There is an amendment by the Minister. Amendment No. 101 appears to be consequential and I suggest we take both together.
SECTION 318.
I move amendment No. 100 :
To delete subsections (1) and (2) and to substitute the following :
" (1) The Court may, on an application made to it by the liquidator of a company or by any creditor or member of the company, by order fix the amount to be paid by way of remuneration to any person who, under the powers contained in any instrument, has been appointed as receiver of the property of the company notwithstanding that the remuneration of such receiver has been fixed by or under that instrument.
(2) Subject to subsection (3), the power of the court under sub-section (1) shall, where no previous order has been made in relation thereto under that subsection—
(a) extend to fixing the remuneration for any period before the making of the order or the application therefor ; and
(b) be exercisable notwithstanding that the receiver has died or ceased to act before the making of the order or the application therefor; and
(c) where the receiver has been paid or has retained for his remuneration for any period before the making of the order any amount in excess of that fixed by the court for that period, extend to requiring him or his personal representatives to account for the excess or such part thereof as may be specified in the order."
This amendment is simply a drafting re-arrangement involving little change in the substance of the provisions of the section. A brief on this amendment has been circulated.
Amendment agreed to.
I move amendment No. 101 :
In subsection (3), page 163, line 25, to delete " (d) " and substitute " (c) ".
This is a drafting change consequential on the previous amendment.
Amendment agreed to.
Question proposed: " That Section 318, as amended, stand part of the Bill."
This section deals with the question of the remuneration of the receiver. In line with all these sections, it is a new section. I wonder if the Minister can give us any information about how it is proposed to fix the remuneration of the receiver ? So far as I am aware, there is no machinery for fixing remuneration. In fact, I think in practice it has proved difficult to fix remuneration in any of these cases in the past. There is, of course, a schedule of fees for solicitors but in the case of receivers, there is no machinery by which remuneration can be fixed. I understand that in the English Act there is a somewhat similar provision, but in Britain I think perhaps an officer of the court is specially designated for this sort of work. Here, there would hardly be a sufficient number of cases occurring to designate a special officer.
A taxing officer.
I wonder if the Minister would have any information as to what arrangements will be made or has consideration been given to the matter ?
I cannot say there is a fixed method available to the court by which it can assess what remuneration ought to be given to a receiver. The reason for the section, it might be well to point out, is that there have been difficulties in the past about the rate at which non-court receivers were remunerated. In some cases, the payment involved a lot, if not most, of the assets the receiver was handling. A receiver appointed by the court always has, of course, his remuneration fixed by the court. I should say that the court would be able to have regard generally to the amount of work involved and to whatever scales operate in the profession. There should be sufficient advice available to the court to fix equitable remuneration, bearing in mind its functions in other matters of this kind. I cannot say there is a fixed method by which the court could assess remuneration but I think it is not beyond the capacity of the court to be able to fix a sum that would be regarded as reasonable in all the circumstances.
Is there any time limit beyond which this section will not extend backwards ?
You mean to the extent that it may be retrospective ?
Subsection (5) makes it retrospective. How far back can this operate ?
I should say that under subsection (5) it would apply to any receivership then in existence at the date of the coming into operation of the Act. This section was recommended by our Committee on Company Law.
In a matter of this sort, of course, if the court wanted it, it could refer the matter to the Taxing Master or could consult——
Yes. It is not unusual for the court to consult its officers in matters like that.
I may be missing something in this but what portion of this section confines the power to receiverships in existence ?
I think subsection (5) applies it universally to receiverships in existence at the time of the passing of the Act and receiverships to arise after the passing of the Act.
Could it apply to a receivership which has been completed and where everything has been fixed up?
A person who has been acting as a receiver but who has completed his assignment would not be affected. In that case he is a receiver no longer and therefore the Act could not apply to him.
I am strongly opposed to this section. The Minister has repeated the allegation in the explanatory memorandum that there have been cases of payment of excessive remuneration to receivers. I should like the Minister to indicate to us whether or not he believes that receivers in the past have been excessively remunerated.
