Fielding & Anor v Hunt ( Liquidator of the Burnden Group Ltd) [2017] EWHC 406 (Ch)

[2017] EWHC 406 (Ch)Case No 2541 of 2010
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue MANCHESTER DISTRICT REGISTRY
IN THE MATTER OF THE BURNDEN GROUP LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Venue Manchester Civil Justice Centre,, 1 Bridge Street West, Manchester M60 9DJ
Date handed down: 2 March 2017
Before
HIS HONOUR JUDGE STEPHEN DAVIESSITTING AS A JUDGE OF THE HIGH COURT
Between
GARY JOHN FIELDINGApplicantsSALLY ANNE FIELDINGApplicantSTEPHEN HUNTRespondent
JOHN BRIGGS (instructed by Addleshaw Goddard LLP, Manchester) for ApplicantsJAMES PICKERING (instructed by Mills & Reeve LLP, Cambridge) for RespondentHearing Hearing date: 15 February 2017
JUDGMENT IN RELATION TO COSTS APPROVEDHis Honour Judge Stephen Davies:Date 2017-03-02

Introduction

[1]This is my judgment on the costs of the appeal against the rejection of a proof of debt. The substantive judgment is at [2017] EWHC 247 (CH). The issue of costs is particularly important in this case because the Applicants, the Fieldings, are seeking an order that the Respondent, the liquidator of the Burnden Group Limited (“BGL”), pays their costs personally, in circumstances where:(i) as matters stand the company has no assets to pay the costs;(ii) the Fieldings’ incurred costs are in excess of £290,000 inclusive of VAT.[2]There is no doubt that the Fieldings have been the successful party in this matter. Hence, if the general rule in CPR Part 44.2(2)(b) was to be applied, there is no doubt but that the Fieldings as the successful party would be entitled to an order for costs against the liquidator as the unsuccessful party.[3]However, because this matter has involved an appeal by the Fieldings against the rejection by the liquidator of their proof of debt, brought under rule 4.83 of the Insolvency Rules 1986 (“the Rules”), the liquidator’s potential liability for their costs is governed by rule 4.83(6), which provides that:
“The official receiver is not personally liable for costs incurred by any person in respect of an application under this Rule; and the liquidator (if other than the official receiver) is not so liable unless the court makes an order to that effect.”
[4]Thus, the Fieldings are inviting me to make an order to that effect, whereas the liquidator is contending that the default position of no personal liability should apply.[5]I should identify why the Fieldings contend that the default position under rule 4.83(6) should not apply. As I said in [1.4] of the introductory section of my substantive judgment:
“This application is in substance, if not in form, a precursor to two misfeasance applications brought by the liquidator against the Fieldings and the former administrators of BGL, challenging a payment of £1.3 million made by the administrators to the Fieldings. If I am satisfied that the Fieldings have a valid proof of debt in excess of that £1.3 million then the misfeasance applications will effectively fall away, because the liquidator will be unable to establish any resultant loss suffered by BGL as a result of that payment being made, even if he can establish breach. It is therefore very much in the interests of the Fieldings, both directly and because they gave an indemnity to the former administrators, to establish that they have a claim in excess of £1.3 million, even if they have no real prospect of receiving any actual dividend.”
