In the recent decision of Pagden v Ridgley [2025] EWHC 2674 (Ch), the court considered the question of the scope of a creditor’s right to challenge administrator remuneration on the grounds that the sought expenses are considered “excessive”.
Under rule 18.34 of the Insolvency Rules 2016, a creditor (whether secured or unsecured) may apply to the court within eight weeks of receipt of a report from the administrator, which first sets out the proposed remuneration to be charged in the administration seeing to challenge the proposed remuneration if the creditor considers it to be excessive.
On the underlying facts of the matter, Mr Ridgley was appointed as joint administrators of:
- Orthios Eco Parks (Anglesey) Limited
- Orthios Power (Anglesey) Limited
These were related companies which had both entered into administration (together “Orthios”).
Orthios had raised operating funds by way of the issue and sale of a number of bonds which together held a total value of £92,400,000.
The bonds were secured by way of qualified floating charges together with fixed charges over a portion of the land owned by Orthios. The security for the bonds was held by a Security Trustee under the terms of a Security Trust Deed which provided that in an Event of Default, the Security Trustee was entitled to appoint administrators.
When an event of default occurred, Mr Ridgley was appointed as administrator of the Orthios companies. The Security Trustee gave approval to the administrator to sell the land, in the course of the administration, provided that a percentage of the sale proceeds be paid to the administrator by way of remuneration.
Upon becoming aware of the proposed sale and remuneration package, the claimant, Cresta Energy Limited, which had held £66 million in Orthios issued bonds prior to the insolvency event. They believed that the proposed sale undervalued the land, raised concerns to the Security Trustee in the first instance and subsequently applied to the court for the removal of the Security Trustee from his office.
The Security Trustee agreed to his removal but only after the land was sold for a total of £35,000,000 with the administrator receiving £2,760,000 in remuneration.
Mr Pagden was appointed as the Second Security Trustee on 12 October 2022, and on 19 May 2023 issued an application seeking relief under rule 18.34 of the Insolvency Rules on the basis that the remuneration of Mr Ridgley was excessive.
The application was refused in the first instance, with ICC Judge Greenwood holding that Rule 18.34 empowered the court to adjudicate on matters of compensation relating to “assets held by the insolvent company for the benefit of its creditors”, but that an asset subject to a fixed charge, that had been advanced under a contract with a secured creditor, fell outside of the scope of Rule 18.34 and therefore could not be challenged on this basis.
Mr Pagden appealed the court’s decision on this point and on appeal the court considered the scope of Rule 18.34 and the question of whether, even if assets subject to a fixed charge fell outside of the scope of 18.34, the court was entitled to exercise its inherent jurisdiction to restrict the remuneration payable to the administrator.
The Court of Appeal, considering these issues, affirmed the decision of the first instance judge, noting that English insolvency law drew a distinction between amounts paid from company assets and amounts paid from assets held by the company for the benefit of others.
The court held that Part 18 of the Insolvency Rules gave creditors’ committees the power to determine the basis of administrator remuneration relating to assets held by the company, and it was this remuneration that was challengeable under 18.34.
On the facts of the case, the assets subject to a fixed charge were held by the companies (by way of the Security Trustee) for the bondholders, and at the time of the insolvency event equitably fell outside of the scope of the court’s powers under 18.34.
Consequently, the appeal was dismissed and the remuneration package relating to the sale of the land stood.
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