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Officeholders’ Remuneration cut by a third

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Re Friar and another (as Joint Administrators of Martin Groundland & Co Ltd) [2011] Scot CS CSOH_14 is a case that was heard by the Court of Session in Scotland but will no doubt be of interest to Officeholders throughout the UK.

This is another case where Officeholders’ remuneration has been scrutinised by the Court and in this case cut by a third. It appears that one of the reasons that the remuneration was reduced so substantially was because the court formed the view that the time records kept by the officeholders were not detailed enough to enable the court to determine whether the creditors got value for money.

The time records rounded up all time spent on the matter to the nearest half an hour of time. The court found that this was not precise enough and came to the conclusion that the result was the Administrators charged for more time than they had spent on the matter.

The court did not give any guidance as to what it thought would be suitable units of time, simply commented that it had no information as to usual practice of accountants.

The case can be contrasted with the decision in Super Aguri F1 Limited [26/10/2010] where the Court awarded the Administrators 95% of their costs. The Administrators were also allowed to charge out for support staff by reference to time recorded rather than as part of their overheads. This was the opposite of the decision made by the Court in Re Cabletel.

The Court decided that the administration was a complex one and that the Administrators had faced hostility from Honda who was the largest creditor. The court commented that the administration was "conducted in an atmosphere akin to trench warfare", and the “Rolls Royce” approach taken in relation to the creditors’ meeting could be justified in those circumstances.

Subject to a small reduction the Administrators’ remuneration and disbursements were approved by the Court.

If you have any questions about these or any other issues please contact a member of our Insolvency and Business Recovery Team.

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