examples include the 12.5 hours of a senior associate’s time expended on the “review and renewal (and termination) of insurance policies” and the 19.5 hours spent on the finalisation of sale in respect of a company vehicle.

  94. The R&M’s involvement in the Suits

  95. (a) Suit 1015 is a claim for, inter alia, misrepresentation and conspiracy brought by Airtrust against sixteen parties. A total of 1089.5 hours was spent on Suit 1015 to deal with a number of interlocutory applications which arose in connection with the suit. These included applications for service out of jurisdiction and requests for further and better particulars. A large amount of time was spent on preparatory matters in advance of the trial of Suit 1015 (eg, e-discovery matters and keyword searches).

  96. (b) Suit 523 is an action brought against Airtrust by two of its shareholders in which the repayment of several purported loans were sought. A total of 664.5 hours was spent, inter alia, on the review of the pleadings and trial documents, preparation for the trial, and on post-judgment follow-up work.

  97. Was there duplication of work?

  98. [74] The respondents raised a number of concerns over the unnecessary duplication of work in relation to the Suits, given that WongPartnership LLP (“WongP”) had conduct of the Suits. I agreed with those concerns. Many of the tasks listed appeared to be matters within the exclusive domain of their lawyers’ expertise. They included: review of the pleadings (211 hours), strategy in respect of overseas defendant service, review of further and better particulars (160.5 hours), preparation of possible cross-examination questions, review of transcripts during the trial, and discussions with witnesses (93 hours collectively). It did not appear to me that the R&M, with respect, could or would have been able to offer any meaningful contribution to these matters. As explained at [59] above, if there are several sets of professionals engaged for the same task or scope of work, the onus lies on the R&M to justify that the work they performed was distinct and separate from that performed by the other professionals.

  99. [75] It seemed that the R&M had anticipated this criticism. In his supporting affidavit, Mr Loh had deposed that even though the bulk of the work in relation to the Suits was done by WongP, the R&M still had to review the documents (which were voluminous) in order to give them proper instructions. He explained that, given the R&M’s familiarity with the source documents, it was necessary for them to work “in tandem” with WongP in the prosecution of the Suits since they were ultimately responsible for the conduct of the Suits. When more specific questions were raised in relation to particular items in the spreadsheets, the R&M followed up with somewhat banal responses which included “it is not uncommon for a litigant to work closely with its lawyer in complex litigation” and “the Receivers and Managers were ultimately responsible for the conduct of the suit and therefore had to ensure that the suit was properly conducted.”

  100. [76] I did not find these responses particularly helpful. The problem, it seemed to me, was that there was no clear demarcation of the relative roles and responsibilities between the lawyers and the R&M. This is quite unlike the situation in Dovechem. In that case, the suit was already proceeding to trial when it was held in abeyance due to the entry of the company into liquidation. When the liquidators took conduct of the matter, they discharged the previous counsel and instructed new ones, who had to work closely with the liquidators to amend the statement of claim in short time before the trial. The urgency of the matter (due to the impending hearing) and the fact that the liquidators were far more familiar with the matter necessitated their intimate involvement in the legal proceedings. On our facts, WongP had been acting for Airtrust for at least two years so it cannot be said that either of these conditions obtained.

  101. [77] At the end of the day, the company still has to pay both sets of professionals their respective sets of fees. In my judgment, the court could not classify the significant devotion of the R&M’s resources to litigation as “proper” when the evidence was that lawyers had been instructed and were capable of managing the cases.

  102. Was the work efficiently performed?

  103. [78] One point which received much attention during the hearings was the staggering amount of time spent by the R&M on e-discovery. In total, nearly 1000 hours were devoted to this task, of which 860 hours were devoted to the performance and review of keyword searches while the remainder was spent in relation to discussions pertaining to the e-discovery protocol to be applied. I stated at the hearing that I was not convinced that it ought properly to be the responsibility of the R&M to perform these tasks and I remain of that view today. In the main, matters relating to discovery should be performed by lawyers, and not their accountants. Furthermore, even if it were accepted that this task ought to be undertaken or assisted by the R&M, it seemed to me that this was work which must be capable of being performed by administrative staff (perhaps with supervision), instead of being performed by the insolvency professionals themselves.

  104. Hourly charge for administrative staff

  105. Comparisons with the company as a going concern

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