Cooke v Dunbar Assets Plc [2016] EWHC 1888 (Ch)

[2016] EWHC 1888 (Ch)Case No CH/2015/0022IN THE HIGH COURT OF JUSTICEON APPEAL FROMDEPUTY DISTRICT JUDGE BUCKLEY-CLARKE (No: 168 of 2014)CHANCERY DIVISIONIN BANKRUPTCYIN THE MATTER OF BRIAN HERBERT COOKEAND IN THE MATTER OF THE INSOLVENCY ACT 1986Venue Rolls Building, Fetter Lane,LONDON EC4A 1NLDate Friday 29 th July 2016
Before
MR JEREMY COUSINS QC,SITTING AS A DEPUTY JUDGE OF THE CHANCERY DIVISION
Between
BRIAN HERBERT COOKEAppellantDUNBAR ASSETS PLCRespondent
Miss Aileen McErlean (instructed by Messrs Ronaldsons LLP, of 55, Gower Street, LONDON WC1E 6HQ) for AppellantMr Joseph Curl (instructed by Messrs DLA Piper UK LLP, of 3, Noble Street, LONDON EC2V 7EE) for RespondentHearing Hearing date: Wednesday 6 th April 2016

JUDGMENT APPROVED

[1]On 6th April 2016 I handed down judgment dismissing the appeal of Mr Brian Cooke (“Mr Cooke”) against the decision of Deputy District Judge Buckley-Clarke whereby, sitting at the Luton County Court on 18th December 2014, she made a bankruptcy order against Mr Cooke. Only shortly before judgment was handed down, it became apparent that there was an issue between the parties as to the costs order which should be made. For Mr Cooke, Miss McErlean suggested that the appropriate order for costs was that they be treated as a cost and expense of the bankruptcy, whereas Mr Curl, for the petitioning creditor who was the successful respondent to the appeal, maintained that Mr Cooke should be ordered to pay the costs.[2]It was apparent when this issue was argued before me that neither counsel had had a full opportunity to research the point, upon which they were in fundamental disagreement as to issues of principle, and, therefore, I directed that I would reserve judgment, and allow counsel further time in which to conclude their researches on the issue. In the event, in accordance with a timetable which I approved, both counsel put in further written submissions (from Miss McErlean dated 20th April, 27th April, and 28th June 2016, and from Mr Curl dated 25th April and 25th May 2007) and further authorities, all of which I have considered.

The issues

[3]Mr Curl and Miss McErlean, both of whom have considerable experience in bankruptcy matters, in the course of the hearing, agreed that the costs of the appeal had to be dealt with as falling within three possible categories:(i) As a cost and expense of the bankruptcy, and thus falling to be dealt with in accordance with the order of priority set out in rule 6.224(1) of the Insolvency Rules 1986 (“the 1986 Rules”).(ii) As a provable debt in the bankruptcy.(iii) As a liability outside of the bankruptcy, that is to say, as costs ordered against Mr Cooke personally. (For convenience I shall refer to these respectively as Categories 1, 2, or 3.) Miss McErlean’s oral submission was that the costs must be dealt with as Category 1, but, alternatively, they should be ordered to be dealt with under Category 2. Mr Curl’s submission as the hearing was that the costs should be ordered against Mr Cooke personally under Category 3. Counsel agreed further that it was a matter of law into which of these three categories that the costs liability should fall, and not a matter of discretion for the court.[4]With the benefit of time to research the matter more fully, counsel were able to elaborate upon and refine their submissions. Mr Curl, having initially submitted that the costs did not amount to an expense of the bankruptcy, in light of authorities to which I shall refer below, submitted that whilst costs should be ordered against Mr Cooke, it was permissible and appropriate to order a fall-back provision, namely, that to the extent that costs are not paid by Mr Cooke then the costs should be treated as a cost of his bankruptcy.[5]It is remarkable that despite the long-standing history of the jurisdiction to hear appeals in bankruptcy matters that no authority, reported or otherwise, which directly addresses the issue of costs on an appeal against a bankruptcy order, could be found by counsel, despite their extensive researches.[6]Both parties’ submissions proceeded on the basis that a costs order should be made. The issues for me to decide are(1) under which Category (or Categories) a costs order permissibly can be made, and,(2) if I have any discretion in the matter as to allocation to a particular Category (or Categories), then the form of order that I should make. THE LEGISLATIVE BACKGROUND 7. Appeals in insolvency proceedings

THE LEGISLATIVE BACKGROUND

[7]Provision for appeals in matters of individual insolvency is made by s375(2) of the Insolvency Act 1986 as amended:
“An appeal from a decision made in the exercise of jurisdiction for the purposes of those Parts by [the county court] or by a registrar in bankruptcy of the High Court lies to a single judge of the High Court; and an appeal from a decision of that judge on such an appeal lies [...] to the Court of Appeal.”
[8]Chapter 8 of the 1986 Rules is headed “Appeals in Insolvency Proceedings”. Rule 7.47 deals with corporate insolvency. Rule 7.48, headed “Appeals in bankruptcy [by the Secretary of State]” (which provision is not applicable in the present matter) is in the following terms:
“(1) In bankruptcy proceedings, an appeal lies at the instance of the Secretary of State from any order of the court made on an application for the rescission or annulment of a bankruptcy order, or for a bankrupt's discharge.”
[9]Rule 7.49A(1) provides that an “appeal against a decision at first instance may only be brought with either the permission of the court which made the decision or the permission of the court which has jurisdiction to hear the appeal”.

The bankrupt’s estate – definition and vesting

[10]The bankrupt’s estate is defined as follows in s283(1) of the 1986 Act:
“(1) Subject as follows, a bankrupt's estate for the purposes of any of this Group of Parts comprises— (a) all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and (b) any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling within the preceding paragraph.”
[11]Pursuant to s305(2) of the Act, it is the function of the trustee in bankruptcy to get in, realise and distribute the estate in accordance with Chapter IV of Part IX of the Act. The bankrupt’s estate vests in the trustee immediately upon his appointment; s306(1).

Bankruptcy debt

[12]By s382 of the 1986 Act, a bankruptcy debt is defined to mean “(subject to the next subsection) any of the following—(a) any debt or liability to which he is subject at the commencement of the bankruptcy,(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy,(c) any amount specified in pursuance of section 39(3)(c) of the Powers ofCriminal Courts Act 1973 in any criminal bankruptcy order made against him before the commencement of the bankruptcy, and(d) any interest provable as mentioned in section 322(2) in Chapter IV of PartIX. (2) In determining for the purposes of any provision in this Group of Parts whether any liability in tort is a bankruptcy debt, the bankrupt is deemed to become subject to that liability by reason of an obligation incurred at the time when the cause of action accrued. (3) For the purposes of references in this Group of Parts to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in this Group of Parts to owing a debt are to be read accordingly. (4) In this Group of Parts, except in so far as the context otherwise requires, “liability” means (subject to subsection (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment and any liability arising out of an obligation to make restitution.”

