Re Global Crossing Ltd and Others

• Jurisdiction: Bermuda
• Judgment Date: 27 June 2003
• Docket Number: Civil Appeal 2003 No. 4
• Date: 27 June 2003
• Court: Court of Appeal (Bermuda)

In The Court of Appeal for Bermuda

Nazareth, JA

Civil Appeal 2003 No. 4

BETWEEN:

In the Matter of Global Crossing LTD.

Mr. J. Woloniecki and Ms M Anderson for the Appellants

Mr. J Cooper for the Official Committee of Unsecured Creditors

Mr. P Smith for the Senior Secured Lenders

The following cases were referred to in the judgment:

Re AV Sorge & Co LtdUNK [1986] BCLC 490

Re Berkeley Applegate (Investment Consultants) Ltd; Harris v ConwayUNK [1988] 3 All ER 71

Whether joint provisional liquidators are entitled to costs incurred in restructuring — Statutory priority

JUDGMENT of Nazareth, JA

The single question in this appeal is whether the joint provisional liquidators concerned are entitled to their costs incurred, not in winding-up, but in an associated restructuring exercise. It has arisen in the following way.

Global Crossing Ltd. is the ultimate holding company of a group of approximately 200 companies that operated a world-wide international telecommunications business. Subsidiary companies within the group are incorporated in over 23 different jurisdictions. The group got into severe financial difficulties. Reorganization was thought to be necessary for survival. Fifty-five of the companies in the group began preparation for filing for relief under Chapter 11 of the U.S. Bankruptcy Court. These included Global Crossing Ltd. and 11 of its Bermudian subsidiary companies (‘the Bermudian Debtors’). On 28^th January, 2002, the Chief Justice made an order appointing two persons in England and one in Bermuda as Joint Provisional Liquidators (‘JPLs’). The order recited that the Petitioner had filed a petition under Chapter 11 of Title 11 of the U.S. Court (‘The Bankruptcy Court’) in the U.S. Bankruptcy Court for the Southern District of New York, and it empowered the JPLs to enter into protocol or other agreements for the co-ordination of the Bermuda proceedings, the Chapter 11 and any other like proceedings for the restructuring and/or reorganization of the Petitioner and other companies within the Global Crossing Group. The order provided for the payment of certain pre-petition expenses, but no mention was made of pre-appointment costs, charges and expenses of the JPLs.

KPMG, from whom the JPLs had come, had been contacted by the Bermudian Debtors in mid-December 2001 who requested KPMG to consider acting as JPLs in Bermuda. The restructuring process was being planned in the United States. Between mid-December 2001 and 28^th January 2002, KPMG took the view that they were preparing for the provisional liquidation of the Bermudian Debtors rather than providing advice to them, and that the fees and expenses of carrying out this work would be recoverable in costs in the intended provisional liquidation. KPMG took the precaution of obtaining the confirmation from Global Crossing that if the proposed applications for the appointment of the Provisional Liquidators did not go ahead, then Global Crossing would reimburse KPMG for fees and expenses incurred. It is said that the preparation for...