Liquidators whose bills come under court scrutiny should substantiate the rates charged. They should also show how the bills were made up or at least explain the policy behind the rates.
A reason for this is that there is no formula in law to calculate their fees.
A High Court judge made this point when she raised liquidator fees from $667,678 to $750,000 on appeal, in the case of the winding down of holding company Dovechem in 2011.
"The issues before me involve the accuracy and reasonableness of the bill presented and raise questions as to the basis on which liquidators should charge for their services," Justice Judith Prakash said in judgment grounds released earlier this month.
The bills were for about 18 months of work done from September 2011 by liquidators Cosimo Borelli, Hamish Christie and Jason Kardachi on Dovechem Holdings.
Dovechem is a holding company of various businesses, mainly in the chemical and paint industries, built up by Mr Ng Joo Soon, his brothers and nephews.
In 2008,disputes began between Mr Ng and the majority shareholders - his brothers Joo Tian and Ju Aik, as well as his nephews Anta and Andrew. Mr Ng obtained a court order in 2011 to wind up Dovechem and the liquidators carried out their duties until 2012.
However, the majority shareholders were unhappy with their bills which the liquidators took to court to be assessed . Lawyers said it was rare for liquidators' fees to be the subject of court scrutiny.
The liquidators explained that their work included resolving disputes between Ng and the majority shareholders as well as trying to realise the company's assets .
However, the majority shareholders, through their lawyers Denis Tan and Thomas Ng, claimed that the liquidators had done "a great deal of unnecessary work" and the bill was "exhorbitant".
The liquidators had wanted $1.2 million for their work.
A High Court Assistant Registrar (AR), after hearings last year, cut the sum sought to $667,678 and the liquidators appealed .
Their lawyers , then Senior Counsel Kannan Ramesh, Marina Chin and Keith Tnee, argued that the AR erred in principle.
But the majority shareholders cross-appealed for an even lower sum of $350,000.
Justice Prakash held that, based on the practice in England, liquidators should not be allowed to include time charges in their bills for the work done by administrative and support staff.
This should be treated as overheads and "factored into the general remuneration charged by a liquidator", she said.
The liquidators had said there were three layers of professional fee earners comprising accountants and associates, managers and liquidators.
However "the difficulty here is that there is no recognised body of insolvency practitioners that could prescribe who, other than a professional accountant and approved liquidator, could qualify to be recognised as a professional insolvency practitioner and fee earner", said Justice Prakash.
"The liquidators criticise the AR's reduction in their bill as being arbitrary but do not appear to recognise that their rates are, in the absence of any evidence as to how they were derived, equally arbitrary."
The court did not accept the liquidators' charge-out rates at face value and held $750,000 to be "fair and reasonable" sum for the work.
"I am cognisant that the liquidators, and perhaps others, may consider this figure to be arbitrary but, as the law does not provide or support mathematical formula for the calculation of a liquidator's fee, any award made would be open to the same criticism."