Hosking v Slaughter and May

Corporate insolvency – administration – IR r. 7.34 – legal fees and administration expenses – judicial assessment of fees

A firm of solicitors provided legal services to a company in administration. The firm and the administrators agreed the quantum of the fees. The company entered liquidation and applied for an order for the court to assess those costs under IR r. 7.34 (as in force when the application was issued) or the court’s inherent jurisdiction.

Registrar Jones had held that administrators could agree and pay the fees of solicitors and that, if they did so, the court had no power under IR r. 7.34 to order an assessment.

HHJ Cooke, sitting as a Deputy Judge of the High Court, dismissed an appeal against that decision, but accepted the liquidators’ new argument that the former administrators could not approve that portion of the fees they had approved after leaving office. He further held that if the court had any inherent jurisdiction, there were no grounds on which to interfere with the Registrar’s exercise of discretion.

The Court of Appeal held that the administrators could agree and pay the firm’s fees before and after the end of the administration. Administrators were not within IR r. 7.34 (contrary to what the Registrar had held) but could nevertheless agree fees for services incurred by them, although a creditors’ committee could require a detailed assessment under CPR Part 47 under IR r. 7.34(2). If subsequently appointed liquidators did not agree with the fees, their remedy was to bring misfeasance proceedings against the administrators. Creditors could challenge those fees under paragraph 74 of Schedule B1. Given the existence of the statutory regime, there was no inherent jurisdiction of which the liquidators could pray in aid.

Rule 7.34 has now been replaced by Rule 7.34A, which is drafted differently in important respects. Whilst this decision relates to a provision that is no longer in force, it is important because (a) textbooks have suggested that the reasoning of Registrar Jones and HHJ Cooke might be a guide to the construction of Rule 7.34A and (b) the Court of Appeal has rejected the suggestion that the Companies Court has an inherent jurisdiction to assess legal costs in these circumstances.