Hellas Telecommunications (Luxembourg) II SCA, Joint Liquidators of v Slaughter and May (a firm)

Under r 7.34 of the Insolvency Rules 1986, the responsible insolvency practitioner may agree costs payable from an insolvent estate instead of requiring detailed assessment. That agreement ordinarily binds the estate and cannot be reopened merely because a later office-holder disagrees. The practitioner responsible for an administration is the administrator in office, not a later liquidator. Rule 7.34(4) concerns costs orders made in proceedings before the court seized of those proceedings; it is not a general power to assess administration costs retrospectively. The court retains an exceptional inherent jurisdiction to intervene in insolvency administration, but the statutory allocation of commercial judgment to the office-holder is highly material. An appeal was allowed only because one invoice had been approved after the administration ended and therefore required assessment.

The joint liquidators of Hellas II appealed against the Registrar’s refusal to order detailed assessment of approximately £2.5 million in fees paid to Slaughter and May, who had acted for the company’s administrators. The Registrar held that agreement of the fees by the administrators prevented assessment under r 7.34 and declined to exercise the court’s inherent jurisdiction to order assessment.

The appeal concerned the construction of r 7.34, the effect of the administrators’ agreement, the scope of the court’s inherent jurisdiction, and whether former administrators could approve an invoice after the administration had ended.

1. Appeal partly allowed. The order was varied in respect of the invoice dated 22 December 2011. The appeal was otherwise dismissed.
2. Rule 7.34(1) introduced a substantial change from the former regime. Costs payable as an expense of an insolvency are to be decided by detailed assessment unless agreed by the responsible insolvency practitioner. The agreement is intended to have binding effect. A subsequent liquidator cannot retake or undo the administrators’ decision to agree costs incurred as expenses of the administration.
3. Rule 7.34(4) is concerned with a costs order made in proceedings before the court seized of those proceedings. It does not confer a general power on the insolvency court to order retrospective assessment of costs incurred in other proceedings. If the court making the litigation costs order considers assessment necessary, it may order it even though the insolvency practitioner has agreed the costs.
4. The administrators were no longer the responsible insolvency practitioners when the 22 December invoice was approved. The present tense in r 13.9 requires the relevant person to hold office when the decision is taken. The invoice had therefore not been validly agreed. Since the liquidators did not agree it, assessment was required under r 7.34(1).
5. The court retains an inherent jurisdiction to control a court-supervised insolvency, but it should exercise that jurisdiction cautiously where it appears to conflict with the statutory scheme. The statutory policy gives the responsible practitioner the commercial judgment whether to agree or assess costs. That decision should not readily be overridden at the instance of a later liquidator. Inappropriate conduct by the practitioner may instead support a claim against that practitioner. The Registrar’s refusal to order assessment was a discretionary decision and was not plainly wrong.

• High Court (Chancery Division): The appeal from the Registrar was allowed only in relation to the 22 December 2011 invoice and dismissed otherwise.
• Registrar: Detailed assessment was refused, although the Registrar held that an inherent jurisdiction to order assessment existed in principle: [2014] BPIR 179.