The High Court has held that there is limited scope for secured lenders to challenge administrator remuneration for dealing with fixed charge assets, particularly where those fees have been agreed at the outset

Background

An administrator was appointed by a security trustee, acting on behalf of various secured parties. Following appointment, the security trustee (acting in his capacity as the holder of the security) agreed to pay the administrator, from the proceeds of sale, a fee equal to 5% of the proceeds up to £25 million, and 15% of the proceeds in excess of £25 million. The land sold for an amount in excess of £25 million triggering a payment to the administrator of £2,765,000.

Court applications

The security trustee was subsequently replaced by a successor security trustee and the successor security trustee applied to the court for relief under rule 18.34 of the Insolvency Rules on the basis that the administrator's remuneration was excessive. 

Decision 

The court held that:

• It had no jurisdiction under rule 18.34 to review or determine administrator remuneration where it had been expressly agreed with the fixed charge holder and was payable from the proceeds of sale of the asset subject to the fixed charge. 
• Rule 18.34 generally applies to remuneration which is an expense of the administration and remuneration for realising a fixed charge asset would not be an expense of the administration.   

Pagden (as Security Trustee) v Ridgley (as former Administrator of Orthios Eco Parks (Anglesey) Ltd) [2024] EWHC 3047 (Ch) 

Read a more detailed article on this judgment published in our Lending Focus - February 2025 edition here.

Author: Huguette Craggs