England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
LEEDS DISTRICT REGISTRY
(HIS HONOUR JUDGE KAYE QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		11th October 2012

Lord Justice Etherton:

1. This is a second appeal in relation to the costs of two applications by the appellants in insolvency proceedings relating to the insolvency of the first appellant.
2. The appellants are married with young children. The matrimonial home, 2 Branksome Crescent, Bradford ("Branksome Crescent") is in their joint names and registered at HM Land Registry.
3. The first appellant was made bankrupt with a debt of £3,700 to the City of Bradford MDC. The respondents are his trustees in bankruptcy.
4. In addition to his interest in Branksome Crescent the first appellant is the sole owner of 19 Sawrey Place, Bradford ("Sawrey Place"), a residential property which is unregistered.
5. The bankruptcy debt, which was originally very modest, has swollen considerably due to administrative and litigation costs. It is a matter of surprise, if not astonishment, and certainly considerable concern that the debt, administrative and legal costs and interest are said now to be in excess of £100,000. There is, or at any event at the time of the relevant costs orders in this case was, sufficient equity in Sawrey Place to discharge the indebtedness and expenses; that is to say there is or there was at the relevant times likely to be a surplus in the first appellant's bankruptcy estate after payment of the indebtedness and expenses.
6. On 7 December 2009 District Judge Lingard made an order in these bankruptcy proceedings in the Bradford County Court ("the 2009 December order"), by which it was declared and ordered as follows, among other things. (1) It was declared that the first appellant's interest in Branksome Crescent and also Sawrey Place had vested in the respondents pursuant to the Insolvency Act 1986 section 306; (2) the first appellant was to deliver up all title deeds to Sawrey Place to the respondents' solicitors no later than 4pm on Monday 21 December 2009; (3) the first appellant was by that time and date to send to the court and to the respondents a statement and documentary evidence as to the whereabouts of the title deeds of Sawrey Place, exhibiting a copy of the then current tenancy agreement; (4) Sawrey Place was to be sold and the first appellant was to concur in such sale; (5) the conduct of such sale was to be given to the respondents; (6) the first appellant was to join with the respondents and do all such things as might be necessary to procure the sale of Sawrey Place with vacant possession; (7) the first appellant was to deliver up vacant possession of Sawrey Place to the respondents within 28 days of the order; (8) the net proceeds of sale of Sawrey Place were to be paid to the respondents; (9) unless within 180 days of the order the bankruptcy debts and interest and the expenses of the bankruptcy were all paid, Branksome Crescent was to be sold, the second appellant was to concur with such sale, the conduct of such sale was to be given to the respondents, the appellant was to deliver up vacant possession on the expiry of 180 days from the date of the order, and the net proceeds of sale were to be paid to the respondents and the second appellant: The order also contained an order for payment by the appellants and the respondents of the respondents' costs, summarily assessed in the sum of £5,000 inclusive of VAT.
7. The first appellant's bankruptcy debt and the expenses of the bankruptcy were not paid within the 180 days. Nor was Sawrey Place put on the market during that period. There are disputes of fact between the parties as to their respective conduct during that period and their respective responsibility for the failure to put Sawrey Place on the market. I will return to those matters in due course.
8. For the present, it is sufficient to say the following. On 8 June 2010 the respondents applied for a warrant of possession of Branksome Crescent. The date for execution was fixed for 21 July 2010. On 1 July 2010 the first appellant applied to suspend the warrant. The matter came before District Judge Edwards on 13 July 2010. He adjourned the application to a full hearing on condition that an application to vary the December 2009 order was issued by 23 July 2010. He suspended the possession warrant in the interim. On 23 July 2010 the first appellant made an application to vary the December 2009 order "so as to allow the Trustees more time to effect first registration of … Sawrey Place and then to sell the property".
9. The application to suspend the warrant for possession and the application to vary the December 2009 order came before District Judge Lingard in the Bradford County Court on 13 September 2010. The District Judge gave a careful and detailed reserved judgment on 21 October 2010. He observed that a "plethora" of witness statements had been generated since the application to suspend the warrant had been issued. The District Judge gave detailed findings of fact as to what had taken place since the December 2009 order. The District Judge referred to a witness statement filed and served by the first appellant on 21 December 2009, in which the first appellant explained that Sawrey Place had been gifted to him in 1989 by his mother and that he was having considerable difficulty in tracking down and obtaining the title deeds. He also explained that he was trying to re-mortgage Sawrey Place in order to raise funds. The District Judge then outlined in considerable detail the events that had taken place and correspondence that had been sent in the period since the December 2009 order. It is sufficient for the purposes of this appeal to set out the following parts of the District Judge's judgment:

