Dispute with Liquidators Over Additional Fees

[binaryflip]

Hi all,

I'm looking for some help and advice regarding a dispute I have with liquidators over their additional fees. Apologies for the long post, but here are some relevant details regarding my situation with questions below:

• English law applies.
• I am the only director/shareholder of a private limited company which entered Members Voluntary Liquidation in Feb 2021.
• The company had only cash in the bank, with a few IT assets, and had no debts or creditors.
• Liquidators were appointed on a fixed fee basis (£5000).
• On the anniversary of the liquidation (Feb 2022) the liquidators requested an additional fee of £1500.
• There are also £124 in bank account charges relating to the liquidator's bank account.
• The liquidators have blamed a lack of response from my company's bank and HMRC for the delay in completing the liquidation prior to the anniversary.
• The liquidators have sent reminder letters roughly every 4 months, they claim to have phoned HMRC in Oct and Nov 21 and Jan 22, however HMRC have no record of these calls.
• Due to the lack of progress, I took it upon myself to phone both the bank and HMRC to try to resolve any issues. Admittedly there have been failings on their parts which were resolved following my phone calls.
• The bank accounts have now been closed and HMRC have granted clearance to close the liquidation.
• I have disputed the additional fee with the liquidators since its initial request in Feb 2022.
• The liquidators have produced a draft of the final account of the liquidation which still includes the additional fee (£1500) and liquidators bank account charges (£124).

I believe the liquidation should have been completed prior to the anniversary in Feb 2022 had the liquidators been more proactive with the bank and HMRC. Despite the liquidators sending reminder letters, I believe they should have followed them up with phone calls, as I have found following my phone calls that issues have been resolved and progress is made. I therefore believe that it is due to my efforts, not the liquidators, that the liquidation has been completed, and therefore the additional fee is unjustified.

Is it reasonable to believe that I have a case against the liquidators for the additional fee?

I have found the following in the liquidator's contract/letter of engagement and a Guide to Liquidators Fees:

• "If a member believes that the liquidator’s remuneration is too high, the basis is inappropriate, or the expenses incurred by the liquidator are in all the circumstances excessive he may, provided certain conditions are met, apply to the court."
• "Any such application must be made within 8 weeks of the applicant receiving the liquidator’s progress report in which the charging of the remuneration or incurring of the expenses in question is first reported"

I'm concerned the 8-week deadline to apply has expired, the initial report was in Feb 2022. However, I have been disputing the fee with the liquidator since then as information regarding their procrastination has subsequently been revealed. Could the 8-week deadline apply to the draft final account in Oct 2022?

If I can still apply to the court, details on how to do that are not provided.

• How do I find out which court to apply to?
• Do I need a solicitor to apply to the court?
• Will there be court fees? Can these be reclaimed?

Thank you for anyone taking the time to read this post, any help would be greatly appreciated.

[atticus]

What I can see is that for £1500 plus £124, it is probably not going to be worth engaging solicitors.

You have, presumably, received your final dividend at the beneficial tax rates, with entrepreneurs relief.

[binaryflip]

Thanks for your quick response.

The majority of the company's money has already been received with ER. There is about £4000 remaining with the liquidators subject to me agreeing to the additional fee which will reduce the final distribution to about £2500.

[atticus]

If it is indeed a fixed fee, surely you can hold them to that, without needing to consider other avenues. Check your engagement letter, and be sure that you understand fully what it says about fees. The bank charges may be a different matter.

[binaryflip]

The following is taken from the engagement letter:

"Our fee for both the pre and post appointment work will be capped at £5000 and as such no further fee will be charged for the post appointment work. This is subject to there being no assets other than as described in the declaration of solvency, no requirement for a distribution to creditors and is limited to two distributions to the shareholder. It also assumes that we will be in a position to finalise the liquidation prior to its anniversary. Should a further fee be required this will be subject to approval by the shareholder."

If I understand correctly, they can request additional fees and I can either accept or refuse them. In the case of a dispute, such as this, I assume it is the court that will have to decide.

[atticus]

Have you notified the liquidator that your approval as shareholder will not be provided, and that you expect the remaining funds to be paid to you in full?