In my current capacity as Minister I have had that experience myself.
Of a case of excessive remuneration ?
Yes.
On what basis would it be judged ?
A person appointed as receiver had applied the fixed rates of his profession to every operation he carried out on behalf of the receivership, no matter how insignificant, over a period of many months, to the point that there was nothing left. I have had a personal experience of that kind of case.
I accept that from the Minister but I must say I can hardly think of anyone who would have a less practical approach or who would understand the complexities of day to day administration of a receivership than would a High Court judge. I have had some little experience of this matter. I can say without hesitation that in many cases of receivership, the receivership fee for the disposal of assets is less than is charged by auctioneers in the city of Dublin today for the sale of property on a percentage basis. The courts have no machinery for assessing what is adequate remuneration in these cases. There is, of course, in the matter of legal costs, the Taxing Master. As Deputy Cosgrave pointed out, there is in Britain a sort of taxing officer of the courts who is more or less full time engaged on this type of work but it is extremely unlikely that you could have such an officer in this country by reason of the rarity of receivers. Most receivers in this country act for one or other of the Irish banks, in nine cases out of ten, and these banks usually see to it that a receiver will not charge excessive remuneration or such as would work hardship on unsecured creditors. The mere fact that there have been some very few cases of excessive remuneration does not justify the very stringent provisions laid down in this section. I am particularly apprehensive of the right of application to the court which is being given in this section to any creditor or to any member of the company. There is no doubt when a receiver is appointed the directors of the company usually labour under a sense of grievance and I would be apprehensive of vexatious applications to the court under these provisions.
From my limited experience I can say I have seen receivers' fees climb very high and even assuming, as Deputy Byrne points out, that receivers are such honourable men, I still think some reference to the court is reasonable. It is a matter of securing expedition in dealing with these matters. Some receivers know when they are on a good thing and string it out as long as they possibly can.
In regard to what Deputy Byrne said, I do not think it is quite true to say that the officers of the court have no real experience of this because a receiver's work is very much akin to that of the liquidator and the examiners in the courts and, indeed, the taxing masters have considerable experience of that kind of work and would have a fairly accurate idea of what was involved on the part of the receiver.
I was going to make that point. To take another point made by Deputy Byrne, that the banks usually can fix reasonable charges in the event of their putting in a receiver, the banks, as a general rule, are secured creditors; there are, however, very many unsecured creditors who would have no hand, act or part in the appointment of a receiver or in the assessing of his remuneration. It is people like that for whom we should have particular concern. The general approach of all of us to legislation of this kind is that we should try to do the greatest good for the greatest number. Having regard to what you, Mr. Chairman, have said on the matter of the experience of the court in other financial matters and in dealing with its own receivers, there would be plenty of information available to the court in regard to fixing adequate and fair remuneration. I repeat that this provision was specifically recommended by the committee and none of the professional bodies have communicated any objection whatever to me about the existence of this section.
I have one point about the machinery of this section. It is not by any means uncommon for a receiver to be appointed and thereafter, after some delay, the company goes into liquidation. This section involves an application to the court by the liquidator or the creditors to fix the remuneration of a receiver who may have been appointed some months or even a longer period before that. Would it be desirable, I wonder, to give power to the receiver also to apply to the court? Subsection (4) of the section as it is drafted provides :
The court may from time to time on an application made by the liquidator or by any creditor or member of the company or by the receiver, vary or amend an order made under subsection (1).
We are permitting the receiver to apply to have the order varied but we are not permitting him to apply to have the remuneration fixed. If circumstances arise where a receiver is appointed and subsequently a liquidator is appointed, and the liquidator communicates to the receiver that he is concerned about the receiver's fees, there the receiver should be able to say that he would like the question of his fees referred to the court. The liquidator might for some considerable time delay his application for one reason or another, and the receiver should in such circumstances be in a position to apply to the court himself to have the remuneration fixed. I do not think it would do any harm to permit him, if he so wished, to exercise the right under this section so to apply to the court.
