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Legal Update

Value for Money - the Guiding Principle in Assessing Liquidators' Remuneration on Administration of Trust Assets

29 January 2013
Mayer Brown JSM Legal Update

Did you know that the court's guiding principle on assessing remuneration for liquidators in respect of their administration of trust assets held by the company is similar to the principle applicable to liquidation work, that is, on a "value for money" basis rather than as an indemnity against cost?

It was established in Re Berkeley Applegate Ltd (No.2) [1989] 1 Ch 32 that where a person seeks to enforce a claim to an equitable interest in property (i.e., a trust asset), the court may order, as a condition for giving effect to that equitable interest, that an allowance be made for skill and labour expended and costs incurred in connection with the administration of the property.

In Re CA Pacific Finance Limited & Another (HCCW 36 and 37/1998), the liquidators applied to the court for remuneration for their work done in administering trust assets belonging to clients of the wound-up companies. The Court of First Instance was asked to determine the appropriate level of remuneration for the liquidators and a written decision was issued on 28 August 2012.

The Honourable Madam Justice Yuen, Justice of Appeal, sitting as an additional judge of the Court of First Instance, decided that similar principles apply to claims for remuneration in respect of liquidation work and administration of trust assets. This is because both liquidators and administrators of trust assets are fiduciaries.

The court also decided that as fiduciaries, the liquidators "must be able to justify that it was prudent from the point of view of the [beneficiaries of the trust assets] to expend cost on the task in hand". Therefore, the guiding spirit in assessing liquidators' remuneration in both liquidation and administration of trust assets is "value for money". It was further pointed out by her Ladyship that the assessment exercise should not only be an audit of the liquidators' charges, but also a question of whether the returns to the beneficiaries of the trust assets are worth the entirety of the liquidators' effort.

Having said that, value of the trust assets will not be the sole factor considered by the court in assessing liquidators' reasonable remuneration. The court expressly recognises that liquidators may have to assume certain exceptional responsibilities in the immediate aftermath of the collapse of a company, which require liquidators to mobilise a large work force at short notice. The complexity of issues pertaining to the trust assets will also be a relevant factor considered by the court.

The CA Pacific decision illustrates that the court will likely consider the following factors (among other factors of relevance in particular cases) in determining the reasonable remuneration for liquidators in administering trust assets:

  • value and nature of the assets;
  • time spent;
  • exceptional responsibility assumed;
  • complexity; and
  • effectiveness of performance.

For inquiries related to this Legal Update, please contact Richard TollanEdmund Ma or your usual contacts with our firm.


  • Richard M. Tollan
    T +852 2843 4551
  • Edmund M. S. Ma
    T +852 2843 2458

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