In the Supreme Court of Belize, A s1

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In the Supreme Court of Belize, A s1

IN THE SUPREME COURT OF BELIZE, A.D. 2005

CLAIM NO: 471 OF 2005

BETWEEN CEDRIC FLOWERS CLAIMANT

AND

RBTT TRUST LIMITED DEFENDANT

Mr. A. Courtenay SC, with Mrs. R. Magnus-Usher, and Miss. V. Flowers, for the claimant. Mr. C. Hamel-Smith SC, and Mr. P. Zuniga SC, for the defendant.

AWICH J.

4.10.2008. J U D G M E N T

1. Notes: Receivership – remuneration of a receiver appointed, of company assets charged by debenture; whether terms in the debenture regarding remuneration of the receiver were adopted by the instrument appointing the receiver or whether no manner of determining remuneration was specified, and the remuneration would be determined solely by the rule that remuneration must be fair and reasonable. Considerations for a fair and reasonable remuneration. The meaning of the clause, “such receiver shall be entitled to remuneration appropriate to the work and responsibilities involved

1 upon the basis of charging from time to time adopted by such receiver in accordance with the current practice of his firm”. The function and duties of a receiver. A trustee under the trust deed and debenture deed; appointment of the receiver made by the trustee for the benefit of the “bond-holder”. Bonds acknowledging the loans and binding the debtor company to perform the loan obligations; whether sale of the bonds during the receivership was sale of the charged assets for the purposes of determining the remuneration of the receiver.

2 This case arose out of failure at commencement, of a much publicised

intended business of a company known as International

Communications Limited (Intelco), incorporated in Belize. The

company had raised loan capital of US$25,000,000.00 from or

through RBTT Merchant Bank Limited, a sister company to RBTT

Trust Limited, the defendant. The two were parts of a conglomerate

holding company. For the loan, Intelco issued fixed rate bonds to

RBTT Merchant Bank Limited, the original bond-holder, by a deed of

trust dated 24.3.2003. In the deed of trust, RBTT Trust Limited was

appointed trustee for the benefit of the “bond-holder” for the time

being. The same loan was then secured by a debenture that charged

the assets of the company with the loan, in accordance with the terms

of a deed of debenture of the same date. In the deed of debenture,

RBTT Trust Limited as the trustee of the bonds for the benefit of the

“bond-holder” was made the debenture-holder. I have used, and will

2 use the term “bond-holder” to refer to RBTT Trust Bank Limited,

because counsel for the parties in conducting their cases referred to

RBTT Merchant Bank Limited by that term; and it is convenient.

Strictly speaking, RBTT Merchant Bank must be a beneficiary of the

bonds held in trust by another entity, RBTT Trust Limited, the trustee.

3. The assets of the company were stated as, goodwill, rights of the

company, land, communications equipment, plants and similar items.

The debenture charged both fixed charge and floating charge to them.

4. Intelco was not a successful business. On 1.11.2004, the claimant,

Mr. Cedric Flowers, was appointed the receiver of the charged assets

of the company. His main mandate was to sell the charged assets so

that the proceeds would be applied to pay the loan principal sum,

interests and costs. The appointment was made by the defendant,

RBTT Trust Limited, acting as a trustee for the purposes of the bonds

and debenture.

5. The evidence was that in the course of the receivership RBTT

Merchant Bank Limited, “sold the bonds”, to Belize

3 Telecommunications Limited for US$26,266,049.38, representing the

principal sum and interests owed on the loan obtained by Intelco, and

which the assets were charged with. When this claim was

commenced, Belize Telecommunications Limited was said to be the

“new bond- holder”, RBTT Trust limited remained the trustee, and

also the debenture-holder.

6. The core facts upon which, Mr. Flowers, based his claim were the

following. On 1.11.2004, he was appointed under the terms of the

deed of debenture, a receiver of the charged assets of Intelco. He was

a professional certified public accountant practising in Belize City,

Belize. He had experience of several years of practice, and at least of

three company receivership works. The appointment was made by the

defendant, RBTT Trust Limited in its capacity as the trustee for the

“bond-holder”, at the time, RBTT Merchant Bank Limited. By a

letter dated 1.11.2004, RBTT Trust Limited undertook to pay

remuneration and costs to Mr. Flowers. He commenced his work

straightaway. On 14.1.2005, RBTT Trust Limited terminated his

appointment. It informed Mr. Flowers that the bonds securing the

loan had been sold by “the bond-holder”, and “the new bond-holder”

4 desired to terminate the receivership. The defendant did not disclose

to Mr. Flowers the identity of the “new bond-holder”. Mr. Flowers

demanded payment of his remuneration which he charged at 3.5% of

the price at which the bonds were transferred to the new beneficiary of

the bonds, and as the result Intelco was released from its loan

obligations. He also demanded reimbursement for costs incidental to

the receivership. The total sum he demanded and claimed was

US$931,036.73, with interest. RBTT Trust Limited has not made any

payment, and has refused to pay. Mr. Flowers says, the refusal was a

breach of their agreement by which he was appointed a receiver, and

was wrongful. He filed this claim in court.