Priority of debts and expenses upon bankruptcy

[13]The priority of debts in the distribution of a bankrupt’s estate is established by s328 of the 1986 Act:
“(1) In the distribution of the bankrupt's estate, his preferential debts shall be paid in priority to other debts. (1A) Ordinary preferential debts rank equally among themselves after the expenses of the bankruptcy and shall be paid in full, unless the bankrupt's estate is insufficient to meet them, in which case they abate in equal proportions between themselves. (1B) Secondary preferential debts rank equally among themselves after the ordinary preferential debts and shall be paid in full, unless the bankrupt's estate is insufficient to meet them, in which case they abate in equal proportions between themselves.” (Emphasis added)
[14]Rule 6.224 of the 1986 Rules establishes the priority of the expenses of a bankruptcy. At (h), in a list running from (a) to (r), “the costs of the petitioner, and of any person appearing on the petition whose costs are allowed by the court”.

Costs in insolvency proceedings

[15]Chapter 6 of Part 7 of the 1986 Rules is headed “Costs and Detailed Assessment”. Rule 7.33A(1) provides that the chapter applies in relation to costs in connection with insolvency proceedings. Rules 7.34A and 7.35 make provision for assessment of costs by the detailed procedure in accordance with the CPR; rule 7.36 deals with the costs of officers charged with execution of writs or other process, rule 7.37A is concerned with costs in respect of petitions presented by insolvents. Rule 7.38 makes provision in respect of costs paid otherwise than out of the insolvent estate. It is in the following terms:
“Where the amount of costs is decided by detailed assessment under an order of the court directing that those costs are to be paid otherwise than out of the insolvent estate, the costs officer shall note on the final costs certificate by whom, or the manner in which, the costs are to be paid.”
Rules 7.39, 7.40, 7.41 and 7.42 deal respectively with costs against an official receiver, applications for costs, costs of witnesses, and final costs certificates.[16]Chapter 9 of the 1986 Rules (headed “General”) begins with rule 7.51A, in turn headed “Principal court rules and practice to apply”. Insofar as it is material it provides as follows: “(1) The provisions of the CPR in the first column of the table in this Rule (including any related practice direction) apply to insolvency proceedings by virtue of the provisions of these Rules set out in the second column with any necessary modifications, except so far as inconsistent with these Rules. [The table here provides by the first column, inter alia, for the application of CPR Parts 44 and 47, by virtue of Chapter 6 of Part 7 of the 1986 Rules.] (2) Subject to paragraph (3), the provisions of the CPR (including any related practice direction) not referred to in the table apply to proceedings under the Act and Rules with any necessary modifications, except so far as inconsistent with these Rules.” [The table here provides by the first column, inter alia, for the application of CPR Parts 44 and 47, by virtue of Chapter 6 of Part 7 of the 1986 Rules.][17]Part 12 of the 1986 Rules is headed “Miscellaneous and General”; it does not merely define what is meant by particular terms used in the Rules, but makes substantive provision as to how various matters, including as to costs, are to be dealt with. Rule 12.2 (headed “Costs, expenses, etc.”) is in the following terms:
“(1) All fees, costs, charges and other expenses incurred in the course of winding up, administration or bankruptcy proceedings are to be regarded as expenses of the winding up or the administration or, as the case may be, of the bankruptcy. (2) The costs associated with the prescribed part shall be paid out of the prescribed part.”
[18]Rule 13, deals with interpretation and application of the 1986 Rules, and by rule 13.7 provides that “Insolvency proceedings” means “any proceedings under the Act or the Rules”. (It has, however, been held that proceedings under s423, relating to transactions defrauding creditors, are not insolvency proceedings; see Jyske Bank (Gibraltar) Ltd v Spjeldnaes [2000] BCC 16, and In re Banco Nacional de Cuba [2001] 1 WLR 2039.) “Bankruptcy proceedings” are not separately defined within the 1986 Rules, or under the 1986 Act. THE SUBMISSIONS FOR MR COOKE 20. Rule 12.2 of the 1986 Rules[19]Miss McErlean began her submissions, developed more fully later in writing, by emphasising the provisions of Rule 12.2(1). She relied upon this rule for the proposition, simply, but attractively stated, that costs on a bankruptcy appeal cannot be divorced from the underlying proceedings, because an appeal is a continuation of those proceedings commenced below by the petitioning creditor, and an appeal is not a standalone action. Thus, applying the provisions of Rule 12.2(1), she maintained, the costs of the appeal are a cost and expense of the bankruptcy, and the priority of such costs is established by Rule 6.224, at (h) in the rankings from (a) to (r). The costs of an appeal from a bankruptcy order, she maintained, should be treated no differently from the costs of the petition pursuant to which the original order was made, in respect of which it was common ground that the petition costs are regarded as a cost and expense of the bankruptcy. Rule 12.2 does not confine “costs and expenses” to those incurred prior to the making of the bankruptcy order. All costs incurred in the course of the bankruptcy are included. The underlying rationale for making the petitioner’s costs at first instance a cost and expense of the bankruptcy applies with equal force to the costs of an appeal; the costs of both are incurred to secure or maintain a bankruptcy order as a collective remedy for creditors.

THE SUBMISSIONS FOR MR COOKE

[20]Developing her submission from this proposition, Miss McErlean maintained that the categorisation of the liability for costs was a matter of law and not a matter of discretion. Mr Cooke’s liabilities must be(1) a bankruptcy debt within s382 of the Act, or(2) a cost and expense of the bankruptcy (subject to priorities in Rule 6.224), or(3) a post-bankruptcy debt. Both (1) and (2) fall to be dealt with in Mr Cooke’s bankruptcy and met from the bankruptcy estate, whereas (3) would fall outside of the bankruptcy and fall to be met from any after-acquired assets (if any) not falling within the bankruptcy estate. Her primary submission was that the appeal costs constituted a cost and expense of the bankruptcy, failing which they were to be treated as a provable debt; either way they would be payable from the bankruptcy estate, the difference between the two is as to how the costs would rank in order of priority.

