Removed Administrator Has Remuneration Order Set Aside Or Varied 

Removed Administrator Has Remuneration Order Set Aside Or Varied is sparked by the case of MTA Personal Injury Solicitors LLP v Wiseglass [2024] EWHC 2208 (Ch).

Application To Set Aside Removed Administrator’s Remuneration Order

On 5 April 2023, the judge fixed Steven Wiseglass’s remuneration at £60,000 upon application to the court in respect of administrator remuneration for MTA Personal Injury Solicitors LLP (“the LLP”). The LLP appeared under the management of Michael Taylor (“MT”).

Mr Wiseglass was removed as administrator (“the Removed Administrator) and replaced by Andrew Hosking and Sean Bucknall (“the Joint Administrators”) after a decision procedure on 10 January 2023.

On 23 February 2024, the Joint Administrators inter alia sought for the Removed Administrator’s remuneration order to be set aside or varied (“the Remuneration Review Application”). This application succeeded. If the Removed Administrator wants remuneration as administrator he will now have to address this through a detailed assessment.

Andrew Hosking (“AH”), one of the Joint Administrators, took the lead in fleshing out the evidence regarding the Remuneration Review Application. 

Joint Administrators’ Criticisms Of Removed Administrator

AH was critical of the Removed Administrator’s conduct:

• Too lenient with MT and or adopting a light touch approach.
• Inadequate investigations into books and records and transactions of the LLP prior to Administration, including but not limited to £1 million paid to MT on 19 May 2019.
• Insufficient disclosure to the court of relevant facts that the Removed Administrator which would have impacted on the outcome of the Removed Administrator remuneration application.
• The Removed Administrator was too close to MT and should not have accepted the appointment.
• The Removed Administrator had not justified the £60,000 he had persuaded the judge to fix as remuneration.

Removed Administrator’s Position

The Removed Administrator did not accept the position of the Joint Administrators and put in evidence in response accordingly.

Counsel for the Removed Administrator also said:

Mr Fennell took a further point, namely that a number of the issues raised by the Joint Administrators were issues that were disputed by Mr Wiseglass that could only satisfactorily be resolved by cross examination, and that a number of matters raised by the Joint Administrators, whilst potentially relevant to misfeasance or similar proceedings that the Joint Administrators might seek to bring against Mr Wiseglass, were not allegations that could be satisfactorily resolved within the context of the Review Application.

Judgment Highlights

… the correspondence produced by Mr Wiseglass shows that, on 16 June 2021, Mr Wiseglass had written to Mr Taylor enquiring as to what an “other debtors” figure of £2.4 million in LLP’s accounts related to. Mr Taylor forwarded the enquiry to LLP’s accountant/auditor, Richard Zoltie (“Mr Zoltie”). The following day, at 10:48 am, Mr Zoltie emailed Mr Taylor with a breakdown, showing that of the figure for debtors in LLP’s 2019 accounts of £2,443,341, £935,799 was shown as owed by Mr Taylor, and £760,308 was described as “historic loans to other companies”, principally ones that Mr Taylor was associated with, albeit described as irrecoverable. Mr Taylor then forwarded this latter email to Mr Wiseglass who, in his reply to Wiseglass at 11.09 am, responded to say: “This appears (sic) that you personally owe £995k are you in a position to repay this to the company? Are the other companies able to repay as well?” Mr Taylor responded to this by saying: “Thanks Steven in a word no. Does this matter?”

…

I do have very real concerns with regard to the evidence now before the court concerning what may or may not have been done by Mr Wiseglass, as administrator, in respect of investigating the affairs of LLP, and in particular investigating the extent to which Mr Taylor might have been indebted to LLP. Given the circumstances in which these allegations have come to be made, late in the day through Hosking 2, I do not consider it appropriate to make any findings as such as to whether Mr Wiseglass had adopted a strategy of “cut and shut”, or to the effect that his relationship with Mr Taylor was so close that he ought not to have accepted the appointment as administrator in the first place. However, I do consider there to be credible evidence in support of the assertion in Hosking 1 that Mr Wiseglass acted unfavourably leniently towards Mr Taylor in a manner and to an extent that was not justified in the circumstances.

In any event, given the absence of a contemporaneous record of Mr Wiseglass’s actions and thinking so far as even his preliminary investigations of the affairs of LLP are concerned, I consider that I am entitled to be concerned that matters concerning his investigation of the affairs of the LLP were not pursued with the rigour required not least by SIP 2. On this basis I feel bound to conclude that matters may not have been fairly and frankly disclosed to the court when I considered the position on 5 April 2023, and that the remuneration that I then found that Mr Wiseglass was entitled to cannot be properly justified, at least on the evidence presently before the court.

My concerns primarily stem from the following:

i) There is clear evidence of the two sums of £500,000 being paid out of the office account of LLP in favour of Mr Taylor on 22 March 2019, and of LLP’s draft accounts to 30 June 2020 and 30 June 2021, the latter relating to a period shortly prior to LLP entering into administration, showing Mr Taylor as owing very substantial sums of money to LLP. In addition, there is the evidence of very substantial sums of money being owed to LLP by MTA Solicitors and companies controlled by Mr Taylor, albeit insolvent in many cases. It may be that, in the light of the draft 2021 accounts, the figure of £935,000 odd referred to in Mr Wiseglass’s email to Mr Taylor on 17 June 2021 was an overstatement of Mr Taylor’s liability. However, it is a striking feature of the case that there is no evidence of Mr Taylor’s response to this email having been followed up by Mr Wiseglass, and there is no suggestion in the statement of affairs made on LLP entering into administration, the Proposals, the Conduct Report or in Mr Wiseglass’s subsequent progress reports as to even the possibility of very significant sums being owed by Mr Taylor to LLP.