7. The reason for appointing a receiver of the assets of Intelco were the

following. In the year 2004, Intelco became moribund; the reasons

were not important for this case; suffice it to state that Intelco had

several creditors; and it had come to the attention of the defendant that

some creditors were taking action about default by Intelco to pay

debts. It was also stated in evidence that one of the debts was

guaranteed by the Government of Belize, and the Government was

paying about 90% of US$350,000.00 (i.e. US$315,000.00 equivalent

5 to about BZ $630,000.00) quarterly, to International Bank of Miami,

in the USA. The payment by the Government was for services to be

provided by Intelco, and which payment Intelco assigned to the

International Bank of Miami. It was stated further, that the payment

by the Government, “was a very sensitive issue for the Government”,

and that, “politically it could have major implications for the

Government”. It was in those circumstances that RBTT Trust Limited

appointed Mr. Flowers a receiver of the charged assets of Intelco in

accordance with the terms of the debenture deed of 24.3.2003.

8. The defendant admitted that in its capacity as trustee for the bonds, it

appointed the claimant a receiver, and that it gave to the claimant

receiver, an undertaking to pay his remuneration and costs, in the

event payment was not obtained from Intelco, that is, from the sale of

the charged assets. However, the defendant contended that: (1) the

claimant failed to carry out his duty as a receiver or substantially; (2)

the claimant was to recover, “his payment from monies coming into

his hands as a receiver”, he did not sell any assets and did not received

any money into his hands; (3) the claimant was not entitled to rely on

the terms for remuneration stated in the deed of debenture, because he

6 was not a party to the debenture; (4) the claimant was appointed,

“without agreed fee structure, but on terms of reasonableness”, the

demand by the claimant was for an unreasonable sum; and (5) the

defendant was willing to pay reasonable remuneration which would

be based on a hourly rate of US$150.00 per hour, and to pay

reimbursement for costs of the receivership properly incurred.

9. Determination

Right at the commencement of the trial, during crossexamination of

Mr. Flowers, it became apparent that most of the contentions of the

defendant were inconsistent with one another. For examples: (1) it

was inconsistent to contend that the claimant failed to perform his

duties, and also contend that the defendant was willing to pay

reasonable remuneration based on a hourly rate of US$150 per hour;

and (2) to contend that there was no agreement that the manner of

determining the remuneration of the receiver would be the manner

provided for in the debenture, and also contend that the manner

adopted by the claimant in his practice (as required in the debenture)

was a hourly rate and not a percentage rate, and the defendant was

willing to pay remuneration based on hourly rate. The practical way

7 to deal with the defences was to regard some of them as alternative to

others. Because of that, the issues shifted from one to another. The

difficulty had presented itself when counsel presented the cases for

their clients. It led to unnecessarily long trial and excessively

voluminous record of proceedings, some 509 pages.

10. But there were also some common grounds between the parties.

After detailed and long crossexamination of Mr. Flowers for 3 days;

and of Mr. Stephen Bayne, the managing director, and the only

witness for the defendant, for one and one-half days, most of the

material facts became common facts. That was largely due to Mr.

Bayne eventually admitting most of the facts put to him by learned

counsel Mr. A. Courtenay SC, for the claimant. Mr. Flowers had

earlier been grilled in crossexamination about those facts, by learned

counsel Mr. C. H. Smith SC, for the defendant, but Mr. Flowers

maintained his basic account of facts. It was apparent that Mr.

Flowers gave much more detailed instructions to his attorneys, than

RBTT Trust Limited gave to its attorneys.

8 11. Mr. Bayne was in court when Mr. Flowers testified and was

crossexamined, so Mr. Bayne had the advantage of considering the

effect of the detailed crossexamination of Mr. Flowers. One of the

consequences was that Mr. Bayne commenced his testimony by

requesting court to grant permission for him to amend his written

witness statement by including admissions that: (1) “ the receiver did

take some steps in the course of the receivership”; and (2) “the

receiver incurred certain costs of minimal amounts”. The claimant

did not oppose the request of Mr. Bayne. Permission was granted and

the two new admissions or partial admissions were added as evidence

in the testimony of Mr. Bayne.