[6]In short, Mr Briggs contends on behalf of the Fieldings that the reason why the liquidator rejected the Fieldings’ proof of debt and why he has so fiercely contested this appeal was not because he was exercising his quasi-judicial rule of adjudicating upon the validity of the proof in order to determine what dividend should be paid to those claiming to be creditors of an insolvent company where there are assets for distribution, but because it was a necessary pre-condition to the success of the misfeasance applications against the Fieldings and the administrators. He submits that the liquidator’s conduct shows that he has been determined to pursue the misfeasance applications from the outset and that this desire has influenced and coloured his approach to the Fieldings’ proof of debt. He submits that the liquidator would be personally liable for the costs of an unsuccessful misfeasance application and therefore, by parity of approach, he should be liable for the costs of his unsuccessful resistance to this appeal.[7]Mr Pickering’s response, in short, is that the liquidator acted entirely properly in rejecting the Fieldings’ proof of debt, and in resisting the appeal and that, in so doing, he was performing his statutory role in a perfectly proper manner. He submits that it is irrelevant that the reason why both parties have contested the proof of debt is because it is a precursor to the misfeasance applications, which if successful would produce an asset recovery for the company, as opposed to because there are already assets of the company available for dividend. Accordingly, he submits, there is no good reason for not applying the default position under rule 4.83(6).[8]If I decide that it is not appropriate to order that the liquidator should be personally liable for the Fieldings’ costs, the Fieldings contend that there should be an order that their costs be treated as expenses in the liquidation, whereas the liquidator contends that there should simply be no order as to costs.[9]If I decide that the Fieldings’ costs should be treated as expenses in the liquidation, there may be a dispute as to what order of priority those costs should have as against the liquidator’s own costs and/or the liquidator’s remuneration. However, since the parties had not come prepared to argue this on 15 February 2017, it was agreed that this would have to be the subject of a further application and argument in the event that a dispute as to this point became a live issue.

The law

[10]The researches of counsel have not uncovered any authority which bears directly on the circumstances in which a court should make an order under rule 4.83(6) that the liquidator should be personally liable for the successful applicant’s costs.[11]I have however been referred to a number of authorities which provide some assistance, and to which I shall refer.[12]The first case I was referred to is that of In re Arthur Williams & Co [1913] 2 KB 88, a decision of the Court of Appeal. The facts of that case were very different to the facts of the present case, since the question was whether or not the official receiver ought to be personally liable for the costs incurred in unsuccessfully seeking to make an individual bankrupt on the basis that he was a partner of a firm against which a receiving order had been made. The Court of Appeal held that he should be personally liable for those costs, since in bringing the claim against the individual he was acting not in discharge of his statutory duty but in the exercise of his power.[13]Mr Briggs referred me to the submission of counsel for the official receiver, who is recorded as submitting that:
“The official receiver in dealing with this matter was acting as an officer of the Court, and in the absence of any misconduct on his part, or of any attempt to reap a private advantage, there was no jurisdiction to order him personally to pay costs. It is a fallacy to say that because, from some points of view, he may be regarded as a party to litigation, therefore he may be ordered to pay costs.”
[14]Mr Briggs submitted that counsel was right to submit that the jurisdiction to order the official receiver to pay costs should be exercised when the official receiver was attempting to reap a private advantage, and that by parity of approach the liquidator in this case ought to pay the costs personally because he was acting for his personal advantage in using the proof of debt procedure to promote the misfeasance applications.[15]Although not expressly endorsed by the Court of Appeal, I am prepared to accept – and I do not think that Mr Pickering would dispute – that a finding that a liquidator had been acting for his personal advantage in relation to an appeal against a proof of debt ought to lead to the liquidator being ordered personally liable to pay the costs of unsuccessfully resisting the appeal.[16]Mr Briggs also referred me to the observation of Cozens-Hardy M.R. at p. 93 of the judgment where, in the course of considering the difference between the performance of a duty and the exercise of a power, he said this:
“One of the duties of the official receiver is, of course, to admit or reject proofs: that is quite clear. If he rejects a proof and a creditor successfully appeals, it seems to me that prima facie he would be liable to pay the costs, if it were not for the statutory provision that in that case he shall not be so liable. Rule 231 says: “The official receiver shall in no case be personally liable for costs in relation to an appeal from his decision rejecting any proof wholly or in part.”
