Poxon & Anor v Wejo Ltd

Factual and Procedural Background

The Joint Administrators of Company A ("the Company") applied for a court order to fix their remuneration and expenses, including those of their associate, Company B, by reference to time properly spent in attending to the administration of the Company pursuant to the Insolvency (England and Wales) Rules 2016 ("IR 2016"). They also sought approval for unpaid pre-administration costs totaling £361,651.20 to be paid out of the Company's assets and for their discharge from liability upon cessation of their appointment pursuant to the Insolvency Act 1986 ("IA 1986").

The Application was initially heard by District Judge [Last Name] on 7 October 2024, where related creditors, collectively referred to as Appellees, opposed the order on grounds of insufficient information to properly consider the remuneration and expenses claimed. Directions were given for further evidence to be filed, and the matter was listed for hearing before Judge [Last Name] on 16 January 2025.

The Company, part of a group engaged in high-volume vehicle data processing, experienced funding difficulties in mid-2023, leading to cash flow problems and the appointment of the Joint Administrators on 10 July 2023. The estimated debts included significant sums owed to secured creditors, notably Appellees and another secured creditor, Company C. A dispute arose regarding the priority and security interests of Appellees over certain assets, including proceeds from a sale of intellectual property.

Appellees challenged the Joint Administrators' entitlement to remuneration and expenses, asserting a secured and unsecured creditor interest. The Joint Administrators and Appellees agreed that the dispute over security entitlement would require separate determination and was not to be resolved in this Application. Company C did not oppose the Application.

The Joint Administrators provided detailed reports and witness statements outlining pre- and post-administration costs, fees estimates, and supporting evidence including timesheets. However, Appellees contended that the evidence lacked sufficient granularity and narrative linkage to justify the sums claimed.

Legal Issues Presented

1. Whether the court should fix the Joint Administrators' remuneration and expenses by reference to time properly spent by them and their staff in attending to the administration under IR 2016 r.18.23.
2. Whether the unpaid pre-administration costs totaling £361,651.20 should be approved as an expense of the administration pursuant to IR 2016 r.3.52.
3. The extent to which the court should scrutinise the quantum of the fees estimate delivered to creditors under IR 2016 r.18.16(4)(a) when determining the basis for remuneration under r.18.23.
4. The level of detail and granularity of information required from office-holders in remuneration applications under the Insolvency Rules and relevant Practice Directions.

Arguments of the Parties

Applicant's Arguments

• The Joint Administrators submitted that their remuneration and expenses, including those of their associate Company B, should be fixed by reference to time properly spent, pursuant to IR 2016 r.18.23.
• They argued that the court need not scrutinise the fees estimate in quantifying remuneration at this stage, only determine the appropriate basis for fixing remuneration.
• Further, they contended that sufficient information and evidence, including detailed timesheets and breakdowns of work categories, had been provided to justify the remuneration and expenses claimed.
• They sought approval for the unpaid pre-administration costs as an expense of the administration under IR 2016 r.3.52.
• The Joint Administrators acknowledged the need to provide detailed evidence and sought leave to file further evidence if required.

Appellees' Arguments

• Appellees argued that the court should scrutinise the fees estimate before fixing remuneration on a time basis, especially given that a significant portion of the work had already been performed.
• They contended that the evidence provided was insufficiently detailed and lacked the necessary granularity to justify the remuneration and expenses claimed.
• Specifically, they pointed to the absence of a clear narrative linking timesheets to the categories of work and the individuals performing the tasks.
• They criticized the lack of narrative for the legal fees charged by Company B, asserting that the court was being asked to approve substantial solicitor costs without adequate information.
• Appellees submitted that the court should decline to make any order until sufficient information was provided to properly justify the claims.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began with the principle that as fiduciaries, office-holders bear the onus to justify their remuneration with sufficient, proportionate, and detailed information. This includes providing narratives explaining the tasks undertaken, the time spent, and why the work was necessary and reasonable.

The court examined the relevant statutory framework under the Insolvency Rules 2016, noting that when remuneration is proposed on a time basis, a fees estimate must be delivered to creditors. The court found it necessary to scrutinise this fees estimate when determining the basis of remuneration under r.18.23, contrary to the Applicant's submission that only the basis, not the quantum, needed consideration at this stage.

The court reasoned that the fees estimate plays a critical role in creditor decision-making and court oversight, especially since administrators cannot draw remuneration exceeding the fees estimate without approval. The absence of a mechanism to challenge the fees estimate post-fixation further underscored the need for scrutiny at this stage.

Applying the Practice Direction: Insolvency Proceedings, the court assessed the sufficiency and proportionality of the evidence provided. It found that although timesheets and some breakdowns were submitted, there was no adequate narrative linking the timesheets to the categories of work or justifying the time spent on specific tasks. The lack of granularity was particularly problematic given the large sums claimed.

Regarding the legal fees charged by Company B, the court acknowledged the confidentiality and privilege concerns but held that some form of sufficiently detailed narrative should be provided to enable proper scrutiny. The absence of any narrative for substantial solicitor costs was unacceptable.

Consequently, the court concluded that the evidence before it was insufficient to satisfy the requirements for fixing remuneration on a time basis or to approve the pre-administration costs claimed. It noted the possibility of a broad brush reduction or fixing an irreducible minimum, but as no party invited the court to proceed on that basis, it did not do so.

Instead of dismissing the Application outright, the court decided to stand the matter over for 2 to 3 months to allow the Joint Administrators to file supplemental evidence addressing the identified deficiencies.

The court approved the small pre-administration costs charged by two third parties (Company D and Company E) but adjourned consideration of the Joint Administrators' and Company B's costs.

Holding and Implications

The court's final decision was to STAND OVER the Application for a period of approximately 2 to 3 months to permit the Joint Administrators to provide further evidence addressing the insufficiencies in detail and narrative supporting their remuneration and expenses claims.

The court approved certain smaller pre-administration costs from third parties but did not approve the larger pre-administration costs or fix the basis for post-administration remuneration at this stage.

This decision means that the Joint Administrators must supplement their evidence to meet the standards of justification and proportionality required by insolvency law and practice directions. No new precedent was set, but the ruling reinforces the necessity for detailed evidential support in remuneration applications, particularly where large sums are involved.

Costs were reserved for the further hearing, with an invitation for the parties to agree on the form of order to avoid a consequential hearing unless permission to appeal is sought.