Those within the insolvency industry will know how important it is to keep up to date with legal developments regarding office-holder remuneration. The first half of this year has provided two useful cases both focusing on approval of administrators' costs.
The first, Poxon and another v Wejo Ltd (in administration) [2025] EWHC 135 (Ch)) (Wejo), was decided in January and provides useful insight into the level of scrutiny the court will use when considering fee proposals. The second, Frost & Anor v The Good Box Co Labs Ltd & Ors [2024] EWHC 422 (Ch) (the Good Box Co) was decided in March and focused on whether a former office holder can retain standing to apply for an increase in previously approved fees.
This article explores the facts of both cases as well as identifying key take aways and considering the impact on insolvency practitioners who may find themselves before a judge seeking an order relating to their costs in the future.
Wejo
Wejo concerned the joint administrators' application to the court to determine their pre-appointment fees (totalling just over £360,000) and fix the administrators basis for remuneration under r.18.16(2)(b) of the Insolvency (England and Wales) Rules 2016 (the "IR 2016").
The application was contested by the secured creditor, which argued that before deciding on whether the joint administrators' costs could be approved on a time cost basis, the court had to be satisfied that their fees were reasonable, reflected the value of the services rendered (not merely just time spent) and that the costs claimed were proportionate with the nature and extent of the work conducted.
The court agreed with the secured creditor's arguments that the timesheet documents "simply do not allow a link to be made between the time spent by individuals and the narratives provided". The timesheets in relation to legal work undertaken in some instances failed to provide any detail of work undertaken, with some narratives seeming to have been removed. The secured creditor argued the effect of that lack of information meant that they were "being asked to assess £235,151 of solicitor costs with, essentially, no information".
On the basis that there was insufficient information to enable the judge to fix the basis for remuneration or approve the pre-appointment fees, the hearing was adjourned pending the provision of further information from the joint administrators.
The Good Box Co
This case relates to an application by the joint administrators of Good Box Co Labs (a contactless donation system) for an increase in their remuneration
After their appointment in December 2022, the creditors fixed the joint administrators' remuneration on a time cost basis and approved £235,000 plus VAT of fees on account. On 16 January 2023, the court sanctioned a restructuring plan for the company, bringing the administration to an end and terminating the appointment of the joint administrators. On 18 August 2023, the former joint administrators applied under r.18.24 and r.18.28 of the IR 2016 for an increase in their remuneration, after this increase had been rejected by the plan administrators. The question for the court was whether the joint administrators had standing to make that application.
Although the court found that the joint administrators had legal standing to make the application, their application was flawed on other grounds. The joint administrators had sought to secure an additional £209,000 that had fallen outside of the £235,000 that had been pre-approved by creditors. Rule 18.24 provides a mechanism through which a joint administrators could (1) increase the rate of remuneration that had been fixed to a time cost basis; or (2) change a set amount of remuneration that had been pre-approved; or (3) change the basis of the remuneration itself. However, the court found that the rule provided no route through which the joint administrators could claim additional remuneration in excess of that already approved on a time cost basis, where that additional remuneration was not based on time costs. The judge concluded that:
"To put the same point another way, as they do not, in fact, consider that the rate or amount of remuneration fixed by the resolution is insufficient or that the basis so fixed is inappropriate, they do not have standing, under rule 18.24 of the IR2016, to make a rule 18.28 application.".
Key Takeaways for Office Holders:
- While remuneration applications are best avoided if one does become necessary it is essential to ensure that time recording systems and narratives enable the court to satisfactory scrutinise time costs incurred.
2. Early creditor engagement, especially from key stakeholders like secured creditors or future office holders such as plan administrators, when seeking an increase in costs is key. Approval by consent is much more time and cost effective than having to make an application to court which might not ultimately succeed (or require a second bite of the cherry which was the case in both Good Box and Wejo).
3. The courts will not fix or increase remuneration without being entirely satisfied that those costs can be justified and that the office holders have a right to do so under the relevant insolvency rules. Detailed evidence and properly drafted proceedings are both necessary in order to persuade the court to make an order in the office-holders favour.
Despite the recent case law highlighting the issues that can arise, sometimes an application to court regarding remuneration is necessary during the course of an insolvency process. Our Insolvency team have significant experience dealing with applications of this nature and can help guide clients though that often difficult process.
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