Orthios Eco Parks (Anglesey) Limited, Re

Part 18 of the Insolvency Rules 2016 governs remuneration payable as an expense of an administration. It does not govern sums agreed between an administrator and the holder of a fixed charge for realising fixed-charge property, where payment is made from sale proceeds. A fixed-charge creditor therefore has no standing under rule 18.34 to challenge such an agreement. Potentially affected creditors may instead have remedies based on unfair harm, misfeasance, breach of duty or the court’s supervisory jurisdiction. The eight-week rule 18.34 period runs from receipt of the report which first states that the relevant remuneration or expenses were charged or incurred during the reporting period.

The applications concerned the remuneration and legal costs of an administrator appointed over two companies whose principal asset was land subject to fixed charges. The former security trustee had agreed percentage-based realisation costs, which were paid from the £35 million sale proceeds. A successor security trustee and administrators of an unsecured creditor sought relief under rule 18.34 of the Insolvency Rules 2016, alleging that the sums were excessive or fixed on an inappropriate basis. The former administrator applied to strike out the challenges, contending that rule 18.34 did not apply, that the successor was bound by the agreement, and that the applications were out of time. The central questions were the scope of rule 18.34, the commencement of its eight-week period, and the applicants’ standing.

1. Applications dismissed. Rule 18.34 did not confer power to review or determine remuneration and expenses expressly agreed with the holder of a fixed charge in respect of realisation costs payable from sale proceeds.
2. In administration and liquidation, company property comprises distinct funds. Administration expenses are payable from free assets and, in defined circumstances, floating-charge assets. They are not payable from fixed-charge assets, absent the secured creditor’s agreement or a relevant court order.
3. Part 18 concerns remuneration payable as an expense of the administration. A payment agreed for work connected with realising fixed-charge property is a separate realisation cost. It is not remuneration fixed under Part 18, even though it may ordinarily be described as remuneration.
4. Rule 18.38 did not justify extending rule 18.34 to administration realisation costs. It is a separate provision concerning liquidation and bankruptcy, and rule 18.34 contains no reference to remuneration fixed under rule 18.38.
5. Potentially affected creditors may have alternative remedies, including applications under paragraphs 74 and 75 of Schedule B1, a supervisory application in an appropriate case, or complaints based on the administrator’s obligation to act honourably and fairly. Those remedies raise different substantive issues from a rule 18.34 application.
6. The eight-week period under rule 18.34(3) begins when the applicant receives a report stating that the relevant remuneration or expenses were charged or incurred during the reporting period. The applications were issued in time, but this did not affect the outcome.
7. The successor security trustee was independently bound by the predecessor’s agreement. The administrators of the unsecured creditor were not themselves creditors and lacked standing.