Three propositions derived from Re Nortel

[21]Miss McErlean drew heavily, in support of her case, upon the recent decision of the Supreme Court in Re Nortel GmbH [2014] AC 209, a case concerned with whether liabilities under a financial support direction issued under s43 of the Pensions Act 2004, constituted expenses of administration. It was held in Nortel that the relevant liability constituted a provable debt. She relied upon the decision for three propositions, the first being that upon no view could the costs liability fall outside the bankruptcy, and be ordered personally against Mr Cooke. This was because, she argued, before the making of the bankruptcy order, there was a contingent liability for the costs of any appeal from it. In this regard, Miss McErlean emphasised particularly what was said by Lord Neuberger (with whom Lords Mance, Clarke and Toulson agreed) at paras 88-90:
“88 In a number of cases, it has been held that, where an order for costs was made against a person after an insolvency process had been instituted against him, his liability for costs did not arise from an obligation which had arisen before issue of the bankruptcy proceedings, even though the costs order was made in proceedings which had been started before that insolvency process had begun: see for instance In re Bluck; Ex p Bluck (1887) 57 LT 419, In reBritish Gold Fields of West Africa [1899] 2 Ch 7 , In re A Debtor (No 68 of1911) [1911] 2 KB 652, and In re Pitchford [1924] 2 Ch 260. 89. In my view, by becoming a party to legal proceedings in this jurisdiction, a person is brought within a system governed by rules of court, which carry with them the potential for being rendered legally liable for costs, subject of course to the discretion of the court. An order for costs made against a company in liquidation, made in proceedings begun before it went into liquidation, is therefore provable as a contingent liability under rule13.12(1)(b), as the liability for those costs will have arisen by reason of the obligation which the company incurred when it became party to the proceedings. 90. I have little concern about overruling those earlier decisions, although they are long-standing. ...”
Similarly she relied upon para 136, where Lord Sumption (with whom Lords Mance and Clarke agreed) held that many costs cases concerned with contingent liabilities had been wrongly decided. He said:
“There are a number of problems about these cases. One of them, as it seems to me, is the absence of any real attempt to analyse the effect of the statutory scheme in creating an obligation to meet a liability contingently on some specified event. In the earlier cases, this can perhaps be regarded as the legacy of the older principle which admitted only contractual debts to proof. But that consideration cannot explain the more recent decisions. In my view they were wrongly decided. In the costs cases, I consider that those who engage in litigation whether as claimant or defendant, submit themselves to a statutory scheme which gives rise to a relationship between them governed by rules of court. They are liable under those rules to be made to pay costs contingently on the outcome and on the exercise of the court's discretion. An order for costs made in proceedings which were begun before the judgment debtor went into liquidation is in my view provable as a contingent liability, as indeed it has been held to be in the case of arbitration proceedings: In re Smith; Ex p Edwards (1886) 3 Morr 179. In both cases, the order for costs is made against someone who is subject to a scheme of rules under which that is a contingent outcome. The fact that in one case the submission is contractual while in the other it is not, cannot make any difference under the modern scheme of insolvency law under which all liabilities arising from the state of affairs which obtains at the time when the company went into liquidation are in principle provable. Of course, an order for costs like many other contingencies to which a debt or liability may arise, depends on the exercise of a discretion and may never be made. But that does not make it special. It is not a condition of the right to prove for a debt or liability which is contingent at the date when the company went into liquidation that the contingency should be bound to occur or that its occurrence should be determined by absolute rather than discretionary factors.”
[22]Applying this reasoning to the present case, Miss McErlean submitted, the bankruptcy petition preceded the making of the bankruptcy order, and at the point of presentation of the petition, Dunbar and Mr Cooke had submitted themselves to the statutory régime whereby the relationship between them was governed by the rules of court; those rules make provision for an appeal. Thus, she argued, by the time of the bankruptcy order, Mr Cooke had a contingent liability for the costs of any appeal. Miss McErlean acknowledged, however, that Lord Neuberger’s observations, at para 89 in the passages just cited, concerning costs in proceedings begun before liquidation, were concerned not with the costs of the liquidation itself. (The acknowledgment, logically, must extend to what Lord Sumption said at para 136.) He was there addressing other legal proceedings which were in existence before the commencement of liquidation.[23]Closely linked with this point, Miss McErlean maintained that costs and expenses of bankruptcy cannot be confined to such costs and expenses up to the date of the bankruptcy order because otherwise the trustee in bankruptcy’s fees and costs in dealing with a bankrupt’s assets could not be recovered from the bankruptcy estate. Since Dunbar had successfully resisted the appeal, it had obtained and held the relief sought in the petition, a class remedy, and the costs accordingly should come from the assets of the bankrupt in priority to distribution to unsecured creditors. If the position adopted by Dunbar were to be correct, she submitted, a petitioning creditor who successfully resisted an application to annul a bankruptcy could not recover its costs of doing so, and would be left as an unsecured creditor of the bankrupt despite having incurred costs for the benefit of the body of creditors as a whole. This, she suggested in her oral submissions, was contrary to the practice where the costs of failed annulment applications were treated as expenses of the bankruptcy.[24]Miss McErlean’s second proposition said to be derived from Nortel, was closely related to her submissions, described above, as to priority and ranking of liabilities under the 1986 Rules. It is that the status and ranking of the liability in respect of costs, including the costs of an appeal, are fixed as a cost and expense of the bankruptcy by the provisions of Rule 12.2 of the 1986 Rules, or alternatively s382 of the 1986 Act (defining, as set out above, a bankruptcy debt), so that it is not open to the court on this appeal to order Mr Cooke personally to pay Dunbar’s costs, or, indeed to make alternative costs orders (against Mr Cooke, with a fall-back recovery as a cost and expense). For this she relied upon what Lord Neuberger, having expressed (at para 95 of his judgment) the conclusion that the relevant liability in Nortel was a provable debt, went on to say at paras 115-117:
“115 If I had taken a different view on the provable debt issue, an alternative argument to that just discussed was that the court has the power to direct the administrator of a target company to accord to the potential liability under the FSD regime a higher ranking than it would be given under the 1986 Act and the Insolvency Rules . In other words, that the court could order the administrator to treat the potential FSD liability as a provable debt (category 5 in para 39 above) even though the effect of the legislation is that it should rank lower (namely category 7). 116 At any rate at first sight, it would be extraordinary if a court, which had decided that a liability did not fall within the definition of provable debts in rule 13.12, could none the less go on to decide that it was to be so treated, in the absence of any specific statutory power to do so. Such a course would appear to be wrong in principle, because it would involve a judge effectively overruling the lawful provisions of a statute or statutory instrument. It would also be highly problematic in practice because it would throw many liquidations and administrations into confusion: the law would be uncertain, and many creditors who felt that the statutory ranking caused them unfair prejudice would make applications to the court. 117 If further reasons were required for this conclusion, they may be found in rule 2.67 and in In re Toshoku Finance. Rule 2.67(2)(3) , referred to in para 42 above, show that, where the Insolvency Rules wish to give the court the ability to change the priority rules, they say so. In the course of his speech in In re Toshoku Finance [2002] 1 WLR 671, para 38, LordHoffmann referredto the proposition “whether debts should count as expenses of the liquidation is a matter for the discretion of the court” and held that there was no such discretion and disapproved Sir Donald NichollsV-C's comments in In re Kentish Homes Ltd [1993] BCLC 1375. As Lord Hoffmann made clear in para 41, how a particular liability was to be ranked depended solely on the proper interpretation of the Insolvency Rules.”
[25]Miss McErlean’s third Nortel proposition is that there are strong “fresh start” public policy reasons for treating the costs of the appeal as a cost and expense of the bankruptcy, or alternatively as a provable debt in the bankruptcy. She relied upon what was said by Lord Neuberger at para 93: 93 The notion that all possible liabilities within reason should be provable helps achieve equal justice to all creditors and potential creditors in any insolvency, and, in bankruptcy proceedings, helps ensure that the former bankrupt can in due course start afresh. Indeed, that seems to have been the approach of the courts in the 19th century before the somewhat aberrant decisions referred to in para 88 above. Thus, in Ex p Llynvi Coal and Iron Co; In re Hide (1871) LR 7 Ch App 28 , 32, James LJ described one of the main aims of the bankruptcy regime as to enable the bankrupt to be “a freed man— freed not only from debts, but from contracts, liabilities, engagements and contingencies of every kind”. If that was true in 1871, it is all the more true following the passing of the 1986 and 2002 Acts, and as illustrated by the amendment to rule 13.12(2) effected following the decision in In re T & N Ltd[2006] 1 WLR 1728, so as to extend the rights of potential tort claimants to prove.”

