Insolvency Fees

There has been discussion regarding the remuneration of insolvency practitioners with some commentators even suggesting an independent body to oversee and review the same. Part of the problem appears to be that of perception, where an insolvency practitioner (”IP”) records time spent on an insolvent estate with the same subject simply to historical approval in principle from creditors. The IP is then able to write a cheque out accordingly for the time costs incurred. In reality there are procedures and checks which prevent it from being quite so straight forward but the apparent inability of the creditors (who are the ultimate clients) from in effect withholding the money because it is controlled by the insolvency practitioner does separate us from many other client relationships in that we do not usually need to sue for money when in disagreement with creditors, they ultimately have to sue us when a dispute arises which arguably creates an imbalance. The case of Hunt v Yearwood-Gazette [2009] EWHC 212 (Ch) inter alia highlights that insolvency practitioners need to justify their fees when challenged through the courts with reference to the Practice Direction on insolvency officeholder remuneration. Currently creditors unhappy with an insolvency practitioner’s level of fees can only have the same scru- tinised by the courts. However, as with any application to court there are potentially significant costs associated with such an exercise. The Practice Direction has taken the requirement to justify the nature of the work to new heights in that you are required to elucidate why a piece of work has been done, to demonstrate the benefit to the insolvent estate and why a particular grade of staff was utilised for the same. Many time recording systems will often record the facts of who has done the work, the nature of the work and when the same was done but they may not routinely elaborate why a particular grade of staff was used for each individual piece of work. Like many situations the court is not always the most commercial forum to resolve such disputes but if the parties adopt intransigent positions it may well be the only one and it is hard to see another body being more effective in reducing the cost such disputes bring.

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