12. Nevertheless, it appeared from the crossexamination by Mr. Smith,

that despite the above admissions by the defendant, it remained the

contention of the defendant that Mr. Flowers did not perform his

duties substantially. Mr. Flowers of course, claimed that he set about

his duty professionally and exercised due professional skill and

responsibility, and accomplished what was expected of a receiver up

until his appointment was terminated on 14.1.2005, by the defendant.

9 His answers to questions during crossexamination, outlined in much

detail what his duties were and what actions he took.

13. So, what was the function, and what were the duties and

responsibilities of a receiver of a charged asset of a company; and

which Mr. Flowers claimed he properly discharged?

14. The Companies Act Cap. 250, Laws of Belize, unlike the enactments

of some countries, does not define the term receiver, or set out the

function, of a receiver, so we have to take the common law definition,

and function of a receiver of asset, and apply it to company

receivership in Belize, with necessary adaptation. The oldest common

law general definition of a receiver which is regarded as accurate was

stated in the case of, Re Manchester and Milford Railway Co. Ex

parte Cambrian Railway Co. (1880) 14 Ch D 645, by Lord Jessel M.

R. as follows:

“A receiver is a term which was well known in the Court

of Chancery, as meaning a person, who received rents or

other income, paying ascertained outgoings, but also

10 who does not,… manage the property in the sense of

buying and selling or anything of the kind…”.

15. So, the function of a receiver of a charged asset of a company is to

receive the income from the charged asset, and the proceeds of its

sale, pay the costs and liabilities connected with the charged asset, and

realise the security interest of the secured creditor, that is, pay off the

debt charged to the asset.

16. The duties and responsibilities of a receiver arise necessarily from his

function to sell the charged asset, pay incidental costs and realise the

security interest of the creditor who appointed him or on whose behalf

he has been appointed. In the first place, a receiver must exercise his

power for the proper purpose and not abuse it– see Downsview

Nominees Ltd v First City Corp. Ltd [1993] AC 295. He is the agent

of the debtor company, not of the secured creditor, – see Gaskell v

Gosling [1896] AC 575. However, if the secured creditor gives

instruction to the receiver, the creditor may be liable for lack of duty

of care if it occurs – see, Standard chartered Bank v Walker [1982] 2

ALL ER 938. The receiver must act honestly and bona fide in

11 realising the asset so as to obtain the best price – see, Parker-

Tweedale v Dunbar Bank PLC. and Others [1991] Ch 12.CA. He

must also act honestly and bona fide so as not to harm the interest of

the debtor company and the general creditors, except to the extent that

it is necessary for realising the security interest – see Tse Kwong Lam

v Wang Chit Sen and Others [1983] 3 ALL ER 54. He must avoid

conflict of interests. He must protect and preserve the asset while

proceeding to sell it. That may require him to secure and insure the

asset. So in this claim, if the claimant has proved that he carried out

the work assigned and observed his duties as a receiver, the defendant

must disprove that by proving its averment that the claimant did not

carry out its work substantially, or that he failed to live upto the above

legal duties when he set about carrying out his work.

17. In this claim, the function, and therewith, the powers, duties and

responsibilities of this receiver were the usual common law ones, but

enlarged by those given to him by the contract of appointment, which

adopted by reference, the terms set out in the deed of debenture of

24.3.2003. The enlargements were specified in paragraph 7.01 (a) to

(j) of the deed. They were extremely wide and went far beyond those

12 of a receiver, and included the function and powers of, “a receiver and

manager”. The powers, duties and responsibilities included the

powers, duties and responsibilities to take possession of the assets,

develop, improve, repair, sell by public auction or private contract,

grant licence over or otherwise dispose or deal with the assets,

exercise the power of a landlord, appoint personnel to guard or protect

the assets, insure the assets, and sign documents, and do all acts as the

receiver may consider incidental or conducive to any of the above

matters or powers, or to the realisation of the trustee’s security.`

18. Did Mr. Flowers perform his duties?

Mr. Flowers related the actions he took. He said that he hesitated to

accept the appointment because the circumstances of Intelco were,

“politically very sensitive”, and he was apprehensive about the

consequence of accepting the job, to his practice. He started by

stating that he cleared his desk so that he would concentrate on the

receivership. He took steps to identify the charged assets, he made

inquiries in Belize about some assets and got answers about their

whereabouts. He mentioned that the auditor had a list of assets, but it

was not an accurate list. He engaged Mr. Kimano Barrow, a

13 telecommunications engineer, to locate, identify and inspect some of

the assets; and he paid to Mr. Barrow BZ$1,995.00 for the services.

