We blogged about the 18 month rule as regards fee approval back in January 2018 (click here) but it has raised its ugly head again recently with at least one regulator having a different view to ours.
Rule 18.23(1) says that if fees are not fixed by the committee, creditors, or members as applicable within 18 months the office holder must apply to court, but rule 18.23(3) in ADMs, MVLs and, most importantly CVLs prevents you from applying to court for your fee approval after 18 months. Our interpretation has always been that because you will not know until the 18 months are up whether you have got permission from the relevant authority, you would not have time to apply to court, or you would have to apply to court early, so you must be able to continue to seek fee approval from the creditors after the 18 months.
However, a different interpretation of the rule is currently being suggested by one regulator. They say that you only have 18 months in which to apply to Court to fix the basis of your remuneration if creditors or a committee do not do so, and that once that time period has elapsed there is no mechanism for you to keep asking the creditors or a committee for approval. In other words, if you have not applied to Court or got your remuneration fixed by the creditors or committee within 18 months there is no statutory mechanism for you to do so.
The regulator has asked the Insolvency Service for their views on the interpretation of rule 18.23 and we await their views with interest. To be honest, even then that will not give total certainty, which will need someone brave enough to raise the issue in Court. In connection with that, Schedule 5, paragraphs 3 and 4 say:
“3. The provisions of CPR rule 3.1(2)(a)(b) (the court’s general powers of management) apply so as to enable the court to extend or shorten the time for compliance with anything required or authorised to be done by these Rules.
4. Paragraph 3 is subject to any time limits expressly stated in the Act and to any specific powers in the Act or these Rules to extend or shorten the time for compliance.”
Therefore, if the Insolvency Service considers that the 18 months is an absolute cap, an IP would have to first apply to court to vary the 18 month limit, adding an extra layer of complexity and uncertainty.
In the meantime, pending the words of wisdom from the Insolvency Service the risk averse approach should be to either obtain fee approval from the creditors or committee, or apply to Court well before 18 months of your appointment, to allow time for a further application within 18 months, if that is the only option left available to you.
