Administrators’ Remuneration: Neglecting the detail can be costly!

Applications by administrators for approval of their remuneration can often be a thorny issue. Poxon and another v Wejo Ltd (in administration) [2025] EWHC 135 (Ch) (“Wejo”) made clear that detail matters, and provides guidance on the issue; underscoring the importance of transparency, accountability, and adherence to statutory requirements. Fear not though – a helpful summary and practical tips are below.

Background

The Administrators of Wejo applied to the court to fix the basis of their remuneration and expenses in attending to the administration of the company pursuant to r. 18.23 of the The Insolvency (England and Wales) Rules 2016 (IR 2016). Additionally, they asked the court to approve their unpaid pre-administration costs as an expense of the administration pursuant to r. 3.52(5) of the IR 2016. The application was necessary given they had failed to obtain approval from the creditors.

Some creditors of Wejo opposed the application on the grounds that the Administrators’ evidence was insufficient to enable to court to properly consider the level of remuneration sought. However, the Administrators attempted to argue that r. 18.23 dealt with the “basis” of remuneration only, and the court did not need to analyse their fees estimate given to creditors. They argued that if the creditors did not agree with the amount of remuneration sought, they should have applied to challenge the amount under r.18.34 IR 2016 instead.

In determining the application, the court considered the extent to which (if at all), the court should scrutinize the Administrators’ fees estimate when asked to determine the basis of remuneration under r. 18.23 (by reference to time properly spent by the administrators); and the level of detail required more generally.

Outcome

The judge rejected the Administrators’ argument that the court did not need to review the remuneration sought against whether the time spent was appropriate. A determination of whether the basis of remuneration should be fixed by reference to time spent could not properly be done without the court scrutinising the remuneration that administrators were seeking to recover by reference to their fees estimate.

The judge was not prepared to fix the basis for remuneration (or approve pre-administration fees, which were also in dispute) because the Administrators had failed to provide sufficient information about the work done – to enable the judge to form a sensible view on the reasonableness of the fees, especially as the fees estimate represented work already carried out.

Before deciding whether the basis for remuneration should be fixed based on time properly spent by administrators, the court had to be satisfied that the fees estimate was reasonable and commensurate with the nature and extent of the work properly undertaken or to be undertaken (as provided by the insolvency practice direction). Additionally, it had to be satisfied that there was sufficient information to enable it to come to such a conclusion having regard to all relevant matters, including the effectiveness with which the administrators appeared to be carrying out or have carried out their duties.

The judge also disagreed with the Administrators’ submission that a creditor’s ability to challenge the amount of remuneration pursuant to r.18.34 IR 2016 extended to remuneration fixed by the court under r. 18.23 IR 2016.

As such, the judge adjourned the hearing pending the provision of further information by the Joint Administrators.

Practical tips for Administrators following Wejo

1. Provide Accurate and Realistic Fee Estimates

Administrators should ensure that their fee estimates are carefully considered and based on realistic assumptions about the complexity and scope of the administration. Underestimating fees can lead to later scrutiny, while overestimating fees may deter creditor approval.

2. Maintain Detailed Records of Work Done

It is crucial that administrators keep comprehensive records of the work carried out, including clear justifications for why certain tasks were necessary. This will help demonstrate the value delivered to creditors.

3. Communicate Regularly with Creditors

Given the court’s emphasis on creditor protection, administrators should maintain open communication with creditors regarding fees. If it the original estimate will be exceeded, they should inform creditors promptly and seek approval where required.

4. Justify Fee Increases with Clear Evidence

If administrators need to seek additional remuneration beyond the original estimate, they must be able to provide clear and specific reasons for the increase, supported by documentation.

The court’s emphasis on transparency and accountability applies not only to administrators’ own fees but also to the costs incurred through third-party professionals, including legal advisors.

Summary

Wejo serves as a salutary reminder that insolvency practitioners must handle remuneration with care, ensuring that fees are justified and proportionate. Administrators must remember their obligation to provide detailed and accurate fees estimate at the outset. The judgment reinforced that the initial fee estimate submitted by administrators serves as a crucial benchmark against which their final remuneration will be assessed. If administrator’s fees significantly exceed the estimated amount, they must provide a detailed compelling justification for the increase.

The decision reaffirmed the role of the court in protecting creditors from excessive fees. Creditors (and members) have a legitimate interest in ensuring that the costs of administration do not erode the value of the insolvent estate. Although administrators have 18 months from the date of their appointment to make an application to fix the basis of their remuneration, it might be advisable, in some cases, to make an application to fix the basis of remuneration earlier than this, especially in cases where unforeseen work is required.

We await the outcome of the return date and will update you when we know more!

By Henry Harris, DMH Stallard

Originally published on the DMH Stallard website.