Administrator Remuneration Challenges and Fixed Charge Assets

The High Court’s decision in Pagden v Ridgley [2025] EWHC 2674 (Ch) provides useful clarification on the limits of creditors’ ability to challenge administrator fees under rule 18.34 of the Insolvency Rules (England & Wales) 2016 (“IR 2016”). 

This case is significant for both secured creditors and insolvency practitioners, as it delineates the boundaries of court oversight in remuneration agreements relating to fixed charge assets.

Key Takeaways

• Rule 18.34 IR 2016 does not apply to remuneration paid to administrators from the proceeds of assets subject to a fixed charge, as such assets do not form part of the company’s property and therefore fall outside the scope of challenge under this rule.
• There is a distinction between “the company’s fund” and “the chargee’s pots”.
• When realizing fixed charge assets, an administrator’s duties are owed primarily to the secured creditor, not the general body of creditors.
• The fiduciary duties of administrators do not, in themselves, preclude them from entering into agreements with secured creditors for the realisation of assets subject to fixed charges.

Background

The renumeration dispute arose from the administration of Orthios Eco Parks (Anglesey) Limited and Orthios Power (Anglesey) Limited (“the Companies”), both part of the Orthios Group.

The Orthios Group raised funds through bonds: £66 million from Cresta Energy Limited (“Cresta”) and £26.4 million from retail investors. The bonds were secured by fixed and floating charges over land, held by a Security Trustee, Mr Collin.

Following an event of default, Mr Colin appointed Mr Ridgley as administrator of the Companies on 25 March 2022, without first consulting Cresta.

In April 2022, Mr Colin approved the sale of the land held under the fixed charges and agreed to pay the following fees from the sale proceeds:

• Mr Ridgley’s remuneration in the amount of 5% of realisations up to £25 million and 15% of realisations above £25 million;
• Mr Ridgley’s solicitors’ fees in the amount of 1% of realisations up to £25 million and 5% of realisations above £25 million;
• Agent fees in the amount of 2% of realisations; and
• Mr Colin’s remuneration in the amount of 5% of realisations capped at £2 million.

Cresta disputed the scale of the fees and expenses and, after Mr Colin failed to address their concerns, sought his removal as Security Trustee. Mr Pagden was appointed in his place and subsequently sold the land for £35 million, which Cresta had valued at £44 million.

Mr Pagden as Security Trustee and the joint administrators of Orthios (Anglesey) Technologies Ltd (“OAT”) applied under rule 18.34 IR 2016 (“rule 18.34”) arguing that the remuneration and expenses charged and incurred was excessive.

At first instance, the judge dismissed the application, holding that the court lacked jurisdiction under rule 18.34 because Mr Ridgley's remuneration was solely referable to assets subject to a fixed charge and was advanced under a contract with the secured creditor.

Mr Pagden and the joint administrators of OAT appealed.

Issues on Appeal

Mr Pagden and the joint administrators of OAT advanced three grounds of appeal:

1. Remuneration agreed in connection with an administrator realising property which is subject to a fixed charge is within Part 18 of the IR 2016 and can be challenged;
2. In the alternative, the court should have heard and determined the challenge to Mr Ridgley’s remuneration under its inherent jurisdiction; and
3. Whether Mr Pagden was bound by the agreement made by his predecessor in title as Security Trustee.

Judgment

The appeal was dismissed on all grounds.

The court found that Part 18 of IR 2016, including rule 18.34, applies only to remuneration and expenses relating to the administration of the company's assets as statutorily enlarged, not to assets subject to fixed charges.

Practical Implications

This decision has several practical points:

• The case affirms that the statutory framework for challenging administrator remuneration does not extend to assets subject to fixed charges, underscoring the importance for secured creditors to be proactive in negotiating and monitoring remuneration agreements.
• Administrators owe their fiduciary duties primarily to the secured creditor when realising fixed charge assets and may enter into agreements for remuneration without breaching those duties.
• General creditors have limited recourse to challenge administrator remuneration relating to fixed charge assets but should remain vigilant and consider alternative remedies if their interests are affected.