ii) The striking silence in relation to such matters is notwithstanding that, as referred to in paragraph 23 above, in his progress reports filed on 29 June 2022 and 22 December 2022, Mr Wiseglass had, under the heading “Investigations into the affairs of LLP”, referred to having recovered, listed and reviewed LLP’s accounting records, and to having obtained and reviewed copy bank statements for the 3 years prior to LLP cease to trade. Further, reference was made to comparisons and enquiries being made, and it was confirmed that investigations were “still ongoing”, i.e., as late as the progress report filed on 22 December 2022. A difficulty from Mr Wiseglass’s perspective is that there is no evidence of any outcomes being reported for the purposes of paragraph 4 of SIP 2 or, perhaps more significantly for present purposes, of there being any documentary record of initial assessments, investigations or conclusions as required by paragraph 18 of SIP 2 that might have shown the extent of the investigations that were, in fact, carried out even for the purposes of the initial assessment envisaged by paragraphs 9-11 of SIP 2.

iii) On this basis, I consider that it is impossible for the court to be satisfied that any proper investigation, even of an initial kind, was carried out in relation to the affairs of the LLP, and in particular to follow-up on the evidence that indicated that Mr Taylor, and companies that he controlled, owed significant sums of money to LLP.

iv) The position in relation to the underlease and the use of the Demised Premises does, I consider, create further difficulties for Mr Wiseglass. It may be that his response to the landlord that the LLP had made no use of the Demised Premises for the purposes of the administration was correct, which would, prima facie, mean that the rent could not be recovered as an administration expense. However, there is the oddity that in his email dated 4 October 2022 responding to the landlord’s solicitors, Mr Wiseglass referred to having been “entirely unaware” prior to receipt of the landlord’s Solicitors’ letter of 21 September 2022 of a lease of the Demised Premises in the name of LLP, and suggested that Mr Taylor had been confused as to which LLP, either LLP or MTA Solicitors, held the relevant underlease of the Demise Premises. This accords with paragraph 23.1 of Wiseglass 5 where Mr Wiseglass refers to having been informed by Mr Taylor that LLP had no leasehold property. However, this does not accord with what was said in the Proposals as referred to in sub-paragraph 13(iv) above where reference was made to leased premises, and to the draft accounts ended 30 June 2021 having included improvements made to leasehold premises of £19,476 as well as showing rent as a major item of expenditure. I am concerned that Mr Wiseglass was either presenting a false picture in relation to who held the relevant leasehold interest, or at least failed to properly investigate and ascertain the position in circumstances where, until August 2022, Mr Taylor’s other LLP, MTA Solicitors, was apparently using part of the Demised Premises, as well as invoicing the subtenant for rent that was received either by MTA Solicitors, or by Mr Taylor himself. This is all, as I see it, consistent with there having been what was, at least, an inappropriately light-touch approach to the administration that favoured Mr Taylor.

v) Similar observations might, I consider, be made in respect of the lack of apparent investigation as to the use of VAT registration numbers by the respective LLPs, LLP and MTA Solicitors, and the acceptance without further enquiry of explanations given by Mr Taylor in relation to the cyber-attack that was said to have rendered LLP’s electronic records inaccessible. I would however add that I was not persuaded that the evidence pointed towards anything untoward in Mr Wiseglass having accepted the information provided by Lloyds Bank as to the bank accounts held by LLP, or in respect of the operation of the LLP’s client account during the course of the administration.

…

Taking into account the above considerations, and in the light of the evidence now before the court, I am left with a sense of real unease and concern as to the basis upon which I determined that Mr Wiseglass’s remuneration as administrator ought to be fixed in a sum of £60,000 plus VAT. As I have said, I was, perhaps to an extent inconsistent with the “guiding principles”, prepared to give him the benefit of the doubt notwithstanding his inability to provide documentary evidence to satisfy the requirements of paragraph 21.4.4 of the IPD 1. However, in the light of the evidence now before the court that at least seriously questions whether Mr Wiseglass carried out, even on an initial basis, the investigations that he ought to carried out with regard to the affairs of LLP, in the light of the somewhat deafening silence from Mr Wiseglass as to what, exactly, was done, and given the absence of a documented narrative of the kind envisaged by paragraph 18 of SIP 2, I feel bound to conclude that the remuneration as sought by Mr Wiseglass, even if limited to the amount as fixed on 5 April 2023, has not been properly justified in the manner required by the authorities and by paragraph 21 of the IPD.

I would add that in determining the amount at which Mr Wiseglass’s remuneration should be fixed on 5 April 2023, I proceeded on the footing, as reflected in what creditors had been informed in the progress reports about Mr Wiseglass’s investigations of the affairs of LLP, that Mr Wiseglass had carried out the sort of inquiries as to the affairs of the LLP, and as to the liabilities of Mr Taylor and his connected entitles to LLP, that might reasonably have been expected to have been carried out by a reasonably diligent administrator acting on an objective basis. Unfortunately, on the evidence now before the court, I fall a long way short of being able to satisfy myself that this was the case, and I have a very real concern at least that it was not the case.

In these circumstances, notwithstanding that the Joint Administrators could potentially have intervened on 5 April 2023, and that one of the options then open to me was to direct a detailed assessment, I am persuaded that the proper course, in the exercise of my discretion under r.12.59(1), is to set aside paragraphs 2 and 3 of the 2023 Order, and direct that if Mr Wiseglass wishes to pursue his claim for remuneration and Category 2 expenses, then his claim should be subjected to a detailed assessment.

I reach this conclusion because I am persuaded that it is appropriate to exercise the exceptional jurisdiction to set aside this aspect of my earlier order on the basis of the changed circumstances, and the new evidence before me which does, I consider, make a material difference to what was before me when I made the 2023 Order.