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Those who have attended either of the Griffins seminars this year will have heard me talk about our experience as experts in the assessment of insolvency practitioner’s fees for acting as office-holders and how the costs of the final court determination frequently mean that finding a settlement is the best approach for all involved. An example of the potential costs has appeared in a recent case.

In the case of Re Nortel Networks France SAS [2019] EWHC 2447 (Ch), Snowden J was asked to approve the fees of the joint administrators for their work as joint administrators and as CVA supervisors. The sum to be approved was £1,678,692.77 which would bring total remuneration to £6.7m [22]. The joint administrators felt they could not seek the approval of the creditors’ committee as for any fees after 2 September 2016 as by that date the sums recovered into the Nortel Networks France estate were significantly in excess of the creditors’ claims and so it would be inappropriate to seek the Company’s creditors to approve the remuneration when the funds would come out of amounts otherwise for distribution to the Company’s shareholder (who was in liquidation, so, in effect it would be that liquidation’s creditors) [27].

The liquidation committee of the shareholders felt they were not close enough to form a view so were happy to leave it to the court to decide [29].

Snowden J stated that in a case of this magnitude he felt unable to conduct an appropriate line by line analysis of the work done by the joint administrators or to investigate and verify the evidence of the joint administrators without the assistance of an experienced IP [32].

Snowden J noted that the obvious route was to instruct an expert assessor under section 70 of the Senior Courts Act 1981 and CPR 35.15as was envisaged by paragraph 21.3 of the Insolvency Practice Direction [42]. The budget for the assessment was set by Snowden J at £150,000, lower than the requested £200,000 [53]. This figure appears to include at least an element of the lawyers’ costs as well as the expert.

The figure for the report can be noted as only one side’s costs in relation to this fee application. If this matter were a contested matter with a creditor challenging the office holder’s fees then there would likely be two sets of legal teams and two experts assessing. Thus the costs of a hypothetical challenge to fees of this order could easily reach £300-£400k. This is between 18 and 24% of the total fees claimed.

If one considers that with solicitors’ fees between parties there will often be a deduction of about 30% then the costs of the assessment exercise could nearly reach such a reduction (which would be around £500k on the figures of this case). As the costs of the assessment exercise are likely to be met by the estate, the benefit to creditors could end up being marginal. It is for this reason that getting an initial expert view as early as possible is essential as it allows both sides to spend time, energy and money on finding a settlement that works out better for both the office holder and the creditors of the insolvent estate. I head up the team at Griffins that deals with this work and am more than happy to discuss any queries anyone might have.

As published on 16 October 2019 on LinkedIn by Andrew Goodson, Insolvency Practitioner at Griffins

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