Key Message An Administrator’s remuneration agreed in relation to the Administrator realising a fixed charge asset is not fixed under Part 18 of the Insolvency (England and Wales) Rules 2016 (‘IR16’), and therefore cannot be challenged under it. Practical application An Administrator is bound by an agreement made by his predecessor, and is unable to challenge it without setting aside that agreement or alleging some breach of duty. Although other means of advancing a challenge do exist, they were not raised in this case. Background Mr Ridgley was appointed as the administrator of Orthios Eco Parks (Anglesey) Limited (OEPAL) and it’s wholly owned subsidiary, Orthios Power (Anglesey) Limited (OPAL) on 29 March 2022 (Administrator). Mr Miller and Mr Katz were appointed joint administrators (Joint Administrators) of an associated company, Orthios Anglesey (Technologies) Limited (OAT), an unsecured creditor of OEPAL. The Administrator was appointed by Mr Colin who was the security trustee for various secured parties (Security Trustee). The Administrator and the Security Trustee entered into an agreement (Agreement) in connection with the sale of land subject to a fixed charge (Land) which included provision for the payment of the costs and expenses incurred by the Administrator in realising the Land (Remuneration). Mr Colin was subsequently removed as security trustee on 12 October 2022 and replaced by Mr Pagden. The main issue in the case is a dispute over Remuneration charged by the Administrator. Messrs Miller, Katz and Pagden (together the Applicants) issued applications under r18.34 Insolvency (England and Wales) Rules 2016 (IR16) to claiming the Remuneration was excessive (Applications). The court had to consider, among other things, whether it had the jurisdiction to rule on the matter under r18.34 IR16, and if so, whether the Remuneration was indeed excessive. Decision The Court considered there to be four main points to be reviewed: 1. Were the applications capable of being brought under r18.34 IR16? 2. If so, were the Applications issued within the prescribed time limit? 3. Were the Applicants able to mount a challenge to the agreed fees and costs? 4. If the above were all true, then were the fees charged ‘excessive’ or fixed on an inappropriate basis? 1. Jurisdiction and the scope of r18.34 IR16 The Administrator’s costs and expenses that were agreed with the Security Trustee as a cost of selling the Land, which was property subject to a fixed charge, was neither fixed nor determined under Part 18 IR16 and cannot be challenged under r18.34 IR16. Part 18 of IR16 provides a detailed code for the determination of the remuneration payable to an Administrator because such remuneration is not payable from fixed charge property. It is determined without reference to wholly secured creditors holding fixed charges; fixed charge (wholly) secured creditors, therefore have no standing to complain under r18.34 IR16. This is not to say that there are no means to challenge an Administrator’s agreed remuneration in respect of realising fixed charge assets, the court has powers to consider allegedly excessive costs and remuneration under paras 74 (unfair harm) and 75 (misfeasance) Sch B1 Insolvency Act 1986 (IA86). Furthermore, an administrator, as an officer of the court, is subject to an obligation to act honourably and fairly (Ex Part James (1874) LR 9 Ch App 609). However, these challenges raise different issues of substance from those under para 18.34 IR16 2. Were the Applications issued within the prescribed time limit? Yes. Rule 18.34(3) of IR16 states a challenge to remuneration “. The Administrator’s progress report issued in September 2022 (Report) stated that, within the reporting period, remuneration had become ‘payable’. However, as it was not stated that the remuneration and expenses in respect of the Land had been “charged”, time did not therefore begin to run until receipt of the final report filed on 5 April 2023.Eight weeks from that date was 31 May 2023; the Applications were issued on 19 May 2023, so within the eight-week challenge period. 3. Were the Applicants able to mount a challenge to the agreed fees and costs? Security Trustee There was no dispute that the Agreement had been made, as without the Agreement, the Administrator had no right (without a court order) to receive the Remuneration from the proceeds of the sale of the Land. However, a successor in title, is unable to challenge the effect of an agreement made by his predecessor without setting it aside or alleging some breach. In this case Mr Pagden is bound by the Agreement. Mr Miller and Mr Katz as Joint Administrators of OAT Mr Miller and Mr Katz are the Joint Administrators of OAT, which held over 80% of OEPAL’s unsecured debt. However the Joint Administrators themselves are not an unsecured creditor of OEPAL and therefore do not have standing to apply under r18.34 UR16 or to otherwise challenge theRemuneration. 4. If the court has jurisdiction to make an order, was the Remuneration ‘excessive’ or fixed on an inappropriate basis This was not considered as the Applications were dismissed Judgement
Pagden v Ridgley [2024] EWHC 3047 (Ch) (28 November 2024)
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