[17]I accept that it follows from this passage that a liquidator who unsuccessfully opposes an appeal against a rejection of a proof of debt would also be regarded as exercising a power as opposed to performing a duty. But, of course, rule 4.83(6) must be read in the context that this is the position but nonetheless provides that the default position is that in such circumstances a liquidator will not be personally liable for the costs of the successful appellant unless the court so orders. It follows, as Mr Pickering submits and I agree, that something more than merely unsuccessfully resisting an appeal is needed for the court to make an order for personal liability.[18]I have been referred to the general position as regards a liquidator’s personal liability for costs, which in summary is that:(a) Where a liquidator unsuccessfully pursues a claim in his own name, such as misfeasance proceedings, he will be personally liable for the successful respondent’s costs: see the observations of Oliver J. in Re Wilson Lovatt & Sons Ltd [1977] 1 All ER 274 at p. 285 where he said: “I think that a review of the authorities does disclose that a clear dichotomy between the case where the liquidator is sued and the case where the liquidator initiates proceedings, is established, and indeed it seems me to be a perfectly reasonable one. I cannot at the moment see why it should be contended that a liquidator who takes it on himself to institute proceedings, to bring parties before the court, to subject them to costs, and as against whom it is quite clearly established that no order for security can be made, should then be entitled to plead that he is not responsible beyond the extent of the assets in his hands. I can see no reason at all why a liquidator should be entitled to an immunity which is not conferred on other litigants. A trustee or a personal representative who institutes proceedings no doubt has a right to indemnity out of the estate which he represents but, if he litigates, he litigates at his own risk and so, in my judgment, it should be with the liquidator, and the authorities which point that way seem to me, if I may say so respectfully, to be completely reasonable. I can quite see that there may be very powerful reasons of policy for a rule that a liquidator, when carrying out his functions and thus subjecting himself to the possibility of proceedings against him by parties who are discontented with the way in which he has carried out those functions, must be entitled to defend himself without being subjected to the risk of having costs awarded against him personally, because of course he cannot protect himself against claims being made. Unless there were some such rule it might be very difficult to get persons to take on the heavy responsibility of the liquidation of companies. It seems to me that it is quite a different matter where the liquidator himself takes it on himself to institute proceedings, whether they be proceedings in the winding-up or otherwise. In fact of course any other proceedings would be proceedings in the name of the company where, in the ordinary way, the litigant on the other side could get security for costs under the provisions of the Companies Act.”(b) Where an office holder (thus including a liquidator) is made a party to proceedings on the application of another party, he shall not be personally liable for costs unless the court otherwise directs: rule 7.39 Insolvency Rules.[19]Rule 7.39 was considered by Sir Donald Nicholls, V-C, in Re Mordant (a bankrupt) [1995] 2 BCLC 647 in terms where he accepted (at p. 648) that the court should not direct otherwise save in a “special case” where there was “good reason” to do so. I respectfully consider that the same approach ought to apply to rule 4.83(6).[20]The Mordant case is also relevant to the second issue between the parties since it is clear that, having rejected the submission that the trustee should be directed to be personally liable, the Vice-Chancellor nonetheless ordered that the successful party’s costs should be an expense in the bankruptcy He said that he would make an order that “the trustee pay the wife’s costs of the application, but I will not make any contrary direction within r 7.39”, and it is clear from the report that he was fully aware that the effect of such an order, given the absence of assets within the estate, was that the wife “effectively will have to bear her own costs”. . This approach is entirely consistent with the approach of Vaughan Williams J. in In re National Wholemeal Bread and Biscuit Company [1892] 2 Ch. 457 where, as the headnote records, he held that “On a successful appeal from the rejection of a proof in the winding-up of a company, the rule in bankruptcy is followed, that the applicant is allowed his costs, not of the proof, but of the appeal, out of the assets”.[21]The distinction drawn between the costs of the proof and the costs of the appeal is in my view consistent with the position under the current Insolvency Rules, because rule 4.78 provides as follows:
“4.78: Cost of proving (1) [Creditor bears cost of proving own debt] Subject as follows, every creditor bears the cost of proving his own debt, including such as may be incurred in providing documents or evidence under Rule 4.75(3) or 4.76-CVL. (2) [Liquidator’s costs] Costs incurred by the liquidator in estimating the quantum of a debt under Rule 4.86 (debts not bearing a certain value) are payable as an expense of the liquidation. (3) [Application of r.4.78(1), (2)] Paragraphs (1) and (2) apply unless the court otherwise orders.” (1) [Creditor bears cost of proving own debt] Subject as follows, every creditor bears the cost of proving his own debt, including such as may be incurred in providing documents or evidence under Rule 4.75(3) or 4.76-CVL. (2) [Liquidator’s costs] Costs incurred by the liquidator in estimating the quantum of a debt under Rule 4.86 (debts not bearing a certain value) are payable as an expense of the liquidation. (3) [Application of r.4.78(1), (2)] Paragraphs (1) and (2) apply unless the court otherwise orders.”
