Trade minister Nigel Griffiths MP has warned lawyers and accountants who practise insolvency that he will be looking closely at the way they charge fees following the expected publication of a report into the matter by Mr Justice Ferris.
A working party representing all professional bodies involved in insolvency was set up last year under the aegis of Mr Justice Ferris to examine the fees charged by court-appointed insolvency practitioners and their lawyers. It is expected to publish its report next month.
Griffiths warned last week that he will “look at its recommendations very closely”, hinting that he would want to apply them to all insolvencies, not just court-appointed ones.
In July Mr Justice Ferris examined the level of fees in the Maxwell insolvency. He called the £705,000 charged by Nabarro Nathanson and £744,000 billed by Buchler Phillips “profoundly shocking”. The total bill was only slightly less than the total £1,672,500 recovered from the Maxwell estate.
Speaking at the the Bernard Phillips Memorial Lecture hosted by the Insolvency Practitioners Association, Griffiths said that Ferris' comments in that case – that the fees of practitioners should “reward value and not indemnify cost” – had “struck a real chord” and that he was pleased the president of the Society of Practitioners of Insolvency had endorsed them.
He went on to say: “The task, initially for Mr Justice Ferris and his working party but also for the profession, is to come up with some mechanism which translates the principle into practice.”
He added: “There is an obvious and understandable public concern when any insolvency process consumes the greater portion, if not the whole, of the funds to which creditors look for payment of their debts. The equitable distribution of a debtor's funds among his creditors is what insolvency is supposed to be all about. There is obviously a lot more work to be done in this area.”
Griffiths praised lawyers and insolvency practitioners for getting the courts to disqualify a growing number of “dodgy” and “cowboy” directors (464 in 1993/94 to 1,430 last year). But he warned: “I must be able to continue to defend the cost of disqualification work and particularly the costs of insolvency practitioners and lawyers involved in it.”