Nortel Networks France SAS, Re

When administrators seek approval of remuneration without meaningful scrutiny by creditors or other economically interested stakeholders, the court must scrutinise the claim independently. It may appoint an independent assessor where that is necessary and proportionate. Remuneration should be approved only after considering the assessor’s recommendations and any accepted reductions. Costs of the assessment exercise may be apportioned between the insolvency estate and the office-holders. In doing so, the court may take account of avoidable delay, inadequate engagement with creditors, uncertainty whether earlier engagement would have avoided the assessment, and costs already borne by the office-holders.

The joint administrators of Nortel Networks France SAS applied for approval of final remuneration for the administration and company voluntary arrangement. The application followed an earlier judgment, [2019] EWHC 2447 (Ch), in which the court appointed an independent assessor under section 70 of the Senior Courts Act 1981 and CPR 35.15 because no economically interested creditor or stakeholder had independently scrutinised the fees.

The assessor broadly supported the remuneration claim but recommended reductions and criticised the administrators’ failure to engage earlier with creditors. The court had to determine the remuneration to approve and how the assessment costs should be borne.

1. Remuneration. The court accepted the independent assessor’s overall recommendation that most of the remuneration was fair, reasonable and commensurate with the work undertaken. It approved remuneration of £1,642,598 for the relevant administration and CVA periods, including reductions of £34,781 and £1,315 for excessive charge-out rates. The administrators were not permitted to offset those reductions against an overrun in their budget.
2. Need for independent scrutiny. Where no substantial creditor or other economically interested stakeholder has scrutinised an office-holder’s remuneration, the court must undertake that scrutiny itself. Appointment of an assessor is an available procedural mechanism where appropriate, but the process should be conducted without disproportionate expense or avoidable delay.
3. Assessment costs. The court declined to charge all assessment costs to the company’s assets. Relevant considerations included the administrators’ failure to seek earlier creditor engagement, the possibility that earlier engagement might have reduced costs, the absence of certainty that it would have avoided the assessment, remuneration already allowed for the late engagement, and the administrators’ acceptance of a substantial cost overrun. The assessment costs were apportioned approximately: the administrators could retain £100,000 of the £150,000 retention and had to return the balance.
4. The order also required the administrators to refund the remaining sums covered by the earlier order. A limited confidentiality order was made over commercially sensitive parts of the assessor’s report until after 31 December 2020.

Not an appeal. The application followed an earlier judgment in the same proceedings, [2019] EWHC 2447 (Ch), which appointed an independent assessor.