The Good Box Co Labs - Case Update

The Court of Appeal has dismissed an appeal by the former administrators of The Good Box Co Labs of a decision rejecting their application for approval of additional remuneration.

The administrators sought an increase in their fees after the completion of a restructuring plan under Part 26A of the Companies Act 2006. Their fees had previously been approved by creditors via a December 2022 resolution fixing remuneration of £235,000 on a time-cost basis. Following the approval of the restructuring plan in January 2023 and the appointment of plan administrators, the former administrators filed a claim for additional unpaid remuneration, including approximately £209,000 over and above the £235,000 approved by the creditors. The plan administrators rejected this portion of the claim, leading the former administrators to apply to the Court under Rules 18.24 and 18.28 of the Insolvency (England and Wales) Rules 2016 for approval of this remuneration.

The High Court rejected the claim on procedural grounds, finding that Rules 18.24 and 18.28 did not apply because the administrators’ fees had been set on a time-cost basis rather than a fixed amount. As a result, the Court dismissed the application, but made clear that it was open to the former administrators to pursue this relief through an alternate route.

On appeal, the Court of Appeal upheld the High Court’s decision to dismiss the administrators’ application, finding that the High Court was correct to conclude that the administrators' application did not fall within the ambit of Rule 18.24 or Rule 18.28.

The Court then described the consequences flowing from its decision to dismiss the appeal, with the immediate consequence being that the application itself stood dismissed, since it was only brought on the basis of Rules 18.24 and 18.28. However, the Court went on to consider the procedure that should have been followed in bringing the claim. The Court found that any unpaid remuneration is governed by the restructuring plan and subject to the adjudication process provided for in the plan. Accordingly, the appropriate persons from whom approval should be sought for additional remuneration are the plan administrators. In the event the further remuneration cannot be resolved, the dispute would need to be resolved in a Part 7 claim before the Court (not by an application under the Rules).

The Court stated that the “current procedural muddle” in which the administrators found themselves stemmed in large part from the drafting of one provision of the plan. The provision stated that the administrators were at liberty to apply to the Court "in accordance with the Rules", in the event that the plan administrators did not accept the administrators' claim for remuneration up to the amount of their fee estimate. The problem with this language is that the Rules do not make provision for the Court approving an increase in remuneration where it was fixed on a time-cost basis. Accordingly, bringing the application under Rule 18.24 or Rule 18.28 was the wrong process. That did not mean, however, that the former administrators had no recourse to apply to the Court if the plan administrators did not approve their claim for additional fees — that right existed under the adjudication process set out in the plan and could not be removed merely because the phrase "in accordance with the Rules" was inapposite.

The decision can be accessed HERE.

Professionals involved: Eleanor Temple KC and Jonathan Fletcher-Wright of Kings Chambers (instructed by Prosperity Law) for the administrators