Eleanor Temple KC and Jonathan Fletcher-Wright secure much-needed clarity for former administrators in the Court of Appeal

Judgment has been handed down in Frost v The Good Box Co Labs Ltd [2025] EWCA Civ 252. Kings Chambers barristers Eleanor Temple KC and Jonathan Fletcher-Wright, instructed by Ali Renshaw of Prosperity Law LLP, helped a company’s former administrators obtain much needed guidance on the recovery of their unpaid remuneration in the context of a Part 26A Scheme.

The Court of Appeal recorded that the “substantive issue, which the administrators have acknowledged throughout” that needed to be addressed was whether the administrators’ “remuneration beyond that paid on account and up to the amount of the fees estimate is justified as having been properly incurred…”

The company in question, The Good Box Co Labs Ltd, had been placed into administration, with Eleanor and Jonathan’s clients acting as administrators. The company was rescued as a going concern by entering into a restructuring plan – the relatively new corporate rescue mechanism introduced under Part 26A Companies Act 2006. The administrators therefore found themselves removed from office, with plan administrators in place under the restructuring plan.

The administrators’ remuneration had been fixed by a creditors’ resolution on a time cost basis as long ago as December 2022. The administrators had submitted a fees estimate of just over £400,000 – which, under r.18.30 of the Insolvency (England and Wales) Rules 2016, represented the effective maximum they could recover (without further approval). They had received authorisation from creditors to draw down a payment of £235,000 plus VAT on account of the eventual total and did not wish to exceed their fees estimate.

The difficulty arose when the (now former) administrators sought to draw the balance of their remuneration – i.e. the sum in excess of the £235,000 payment on account, by making a claim within the restructuring plan.  Due to “a procedural muddle” caused by the drafting of one provision of the restructuring plan, a dispute arose as to the correct mechanism for establishing a right to further payment. The provision provided that the former administrators could apply to court for “approval in accordance with the Rules.”  The plan administrators and the company appeared to be taking advantage of the lack of clarity, by taking contradictory stances, the combined effect of which was to make it procedurally impossible for the administrators to recover the balance of their remuneration without court assistance.

In a letter dated 20 July 2023, the plan administrators informed the former administrators that the procedure they should now follow, in order to increase their claim, “is set out under Insolvency Rule 18.24(b)”. The restructuring plan administrators, apparently relying on the drafting of the dispute resolution mechanisms in the plan, thereafter, continued to claim that the administrators needed a decision from the court before they could seek any fees in excess of the £235,000 already approved by creditors. The plan administrators therefore declined to even consider a request for anything in excess of the £235,000, claiming it was simply not a matter for them and that they could not adjudicate upon the claim.

However, once an application to the court was made in order to satisfy the plan administrators, the company itself opposed that application, on the grounds that the relief sought was not covered by r.18.24 and 18.28 of the Insolvency (England and Wales) Rules 2016. These are the rules that would ordinarily allow administrators to seek an increase in their remuneration from the court in appropriate circumstances.

The former administrators were therefore caught between the Scylla of the plan administrators’ insistence on a further court order, and the Charybdis of the company alleging that the court had no power to make such an order.

Eleanor and Jonathan’s clients were unsuccessful at first instance in the Business and Property Courts at Leeds (HHJ Klein), where their application for an increase in remuneration was dismissed. On appeal, the Court of Appeal (Males, Falk and Zacaroli LJJ) declined to overturn that decision – but, helpfully for the former administrators, found that they did not in fact need a further court order at all in order to recover the balance of their remuneration. Moreover, having regard to the overriding objective of dealing with cases justly and at proportionate cost, the Court of Appeal gave clear guidance to the parties and the plan administrators on how the former administrators could use their pre-existing creditor approval to seek to recover their fees, and set out the basis upon which they could approach the plan administrators to seek the release of funds. The former administrators had previously tried and failed twice to persuade the plan administrators to adjudicate upon their claim based on a time cost basis of remuneration up to the value of their fees estimate (even following the judgment at first instance). Hence the decision to proceed with the appeal to obtain a definitive answer on the point.

The former administrators therefore took the unusual course of proceeding with an appeal in circumstances where the dismissal of the same came as no surprise to them, but where they hoped for and successfully obtained a significant benefit from the decision of the Court of Appeal, namely  confirmation that a valid resolution had been passed by creditors fixing their remuneration on a time costs basis, and, importantly  a decision as to how they can recover the balance of their properly incurred remuneration. The result allowing them to overcome one of the main obstacles – namely the plan administrators’ insistence that a further court order was required. The judgment has therefore broken the procedural deadlock that was threatening to leave the former administrators without any recourse, despite clearly having a substantive underlying right to be paid. Their claim to further remuneration in principle having been secured as consequence of the decision of the Court of Appeal.

The Court of Appeal also agreed with Eleanor and Jonathan that the rule in Ex parte James, would indeed have prevented the former administrators from taking further remuneration out of the assets of the Company without further approval, but that this approval need not be sought from the court and had been the gift of the plan administrators all along.

The Court of Appeal confirmed that the problem with the restructuring plan as drafted was that the Rules (without modification) do not make provision for the Court approving an increase in remuneration (above an earlier payment on account, and to no more than the amount of the fees estimate), where it was fixed on the time-cost basis.

To summarise, therefore, the consequence of the dismissal for Eleanor and Jonathan’s clients was that the former administrators were held to be entitled to further remuneration (charged on the assets of the company in their possession or control immediately before they ceased office under Paragraph 99 Schedule B1 to the Insolvency Act 1986) up to the amount of the fees estimate without the need for further approval from the court. In other words, the administrators obtained that which they had sought from the plan administrators at  the outset.

The judgment of HHJ Klein at first instance, at [2024] EWHC 422 (Ch), also dealt with an interesting point about the interpretation of r.18.24 and r.18.28 of the Insolvency (England and Wales) Rules 2016 in the context of former office holders. Eleanor was able to persuade HHJ Klein that the term “office-holder” in this particular context encompasses former office-holders, so that those rules can be used by a former-administrator or former-liquidator to seek a retrospective increase in remuneration. This case is the only decision on the point so far. It was strictly speaking obiter at High Court level, and did not arise in the Court of Appeal judgment, but it remains a persuasive if not binding authority. At first instance, the Court found assistance in the Supreme Court’s decision in Brake v. The Chedington Court Estate Ltd, [2023] 1 WLR 3035,on the proper approach to determining whether an applicant has standing to make an application: namely that, (1) the Court will adopt a purposive interpretation of insolvency legislation, and (2) the Court’s focus will likely be on whether the outcome of the application will directly affect the applicant’s rights or interests in connection with powers conferred by the statutory insolvency regime. The Court of Appeal agreed with Eleanor however that Paragraph 111 of Schedule B1 did not assist on this issue as it only applied to that Schedule. Paragraph 111 of Schedule B1 was not relied upon at first instance for that reason.

The judgment of the Court of Appeal can be found at: https://caselaw.nationalarchives.gov.uk/ewca/civ/2025/252

The original decision at first instance (which is relevant to the question of former office-holders’ right to apply under r.18.24 and r.18.28) can be found at:

https://caselaw.nationalarchives.gov.uk/ewhc/ch/2024/422

Biographical note: Eleanor Temple KC was called to the Bar in 2000 and took silk in 2024. As well as being a leading insolvency KC, she practices in company law and commercial dispute resolution. Jonathan Fletcher-Wright was called to the Bar in 2010, and has a successful High Court practice in commercial, company and insolvency law. For clerking enquiries for Eleanor and Jonathan’s services, please contact Gary Young on [email protected]