Overview Legal Fees In Liquidation
The default position is that legal fees in Liquidation are subject to detailed assessment.
A Liquidator however can and more often than not will pay the legal fees of the insolvent estate’s own solicitors by way of agreement.
Liquidator Duty When Incurring Expenses In A Liquidation
When incurring expenses in a Liquidation a Liquidator has to consider the cost benefit assessment and apply commercial judgment. They are expected to spend the estate’s money as they might their own Mirror Group Newspapers plc v Maxwell and others (No 2) [1998] 1 BCLC 638 as Ferris J said:
Third, the test of whether office-holders have acted properly in undertaking particular tasks at a particular cost in expenses or time spent must be whether a reasonably prudent man, faced with the same circumstances in relation to his own affairs, would lay out or hazard his own money in doing what the office-holders have done. It is not sufficient, in my view, for office-holders to say that what they have done is within the scope of the duties or powers conferred upon them. They are expected to deploy commercial judgment, not to act regardless of expense. This is not to say that a transaction carried out at a high cost in relation to the benefit received, or even an expensive failure, will automatically result in the disallowance of expenses or remuneration. But it is to be expected that transactions having these characteristics will be subject to close scrutiny.
Default Detailed Assessment Provision
The default detailed assessment provisions set out in the Insolvency (England and Wales) Rules 2016 are as follows:
- Rule 12.42 of the Insolvency (England and Wales) Rules 2016 provides that where the costs of any person are payable as an expense out of the insolvent estate, the amount payable must be decided by detailed assessment unless agreed between the office-holder and the person entitled to payment.
- Rule 12.43(4) of the Insolvency (England and Wales) Rules 2016 2016, the detailed assessment proceedings are required to be commenced within 3 months of a request being made, or within such further time as the court, on application, may permit.
