27 April 2024

Former Administrators Have Standing To Apply For Additional Remuneration But Application Dismissed (Frost And Another v The Good Box Co Labs Limited And Others)

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Dispute Resolution analysis: An application by the former administrators of a company for an increase in their remuneration has been dismissed, despite the Court concluding...
UK Corporate/Commercial Law
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Dispute Resolution analysis: An application by the former administrators of a company for an increase in their remuneration has been dismissed, despite the Court concluding that they had standing to bring the application itself.

Frost and another v The Good Box Co Labs Limited and others [2024] EWHC 422 (Ch)

What are the practical implications of this case?

This judgment considers two distinct matters in relation to claims by office-holders for additional remuneration under Part 18 of the Insolvency (England and Wales) Rules 2016. It confirms first that office-holders who have vacated office, including here where the administration ended with the sanctioning of a remuneration plan, retain standing to make an application for additional remuneration, notwithstanding the natural reading of rule 18.28. Second, the judgment offers some useful analysis of the various orders which can be sought by way of such an application. It concludes that an application for payment of remuneration claimed in excess of an agreed payment on account does not fall within the scope of rules 18.24 or 18.28 of the Rules, albeit the Court noted that in such circumstances, alternative applications (or perhaps even a claim) might well be possible.

What was the background?

On 28 June 2022, The Good Box Co Labs Limited entered administration and Jeremy Frost and Stephen Wadsted were appointed administrators. Although a matter of dispute, for the purpose of this application it was accepted that on 30 December 2022 the administrators' remuneration was fixed by a decision procedure in which a resolution was passed that their fees would be charged by reference to the time properly spent by them, charge out at their hourly rates. Fees on account were approved at £235,000 plus VAT. On 16 January 2023, HHJ Davis-White KC sanctioned a restructuring plan in respect of the company under section 901F(1) of the Companies Act 2006. On 18 August 2023, the joint administrators made an application pursuant to rules 18.24 and 18.28 of the Insolvency (England and Wales) Rules 2016 for an increase in the amount of their remuneration. Specifically, they sought from he plan administrators the sum of £209,000 incurred over and above the £235,000 plus VAT account payment provided for in the resolution. During a case management hearing in that application, a preliminary issue was identified, namely whether the joint administrators had standing to issue such an application in light of the fact that the sanctioning of the restructuring plan had brought the administration to an end and terminated their appointments as administrators.

What did the court decide?

The application was dismissed. In relation to the preliminary issue for determination the Court accepted that the joint administrators had standing to issue the application under rule 18.28. Although on a natural construction of the rule it would appear to confer standing only on current office-holders, the provision was to be construed in the context of the chapter as a whole. That chapter includes provisions which are plainly intended to apply to former office-holders and the chapter as a whole is designed to make provision for the remuneration of office-holders. However, that issue ultimately came to be unnecessary for the Court to decide because on other grounds it was appropriate to dismiss the application. Specifically, what the joint administrators sought to do was not caught within any of the relevant rules. Rules 18.24 and 18.28 provide a mechanism by which office-holders can (i) obtain an increase in the percentage of the value of the relevant assets to which it had been initially determined they were entitled and (ii) to obtain an increase in the set amount which it has been initially determined they will be paid. They also provide a mechanism for changing the basis of the remuneration or to obtain an increase in the charge out rates. Here, the application sought not of those things.

Case details

  • Court: High Court of Justice, Business and Property Courts in Leeds, Insolvency and Companies List (ChD)
  • Judge: HHJ Klein, sitting as a High Court Judge
  • Date of judgment: 3 March 2024

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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