In the matter of Re Nortel Networks France SAS  EWHC 2778 (Ch) the question of the Administrators’ fees was considered by an Assessor to assist the Court.
The Assessor suggested that the Administrators could have engaged with the creditors over their remuneration at an earlier stage in the process. Having seemingly not done that an increase in costs appears to have resulted.
The upshot was that although the Administrators did get the vast majority of their fees approved by the Court, Mr Justice Snowden declined the invitation to afford the Administrators all of the costs of the assessment process from the assets of the insolvent estate.
In his Report, however, Mr. Wallace is critical of the Administrators’ failure to engage with creditors of the Company and with the NNSA Creditors’ Committee over the issue of remuneration at a much earlier stage in the proceedings. The gist of Mr. Wallace’s criticisms in this respect are summarised in the following extract from the conclusions to his report (paragraph references are to the paragraphs of his report),
“The Administrators and Supervisors should have sought the approval of the Creditors’ Committee [of NNF] for some part of their remuneration while that Committee still had a statutory responsibility to approve the office holders’ remuneration (paragraphs 61 to 68 and 75). They did not.
In various reports to creditors, both as Administrators and as Supervisors, there has been inaccurate or incomplete information provided regarding the officeholders’ remuneration (paragraphs 57.6, 74, 106 and 107).
The Administrators did not seek to engage the NNSA Creditors’ Committee in the detailed affairs of NNF until March 2019 (paragraphs 71 to 73).
The Administrators incurred costs unsuccessfully trying to persuade the NNSA Creditors’ Committee to support the Application as regards their remuneration notwithstanding the Committee having had limited involvement in the NNF insolvency before March 2019 (paragraph 72).
From early 2018, it was apparent that it was no longer appropriate for the Creditors’ Committee [of NNF] to approve the officeholders’ remuneration. Under those circumstances, best practice would have been for the officeholders to seek to engage with the Creditors’ Committee of NNSA at an early stage to consider amongst other things the reasonableness of their remuneration. Although the officeholders ultimately sought such an engagement, this was not until the case was nearly concluded. Had the NNSA Committee been approached in, say, March 2018 rather than a year later, it is certainly possible that they would have been equally disinterested in supporting any remuneration application. However, it is also possible that approached in the right way and at the right time, the Committee would have been much more helpful, leading to a significant reduction in cost.”
“The Administrators and Supervisors have been unable to persuade the Creditors’ Committee of NNSA to provide support in relation to that part of the Application seeking approval of the Court for their proposed remuneration … This has led to increased costs. First, the Administrators incurred costs in providing information to the Committee and attending meetings with them. Second, when it became apparent that the Administrators were unlikely to persuade the Committee to provide that support, costs were incurred in bolstering the information to be provided to the Court in support of the Application, both to help the Court but also with an eye to the possibility that the Court might decide to appoint an assessor.”
Taking these points into account, as well as the outcome of Mr. Wallace’s Report overall, I consider that it would not be appropriate for all of the costs of the assessment exercise to be paid out of the assets of the Company which would otherwise be available to be distributed to NNSA. Instead, I consider that I should make an order that requires the Administrators to bear some of the burden of the costs of the assessment exercise.