[22]Mr Pickering submitted that rule 4.78(1), i.e. the default position that the creditor bears the cost of proving his own debt, applied as much to appeal against a rejection of a proof of debt as it did to the initial proof stage. I am unable to accept that submission, for the following reasons:(1) Rule 4.73(1) defines “prove” as being the submission of a claim in writing to the liquidator. Rule 4.75(1) states what matters shall be stated in the proof, rule 4.75(3) permits the liquidator to call for supporting documents to be produced, rule 4.76 permits the liquidator to call for particulars of the claim to be provided, and rule 4.82 provides for the liquidator to admit the proof in whole or in part or to reject it. The procedure for appealing the decision with respect to the proof then follows at rule 4.83, with its own separate provision as regards costs at 4.83(6).(2) It follows in my view on the basis of a proper construction of the words used that there is a two stage process, first the proving stage and second – where invoked – the appeal stage. There is no reason why rule 4.78(1) should apply to the second appeal stage. Indeed, the fact that rule 4.78(1) mentions two specific categories of cost which are included, but does not include the costs of an appeal under rule 4.83, is a clear indication that such costs are not included.(3) It would be very surprising if the existing practice as regards the costs of an appeal established as long ago as 1892 in National Wholemeal Bread and Biscuit Company should have been altered by implication in rule 4.78(1), as opposed to expressly by rule 4.83(6). The arguments and my decision as regards the personal liability of the liquidator for the Fieldings’ costs[23]Returning to the question as to whether or not the liquidator should be made personally liable for the costs, I refer first to Mr Briggs’ argument that he should be made personally liable because in rejecting the proof and in opposing the appeal he was acting for his own personal advantage. I do not accept this argument. As Mr Pickering submitted, there is no question of the liquidator acting for his personal advantage here. Insofar as there was a connection between the proof of debt and the misfeasance applications, there is no evidence that the latter were being pursued for the liquidator’s personal advantage, rather than pursuant to the liquidator’s general function, under s. 143 Insolvency Act 1986, to get in the assets of the company. In his written submissions, Mr Briggs drew my attention to the favourable remuneration secured by the liquidator (time costs plus 75% uplift) and to the fact that the liquidator’s legal representatives are acting on a conditional fee basis. However, these matters seem to me to be quite irrelevant; the liquidator’s expenses were sanctioned by the meeting of the creditors, including the Fieldings themselves whose claim was admitted for that purpose, and there can be no objection to the liquidator instructing his legal representatives to act on a conditional fee basis, where the relevant agreements were entered into before the date of abolition of such agreements in insolvency proceedings.[24]Mr Briggs also advanced his case on a rather wider basis. He submitted that, in rejecting the proof and opposing the appeal, the liquidator’s motive was to advance his case in relation to the misfeasance applications, so that this was not the normal case of a liquidator simply having to decide whether or not to admit a proof for dividend in circumstances where the company actually had assets to distribute. He submitted that this in itself was sufficient to take the case outside the default position in relation to costs. He submitted that since the liquidator would always have had to litigate the misfeasance applications at his own personal risk as to cost – see the Re Wilson Lovatt case cited at [18(a)] above - it is that rule, rather than the default rule in rule 4.83(6), which should apply to this appeal. He points to [1.4] of my substantive judgment, referred to in [5] above, where I said that this appeal was effectively a precursor to the misfeasance applications. He submitted that it is apparent as a matter of reality, as a matter of timing and, indeed, on the basis of what the liquidator had said, that the decision to reject and the defence of the appeal were inextricably connected with the misfeasance applications.[25]In response, Mr Pickering submitted that, regardless of the question of there being assets to divide, the liquidator was obliged under rule 4.82 to make a decision on the proof of debt submitted by the Fieldings, and to contest any appeal brought against his rejection of the proof of debt if there were good grounds for doing so. He submitted that there could be no criticism of the propriety or reasonableness of his conduct in either respect. He submitted that the Fieldings were under no obligation to appeal the rejection of their proof, since it had never been said by the liquidator, nor was it self-evidently the case, that an un-appealed decision by the liquidator to reject the proof of debt would be binding against them in any subsequent misfeasance application. Whilst he accepted, realistically in the light of the evidence and my substantive judgment, that there was undoubtedly a link in terms of timing between the rejection of the proof and the issue of the misfeasance applications, he submitted that this was insufficient to dis-apply the default rule in rule 4.83(6).