Administrators’ right to outstanding remuneration (Walker v National Westminster Bank plc)

Administrators’ right to outstanding remuneration (Walker v National Westminster Bank plc)

Simon Passfield of Guildhall Chambers discusses the case of Walker and another v National Westminster Bank plc which raised the question of whether administrators had a proprietary interest in redress monies which survived a company dissolution.

Original news

Walker and another v National Westminster Bank plc and another [2016] EWHC 315 (Ch), [2016] All ER (D) 268 (Feb)

The Chancery Division dismissed an application by the claimants, who were the former administrators of a holiday park, for an order that the unpaid balance of their remuneration should be charged on and payable out as a sum of £62,646.06. The court held that the payment in issue was not an asset, and could not be subject to the charge as sought.

What was the background to the judgment?

In 2008, the claimants were appointed as administrators of Sunnyside Holiday Park Limited (the company) by Lancashire Mortgage Corporation (LMC). Their appointment was renewed several times, but eventually expired in 2012, at which time LMC appointed fixed-charge receivers in their place. At the time they ceased to hold office, the claimants had recorded time costs of £164,664. LMC agreed to make a payment towards those costs from the sale proceeds of the company’s property, which reduced the claimant’s unpaid recorded time costs to approximately £132,000.

After the company was dissolved, the claimants were notified by Natwest that it had carried out a review of two interest rate swaps sold to the company in 2003 and had made a ‘provisional determination of redress’ in the sum of £62,646.06. Natwest indicated that if the company was restored to the register it would make a formal offer of redress in that amount.

The administrators asserted that they were entitled to the benefit of any redress monies by reason of paragraph 99(3) of Schedule B1 to the Insolvency Act 1986, which provides that a former administrator’s remuneration and expenses shall be:

  • charged on and payable out of property of which he had custody or control immediately before his appointment ceased to have effect, and
  • payable in priority to any floating charge

They sought an order directing Natwest to pay the monies directly to them.

What were the legal issues the judge had to decide?

The principal issue for determination was whether the monies claimed by the administrators constituted an asset which was potentially subject to a statutory charge. The judge also considered whether the former administrators would be able to accept any offer of redress.

What were the main legal arguments put forward?

The former administrators argued that the right to the redress payment was either a chose in

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