Absence of prejudice

[26]Further, Miss McErlean urged that it was difficult to see that there would be any prejudice to Dunbar in treating its costs of the appeal as a cost or expense of the bankruptcy, since with such a status those costs would rank in priority above the claims of any other unsecured creditors.

Mr Cooke’s suggested categorisation of the appeal costs

[27]In summary, Miss McErlean’s submission was that whether the costs of the appeal were a cost and expense of the bankruptcy (her primary case), or a provable debt (her alternative case), they most certainly could not be dealt with outside of the bankruptcy, and that it would be wrong in principle, as well as without any legal foundation, so to deal with them. THE SUBMISSIONS FOR DUNBAR The general costs discretion

THE SUBMISSIONS FOR DUNBAR

[28]Mr Curl put at the forefront of his submissions the express provisions of Rule 7.51A of the 1986 Rules, and the application of CPR Parts 44 and 47 (to which I have referred above) in arguing that the court has an unfettered discretion as to what order should be made for the costs of an appeal. These provisions in the Rules, he maintained, amounted to the only statutory guidance as to the treatment of the costs of appeals from bankruptcy orders. It was therefore a matter for the court to decide whether to order costs against Mr Cooke’s bankruptcy estate (within Category 1), or against Mr Cooke (Category 3).[29]The costs of the appeal, he submitted, could not properly fall within Category 2, as a debt provable in the bankruptcy because the liability was incurred post-bankruptcy. In this respect he relied upon what was said by Lord Neuberger in Nortel at paras 88 and 89 (see above). The present case is not concerned with litigation which pre-existed the bankruptcy proceedings. Once an office-holder is appointed, it is up to him as to how to deal with a claim. All causes of action vested in the office-holder, who was responsible for dealing with them. Mr Cooke could not cause costs to be incurred in pursuing any such claims. This was to be contrasted with the costs of the appeal in this case. It was Mr Cooke who had decided to initiate the unsuccessful appeal, which by definition, he did after the making of the bankruptcy order.[30]As I have explained above, Mr Curl maintained, in the light of his research, that an order for costs could be made in the alternative, in the form that Mr Cooke should pay the costs of the appeal, but if not paid by him, then they might be treated as a cost of the bankruptcy. For an example of such an approach he relied on Foenander v Allan (trustee in bankruptcy of Foenanader) [2006] BPIR 1392; see more fully below.[31]Mr Curl submitted that Category 1 cases are those where costs are ordered against the bankruptcy estate, and would not include an order for costs against Mr Cooke personally. Such costs would arise, for example, where litigation was conducted on behalf of the estate and to which Mr Cooke was not a party. On the other hand, Categories 2 and 3 would constitute orders for costs against Mr Cooke personally. He emphasised, in written submissions of 25th May 2016, that his case proceeded on a distinction being drawn between Mr Cooke’s bankruptcy estate, and Mr Cooke’s post-bankruptcy estate, against the latter of which he sought a primary costs order; his case was not, as it had been characterised in Miss McErlean’s written submissions of 27th April 2016, that Mr Cooke and his bankruptcy estate were two separate legal persons. He contended that it was a matter for the discretion of the court as to whether an order should be made falling within any of the three Categories, and that the 1986 Rules are silent as to costs on appeals from bankruptcy orders. In his written submissions, Mr Curl maintained that the issue of costs order provability in Mr Cooke’s bankruptcy was a separate matter from whether the court can only order costs against the estate.

Rule 12.2 of the 1986 Rules

[32]Rule 12.2, submitted Mr Curl, exists to ensure that officeholders are not left out of pocket; it does not address issues as to costs orders or the court’s jurisdiction to make them. He argued that the case advanced on behalf of Mr Cooke, if correct, would preclude the court from making an order against any failed litigant in bankruptcy proceedings; for example, where a trustee successfully defended a claim against the estate, the costs of so defending could only come from the estate, rather than from the unsuccessful party.[33]As for Miss McErlean’s reliance upon Nortel, Mr Curl submitted that this was misplaced because that case dealt with an existing liability against an insolvent estate, and whether it fell to be treated as a provable debt, an expense, or something else. Mr Curl accepted that once a costs order is made, its subsequent treatment as between bankrupt and receiving party is not a matter of discretion. This, he submitted, had nothing to do with the present case, where no costs order has yet been made, and the court is yet to exercise its discretion as to the form of order.

