The role of the court reporter in Scottish liquidation cases (The Provisional/Interim Liquidator of Equal Exchange Trading Limited)

Philip Knight of Womble Bond Dickinson (UK) LLP looks at the recent Scottish case of The Provisional/Interim Liquidator of Equal Exchange Trading Limited which gives guidance in respect of the role of the court reporter when fixing the remuneration of a liquidator.

Lord Bannatyne has issued his opinion in respect of the note of The Provisional/Interim Liquidator of Equal Exchange Trading Limited [2018] CSOH 35 which gives guidance in respect of the role of the court reporter when fixing the remuneration of a liquidator. The full opinion can be viewed here:

What are the practical implications of this case?

This case will be unwelcome news for insolvency practitioners in Scotland and would appear to give a wider remit to the court reporter than previously envisaged. As demonstrated in this case, even where the liquidator is ultimately awarded their remuneration, it opens up the prospect of a personal award of expenses against the liquidator despite there being no breach of any duty.

What was the background?

By way of background, where there is no liquidation committee, the task of auditing accounts and fixing the amount of the outlays and remuneration payable to the liquidator falls to the court. The court usually appoints a court reporter to carry out this task.

In this matter, the liquidator presented her account for remuneration and as is usual practice, the court appointed a court reporter to audit the liquidators accounts. The court reporter raised a number of concerns in respect of the actings of the liquidator and recommended that the court decline to fix remuneration until the liquidator had addressed said concerns in order to ensure that the body of creditors was not affected by the alleged failures of the liquidator. The liquidator lodged a written response to the various concerns raised by the court reporter.

The most recent judicial guidance in respect of the role of a court reporter was issued by Sheriff Jamieson in S & M Livestock Limited (In Liquidation) 2017 SC DUMF 78. The sheriff stated that the court reporter’s duty was to merely “audit” the accounts by checking that the time charges were justified by file entries and records. The sheriff stated that neither the reporter nor the court in this kind of process should seek to second guess the actings of the liquidator.

What did the court decide?

However, Lord Bannatyne disagreed with this approach and was of the view that the court reporter should report concerns to the court otherwise the court could not fulfil its duties in relation to the fixing of a liquidator's remuneration. Lord Bannatyne stressed that while a court reporter may disagree with the course of action followed by a liquidator that does not of itself make the acting unreasonable and therefore something which should be raised with the court as a concern.

Such concerns might include:

  • potential compliance issues: has the liquidator complied with the various duties incumbent upon him in the conduct of the litigation?
  • potential fraud or bad faith in the conduct of the liquidation
  • potential issues regarding the way in which the liquidation has been progressed. Has the liquidation been progressed with reasonable efficiency?
  • where there have been actings by the liquidator which potentially are so unreasonable and absurd that no reasonable insolvency practitioner would have acted in this way

After hearing counsel and the liquidator personally, Lord Bannatyne was satisfied with the liquidator’s responses to the concerns of the court reporter and as such awarded the remuneration albeit found the liquidator personally liable for the expenses rather than form an expense of the liquidation.

Case details

Court: Outer House, Court of Session

Judge: Lord Bannatyne

Date of judgment: 11 April 2018

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