He also inquired and obtained information that the Public Utilities

Commission and some land-owners had large money claims against

Intelco which could cause difficulties in removing some assets. He

further, said that some of the assets were in the possession of Belize

Telecommunications Limited, and that he and Mr. Barrow met some

resistance from Belize Telecommunications Limited to their desire to

access and inspect the assets.

19. The following, in particular, were matters that Mr. Flowers raised and

required response from the defendant about. He requested

information regarding the identities of the assets and relevant

documents, he pointed out the practical need to take possession of,

and transport, store, secure and insure the assets that were in the

possession of Belize Telecommunication Limited when the

arrangement by which it was given possession of the assets by Intelco

would be discontinued. He raised the possible legal issues regarding

the discontinuance of the arrangement, and regarding land on which

telecommunications towers were erected. He also informed the

14 defendant about an agreement by which payment owed by the

Government to Intelco was assigned to the International Bank of

Miami, and requested instruction about discontinuing it and the likely

consequences. He requested title documents for assets and copies of

contracts regarding them. Further, he asked the defendant to provide

money for costs incidental to the actions he would take. He

enumerated many more actions he had taken and those that he sought

information and instruction from the defendant about. I need not

recount all the actions he took. Some details were in exhibits C(CF)

17 and C(CF)19.

20. Mr. Flowers communicated with the defendant by letters and

telephone discussions including a tele-conference. In particular, he

dealt with Mr. Theron Quashie, the officer responsible for this

receivership, and Mrs. K. Singh, the manager in the Asset

Management Department of the defendant. He also had discussion

with Mr. Bayne himself.

21. The defendant did not provide the information, the relevant

documents or the documents of title requested, and did not respond to

15 the questions raised and the instructions requested, although it wrote a

letter exhibit C(CF) 18, appreciating the contents of the letters of Mr.

Flowers, and sought more information about transactions and

agreements it might have not been aware of, that might affect the

interest of Intelco and the secured creditor.

22. More directly to his effort to sell the assets, Mr. Flowers identified at

least four interested and potential buyers, namely, Belize

Telecommunications Limited, Carlisle Group, Speednet and Ericsson

(Latin America); he had discussion with them. He informed the

defendant about the expressions of interests, and specifically

requested that the defendant provide title documents for the purpose

of further negotiations with the potential buyers.

23. All the letters that Mr. Flowers wrote about the actions he had taken

and proposed to take, and seeking documents, information and

instructions were exhibited. They were not denied by the defendant.

The telephone discussions including the tele-conference, were also not

denied. The more Mr. Flowers was crossexamined about actions he

took, the more he extended the list of actions and gave details.

16 24. The defendant had no evidence to the contrary. Mr. Bayne had to

concede that they should have responded to the inquiries and the other

matters raised by Mr. Flowers. When pressed in crossexamination,

his exact words were: “we could have been more reasonable and

professional…, there could have been more frankness with Mr.

Flowers”. He explained that they did not respond or were not frank

because: “this was a short period of time in which a lot of different

circumstances occurred or were changing on the ground, we were

unsure virtually from moment to moment… and it was therefore

difficult for us to be able to respond as quickly and as

comprehensively… There were many issues surrounding this Intelco

matter, some political in nature, had political implications or fall out,

some had to do with contentions between the parties…” From the

above evidence the reasonable inference was that the defendant was

engaged in or was kept informed about the negotiation that led to the

sale of the bonds for which it was a trustee.

25. Undoubtedly Mr. Flowers proved that he carried out his duties

diligently and with due professional skill, as far as was possible, given

17 that the defendant was either uncooperative, unwilling or negligent in responding to the requests for information, title documents, instructions and money for costs incidental. He also proved that he was still carrying out his duties and desirous to proceed when on

13.1.2005, he called the defendant to press for its response and instructions, and the defendant simply informed him that his appointment had been terminated. The reason that the defendant gave for the termination was that the bonds had been sold and, “the new, bond-holder”, desired the receivership ended. Mr. Flowers, the receiver, was not involved in the sale of the bonds although he was the one who informed the defendant about the interest of the buyer, Belize

Telecommunications Limited, to buy the assets of Intelco. The defendant had not discussed the intended termination of the appointment with him. The termination was confirmed in the letter of the defendant dated 14.1.2005, to Mr. Flowers. I have no hesitation in concluding that the defendant either deliberately participated in, or aided the sale of the bonds without the knowledge of Mr. Flowers so as to deny him his remuneration. After all, the defendant was the holder of the legal title to the bonds.

