Changing The Basis Of An Officeholder’s Remuneration 

An application to Court by an officeholder to change the basis of their remuneration, which has already been fixed, may well turn out to be an uphill struggle.

Once in office and the remuneration has been negotiated, without something perhaps even reasonably exceptional, an application to Court for a change of fee basis seeking an increased level of remuneration, sprinkled with persuasive submissions on a change of circumstances, may not necessarily be sufficient to knock the ball out of the park. It is, however, important to remember that the officeholder comes into office as a stranger and there is a specific provision in the insolvency legislation for such an application to be made.

Principles Of Changing Basis Of Officeholder Remuneration

In the case of Cork & Anor v Penfold & Anor (Re Henry Walters Ltd – Old Manor Homes Ltd) [2025] EWHC 1356 (Ch) (“Cork v Penfold”) some key principles were summarised in a case when the officeholders did not succeed in amending the basis of their remuneration:

• The burden is on the office-holder to demonstrate that the fee basis should be changed. Any doubt will be resolved against the applicant officeholder.
• The court will consider all the circumstances in order to decide whether a proper case for change has been established, and if so, what that change ought to comprise.
• An application to change the basis of remuneration to satisfy the court that there has been a material and substantial change in the circumstances would be whether and the extent to which those changes were material and substantial.
• Where remuneration has been fixed as a percentage of realisations and/or distributions (or as a fixed fee), the court will consider the extent to which the actual outcome was or was not foreseeable and probable (or foreseen) when the current basis was fixed.
• The principles stated in the Practice Direction – Insolvency Proceedings will be relevant to ensure that the office-holder’s remuneration is fair and reasonable to the nature and extent of the work properly undertaken, and in particular, reflective of the value provided.
• Applications under Rule 18.24 of the Insolvency Rules (England and Wales) 2016 ought to be prospective rather than retrospective; particularly where the current basis is by reference to a percentage of realisations or a fixed sum.

Judgment Highlights

It follows that in all the circumstances as I have held them to be, and on the principles explained (above at paragraphs [55]-57]) both Applications must be dismissed. Both were, in substance, applications made for a change in the basis of remuneration, and both were made very late, only after the work had been done (as explained above at paragraphs [85]-[94]): the court and the Penfolds were presented with a fait accompli. Furthermore, the current bases were the product of a commercial, freely negotiated agreement, made in circumstances (described above at paragraphs [79] and [81]-[84]) where the work now said to have been “unanticipated” was more or less foreseeable from the outset given the circumstances as they existed and were present to the minds of the office-holders or ascertainable by them (as explained above at paragraphs [95]-[135] in relation to HWL and [136-150] in relation to OMHL) and in relation to which therefore the risks of occurrence were substantially allocated; the issue of insufficiency of remuneration, contrary to the Applicants’ case, does not turn on and neither can it be measured by reference to their private, uncommunicated hopes or wishes (not all of which, in the present cases, were in any event reasonably held). Further, issues of value are central to issues of remuneration, but the evidence was not adequate to support claims to the particular sums sought.

In respect of the OMHL Application, there was a separate point, explained above at paragraph [84]: the real basis of the office-holders’ complaint in respect of OMHL was not that their aggregate workload had exceeded that which was anticipated or allowed for (even by them), or that therefore their time given costs were to any degree exceptional, but that 36 OR had sold for less than it might otherwise have done. However, the sale of 36 OR for £4,150,000 was not a result of some change of circumstance, or other unexpected event – it was simply that it yielded that amount rather than more: it was apparently the outcome of the ordinary operation of the market, an ordinary fluctuation – no doubt unwelcome from Mr Cork’s perspective, but not beyond or outside the scope of that which might have been foreseen or predicted, and which therefore fell within the agreed basis of remuneration. In itself, that was an answer to the claim in respect of OMHL.

There is no test drive before an officeholder slots into the driving seat, puts their foot on the gas and moves into first gear by wading through a mountain of records that can potentially take many weeks to properly assemble and unscramble the facts, disputes and complications of the insolvency.

Furthermore, there is no readily available ejector seat, even if the street travelled is not paved with sufficient gold to discharge what might be considered a fair and reasonable level of remuneration for a job that has turned out to be very different to that originally envisaged. 

Whilst an officeholder is fulfilling statutory functions, the negotiation surrounding remuneration is essentially a feature of commercial bargaining.

The language in this recent case suggests that ordinarily, absent something perhaps rather exceptional, the court may be reluctant to descend into the arena once the bargain has been long settled. If there has been a material change of circumstances, an officeholder may need to apply to the Court at the earliest juncture that it is known about.