I do not think I would like to go so far as to give the receiver the right initially to test the amount of the fees. If he feels they are not adequate at that stage he can say : " No, thank you. I do not want the job." If an order is made under subsection (1) and subsequently it transpires that the job is somewhat bigger than anticipated, that perhaps there are assets to be brought to account which were not envisaged initially and which would involve a lot of extra work, then under subsection (4) the receiver could go back to the court and say: " There is a lot of additional work in chasing these extra assets. I think the fixing of the fee should be reconsidered." I believe that is far enough to go.
I had not in mind that the receiver would apply at the beginning of his receivership in order to ascertain, as it were, in advance what the court would be prepared to give him but I had in mind cases where the receiver had, in fact, undertaken the duties and carried them out and subsequently, as frequently happens, the company goes into liquidation. There is then a period when the receiver becomes aware that the question of fees may come up in the matter of application to the court. Where there might be considerable delay in the liquidator's applying to the court and where the receiver should, in order to ascertain what his fees are, be given a similar right to apply to the court and ask the court to settle the fees. I have in mind that where a dispute arises about his fees the receiver might have the right to apply to the court.
I do not understand what the Deputy means by fees being questioned because he is entitled to them unless the court alters the amount.
I have this in mind. When the liquidator is appointed the receiver hands over the assets to him and he informs him that his fees are, say, 200 guineas. He may then be informed by the liquidator : " I cannot allow this until I have investigated the matter further." Months may pass. There may be objections by the creditors and he may be told : " I am looking further into the matter of your fees." In such circumstances it should be fair to allow the receiver to say : " My fees are being questioned and let the court fix them."
Does it operate like that in practice ? Does it not happen that the receiver's fees are taken before the assets are handed over to the liquidator ?
What I am concerned about all the time is that there are delays in these matters for one reason or another and it may be fair to allow the receiver to apply to the court.
Fees are not normally fixed in advance.
That being so, I see no reason why there should not be an initial contract so that the receiver will then be in the equitable position that he can accept or refuse a definite contract. If the receiver is appointed on the basis of a definite contract, then irrespective of what the assets of the company are he is entitled to certain fees on the basis of that contract. On the other hand, if it is done on a spec basis and he is appointed on a fee basis, he has to take the risk of the speculation as much as the company and the full provisions of a section like this should operate.
It is quite impracticable to suggest that a receiver should get a fee fixed in advance or be in a position to know what work would be involved in receiving. It is not until he takes possession of the company and finds out what are the problems confronting him that he is aware of what time and staff he will have to provide.
If one takes up that attitude, one is driven back to the provisions of Section 318.
I do not think the receiver would be in any worse position than a solicitor who presents his bill of costs and knows that it may be questioned and may be taxed. In effect, he is submitting it to the court for review. That is in fact what is being done here with a receiver.
He is in a much worse position by reason of the fact that no scale of remuneration is laid down. If we could devise a scale of remuneration and empower the courts to negotiate, say, with the Institute of Chartered Accountants and establish a fair and equitable scale, I would be 100 per cent in favour of the provision.
The court is empowered to do it here. Surely the judge, exercising his function under Section 318, would have a right to consider and take expert advise in the matter ?
And that expert advice would be available to him.
If you forego the initial contract, you have to come back to the provisions of the section.
It seems to me to be impossible to fixed an initial contract, because he is going to operate in uncharted seas. He does not know how long he will be or what the business is. If you cannot do it at the beginning, surely the best thing to do is to give him the right to go to the court and say : " I have worked on this job for so many days and I calculate I should be paid so and so." It is only at the end you can do justice. If you fix a scale of remuneration based on a day to day charge at the outset, you might find the receiver has only changed his job.
I know one case of a receiver subsequently appointed liquidator. The assets realised £18,000. He took something in the region of £10,000 for work not exceeding two years. It appeared high to all of us, but there was nothing we could do about it.
Question put and agreed to.