[26]I accept Mr Pickering’s submission that the liquidator was obliged to make a decision on the proof of debt. Although Mr Briggs submitted that it would be very unusual for any creditor or the liquidator to wish to spend time or money in addressing or resolving a disputed proof of debt unless or until the company had assets to make that a worthwhile exercise, nonetheless the fact remains in my view that the liquidator is obliged to make a decision on a submitted proof one way or the other at some stage, unless the parties agree that the proof is withdrawn or varied, as they may do under rule 4.84.[27]I also accept Mr Pickering’s submission that the liquidator was entirely justified in rejecting the proof of debt which was before him on 29 December 2015. As Mr Pickering said, only one of the 6 claims comprised within the revised claim and addressed in my principal judgment was also included within the original proof of debt claim submitted in February 2011. This was the Vital claim, which itself was put forward on a very different basis in the revised claim than it had been in the original claim. Indeed, Mr Briggs accepted in submissions, entirely realistically, that the initial proof of debt was flawed.[28]Nonetheless Mr Briggs says that this is not the end of the matter. He submits that, had the liquidator given the Fieldings more time to substantiate their claim in late 2015 following the letter which he sent to the Fieldings on 17 November 2015, explaining why he was minded to reject their proof of debt, the Fieldings would have been able to produce the revised claim which they in fact submitted piecemeal during the course of January 2016. He submits that the only reason why the liquidator was not prepared to allow the Fieldings more time was his concern to make a decision on the proof of debt prior to the expiry of the limitation period for issuing any misfeasance application.[29]This is ground which I covered at [1.20] and [1.21] of my substantive judgment. In short, I was critical to some extent of the approach taken by both sides in this regard. I accepted that the timing of the process was driven by the liquidator’s desire to make a decision prior to the expiry of the limitation period on 26 January 2016. However, I also found that even if the Fieldings had been allowed more time to put in the revised proof of debt as submitted in January 2016 before the liquidator made a decision he would nonetheless have rejected the greater part of the revised proof of debt, and that this would have been reasonable on the basis of the material put in at that stage. It followed, in my view, that this appeal would still have been necessary. I do not accept, therefore, Mr Briggs’ submission that there is a direct causal link between the liquidator’s desire to complete the process in time to allow him to issue any misfeasance application before the expiry of the limitation period and the need for an appeal against his rejection of the proof of debt. Nor do I accept that the liquidator is properly to be criticised for his conduct as regards his response to the substance of the proof of debt.[30]Furthermore, the liquidator was quite candid in his email of 8 December 2015 that the reason for not allowing the Fieldings more time to respond to his letter of 17 November 2015 was the imminent expiry of the limitation period at a time when he was “considering issuing various claims” and his desire to “have a degree of certainty regarding the Company’s creditors” before doing so. At [1.20] I rejected the Fieldings’ submission that the liquidator had acted discreditably by misleading them into believing that they were not the target of a misfeasance application at that stage.[31]This brings me on to Mr Briggs’ further submission, which was that the liquidator was making his decision on the Fieldings’ proof of debt in order to establish the quantum of the proposed misfeasance application claims and, therefore, that the Fieldings were effectively forced into appealing the rejection of the proof of debt in order to avoid being bound by that rejection in any subsequent misfeasance application. In the course of the argument on 15 February 2017 I queried whether or not the Fieldings would have been bound by the rejection in any subsequent misfeasance application. It became apparent that there was a potential issue between counsel as to the correct answer to that question, and I made it clear that I did not regard it as appropriate for me to seek to rule on that issue in the context of this costs decision. However, insofar as submitted by Mr Briggs I do not accept that the liquidator was rejecting the proof of debt, or that both parties were contesting the appeal, on the mutually communicated agreed basis that his rejection, if not appealed or if unsuccessfully appealed, would be binding on the Fieldings in any subsequent misfeasance application against them. In particular:(1) There is no indication of any correspondence between the parties or their solicitors before the appeal was issued on 18 January 2016, or indeed subsequently, where this was stated to be the position.