"It is also clear that although the Bankrupt says the Sawrey Place property is empty and he has the keys he has not delivered the keys to the Trustee or their solicitors – his excuse being that they are in respectively different parts of the country, but at the same time the Applicants and their Solicitors have done nothing to actually seek possession or even try and market the property. The argument of the Applicants is that they could not start to market the property until they knew that there was a good title and they in effect had been waiting for the Bankrupt to perfect the title and in fact are now prepared to give him until December 2010 so to do.

In view of the fact that 19 Sawrey Place was unencumbered and worth £160,000 which would more than discharge the Bankruptcy debts and expenses whereas 32 Branksome Crescent was in joint names subject to a mortgage and a charging Order, it was clearly in my contemplation when I made my Order in December 2009 that Sawrey Place should be sold and in effect the Bankruptcy administration completed but only if there was a difficulty with that should 32 Branksome Crescent be brought into account.

It is clear that both after the making of the Bankruptcy Order, and after the making of the December 2009 order, there was desultory talk of making an application to annul and talk of a remortgage (in respect of which the Bankrupt instructed Worger Howcroft Solicitors of Bingley and RJ Solicitors of Bradford respectively) and then half heartedly from time to time the Bankrupt instructed Hansards Solicitors to act on his behalf to obtain the deeds and/or act on a purchase by his daughter.

On the other side of the coin however the Applicants and their Solicitors seem to have done very little to implement the very clear terms of my Order as to the sale of Sawrey Place. As that property had been declared to be vested in the Applicants, in my judgment it was clearly thereafter their responsibility to get on with trying to market the property within the 180 day time delay set out in my Order. Whilst clearly the Bankrupt's Solicitors only started to make proper enquiries about the Deeds in July of this year as it was the responsibility of the Applicants to sell it was their responsibility to secure first registration. It is clear that they were well aware of the procedural steps required by the Land Registry Guide in that reference was made to it by them as early as December 2009. As the Bankrupt perceptively points out in one of his statements the Applicants stood in his shoes; they were therefore in a position to have made enquiries of First National (GE Money) and Leeds Building Society. If those had come to nought then in my judgment it would have been proper for them to have sent a questionnaire to the Bankrupt to ascertain greater detail as to how long his family had lived there, when he thought it was transferred, the full name of his mother etc. Furthermore as he had clearly stated in his December 2009 affidavit that he could not remember the name of the Solicitor it would have been appropriate either themselves or, through a Bradford Solicitor acting as agent (to have enquired of Solicitors in the Bradford area by way of a 'round robin' whether they held the Deeds of the property.

It ill behoves the Applicants to criticise the Bankrupt for his apparent inactivity when they themselves were effectively inactive behaving reactively rather than proactively. It am reinforced in this view by the fact that there is no evidence that at any time the Applicants enquired whether 19 Sawrey Place was vacant or as such asked for the keys. It is therefore as a result of inactivity of all parties that the property in Sawrey has not been sold."

10. After considering the merits of the two applications and referring to the fact that there was an agreement as to further time being granted for the sale of Sawrey Place, but disagreement as to the manner in which that should be done, the District Judge said that the only outstanding question was whether or not the December 2009 order should be varied. He said that he considered that it was an exceptional case where it should be varied so as, among other things, to make clear that Sawrey Place should be sold first. He also suspended the warrant for possession until 4pm on 14 March 2011. So far as concerns costs, which is the critical part of his order for the purpose of the present appeal, he said as follows:

"My judgment makes it clear that there has been fault on both sides, both as to reactivity and lack of activity and apparent lack of willingness to apply commonsense and compromise even at the eleventh hour, which might well suggest no order being made as to costs, the result of which could well be that the Trustees' costs would be costs in the bankruptcy and thus in effect paid by the bankrupt; thus negating object of a 'no costs order'.

I do not consider it appropriate to order the Trustees to pay any of the bankrupt's costs in that he was dilatory in the extreme.

To order him to pay the Trustees costs would involve an assessment of ability to pay pursuant to the public funding regulations (although there is a potential fund).