18 26. It is my decision that by terminating the receivership, the defendant

breached the agreement by which the claimant was appointed a

receiver. The defendant first pleaded denial of breach, but amended

that by simply deleting the denial and pleading that it was, “willing to

pay reasonable charges in connection with the functions as a

receiver”. As the consequence of the breach, the claimant is entitled,

against the defendant, to damages for his losses, which are not remote,

arising from the breach.

27. Damages (remuneration and reimbursement).

The next logical question for determination is the sum to be awarded

to Mr. Flowers as damages. It is my view, that the appropriate

remuneration in the circumstances of this case, and costs properly

incurred, are to be regarded as the measure for damages.

28. The contentions that the receiver was to obtain his remuneration and

costs only from monies coming into his hands from sale of the assets,

seemed to have been abandoned, and rightly so. It is true that the

receivership did not bring in any monies and therefore was not

beneficial to Intelco and the secured creditors. That, however, was not

19 because of any fault of the receiver. It is the law that court will not

deprive a receiver of his remuneration solely on the ground that the

receivership has not proved to be beneficial to the secured creditor or

the debtor company See – Mellor v Mellor and Others [1992] 4 All

ER 10. In the case, the receivership pursuant to an order of court

obtained by the claimant- father was discontinued by consent of the

father and the defendant-son who controlled the companies, upon

certain undertakings about the running of the companies having been

given by the son. It was held that the receiver was entitled to his

remuneration although the receivership had not been beneficial.

29. Another reason was that the defendant in the present case, through its

witness, admitted the entire content of the letter of indemnity and

undertaking dated 1.11.2004, exhibit C(CF)10, issued by it to Mr.

Flowers. The content was an unconditional promise by the defendant

to pay the remuneration of the receiver and costs properly incurred,

except of course, for the fundamental condition that the receiver

would carry out his duties. The letter stated as follows:

20 “Dear Mr. Flowers:

Re: International Telecommunications Limited.

In consideration for your agreement to act as

receiver of the Charged Assets of the above-

mentioned company, pursuant to an appointment

to be made by us as Debenture Holder and

Trustee, we hereby undertake to pay or reimburse

you (as the case may require) so much of the

expenses properly incurred by you in the

performance of your duties as Receiver and so

much of your remuneration for so acting as you

are unable to recover from the monies coming

into your hands as Receiver”.

30. It is usual that a receiver of charged assets of a financially troubled

business, or a liquidator in company winding up will look to the

person making the appointment or the applicant for the court winding

up order, for remuneration in the event, payment has not been

obtained out of the sale of the assets or the company. The instrument

21 of appointment, or a letter of undertaking, or the court order, will

usually provide for that.

31. In any case, on the evidence for both parties, it was never an issue that

no monies came into the hands of Mr. Flowers; and it seemed to be

conceded eventually in the course of the long trial, that in the

circumstances of this case, Mr. Flowers was entitled to claim his

remuneration from RBTT Trust Limited. However, the manner of

charging the remuneration remained an issue. Whereas it was claimed

by Mr. Flowers that under the terms of his appointment he was

entitled to charge his remuneration on the basis of a percentage of the

value of the assets, “assigned”, it was contended by RBTT Trust

Limited that the manner of charging remuneration was not agreed and

so remuneration was to be charged, “on the basis of reasonableness”,

which in this case was said to be, charging for the hours spent on the

receivership work, the hourly basis. The rate suggested was

US$150.00 per hour.

32. The submission for the claim of Mr. Flowers was, that the instrument

of appointment in this receivership adopted the terms of appointment

22 and powers of the receiver, specified in the deed of debenture of

24.3.2003, in particular, the terms in paragraph 7.04 regarding the

remuneration and costs of the receiver. I accept that submission. The

meaning urged in the submission is the only one I can read from the

last part of the instrument of appointment.

33. The details of paragraph 7.04 regarding remuneration, said to have

been adopted as a term of the appointment of Mr. Flowers are the

following:

“7.04. The Company hereby covenants with the Trustee

on demand to pay all costs charges and expenses

incurred by the Trustee or by any such receiver or which

it or he shall properly incur in or about the enforcement

preservation or attempted preservation of this security or

of the charged assets or any of them on a full indemnity

basis with interest at the default rate from the date of

payment by the Trustee or such receiver. Any such

receiver shall be entitled to remuneration appropriate to

the work and responsibilities involved upon the basis of

23 charging from time to time adopted by such receiver in

accordance with the current practice of his firm”.

34. The defendant does not contest the meaning of paragraph 7.04. Its

submission against applying paragraph 7.04 of the deed, in

determining the remuneration of Mr. Flowers, was that the terms of

the deed of debenture, including those in paragraph 7.04 did not apply

to the appointment of Mr. Flowers, because he was not a party to the

deed. It was an ingenious submission by learned counsel.

