Brook v Reed: CA 25 Mar 2011

The court was asked ‘What relation should the costs and remuneration bear to the circumstances, and in particular the size, of the bankruptcy?’ The bankrupt had considered that the costs first awarded to the trustee in bankruptcy and the trustee’s solicitors were disproportionate. On appeal they had been reduced, but he appealed again seeking a further reduction.
Held: The appeal failed. The stage has been reached where a court hearing an application to fix or to challenge the remuneration of an office-holder should proceed on the basis that the Practice Statement is to be applied, except in so far as in the circumstances of the particular case the party objecting to its application shows that it would be wrong in principle to do so. On this basis: ‘ the principles set out in the Practice Statement should have been expressly applied, but I do not consider that this omission provides a ground on which this appeal should be allowed. Judge Behrens applied what were fundamentally the relevant criteria to the facts of this case. He examined in some detail, with the benefit of the assessors, the remuneration claimed and the work done, in terms of value more than time, bearing always in mind the need to arrive at a figure which was proportionate to the circumstances of the bankruptcy. It was not open to the Judge wholly to disregard the time spent by the trustee, both because it is a relevant, but not decisive, factor in any case and because the basis of the trustee’s remuneration had been fixed at the meeting of creditors as ‘time properly given’. Equally, however, this basis of remuneration does not absolve the trustee from scrutiny of his remuneration, as required by the word ‘properly’. Time is properly spent if it meets the criteria set out in the Practice Statement, applied with regard to all the circumstances of the case.’
Though the judge should have made express reference to and placed reliance upon the Practice Statement, in this case he had applied the correct principles and the appeal failed. The size of the assets is not the only consideration, and here the bankrupt’s own failure to make progress on the annulment had added to the costs.
Sir David Richards said: ‘The duties of an office-holder are not confined to the realisation and distribution of assets. There are statutory duties which must be performed, such as communicating with creditors and reporting on the events leading to the insolvency, with particular regard to the conduct of the bankrupt or directors of an insolvent company. The office-holder may need to investigate the existence of possible assets or the merits of possible claims, which may in the event not lead to assets available for distribution, although in all cases the office-holder will be expected to exercise commercial judgment in pursuing such matters.’
and ‘the stage has been reached where a court hearing an application to fix or to challenge the remuneration of an office-holder should proceed on the basis that the Practice Statement is to be applied, except in so far as in the circumstances of the particular case the party objecting to its application shows that it would be wrong in principle to do so. In my judgment, the statement of guiding principles in the Practice Statement is a correct statement of the principles generally applicable to issues relating to the remuneration of office-holders, although the particular circumstances of a case might call for the formulation of a further principle.

Arden, Black LJJ, David Richards J
[2011] BPIR 583, [2011] EWCA Civ 331, [2011] NPC 34, [2011] 4 Costs LR 622, [2011] BCC 423, [2012] 1 WLR 419, [2012] 1 BCLC 379, [2011] 3 All ER 743
Insolvency Rules 1986 6.138(1), Practice Statement: The Fixing and Approval of the Remuneration of Appointees (2004)
England and Wales
CitedIn Re Independent Insurance Co Ltd (No 2) 2003
Ferris J was required to consider the insolvency office-holders’ remuneration, assisted by a solicitor with wide insolvency experience, whose report sets out the general principles then accepted by the insolvency profession as the yardstick for . .
CitedUpton v Taylor and Colley 1999
Where it is always clear that there will be a surplus after creditors have been paid in full, the creditors have little or no commercial interest in the liquidator’s remuneration. . .
CitedSimion v Brown ChD 14-Mar-2007
Remuneration of trustee – amount claimed exhausting assets realised. The court approved and applied the Practice Statement 2004. David Richards J said: ‘The task for the court is to arrive at a level of remuneration which balances the various . .
CitedHunt v Yearwood-Grazette ChD 7-Apr-2009
The bankrupt wished to discharge his bankruptcy debt, but challenged the trustee’s fees.
Held: The court approved application of the Practice Statement 2004.
Proudman J said: ‘The court’s task is to balance all the various criteria, . .
CitedSecretary of State for Communities and Local Government v Bovale Ltd and Another CA 11-Mar-2009
The applicant had sought to quash a refusal of its plannng application. An order had been made for the service of evidence, and the judge had set down an order which was expressed to be of more general application. The Secretary of State now . .
CitedJacob and Another v UIC Insurance Company Ltd and Another ChD 2-Nov-2006
. .
CitedRe Super Aguri F1 Ltd 2011
. .
CitedBarker v Bajjon 2008
. .
CitedMirror Group Newspapers Plc v Maxwell and Others (No 2) ChD 15-Jul-1997
The Court reminded insolvency practitioners of fiduciary duties to creditors when refusing application for further payment on account of costs. Ferris J considered the principles applicable to fixing the remuneration of receivers of the estate of . .
CitedIn Re Carton Ltd 1923
The court considered the remuneration of a liquidator in a voluntary liquidation.
Held: The court refused to authorise remuneration at an unusually generous percentage rate, which had been approved by the committee of inspection, on the . .
CitedIn Re Cabletel Installations Ltd 1-Jul-2004
The court criticised the remuneration claimed by the insolvency office-holder were work had been carried out at too senior a level, and the calculation was an uncritical application of the time spent, and where there were more and lengthier meetings . .
CitedFreeburn v Hunt 2010
. .
CitedHome Office v Lownds (Practice Note) CA 21-Mar-2002
The respondent had been ordered to pay costs of over pounds 16,000 in an action for clinical negligence where the final award was only pounds 4,000. The Secretary of State appealed claiming that the costs were disproportionate.
Held: In such . .
CitedPeri v Engel ChD 29-Apr-2002
A third party agreed to pay the bankrupt’s debts. He applied for the bankruptcy to be annulled, and for the trustee’s costs to be assessed and fixed at a reasonable level under section 303. The trustee appealed the costs order saying that the . .

Lists of cited by and citing cases may be incomplete.

Insolvency, Costs

Updated: 01 November 2021; Ref: scu.430847