Clarifying the Limits of Rule 18.24 & 18.28: Administrator Remuneration and the Time‐Cost Basis
Introduction
The case of Frost & Anor v The Good Box Co Labs Ltd & Ors ([2025] EWCA Civ 252) presents an important judicial determination on the scope and application of the Insolvency Rules 2016 with respect to administrator remuneration. At the heart of the dispute is the complex interplay between creditors’ decisions, the administrators’ fee approval process, and the applicable statutory framework governing fees fixed on a time‐cost basis.
Background: The administrators, appointed on 28 June 2022, managed the Company until the effective date of a restructuring Plan under Part 26A of the Companies Act 2006 on 26 January 2023. Their attempts to subsequently obtain an increased fee approval led to an extensive judicial review of the appropriate process, particularly focusing on whether their application for additional remuneration fell within the ambit of Rules 18.24 and 18.28 of the Insolvency Rules 2016.
Key Issues: The primary issues examined were (a) whether the administrators’ application for additional remuneration—effectively seeking payment on a time-cost basis—could be approved under Rules 18.24 and 18.28, and (b) whether, as former office-holders, they retained standing to seek such an application.
Parties Involved: The appeal was brought by the administrators with respondents including the Company, the Plan Administrators, and NGI Systems & Solutions Limited, representing former creditors.
Summary of the Judgment
The Court of Appeal upheld the decision of HHJ Klein, concluding that the administrators were not entitled to seek an increase in the amount of their remuneration under Rules 18.24 and 18.28. The court held that because the remuneration had been fixed on a time-cost basis (supported by a fees estimate of £400,315.50 provided to creditors prior to the decision), the proper mechanism for drawing additional remuneration did not lie with an application under these rules.
Key findings include:
- The resolution approved at the December 2022 creditors’ decision fixed remuneration on a time-cost basis rather than as a set amount.
- Rules 18.24 and 18.28 are specific to cases where the remuneration is fixed by reference to a set amount or a percentage, but not where it is fixed on a time-cost basis.
- The Court clarified that, under Rule 18.30, administrators may only draw remuneration up to the total amount set out in the fees estimate unless further approval is obtained for exceeding that cap.
- The standing of former administrators was addressed separately, but because the appeal’s substance did not fall within the ambit of Rules 18.24 and 18.28, the standing issue was rendered moot.
Analysis
Precedents Cited
The judgment examined prior case law including:
- Re Nortel Networks International Finance & Holding BV [2018] EWHC 2266 (Ch): Although referred to by Ms Temple KC in support of her broader interpretation of Rule 18.24, the facts of Nortel differ significantly. In Nortel, the administrators had routinely sought fee approval for their services on an intermediate basis. However, the Court noted that in the present case the resolution clearly distinguished between payment on account (approved at £235,000) and fees payable up to the fees estimate on the time-cost basis.
- Re Brilliant Independent Media Specialists Ltd [2015] BCC 113: The Registrar’s decision was discussed but ultimately not found instructive for the present application. The point of contention regarding fee structure that arose in the current case was not adequately addressed by the earlier decision.
- Ex parte James, In re Condon (1874) LR 9 Ch App 609: The Court also referenced the enduring principles from Ex parte James regarding the inherent jurisdiction of the court to regulate the conduct of its officers. This was especially relevant in the context of preventing unfair drawing of additional remuneration without creditor or Plan Administrator approval.
Legal Reasoning
The court’s reasoning was methodical and firmly anchored in the text of the Insolvency Rules 2016:
- Interpretation of the Rules: The court determined that the phrases “rate or amount of remuneration fixed” and “the basis fixed” in Rule 18.24 refer back specifically to the distinct methods of fee determination described in Rule 18.16. In other words, the option of increasing the “amount” applies only when remuneration is fixed as a set sum (Rule 18.16(c)) and not when calculated on a time-cost basis.
- Controlling Role of Rule 18.30: The Court emphasized that Rule 18.30 governs administrators who choose the time-cost basis—thereby creating a natural cap on the remuneration as set out in the fees estimate. This clear procedural separation meant that any additional drawing of fees above the initially approved payment on account would require adherence to the process provided by Rule 18.30 rather than Rule 18.24 or 18.28.
- Assessing Standing: Although the standing of the administrators as former office-holders was examined, the Court noted that even had the issue of standing arisen in isolation, the administrators would have retained standing. However, because the factual matrix indicated no search for a change in the basis of remuneration, the standing issue became irrelevant to the central determination.
Impact
The judgment establishes an important precedent with respect to:
- Clarification on Remuneration Basis: The decision reinforces that the approach taken by creditors in approving fees (whether on a time-cost basis or as a fixed sum) is determinative of the subsequent procedural route for any modifications. It clearly sets the boundary that fee increases for time-cost basis remuneration must follow the procedures under Rule 18.30.
- Future Administrator Fee Disputes: The ruling provides guidance to administrators and advisers about the limits of their options when seeking increased remuneration after a resolution has been passed by creditors. It underscores the need to adhere strictly to the established limits as defined in the fees estimate.
- Creditor and Plan Administrator Oversight: By cementing the role of the creditors’ decision and clarifying the court’s interpretation of the applicable rules, the decision enhances the oversight role of creditors and Plan Administrators in ensuring that fee structures remain within fair and predetermined limits.
Complex Concepts Simplified
Several key legal concepts underlie this judgment. For ease of understanding, the following explanations are provided:
- Time-Cost Basis: This is a method where the administrator’s fee is calculated based on the actual time and labor expended, subject to a pre-approved fees estimate. Administrators cannot draw fees beyond this estimate without additional approval.
- Fixed Amount Versus Time-Cost: When fees are fixed as a set amount, rules such as 18.24 and 18.28 allow administrators to seek increases if they deem the approved amount insufficient. In contrast, where fees are based on the time-cost method, Rule 18.30 provides for a cap.
- Standing: This legal term refers to the right of a party (even if they are no longer in office) to bring an application to court. The ruling clarified that, under certain circumstances, former administrators maintain standing for related claims.
- Ex parte James Principle: A long-standing judicial principle preventing officers from acting in ways that the court deems inherently unfair, thereby ensuring that any additional drawing of fees must be subject to external oversight.
Conclusion
In summary, this judgment provides a detailed interpretation of the Insolvency Rules 2016 regarding administrator remuneration. By distinguishing between remuneration fixed as a set amount and that fixed on a time-cost basis, the court has clearly delineated the proper procedural channels. The administrators’ appeal was dismissed because their application for additional remuneration did not squarely fall within the ambit of Rules 18.24 and 18.28, as their fees had been determined on a time-cost basis and subject to a pre-approved fees estimate.
The outcome of this case serves as a significant precedent, ensuring that similar disputes in future insolvency cases are resolved with clarity over the applicable rules and oversight mechanisms. Moreover, it reinforces the accountability of insolvency practitioners by mandating strict adherence to the methodology chosen by the creditors.
Ultimately, the judgment emphasizes judicial caution in extending the scope of rule-based applications, thereby preserving the balance between administrator discretion and creditor protection.
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