Unfortunately for counsel, that effort was wiped out by an

unequivocal admission by the defendant’s witness, Mr. Bayne, on at

least two occasions in crossexamination, that RBTT Trust Limited and

Mr. Flowers adopted the terms of the deed of debenture, and

paragraph 7.04 in particular, by reference, into the instrument of

appointment. The first relevant passage in the crossexamination is as

follows:

“Q. Now Mr. Bayne, can you take a look at the

instrument of appointment signed by –

24 Q. You are familiar with this document?

A. Yes, I am.

Q. According to this document, Mr. Flowers was

appointed pursuant to the terms and subject to the

powers and provisions of the debenture, is that

correct?

A. Yes, that is correct.

Q. You know what that means?

A. I think it means just what it says: the details of that

appointment will be contained in the debenture

document itself by reference.

Q. It’s incorporated by reference?

A. Yes.

Q. Incorporated as you understand clause 7.04 as

well?

A. That is correct.

Q. And did Mr. Flowers accept this appointment on

the terms and subject to the powers and provisions

contained in the debenture?

25 A. Yes, he did.

Q. Mr. Bayne you will agree with me based on what

you just said that as between you, RBTT Trust, by

this instrument of appointment, incorporating

provisions of that debenture, and Mr. Flower’s

accepting that appointment there was an agreement

between RBTT Trust and Mr. Flowers, for him to

act as a receiver upon the terms and conditions

contained in the debenture, you agree with that?

A. Yes, I agree.

Q. And based on what you’ve said Mr. Bayne, you

will agree also that one of the terms of that

agreement between yourself and Mr. Flowers was

that he was to be remunerated on the basis of the

terms, the practice in his firm you agree?

A. Yes, I agree”.

35. I will take advantage of the flow of crossexamination from there, and

continue the quotation to show that the witness admitted

unequivocally, the liability of the defendant to pay the remuneration

26 of Mr. Flowers. It confirmed my earlier decision based on performance of obligation by Mr. Flowers. The crossexamination continued as follows:

Q. When you appointed Mr. Flowers a receiver, who

did you understand was responsible for his fees,

his costs ?

A. My understanding was that in appointing the

receiver, we appointed him as agent for the

company who was responsible for his fees and

costs as outlined in the debenture documents.

Court. Can you repeat that – “We appointed him”, that

is…

A. Mr. Flowers.

Court. Appointing him as agent…?

A. Agent for the company INTELCO, which

company was responsible for his fees and

expenses, and we further, understood that we had a

responsibility…

27 Q. So you are saying that INTELCO was responsible

for paying Mr. Flowers his bill?

A. Ultimately yes.

Q. Can you tell His Lordship when you contacted

INTELCO to pay his bill; when did you do that?

A. …

A. The answer is I did not. We did not contact

INTELCO to pay Mr. Flowers’ fees and expenses.

Q. Why not?

A. …

A: At that time the company INTELCO was in

default, the ownership of the company was

unclear.

Q: Are you telling the court that no attempt has been

made to collect the fees and expenses related to

this receivership from INTELCO?

A: That is correct.

Q: Since you did not do that, who is responsible for

the receiver’s fees and expenses?

A. …

28 A. Given INTELCO’S condition… The person

responsible for settling of receiver’s fees would

have been the person appointing the receiver.

Q. And that is a mystery to us, tell us who that is.

A. RBTT Trust Limited.

Q. … based on this letter you would be responsible to

meet the expenses and fees of the receiver even if

no monies came into his hands?

A. I would agree.

Q: You agree, and I want to be clear there is no

condition in this undertaking that RBTT Trust

Limited would only be responsible if he (Mr.

Flowers) sold the charged assets and received

money, no such conditions.

A. Yes, there is no condition in this letter that RBTT

Trust Limited to meet the fees and expenses of the

receiver, if and only if he sold the charged assets

and received money”.

29 36. To bring his claim for the relief of damages within the terms in

paragraph 7.04, that is that: “any such receiver shall be entitled to

remuneration appropriate to the work and responsibilities involved

upon the basis of charging from time to time adopted by the receiver

in accordance with the current practice of his firm”, Mr. Flowers

presented evidence to prove that the practice adopted by him in his

firm was to charge for his remuneration, a percentage of the proceeds

of sale, or of the value of the assets sold or otherwise disposed of.