On balance, exercising my discretion as to costs I consider that a percentage order is correct and order that the Bankrupt shall pay 60% of the Applicants' costs to be assessed and that those costs only be a charge on the bankruptcy estate."

11. The formal order of District Judge Lingard contained the following provisions, among others. It provided expressly that the proceeds of sale of Sawrey Place were to be the primary funds from which the respondents should discharge the bankruptcy debt. It provided that, unless by 4pm on 14 March 2011 the bankruptcy debts and interest in the expenses of the bankruptcy had been paid, Branksome Crescent was to be sold. The order contained detailed provisions as to the conduct of that sale and what should be done with the net proceeds of sale. The order provided that the parties should be at liberty to apply to postpone the date for payment and as to the implementation of the order generally. It provided for a new paragraph 10B to be inserted in the December 2009 order requiring the first appellant by 4pm on 11 November 2010 to serve on the respondents a witness statement, verified by a statement of truth, setting out eight categories of information concerning the circumstances in which he acquired Sawrey Place, and matters relating to the title deeds, the mortgaging and remortgaging of that property, the solicitors instructed by him or his mother in relation to the property, the occupation of Sawrey Place by himself and others, and the person or persons who at any time had any interest in Sawrey Place.
12. So far as concerns the costs of the applications dealt with by District Judge Lingard, the formal order said as follows:

"2. The First Respondent shall pay 60% of the Applicants costs of this application to be assessed; those costs only be a charge on the bankruptcy estate."

13. The appellants appealed that part of District Judge Lingard's order dealing with costs. HHJ Kaye QC, sitting as a High Court judge in the Chancery Division in the Leeds District Registry, granted permission to appeal and allowed the appeal on 18 January 2012. His judgment contains a detailed and careful analysis of the factual background, the points of principle and the inter-relationship between the various provisions bearing on orders for costs in insolvency proceedings.
14. The argument of counsel for the appellants, Mr Ian Pennock, who also appears for the appellants today, was summarised in paragraph [13] of HHJ Kaye's judgment. The arguments in brief were that the District Judge was wrong to have ordered the first appellant to pay anything; wrong to order that any part of the costs should fall on the bankrupt's estate, which had the same effect as making the bankrupt pay; and wrong not to make an order in favour of the second appellant. Mr Pennock's argument was that there had been a real injustice and that what should happen was the respondent should pay the appellants' costs out of their own pocket, not out of the bankrupt's estate. In substance, he contended that the appellants had won before the District Judge and succeeded in obtaining everything they had asked for and also, insofar as the District Judge criticised the conduct of the first appellant and his failure to co-operate with the respondents, his failure to provide information or as to having been "dilatory", that criticism was totally unjustified. Mr Pennock also argued that the first appellant had complied with the December 2009 order by filing his witness statement on 21 December 2009 in which he explained what he understood to have been the position as regards the title deeds and that he was not in a position to establish where they were or in a position to pay any fees. Mr Pennock criticised the conduct of the respondents, saying that there was a great deal that they could have done, including taking all the steps that they claim the first appellant had failed to do.
15. The Judge's observation on that line of argument was in substance to agree with Mr Pennock's criticism of the respondents' conduct. The Judge said:

"14… Be that as it may, certainly Mr Pennock's submission that the trustees did very little seems to have been borne out. They did not, for example, as I say, seek to put the property on the market; they did not seek to write to the banks or building societies earlier. Really, they were waiting for the bankrupt to supply the information and keep them informed. Only when the six months were up and nothing happened did they think that no doubt trustees ordinarily might think they are entitled to have recourse against the second property, number 32."

