Martin Cross on insolvency practitioners costs.

Martin Cross is head of litigation at Thomas Eggar Church Adams.

The ringing words of Mr Justice Ferris in Mirror Group Newspapers v Maxwell & ors (1998) BCC324 concerning the fees of the receivers sent a chill wind through the offices of all professionals dealing with insolvency work.

In the Maxwell case, the receivers took in about £1.67m and had costs, including legal costs, of some £1.63m. Mr Justice Ferris said: "If the amounts claimed are allowed in full, this re-ceivership will have produced substantial rewards for the receivers and their lawyers and nothing at all for the creditors of the estate."

Justice Ferris said he found it shameful that the Chief Taxing Master approved over 99 per cent of the remuneration applied for by the receivers.

Into this troubled picture there now enters the case of Hawk Insurance Company (in provisional liquidation). In this case, Mr Justice Evans-Lombe, who gave judgment on 13 January 1999, applied his mind to an application by a provisional liquidator for approval of its remuneration and disbursements pursuant to Rule 4.30.

The judge made it clear that he would be paying regard to the principles enunciated in the Maxwell case and the findings of Justice Ferris's working party on the remuneration of office holders. The judge then said that he would have to pay particular regard to whether or not the level of remuneration and disbursement had been approved by the informal creditors committee. He gave particular weight to evidence from an individual experienced in sitting on such informal creditors committees as to the general level and reasonableness of fees and disbursements charged by provisional liquidators.

There is also a lot of dispute over office holders' costs. Sometimes the disputes are between receivers and subsequent liquidators, but more often they are between creditors, their representatives and the office holder himself. Lawyers would be well advised in the current climate of dispute concerning insolvency practitioners' costs to ensure that their own insolvency practitioner clients are keeping appropriate records.

If solicitors are acting for creditors or others who wish to challenge costs, then the past inadequacies of insolvency practitioners and their record-keeping could be fertile ground for litigation.