37. The items of evidence he provided were charges he made in three

previous receivership works. In each of them his final charge was

calculated as a percentage of the receipts from sale or other manners

of transfer of assets. The question was raised as to why in one of the

receiverships, and in this receivership, Mr. Flowers issued several

bills based on hourly charge. In this receivership, the bills were for

November, December 2004, and January 2005. I was satisfied with

the explanation that, usually receivership work lasts a long time, and

the usual practice is to charge interim bills based on hourly rate, and

the interim bills are eventually deducted from the final bill which is

calculated on a percentage basis.

30 38. In this receivership, Mr. Flowers demanded 3.5%. of US$26,

266,049.38, the price paid by Belize Telecommunications Limited to

RBTT Merchant Bank Limited to have the bonds transferred to Belize

Telecommunications Limited. By my calculation, the sum is

US$919,311.72, not US$931,036.73. claimed by Mr. Flowers. He

advised RBTT Trust Limited that the statutory law in Belize allowed

receivers to charge not more than 5%, unless parties had agreed; and

that he was, “flexible”, about the percentage he would charge. RBTT

Trust Limited did not reply. I concluded from the evidence that

RBTT Trust Limited chose not to engage in negotiation for the

receiver’s remuneration because, it was at that moment participating

in the sale of the bonds, or it had known of a parallel negotiation or

arrangement by which the bonds, and therefore the benefit of the

charge over the assets, would change hands without the knowledge of

the receiver, and RBTT Trust Limited desired that the assets no longer

be available to the receiver to sell. It would be an embarrassing

dishonesty for an ordinary person. I did not believe Mr. Bayne that

the defendant was not a party to the negotiations to sell the bonds

which it was a trustee of and held the legal titles to.

31 39. My decision is that Mr. Flowers was entitled, according to paragraph

7.04 of the deed of debenture, to charge by percentage of receipt of

income whether by sale, assignment or howsoever obtained, in this

receivership because that was the basis of charging from time to time

adopted by him in accordance with current practice in his firm.

40. There is, however, one other requirement in paragraph 7.04 about

determining remuneration of the receiver, that I have to take into

consideration, namely, whether in the circumstances of this case, the

remuneration based on a percentage charge of 3.5% of

US$26,266,049.38, that is, US$919,311.72, is remuneration

“appropriate to the work and responsibilities involved”, in the work

done by Mr. Flowers. That clause invites the court to consider

whether the sum determined on a percentage basis, fixed at 3.5% is a

reasonable sum, taking into account the nature and extent of the work

done, any risk in or arising from the work, the professional skill and

experience of the receiver, the time taken to do the work and others.

So the criteria of “reasonableness” urged by the defendant comes in.

41. The submission for the defendant about the reasonableness of the fees

32 was, of course, an alternative submission to the submission that the

parties did not agree on a manner to determine the remuneration of the

receiver. I restate it as follows. If the court decides that the term in

paragraph 7.04 applied, namely, that: “any such receiver shall be

entitled to remuneration appropriate to the work and responsibilities

involved, upon the basis of charging from time to time adopted by

such receiver in accordance with the current practice of his firm”,

then the case for Mr. Flowers and the submission by his counsel, did

not take into consideration that the remuneration must also be,

“appropriate to the work and responsibilities involved”. The work in

this receivership was very little, and so was the responsibility, counsel

for the defendant submitted. The work was only preliminary and was

done only in a short period of two and one half months, he continued.

Counsel then urged that in the circumstances, a reasonable fee would

be one based on the hours worked.

42. The submission is correct that a fee must be, reasonable. The full

legal expression is, “fair and reasonable”. That rule applies to fees of

many professionals, including fees of attorneys – see Property and

Reversionary Investment Corporation Ltd v Secretary of State for

33 the Environment [1975] 2 All ER 436, a case concerning

remuneration of an attorney for a conveyance work.

43. The factors that are taken into account in determining a fair and

reasonable remuneration are many. They relate to the work, the value

of the asset or work, and the professional. The work may be a

difficult one, or a tedious one, or a simple one, or may involve the risk

of losing other clients. The professional may be a very skilled and

experienced one, or an average one, or a beginner. Even reputation

counts. The case cited by Mr. Smith and Mr. Zuniga, Barbados

Sugar Industry Limited v Barbados National Bank and Others

(No1) 50 WIR 51, is to the point. In the case, the Court of appeal of

Barbados stated:

“Generally speaking courts have been reluctant to

award remuneration based solely upon the time

spent by the appointee in performing his duties.

They have preferred to award either a lump sum

or a commission upon the amount collected or

realised by the receiver”.

34 An equally good guidance was given in the Canadian case, Belyea

and Fowler v Federal Business Development Bank, 46 Canadian

Bankruptcy 244. Compare Re Eastmond (1995) 50 WIR 76 and

Maltby v D.J. Freeman ]1978] 2All ER 913

concerning attorneys fees.