Costs in annulment cases

[34]Mr Curl took issue with Miss McErlean’s suggestion that there was any invariable practice whereby the costs of failed annulment applications were treated as expenses of the bankruptcy. The decision of Sir Andrew Morritt, the Chancellor, in London Borough of Redbridge v Mustafa [2010] BPIR 893, Mr Curl submitted was authority directly to the contrary. That was a case in which an annulment application succeeded. The Chancellor said this at paras 25-26:
“25 I turn now to the three issues of principle to which I referred earlier. The first is, what are the basic principles to be applied in determining who should pay these costs. This issue arises because of the various components of costs incidental to an annulment of a bankruptcy order. There are, as it seems to me, four, namely: (1) the cost of the original petition; (2) the costs of the annulment application; (3) the costs of the Official Receiver arising on or after the making of the original bankruptcy order and; (4) the costs and expenses of the Trustee in Bankruptcy in acting as such from the time of his appointment to the order for annulment. For my part, I cannot see that there is any real doubt in relation to the first two. Insolvency Rule 7.33 provides as follows: “Subject to provision to inconsistent effect made as follows in this chapter, CPR 43 , the scope of costs rules and definitions; Part 44 of the General Rules about Costs; Part 45 of Fixed Costs; Part 47 Procedure for detailed assessment of costs in default provisions and; Part 48 costs for special cases, shall apply to insolvency proceedings with any necessary modifications.”
No doubt the detailed applications of those parts of the CPR to insolvency proceedings requires some moulding to make them fit the different nature of insolvency proceedings. For example, it may not always be obvious who is the successful and the unsuccessful party for the purposes of Civil ProcedureRule 44.3(2). In annulment proceedings under s.282, conduct may assume a greater importance than may normally be the case. Insolvency proceedings are defined in Insolvency Rule 13.7 as any proceedings under the Act or the Rules. Plainly therefore, costs in the first two categories I have mentioned should be dealt with in accordance with the relevant parts of the CPR . 26 Contrary to my initial views, I accept the submissions of both counsel that the costs and expenses of the Official Receiver and the Trustee in Bankruptcy have to be determined under a different regime. They are payable out of the bankrupt's estate in accordance with the priority laid down by Insolvency Rule 6.224, but on annulment of a bankruptcy order provision has to be made for them, otherwise than as part of the costs of the insolvency proceedings. In Butterworth v. Soutter [2000] BPIR 582 at 586 when faced with a similar problem, Neuberger J, as he then was, said this:
“The parties can point to no statutory provision or a decision of the court dealing with who should pay the trustee's costs when a bankruptcy is annulled. The parties' arguments have all proceeded on the basis that I have unfettered jurisdiction to decide who, if anybody, should pay the trustee's costs. To my mind that must be right. If the bankruptcy is pursuant to a court order the court is still seized of the matter. In my judgment the question of whether the trustee should have his costs, and the question as to who should pay the costs, are at large when the court makes an order annulling a bankruptcy. Prima facie, it cannot be envisaged that the trustee in bankruptcy will work for nothing, and normally, when a bankruptcy order has been properly made, subject to questions of reasonableness and subject to special facts, the trustee will be paid out of the estate.” …” “Subject to provision to inconsistent effect made as follows in this chapter, CPR 43 , the scope of costs rules and definitions; Part 44 of the General Rules about Costs; Part 45 of Fixed Costs; Part 47 Procedure for detailed assessment of costs in default provisions and; Part 48 costs for special cases, shall apply to insolvency proceedings with any necessary modifications.” “The parties can point to no statutory provision or a decision of the court dealing with who should pay the trustee's costs when a bankruptcy is annulled. The parties' arguments have all proceeded on the basis that I have unfettered jurisdiction to decide who, if anybody, should pay the trustee's costs. To my mind that must be right. If the bankruptcy is pursuant to a court order the court is still seized of the matter. In my judgment the question of whether the trustee should have his costs, and the question as to who should pay the costs, are at large when the court makes an order annulling a bankruptcy. Prima facie, it cannot be envisaged that the trustee in bankruptcy will work for nothing, and normally, when a bankruptcy order has been properly made, subject to questions of reasonableness and subject to special facts, the trustee will be paid out of the estate.”
[35]Miss McErlean sought to distinguish Mustafa, first, on the basis that it was decided before Nortel, and secondly, because in Mustafa the order was annulled on the basis that it ought not to have been made, so that there could be no possibility of the costs being treated as a cost and expense of the bankruptcy.

Costs in other bankruptcy disputes

[36]In his written submissions Mr Curl relied upon the decision of Mr Nicholas Strauss QC, sitting as a High Court judge, in Foenander. In that case a bankruptcy order had been made against Mr Foenander. Following the appointment of a trustee in bankruptcy, various creditors agreed to serve on the creditors’ committee, two members of which sanctioned the bringing of proceedings by the trustee for the possession and sale of a property jointly owned by the bankrupt and his brother, who defended the proceedings. They maintained, amongst other things, that they were invalidly brought on the basis that some of the creditors were not entitled to serve on the committee, and that the bankrupt’s brother was entitled to a greater share of the property than the trustee asserted. On appeal from an order of the registrar, allowing the appeal, but only in a limited part, in giving the bankrupt and his brother liberty to apply to postpone a sale for the purpose of seeking clarification of the situation concerning a pending insurance claim which might affect the value of the property, the deputy judge delivered a supplementary judgment in which he dealt briefly with costs issues. Holding that the appeal had substantially failed, he ordered that the appellants should pay the costs of the appeal, and that if they were not paid by the appellants, they might be treated as costs of the bankruptcy.[37]From the report, as Miss McErlean submitted, it is not clear that there was any jurisdictional challenge to the court’s entitlement to take that course with regard to costs, or that counsel for the appellants in that case had advanced substantial submissions on the point in the way that Miss McErlean has done in the present case. Nonetheless, Mr Curl relies on the decision in Foenander as an instance of how a court has exercised what is in accordance with an ordinary discretion on costs in relation to a bankruptcy appeal, whilst he acknowledges that it was not an appeal against a bankruptcy order as such. Mr Curl submitted that there was no reason why an appeal from a bankruptcy order should, for costs purposes, be treated differently from litigation against a bankrupt which he has chosen unsuccessfully to defend; costs in either case should follow the event. Mr Curl added, based upon his experience in this field, that the kind of order made in Foenander, providing for costs primarily to be recovered from the bankrupt, but if the bankrupt does not pay, secondarily from the estate, is commonplace in bankruptcy proceedings.[38]As with the decision in Mustafa, Miss McErlean objected that Foenander was a pre- Nortel decision, and that it is inconsistent with Nortel, and therefore must be regarded as overruled.