(2) The Fieldings did not state that this was the position or the rationale for the appeal in the appeal notice or in the witness evidence served in support.(3) Whilst it is true that in his witness statement in response dated 15 April 2016 the liquidator said at [11] that it had been necessary for him to adjudicate on the proof of debt “in order to quantify the loss caused by the former joint administrators’ acts … to bring certainty to the claim, and establish the loss caused”, that is not the same as saying that it was the liquidator’s position that the decision would be binding on both parties.(4) Whilst I accept that, even if the decision on the proof of debt would not be binding on either the liquidator or the Fieldings, it would be a highly material consideration for both parties when deciding their strategy as regards any proposed misfeasance application, that is not the same thing as saying that the appeal and the proposed misfeasance application were, effectively, two sides of the same coin. Indeed, on Mr Briggs’ analysis, the purpose of doing things this way round was to achieve an outcome whereby should the Fieldings succeed in the appeal the misfeasance application would almost certainly not proceed further.[32]In short, whilst I accept that there was undoubtedly a connection between the proof of debt process and the misfeasance applications which were waiting in the wings, I do not think that the connection was so close, or that the liquidator’s conduct in relation to the proof of debt process was so inextricably entwined with the contemplated misfeasance applications, such as would make it appropriate for this court to order that the liquidator should be personally liable for the Fieldings’ costs of the appeal. Nor do I consider that his conduct in relation to the proof of debt process due to that connection was improper or unreasonable.[33]In his submissions Mr Briggs also complained about the conduct of the liquidator’s defence to the appeal, pointing to such matters as the way in which the liquidator adduced late evidence in September 2016, took a preliminary objection to the Fieldings being permitted to revise their proof of debt at the September 2016 hearing, failed to make clear that the validity of the assignment from Vital to the Fieldings was not contested until the September 2016 hearing, revised his position to withdraw admissions previously made as to what elements of the revised proof of debt he was prepared to accept, raised further arguments not previously advanced at the October 2016 hearing, and continued thereafter to contest claims which in my judgment I concluded were justifiable. He submits that this all demonstrates that the liquidator would never have accepted the Fieldings’ claim because it was not in his interests to do so.[34]Responding to this, Mr Pickering reminds me that in my substantive judgment I expressly found, at [1.21] that:
“… As I indicate in more detail when addressing the individual claims, I am satisfied that the liquidator did not act unreasonably as regards his initial response to the individual claims based on the material before him and that in many cases it was not until the Fieldings had served evidence in reply to the liquidator’s evidence in response that the strength of their claim became reasonably clear.”
[35]He took me to the individual sections of my judgment where I dealt with the individual elements of the proof of debt, reminding me for example that in relation to the largest individual item, the rollover debt claim, I only found in favour of the Fieldings “not without some hesitation” [3.14], and that in [3.24] I said that:
“I should finally note, insofar as relevant to any question of costs, in the context that this claim was not made in the original proof of debt and was only made after the rejection of the original proof, that in my view the liquidator was reasonably entitled to raise the question of the treatment of the £3.15 million by BGL, which was only explained in the Fieldings’ evidence in response to the evidence of the liquidator. In short, I am satisfied that overall the liquidator did not act unreasonably in taking the position he did and that, as will be apparent from the above, even after the Fieldings had served their evidence in response the question was still reasonably open for argument.”
