Unreported (No 10512 of 2011)

The registrar provided a useful summary of the court’s present approach to applications to fix officeholders’ remuneration

The applicants had been appointed as joint administrators of a company under proposals for an administration to last six months. The respondent creditors’ committee was keen for the applicants to complete the administration as swiftly as possible in order to allow the appointment of liquidators. They did not anticipate that the joint administrators would carry out nearly as much work as the joint administrators contended that they had carried out. The creditors’ committee approved the payment of pre-administration costs in the sum of £32,807 and fees following the joint administrators’ appointment of £180,173. They refused to agree to pay any further fees.

Following the company’s liquidation, the former joint administrators applied to court to fix further remuneration in the sum of £395,265 pursuant to r.2.106 of the Insolvency Rules 1986.

Registrar Jones found that:

  1. Whilst the views of a creditors’ committee should be taken into account during an administration and will frequently be taken as reflecting the views of the creditors as a whole, it was not for the creditors’ committee to determine how the administration should be conducted; that is a decision for the officeholder. The joint administrators were entitled to receive remuneration for work carried out even though the creditors’ committee always made it clear that the company was to be liquidated as soon as possible, and that any investigatory work should be carried out by liquidators.
  2. Where an administrator’s work falls outside agreed administration proposals, and, in particular, a time period for administration contemplated by the proposals, the court should not normally override, or authorise an administrator to do anything which is contrary to, the proposals – or fix remuneration in respect of such work. In this regard, however, “it is also relevant to consider and, if appropriate, take account of the jurisdiction that exists to vary the proposals. Plainly it will be relevant if work otherwise falling outside the proposals could have been authorised” and the court should “normally not question the commercial judgments of an administrator”.
  3. Neither the joint administrators’ litigation against the company’s main creditor nor their investigations into the company’s affairs pre-administration fell outside the proposals.
  4. The court did not have jurisdiction to fix remuneration in respect of work done by the joint administrators after termination of their appointment notwithstanding that the liquidators requested their services. Remuneration for such services was a matter between the liquidators and the joint administrators.

After careful analysis the court fixed the joint administrators’ further remuneration at £233,147 as a fair, reasonable and proportionate sum.

The judgment includes a useful summary of the principles which the court will apply to applications to fix officeholders’ remuneration, particularly in light of Practice Direction (Ch D: Insolvency Proceedings) [2012] Bus LR 643.