Costs in winding up appeals

[39]In his oral submissions, Mr Curl relied, by analogy upon two decisions concerning security for the costs of appeals brought by companies against winding up orders; In re Photographic Artists Co-Operative Supply Association (1883) 23 Ch D 370, CA, and In re E K Wilson and Sons Ltd [1972] 1 WLR 791, CA. Those cases suggested that in the case of such appeals, as “a general rule”, the appellants would be required to give security for costs. This practice, Mr Curl suggested, was indicative of liability, to other parties, for costs incurred upon the appeal of a party who is made the subject of an order putting them into an insolvency process. Following his further researches, Mr Curl has very properly drawn attention to the recent decision of Henderson J in Aidiniantiz v The Sherlock Holmes International Society Ltd [2015] BPIR 1329. Referring to this supposed “general rule”, Henderson J said at paras 66- 67:
“66 [Counsel] submitted, by reference to two Victorian authorities, that there is a general rule, where a limited company appeals from a winding-up order, that it will be ordered to give security for costs: see In Re Diamond Fuel Company (1879) 13 Ch.D 400 (CA) at 412, per James LJ, and In Re Photographic Artists' Co-operative Supply Association (1883) 23 Ch.D 370 (CA) at 372, per Cotton LJ. In the second of those cases, Cotton LJ said: “But when we have an opportunity we ought to order security to be given, for it is not just that any costs occasioned by an unsuccessful appeal from a winding-up order should be thrown upon the assets to the prejudice of the creditors when we have the means of preventing it. It is our opinion that where an order has been made for winding-up a company on the ground that it cannot pay its debts, and the company alone appeals, there as a general rule security for costs ought to be ordered.” 67 I do not doubt the relevance of the considerations referred to by Cotton LJ when an order for security is sought against a limited company which has been wound up, but in my judgment the “general rule” which he laid down has long since been overtaken by statutory provisions and rules of court which make it clear that the court has an unfettered discretion in the matter. …”
Mr Curl emphasised that Henderson J still recognised the underlying mischief which was the subject of the considerations in the earlier decisions, despite the abrogation of any general rule as to the provision of security. “But when we have an opportunity we ought to order security to be given, for it is not just that any costs occasioned by an unsuccessful appeal from a winding-up order should be thrown upon the assets to the prejudice of the creditors when we have the means of preventing it. It is our opinion that where an order has been made for winding-up a company on the ground that it cannot pay its debts, and the company alone appeals, there as a general rule security for costs ought to be ordered.”[40]Miss McErlean, responding to this point in her written submissions, contended that this line of authority, relating to requiring security for costs from companies appealing from the making of winding up orders, assisted Mr Cooke’s case, because in the cases concerned (she developed the point particularly in relation to E K Wilson) the usual order is that the respondents’ costs are treated as a cost and expense of winding up.

Other considerations

[41]The unsustainability of Mr Cooke’s contention that costs must come from the bankruptcy estate, Mr Curl submitted, was demonstrated by consideration of what would have been the position of a third party funder who had funded Mr Cooke’s appeal. Such a funder would normally be expected to be vulnerable to an order to pay costs pursuant to the jurisdiction conferred by s51 of the Senior Courts Act 1981, and CPR Rule 46.2, but that would not be a jurisdiction available if Mr Cooke’s contentions on costs are accepted since an order could only be made for costs to come from the estate. Miss McErlean accepted that a third party might be made liable for costs instead of the bankrupt, but she suggested that this jurisdiction did not interfere with the bankruptcy regime for which provision is made in the 1986 Rules.[42]Further Mr Curl argued that it was irrelevant that bankruptcy was for the benefit of creditors as a whole, or whether there was one creditor or many. There is a simple point of principle, namely that costs should follow the event, and not be thrown on the successful party.[43]Both in oral and written submissions, Mr Curl relied on the necessary consequence of a rule to the effect that costs of a bankrupt’s unsuccessful appeal could only be recovered from the bankruptcy estate, as being that the creditors would be the persons who suffered the consequences of the bankrupt’s decision to appeal; this was described in argument as a “free punt” at the creditor’s expense. Further, in relation to unsuccessful appeals, only the Official Receiver, a trustee in bankruptcy, and creditors would have any interest in costs; the outcome would not affect the bankrupt at all. Miss McErlean accepted that if Mr Cooke’s case is accepted, then the costs of the appeal would be met from assets in priority to funds available to unsecured creditors, but she submitted that this was the effect of the statutory régime which balances interests of creditors with the public policy objective of rehabilitating debtors.

DISCUSSION

[44]In my judgment, key to the matters which I now have to decide is the interpretation of Rule 12.2 of the 1986 Rules, in the context of the other statutory provisions that I have set out above.