[36]He drew my attention to similar observations in relation to the ransom and ROT payments claim at [4.21] and in relation to the rent, rates and buildings insurance claim at [6.16], and that I found against the Fieldings in relation to the Vital claim. He submitted, and I accept, that a recurrent theme was that the liquidator had based his decision on what the company documentation appeared to show, whereas to succeed the Fieldings had been compelled to contend that these documentary records were not accurate, and that either their own records, Vital’s records, or their own oral evidence should be preferred. Whilst I do not accept Mr Pickering’s further submission that the Fieldings could and should personally be blamed for the unsatisfactory state of the company records, given the clear evidence that the company records were produced by or were the responsibility of others within the organisation at the time, I do accept that the liquidator was not unreasonable in seeking to make decisions based on what the company records disclosed, and that the evidence which in the end I found reliable and which proved the contrary was not produced by the Fieldings until later in the proceedings.[37]For these reasons I am further satisfied that this is not a case where an order for personal costs would be appropriate. I appreciate that the likely result of this ruling is that the Fieldings will have to absorb their own costs, but it is clear that they were fully aware, when taking the decision to appeal, and at all relevant times later, that unless they could persuade me to hold the liquidator personally liable that would be the outcome. The arguments and my decision as regards whether or not the Fieldings’ costs should be regarded as expenses of the liquidation or there should be no order as to costs[38]For the reasons I have already given, I am satisfied that the default position is that since the Fieldings have succeeded in the appeal their costs of the appeal should be regarded as expenses of the liquidation.[39]Thus, the real question is whether or not a consideration of the factors referred to in Part 44.2 of the Civil Procedure Rules should produce a different outcome, whether in whole or in part.[40]In this regard, Mr Pickering relies upon the same matters as he advanced as reasons why the liquidator should not be personally liable for costs as reasons why the proper order should be that there should be no order as to costs.[41]In my view these points do justify some reduction, but not such as to lead to a dramatic reduction, let alone to there being no order as to costs. Again, I remind myself of what I said in [1.21] of my principal judgment, which is that what has happened here is that the usual process of exchange of views and information has happened in the course of the case, rather than before the decision on the proof of debt, and that both parties must share the blame for this. Nonetheless, I do accept that the Fieldings’ conduct has caused an increase in the overall length and cost of the appeal. In my view an appropriate reduction would be 20% of their costs.[42]Mr Pickering also relied upon a further discrete matter, which was what he contended was the Fieldings’ unreasonable refusal to assist the liquidator in obtaining access to BGL’s accounting database, known as Navision. In short, in January 2016 the liquidator asked Mr Fielding whether or not he had a username and password which he could allow the liquidator to use to obtain more effective access to Navision. The liquidator already had access to Navision, but believed that he could access information much more speedily if he could access the system as a registered user. Mr Fielding responded to the effect that he did not. It is not suggested that this was not true. The liquidator’s complaint is that Mr Fielding was in contact with a former employee Mr Hutchison, who did have registered access, and that this only became apparent when Mr Fielding submitted his third witness statement in July 2016. At this point, the liquidator’s solicitors asked the Fieldings’ solicitors for the relevant details, which were swiftly provided.[43]I am not persuaded by this point. The difficulties with the liquidator’s argument are that:(a) in the interview in August 2012 Mr Fielding had already told the liquidator’s colleague, Mr Andersen, that Mr Hutchison might have the password, and there is no explanation from the liquidator as to why he did not follow that up at any time after that;(b) the liquidator simply asked Mr Fielding whether or not he had a username and password, and his answer was that he did not – he was not asked whether he knew if anyone else might have access;(c) it is not a case where the liquidator had no access at all to Navision, only apparently slower and more erratic access;(d) as soon as he was asked to obtain the information from Mr Hutchison it was provided;(e) there is no evidence of any, let alone any significant, time or cost being wasted by the lack of unrestricted access to Navision before July 2016. In the circumstances, I am not persuaded that this justifies any alteration to the costs order which would otherwise be appropriate.

Conclusion

[44]My order in relation to costs will be that 80% of the Fieldings’ costs of the appeal should be regarded as expenses of the liquidation.

Cited in 4 later judgments