[binaryflip]

Yes in an email sent 12/09/22:

"I appreciate that you have many other clients, and I don't expect you to work on this case 24/7, however I do expect that if you have not had a response from either the bank or HMRC after a period of several months that you pick up the phone and speak to them directly.
I believe that this should have been a straight-forward liquidation case (cash only, few assets, single director/shareholder, no debts, etc.) which could have been completed comfortably within a year. Despite the failings of HMRC and the bank, I feel your "wait and see" approach has contributed to the delay in completing the liquidation.
Had you been more proactive in October to December 2021 I believe this liquidation would have been closed prior to its anniversary in February 2022. I therefore do not feel that your additional fee of £1500 is warranted, and I expect it to be absent from the final distribution."

[atticus]

With what reply?

[binaryflip]

"I have reviewed this matter and have been able to get further details of our contact with HMRC following Josh’s return to the office.

He has checked his notes and in addition to the letters sent to HMRC as detailed within Neil’s email of 23 August 2022, I confirm that calls were also made on 11 October 2021, 4 November 2021 and on 10 January 2022 (each taking over half an hour to get through). We were also advised that our letter had been received and referrals were made for it to be processed. We did not send further letters, as during this period, as HMRC acknowledged generally that they were behind and asked not to be sent copies of letters which had already been sent.

The further letter in February 2022 was sent because abiding by their request not to chase in writing, had not elicited the required repayment.

I note that you have recently succeeded in speaking with HMRC and hope that this contact might make the difference, as HMRC have recently advised all Insolvency Practitioners that they have taken on more staff in an attempt to reduce the delays. However, in the meantime, we confirm that we will continue to chase.

With regards to the balance at Santander, we chased the closure of the bank account by email on 30 November 2021, 9 December 2021, and 20 January 2022. We eventually received a response by email on 15 February 2022 and at this point they were proposing to transfer only £3.02. We queried this and although we did not receive a response, we received £100.52 into the Liquidation account on 24 February 2022.

As you will see, a significant amount of work has gone into dealing with Santander and HMRC, which is far more than we would expect to need to do to conclude a liquidation.

Once we receive clearance from HMRC, I confirm that the final distribution will be made."

With regards to HMRC:
On two separate occasions I asked HMRC if they had received phone calls from the liquidators, they confirmed that no phone calls were received in relation to this case other than my own. HMRC ask for a Unique Tax Reference at the start of a phone call so a log of the call is registered to the account. The liquidators say they can provide call logs to back up their claim, however I suspect that the calls where general enquires and not specific to my case.

Sep 21: Liquidators wrote to HMRC asking for clearance to close the liquidation and requested that they send a response by the end of Oct 21. There was no response from HMRC.
Nov 21: Liquidators claim to have phoned HMRC - no record of this call at HMRC.
Jan 22: Again, the liquidators claim to have phoned HMRC - no record of this call at HMRC.
Feb 22: HMRC issued a penalty notice for failing to submit a Corporation Tax return for the period Jan-Feb 21. The liquidators sent a manual CT return along with a copy of their original request for closure.
Aug 22: After asking the liquidators for an update I'm again told they are waiting for HMRC and the final distribution will be made when they have received clearance. I decide to phone HMRC myself. HMRC say the letters from the liquidators have not been dealt with and the penalty notice is still against the account. The case is escalated with an estimated completion in Oct. The following day the penalty notice is removed and the process to grant clearance is started.
Oct 22: Liquidators receive clearance from HMRC to close the liquidation.

[dslippy]

Pay up and move on.

[binaryflip]

Thanks for your help dslippy.

Anyway back to the questions...

Is the only way to "apply to the court" to appoint a solicitor?
I agree with Atticus that it will probably cost more in solicitor fees than I am seeking to recover.

If I don't need a solicitor to apply to the court, how do I find out which court and what do I need to do to raise the additional fee dispute with them?

[atticus]

Why not do a deal with the liquidator? Neither of you will want this to go to court..

Otherwise:

Q1. No.

Q2. The County Court.

[binaryflip]

I have been dealing with the liquidator since Feb this year. The only other option I have with them is to raise a formal complaint. The issue I have with that is it will take time which will eat into the 8-week window that I have to apply to the court, if that deadline starts from the completion of the liquidation.