Rule 12.2 of the 1986 Rules

[45]The starting point for this interpretation I consider to be Rule 7.51A of the 1986 Rules which applies the general rules about costs contained in CPR 44, including thereby the provision that the unsuccessful party will be ordered to pay the costs of the successful party, as well as the provision that the court may make a different order; see CPR 44.2(2)(a). This framework for costs in insolvency proceedings is consistent with that which applied under earlier legislation; s109 of the Bankruptcy Act 1914 provided that “the costs of and incidental to any proceedings in court under this Act shall be in the discretion of the court”. This application of the general rules set out in the CPR is, of course, subject to the qualification provided in Rule 7.51A of the 1986 Rules, namely, “except so far as inconsistent with these Rules”, and also subject to the need to mould the application of the CPR Rules as to costs to make them fit the different nature of insolvency proceedings, as mentioned by the Chancellor in Mustafa.[46]Miss McErlean’s submission is that Rule 12.2 of the 1986 Rules precludes the making of a costs order in respect of bankruptcy appeal costs, as well as many other costs that will arise in bankruptcy proceedings (and winding up and administration proceedings) because such costs are to be regarded as expenses of the bankruptcy (winding up, or administration, as the case may be). In my judgment, this is not the effect of the Rule. The purpose of the Rule, as it expressly provides, is to ensure that costs incurred in the course of such proceedings are to be regarded as costs of the relevant insolvency process, but this does not carry with it the implication that costs incurred in such proceedings cannot be directed to be the subject of recovery from another source if that is appropriate. As Mr Curl submitted, the rule is designed to protect persons such as office-holders from being out of pocket; if they are unable to recover expenses from a third party who has caused expense to be incurred, they can rely upon recovery from the estate. Thus a trustee in bankruptcy who successfully resists a claim brought against the estate is entitled to seek costs against the unsuccessful party who brought the claim; if he cannot recover them from him, then he is entitled to look to the estate for indemnity. This simply puts such a trustee in the same position as a trustee under a traditional trust; such a trustee “is entitled as of right to full indemnity out of his trust estate against all his costs, charges, and expenses properly incurred”; see per Lindley LJ in Re Beddoe [1893] 1 Ch 547, at 557-558. The entitlement to such an indemnity does not prevent the court from ordering costs against the unsuccessful third party. I consider that the order made in Foenander is a reflection of this approach. Rule 12.2 is there to safeguard particularly persons who have incurred costs and expense which will promote the interests of the creditors of the bankrupt; it is not designed for the protection of those who make unsuccessful claims or applications which cause the bankruptcy estate to incur costs. Whilst, of course, the position of a petitioner who resists an appeal is different from that of a trustee in bankruptcy, in successfully resisting an appeal the petitioner benefits all the creditors in the same way that the trustee who successfully litigates on behalf of the estate also does so.[47]In my judgment, Miss McErlean’s submissions fail because they are founded upon the premise that Rule 12.2 contains an exhaustive statement as to how costs are to be treated. It does not. In particular, it does not provide that recovery in accordance with that Rule shall be the only means by which costs may be recovered. There is no inconsistency between the provisions of Rule 12.2, and the general rules as to costs in CPR 44, introduced by Rule 7.51A of the 1986 Rules. Mr Cooke was the unsuccessful party in the appeal, and therefore, the starting point is that he should pay Dunbar’s costs. Otherwise the bankruptcy estate would be diminished as a result of Mr Cooke’s decision to bring an appeal which has failed.[48]There are, I consider, good policy reasons which suggest that Rule 12.2 should not have the effect for which Miss McErlean contends:(1) Neither a bankrupt, nor some other party whose interests are aligned with his, or who has his own reasons for wishing to litigate in the bankruptcy, should be afforded the opportunity to do so without being at risk as to costs. The risk of an adverse costs award acts as a deterrent against the advancing of cases that are without merit.(2) A person in the position of Mr Cooke, who appeals against the making of a bankruptcy order, does so of his own volition. As the provisions to which I have referred above demonstrate, a bankrupt actively needs to pursue permission to appeal; an appeal is a distinct process initiated by the appellant. It is not something which flows inexorably from being caught up in the initial bankruptcy proceedings.(3) The bankruptcy estate should be protected, where possible, from the need to fend off unmeritorious disputes which will dissipate the estate to the prejudice of creditors.

Nortel

[49]In my judgment the decision in Nortel affords no assistance to Mr Cooke. That case decides that where, within a statutory scheme of priority upon the liquidation or administration of a company, a position as to ranking within the scheme is established, it is not open to a court, in the absence of a statutory power, to vary the order of priority. I would, therefore, accept, that the court cannot decide that an item of expense of a bankruptcy, whose position has been established within the order of priorities in Rule 224 of the 1986 Rules, should be afforded a higher, or lower, position in the ranking. That, however, is not what Dunbar invites the court to do in this case. Dunbar invites the court to make an order, within its power under Rule 7.51A and CPR Part 44, that primary liability for the payment of costs of the appeal should fall upon Mr Cooke, and not upon the bankruptcy estate. As such the costs do not constitute an expense of the bankruptcy, and no question arises as to adjusting priorities within the established order. If, however, a court, secondarily, makes an order that to the extent that costs are not recovered from Mr Cooke, they may be recovered as a costs of Mr Cooke’s bankruptcy, then costs on this secondary basis do fall within Rule 6.224(1), and as such are ranked in position (h). It is not open to the court to direct that they should instead rank at positions (a) or (r) or in any other position somewhere in between.[50]I must consider also Miss McErlean’s submission that for the reasons explained in the judgments in Nortel, the costs of the appeal were a contingent liability so as to give rise to a provable debt, because by the time that the bankruptcy order had been made, Dunbar and Mr Cooke were in a relationship following the commencement of bankruptcy proceedings, the rules of which provided for an appeal. As I have mentioned above, Miss McErlean fairly drew attention to the point that the analysis of Lord Neuberger in respect of the earlier costs cases was concerned with proceedings which were not themselves the insolvency proceedings whose costs were in issue; I would add, whether at first instance, or by way of an appeal. I consider it difficult to apply the reasoning in Nortel to the costs incurred in the insolvency proceedings themselves. Not only is it not clear that their lordships had such costs in mind, but the structure of the Insolvency Act is difficult to reconcile with the notion that the costs of insolvency proceedings constitute a contingent debt or liability for the purposes of being provable. Such a notion would not be harmonious with the priority of debts established by s328; the expenses of the bankruptcy are afforded priority over other debts, preferential or otherwise. If the costs of the bankruptcy proceedings themselves, including any appeal, are provable in the bankruptcy, then the effect of s328 in conjunction with Rule 6.224 would be to deal with such costs twice, and differently, ranking in priority as an expense, and then again much lower in the order as a non-preferential debt. Further, as Mr Curl submitted, there is the important consideration as to who controls the litigation process that generates costs. Here it can be seen that costs of the insolvency proceedings themselves differ from costs in pre-existing litigation with third parties. Once an office-holder is in control, if he chooses to adopt litigation, then it is readily understandable that the insolvent estate should be responsible for the costs incurred (subject to any possibility of recovery from a third party). The office-holder can always call a halt to further expenditure by compromising a claim, or discontinuing. Where a bankrupt initiates an appeal, or an annulment application, that is not the case. On this point, however, I should add that the decision in Mustafa does not seem to me to afford particular assistance for the reasons identified by Miss McErlean; the application succeeded, and thus there would be no question of treating the costs as a bankruptcy expense.[51]Finally, as to Nortel, there can be no doubt that legal policy in this field has regard to the “freed man” considerations identified by Lord Neuberger in para 93 of his judgment in that case. Those considerations, in my judgment, do not affect the powers of the court to order Mr Cooke to pay the costs, because Mr Cooke, as a matter of his own choice, following the commencement of his bankruptcy, decided to initiate his appeal. As such he made himself subject to a régime, namely the Insolvency Rules and Part 44 of the CPR, pursuant to which the court has a jurisdiction to order him to pay costs where that is merited. That is so whether the costs might also be capable of being recovered on some separate basis, for example, under Rule 2.12 of the 1986 Rules.

