Hosking and Bonney (liquidators of Hellas Telecommunications) v Slaughter and May

The liquidators of a company appealed against the refusal of the Registrar to order that the fees of the solicitors employed by the administrators previously in office (and agreed and paid by the administrators) should be assessed by the court.

The Company entered administration on 26 November 2009. The Administrators had employed Slaughter and May to advise them in relation to a number of claims which might have been open to the Company. The administrators agreed and paid Slaughter and May legal fees of about £2.5m. By the end of 2011 the administrators concluded that there were no claims that could be realistically pursued and therefore applied for the administration to be brought to an end. The administration was brought to a close and the company wound up.

The liquidators later sought to challenge the fees paid to Slaughter and May under rule 7.34 of the Insolvency Rules 1986 (through assessment) or the Solicitors Act 1974. Later they dropped the challenge under the Solicitors Act.

The Registrar held that assessment was not possible under IR 7.34 as the administrators had agreed the relevant fees. He held that there was an inherent jurisdiction to assess the fees but it was not appropriate to exercise it.

It was held that this positon was correct for fees agreed prior to the administration ending: they have been agreed by the responsible insolvency practitioner. The 1986 Act represented a “sea change” from the position prior, which had had mandatory taxation of costs in bankruptcy and compulsory liquidation. Now, the power to decide whether costs should be agreed or assessed was given to the responsible insolvency practitioner; a change which would have little effect if it was not binding.

Slaughter and May had, however, levied an invoice in December 2012 which was after the administration had ended. The administrators were unable to validly agree to it and as the liquidators did not, it would be assessed under IR 7.34(1).

The court also held that in certain circumstances, the inherent jurisdiction to review would be invoked: circumstances such as approval being procured by fraud.

The case highlights the limits of challenge available to subsequent insolvency practitioners in respect of legal fees incurred by previous insolvency practitioners.