When are fee basis uplifts acceptable

In the recent decision of Cork v Penfold [2025] the court considered the liquidator’s application for an uplift in the basis of remuneration and considered when “unanticipated” works fall outside of the initially quoted basis for work. 

The case related to the liquidation of two companies, Old Manor Homes Limited (OMHL) and Henry Walters Limited (HWL) which together had been owned and operated by brothers John and Richard Penfold. In or around July 2017, the brothers had a falling out which precipitated the liquidation of the two companies by way of members voluntary liquidation (MVL).

In February 2019, Mr Stephen Cork and Ms Joanne Milner had been appointed as liquidators and had fixed their remuneration at a basis of 5% of realisations made.

On 5 December 2024, following Ms Milner’s retirement, Mr Anthony Cork was appointed as replacement liquidator and shortly afterwards made an application to the court in relation to each company seeking:

1. An uplift in the recovery basis in relation to OMHL from 5% to 6.3% (an increase of £53,998.28)
2. An uplift in the recovery basis in relation to HWL from 5% to 9% (an increase of £316,240)

The basis of the application was that the liquidator asserted that the hostility between the brothers had given rise to a number of claims raised by each brother against the companies and there had been significant work relating to the need to resolve a planning issue, each of which had been unexpected at the point at which the remuneration basis had been fixed.

In considering the applications, the court applied the caselaw interpreting applications to the court to exercise its powers to vary the basis of remuneration under IR 18.24.

The court ultimately dismissed each application, holding that given that the hostility of the brothers had given rise to the MVL and the appointment of the liquidators in the first place, the potential for this hostility to give rise to  the “unanticipated work” was wholly foreseeable. 

The liquidators had agreed the fixed percentage rate in full knowledge of these circumstances and had taken on the risk that the disparity between necessary works and recoveries made would mean that their work had been priced at an undervalue. This was their risk to bear and the court was not sufficiently satisfied that there was any good reason to justify a retrospective change to the remuneration basis after the fact.

In reaching this decision, the court affirmed the value of certainty of contract and the general position that a party be required to honour the contractual terms that they have freely agreed and entered into.