The costs in winding up appeals cases

[52]With regard to the cases concerning security for costs in appeals by companies against the making of winding up orders against them, I reject Miss McErlean’s submission that they assist her case for the reasons which she gave. The reasoning of the court in E K Wilson appears from the judgment of Stamp LJ, at page 792, with which both Sachs and Megaw LJJ agreed:
“The winding up order was made upon the petition of the respondent to the appeal, the present applicant for security, who is a contributory of the company. The company has substantial assets and it is not suggested that if the appeal were dismissed with costs the company would not be able to satisfy the costs. As I have indicated, the petition on which the winding up order was made was a contributory petition about which I think it is unnecessary to say more than this, that it was based upon allegations against those conducting the affairs of the company which the court found required investigation. Because the company is solvent, it follows that if it loses the appeal and is ordered to pay the petitioner's costs and it does so out of assets that payment will operate to reduce the assets distributable among the contributories, of whom the petitioner is one, so that the successful petitioner will be bearing a part of the costs which have been ordered to be paid to him proportionate to his share of the assets as a contributory. In my judgment nothing could be more absurd. In In re Consolidated South Rand Mines Deep Ltd. [1909] W.N. 66 where the Court of Appeal was confronted with a not dissimilar situation, Cozens- Hardy M.R. expressed the view: “… though the company had a right to appeal, it ought only to be allowed to do so upon the terms of finding, not from the company's fund but from some outside source — the directors or shareholders who were at the back of the appeal — security, and not merely nominal security, but indemnifying security against the costs of the appeal.”
Buckley L.J. put it thus:
“… that such an order therefore ought to be made in this case that if the appeal failed, the company, which in that event would be represented by the official receiver and liquidator, should have their costs from the persons who really promoted the appeal and standing behind the company, as a corporation, asserted a right in the corporation to discharge the compulsory winding-up order.”
In my judgment that is what ought to be done in this case.” “… though the company had a right to appeal, it ought only to be allowed to do so upon the terms of finding, not from the company's fund but from some outside source — the directors or shareholders who were at the back of the appeal — security, and not merely nominal security, but indemnifying security against the costs of the appeal.” “… that such an order therefore ought to be made in this case that if the appeal failed, the company, which in that event would be represented by the official receiver and liquidator, should have their costs from the persons who really promoted the appeal and standing behind the company, as a corporation, asserted a right in the corporation to discharge the compulsory winding-up order.”[53]The order actually made by the court provided as follows:
“That the company do on or before March 6, 1972, procure some sufficient person on their behalf to give security (to the satisfaction of the registrar of the Companies Court in case the parties differ) in the sum of £1,500 conditioned to answer costs in case any shall be awarded to be paid by the company to the petitioner upon the said appeal. And in default of the company so procuring such security by the time aforesaid it is ordered that upon the solicitors for the petitioner certifying such fact in writing to the appeal clerk the said appeal be thereupon struck out without further order. And thereupon it is ordered that the company do pay to the petitioner his costs occasioned by the said appeal including his costs of this motion down to and including this order and consequent hereon such costs to be taxed by the taxing master….”
[54]E K Wilson was, therefore, a case concerned with a solvent company where it was to be anticipated that it would, indeed, be ordered to pay the costs of an unsuccessful appeal. This was fully reflected in the default provision in the court’s order that the company pay the petitioner’s costs. The costs would come from precisely the same source as they would in the case of an order against a company that was not subject to a winding up order, namely the company’s assets. I do not consider that the fact that this source of payment was recognised by the Court of Appeal supports Miss McErlean’s case that there is an invariable practice that an unsuccessful appellant’s costs, where the appellant is the insolvent, are a cost and expense in the insolvency process, and that such recovery is the only recovery permissible.[55]I consider that Mr Curl can derive some support from the security for costs in winding up appeal cases. They proceed from the premise that the company would have a liability to pay costs of an unsuccessful appeal, and in consequence orders were made for the company to procure security. If there were no prima facie contingent liability for a costs order against the company, then making an order against it would not be justified. The premise that an unsuccessful appellate company would have such a liability, in my judgment, was recognised by Henderson J in his judgment in Aidiniantiz, and whilst the general rule which he described may no longer survive, he clearly contemplated that a security for costs order (which for the reasons explained reflects the premise mentioned) could still be made in the exercise of the court’s unfettered discretion.[56]The company security for costs cases are, of course, only of limited relevance by analogy, because in the case of winding up of a company, there is no “life after winding up”, whereas in the case of bankruptcy, a bankrupt may acquire assets after his discharge from bankruptcy which will be available to satisfy an order for costs against him, rather than against the bankruptcy estate.

DISPOSAL

[57]For reasons explained above, I conclude that it is permissible for me to make costs orders that Dunbar’s costs in dealing with this appeal be paid by Mr Cooke (for the avoidance of doubt, not as a provable debt), or as an expense of the bankruptcy, and that the kind of alternative order made in Foenander can also properly be made.[58]I consider that Mr Cooke should pay the costs of his unsuccessful appeal; the general rule as to costs should apply.[59]I direct that Dunbar’s costs of the appeal shall be paid by Mr Cooke to be assessed on the standard basis, and that to the extent that they are not paid by Mr Cooke, then they may be treated as an expense of Mr Cooke’s bankruptcy.[60]Mr Curl invited me to assess costs summarily, but in her latest submission Miss McErlean has helpfully drawn attention to Rule 7.34A of the 1986 Rules which provides that where costs are payable as an insolvency expense out of the insolvency estate, the amount payable must be decided by detailed assessment unless agreed between the office-holder and the person entitled to payment. In these circumstances, it seems to me that I cannot summarily assess costs in so far as they may be payable from the bankruptcy estate. On handing down judgment, I shall invite submissions as to whether it is open to me to assess costs against Mr Cooke summarily, whilst ordering a detailed assessment if the costs are to be paid from the bankruptcy estate.[61]If the form of order can be agreed before handing down, no-one need attend. I remind the parties that I did not hear submissions as to the quantum of costs, and therefore, if the form of order is not agreed, attendance will be necessary for submissions to be heard on that point, unless the parties are content to deal with the point by written submissions, in which case, I shall order that such submissions are to be exchanged and lodged with the court and copied to me no later than 4pm on Friday, 5th August 2016 (unless I am previously informed of counsel’s unavailability to deal with submissions by that date, in which case I will wish to be told by what date such submissions can be prepared). In that event I would deal with any summary assessment in writing, though I would formally hand down that decision in court on a later occasion on which no-one need attend.[62]I am grateful to counsel for the thoroughness of their researches, and the submissions which they have made.

Cited in 1 later judgment