Jeremy Charles Frost & Anor v The Good Box Co Labs Limited & Ors

The Applicants, former joint administrators of The Good Box Co Labs Ltd, applied under Insolvency (England and Wales) Rules 2016 (IR2016) rr.18.24 and 18.28 for a court determination of their remuneration. The preliminary question was whether they had standing to make a r.18.28 application when they were no longer office-holders. The resolution of creditors on 30 December 2022 approved fees on a time-cost basis and authorised a payment on account of £235,000. The Applicants sought further sums via the restructuring plan adjudication process but, in the alternative, issued the r.18.28 application.

Key legal principles: rr.18.24 and 18.28 provide mechanisms for an office-holder to obtain an increase in rate or amount of remuneration or a change in basis; they are properly read in the context of Chapter 4 of Part 18 IR2016. If an applicant does not seek an increase in the rate or amount or a change of basis as required by r.18.24, they lack standing under r.18.28. The court also held that, purposively read, former office-holders can have standing to bring a r.18.28 application, but that is distinct from whether any particular applicant is seeking an increase or change within the scope of the rules.

Decision: the court concluded the Applicants were not actually seeking an increase in the amount fixed or a change in basis and therefore did not have standing under r.18.24 to bring a r.18.28 application. The application was dismissed.

This was a first-instance hearing of a preliminary issue directed by HH Judge Saffman: whether the former administrators (the Applicants) had standing to apply under IR2016 rr.18.24 and 18.28 to increase their remuneration even though they had ceased to be office-holders at the time of the application. The company had been placed in administration on 28 June 2022. A restructuring plan was sanctioned on 16 January 2023, terminating the Applicants' appointments on 26 January 2023. Creditors passed a resolution on 30 December 2022 approving remuneration charged by reference to time properly given and authorising fees on account of £235,000 plus VAT. Clause 8.3 of the restructuring plan preserved the administrators' right to apply to court under IR2016 where adjudication did not resolve claims.

The Applicants claimed further unpaid fees (c.£229,751.38) via the plan adjudication process. When the plan administrators did not admit the additional claim, the Applicants issued the r.18.28 application. The Standing Issue distilled to two questions: (i) whether, on the Applicants' case that their basis of remuneration was a time-cost basis, they could properly bring a r.18.28 application; and (ii) whether a former office-holder generally can bring a r.18.28 application.

The court analysed rr.18.15-18.37 in context. It concluded that rr.18.24 and 18.28 are designed to permit an office-holder to seek an increase in (a) percentages under a percentage basis, (b) a set amount, or (c) to change the basis, and also to permit increase in charge-out rates where relevant. The Applicants, however, were not seeking an increase in rate or amount nor a change of basis; they sought payment of fees they said were due under the time-cost basis and a determination that they should be paid more than the payment on account of £235,000. The judge held the payment on account was not the fixing of the whole entitlement; it was an authorisation to withdraw funds up to that sum. Because the Applicants were not asking for an increase in the amount fixed or a change of basis, they lacked standing under r.18.24 and so could not maintain a r.18.28 application.

The court went on, with hesitation and after considering authorities (including Re Super Aguri F1 Ltd; Re Brilliant Independent Media Specialists Ltd; Re Lehman Brothers Europe Ltd (No.2); Brake v The Chedington Court Estate Ltd; Re Future Route Ltd), to conclude that former administrators can, in principle and purposively construed, have standing to bring a r.18.28 application. That general conclusion did not assist the Applicants because on their pleaded case they were not seeking the specific changes the rules permit. The preliminary issue was answered in the negative and the application dismissed. The court observed possible alternative routes for the Applicants (insolvency application or civil claim via the adjudication process) but did not decide those points.

The application is dismissed. The court held that rr.18.24 and 18.28 must be read in context: they permit an office-holder to seek an increase in the rate or amount of remuneration or a change in basis. The Applicants, who were former administrators, were not seeking an increase in the rate or amount nor a change of basis and therefore lacked standing under r.18.24 to bring a r.18.28 application. The judge nevertheless held that former administrators can, in principle, bring a r.18.28 application, but that conclusion did not assist on the facts here.