44. The submission by Mr. Smith relied directly only on the time taken to

carry out the work, and presumably the hourly rate of US$150 took

into account the skill and experience of Mr. Flowers. The submission

did not take into account the general responsibility for the care and

conduct of the receivership, and the nature of the items of work

undertaken by Mr. Flowers. Even if the items of work done were at a

preliminary stage, the work has already disclosed complicated tasks

ahead. Several side arrangements and contracts were disclosed.

Efforts to trace assets have already disclosed difficulties. Mr. Flowers

also said that the task was politically sensitive and he had hesitated

because of what it might do to his practice. I think the several factors

mentioned by Mr. Flowers should be taken together with the short

time he worked, to arrive at a fair and reasonable remuneration. It is

my view, that charging on a percentage basis takes into account all the

35 factors I have mentioned, and the period (hours) over which the work

was carried out. The hourly basis does not. Instead it brought in an

assessment based on quantum meruit, which is totally inappropriate in

the circumstances of this case.

45. When Mr. Flowers proposed discussion of a percentage to be charged

he acted reasonably. Both parties would have considered a reasonable

percentage, taking into consideration the complexity or otherwise of

the work, the general responsibility for the receivership, the skill and

experience of Mr. Flowers, the comparatively short period over which

Mr. Flowers worked and the value of the assets in the receivership.

The defendant declined to discuss that. Mr. Flowers, thought that

3.5% was a fair and reasonable percentage rate in the circumstances.

In court in crossexamination, Mr. Bayne, witness for the defendant,

confirmed that the rate of 3.5% was not unreasonable for the type of

work. I cannot avoid comparing the fact that for merely arranging for

the loan to purchase the bonds, RBTT Merchant Bank charged 2%

and was paid US$525,328.98. The time taken to arrange the loan was

not disclosed in the evidence, but it was certainly shorter than the time

Mr. Flowers worked.

36 46. While I accept that the estimate of a rate of 3.5% is not unreasonable,

I however, consider it to be fair and reasonable to take into

consideration that Mr. Flowers fixed the rate at 3.5% when

contemplating proceeding with his work to conclusion. He must have

contemplated the work to last for more than the two and one-half

months during which he worked. The evidence has shown that Mr.

Flowers would have met many difficult tasks in the course of his work

ahead had he proceeded to the end. He has been relieved of the

trouble although wrongfully. It is my view that some discounting of

the 3.5% rate is desirable to achieve a fair and reasonable

remuneration, given that the work was not completed, and ended in a

shorter time than expected.

47. One cannot be absolutely accurate in making this type of estimation. I

think a more fair and reasonable rate in the circumstances is 3% of

US$26,266,049.38, the price at which the bonds were sold to Belize

Telecommunications Limited. The sum I awarded for the

remuneration of Mr. Flowers computed at 3% is US$787,981.48. No

award is made for office expenses. That is the law. Pursuant to s: 166

of the Supreme Court of Judicature Act, Cap. 91, I award interest at

37 3% per annum on the judgment sum, from 3.2.2006, when the claim

was filed, until today Friday 10th October 2008, the date of judgment.

Interest at 6% per annum, is of course, chargeable on the judgment

sum, of US$787,981.48, from today until payment in full, in

accordance with s: 167 of the Act.

48. Much was said about the fact that sale of the bonds was not sale of the

assets, so there were no proceeds of sale on which to charge a

percentage as remuneration. I do not see the merit in that argument.

The bonds were sold so that the secured debt about which a receiver

was appointed could be paid to the secured creditor, the beneficiary of

the bonds. As the result of the sale, the debt owed to the beneficiary

of the bonds was fully paid and the beneficiary ceased to have a

charge on the assets of Intelco; and the receivership ended. Intelco

was relieved of its debt. The sale of the bonds was a stratagem aimed

at denying remuneration to Mr. Flowers.

49. Judgment is entered for the claimant against the defendant for:

49.1 remuneration of US$787,981.48;

38 49.2 interest at 3% per annum on US$787,981.48 from

3.2.2006 to 10.10.2008;

49.3 interest at 6% from 10.10.2008, until payment in full;

49.4 costs incurred in the receivership, BZ$1,950.00.

50. I shall mention that it is the law that remuneration and costs of a

receiver is a charge on the charged assets to be sold.

51. An order as to costs of these proceedings is adjourned (delayed) at the

request of the parties, to allow them to file a draft consent order if,

agreed.

52. Permission is granted to parties to apply for an order as to costs.

53. Delivered this Friday the 10th, October 2008, At the Supreme Court of Belize Belize City

Sam Lungole Awich Judge Supreme Court

39

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