16. The Judge in his judgment set out the arguments of Ms Cheryl Dainty, counsel for the respondents, who also appears for them today. Among other points that she made was that the court must be slow to interfere with the manner in which a trustee in bankruptcy administers the bankrupt's estate. The Judge acknowledged that principle, even in a case where, as here, it appears to be the case or certainly appeared to be the case at the time of the order for costs made by the District Judge that there is likely to be a surplus in the bankruptcy estate after paying the creditors' expenses. The Judge referred to the Insolvency Rules 1986 ("IR") Rule 6.224(1)(a)(i) (expenses or costs properly chargeable or incurred by the trustee in preserving, realising or getting in all the assets of the bankrupt or otherwise relating to the conduct of legal proceedings are to be paid out of the estate in priority to all other categories of expenses) which, he said, seemed to have been drafted in the widest possible form in order to protect and support the trustee so that, consistently with case law, trustees should feel that they should not have to look over their shoulders the whole time. The Judge also referred to IR Rule 7.39, (trustee in bankruptcy not to be personally liable for the costs of any proceedings unless the court otherwise directs) and IR Rule 7.51(a), (the cost provisions of CPR Part 44 to apply in insolvency proceedings).
17. The Judge said that it was unfortunate that the District Judge did not seem to have referred to or considered those provisions in the Insolvency Rules and also CPR 44. He observed, plainly correctly, that the starting point under CPR 44 is that, if the court decides to make an order about costs, then the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order. He also observed, again plainly correctly, that in insolvency proceedings the court also has to consider, where an office holder is concerned, that it should make a different order bearing in mind IR Rule 7.39.
18. The Judge held that the District Judge had fallen into error and that the appellants were entitled to consider that an injustice had occurred, effectively ordering the bankrupt to pay in respect of an application that he apparently won. He referred to the District Judge's "cogent criticism" of the conduct of the respondents and observed that, in those circumstances, even though the first appellant was criticised for not delivering the keys of Sawrey Place, the District Judge could not have properly directed himself to the principles in CPR 44 in ordering the first appellant to pay 60 per cent and imposing the cap which he did.
19. The Judge then turned to consider the order which he should make in substitution for that of the District Judge. He acknowledged "the real difficulty" which the District Judge had faced when considering what order in practice to make. The crucial part of the Judge's analysis on this point is set out in the following passages in paragraphs [22] and [23] of his judgment:

"22. The question is what order should I substitute. It is only when one reaches this point, as I did during the course of argument to myself, that, of course, the real difficulty faced by the district judge emerges. Whilst I entirely agree with Mr Pennock that one has to ignore the fact that the appellants are publicly funded, one cannot entirely ignore the reality of it. The result is that the appellants' costs have been funded and I entirely accept that the court has to consider its duty as regards the legal aid fund but, equally, it might said why should the trustees bear the entirety of the costs particularly out of their own pocket given that the general rule, so far as they are concerned, that, rightly or wrongly, they are entitled to costs out of the estate in so far as they have been properly incurred? Mr Pennock says they have not been properly incurred but, as I have said earlier, it seems to me that that rule, 6.22(4)(1)(a)(i), is to be given a wide and generous interpretation.

23. One must not look at it too analytically to see whether the trustees have been improper about this or improper about that. To some extent, there is some justification in Miss Dainty's submission that the bankrupt brought it on themselves in that they were forced to make an application to suspend a warrant. I only say this so there should be no misconception about my thinking behind this but given the six months was expiring, they were not going to be able, clearly, to satisfy the trustees within the six months, what ought to have happened is they ought to have applied, as they later did, in the very steps that they took, to vary the order of 7^th December or at least seek an extension of time. However, it does not follow from that that it seems to me that the bankrupt should pay anything like 60 per cent of the trustees' costs even on an indirect basis. Therefore, doing the best I can, I am going to direct that a practical form of order which ought to have the same effect all round is that there be no order as to costs below save that the costs the trustees shall be entitled to recoup out of the estate in respect of his costs of the proceedings between 7^th December and 21^st October 2010 be limited to 30 per cent. I make it plain that that is limiting the costs of the proceedings. It does not in any way, shape or form, have any bearing on his general conduct of the administration of the proceedings or the letters that he must write. It means –and I intend it to mean – to apply only to the costs of and directly incidental to suspend the warrant and vary the order of 7^th December leading to the order of 21^st October 2010."

20. The Judge then addressed the position of the second appellant in paragraph [24] of his judgment as follows:

"To that extent, I will therefore grant permission to appeal and allow the appeal in the manner indicated, I have not forgotten the position of the wife. She was wholly successful: there was no criticism in respect of her. However, she too was legally aided and, in reflecting her position, I have taken it in mind in reducing the cap, as it were, if such was the effect of District Judge Lingard's order, from 60 per cent to 30 per cent, in taking that all into consideration. To the extent that the trustee has unrecovered costs in excess of 30 per cent, those will be borne by them out of their own pocket."

21. The part of the formal order of the Judge dealing with the substituted order for costs is to be found in paragraph 3 of his order as follows:

"(3) No order as to costs here and below save that the Respondents' entitlement to recover from the 1^st Appellant's estate in Bankruptcy:

(i) Their legal costs between 7^th December 2009 and 21^st October 2010 of:

(a) The enforcement of the order for possession of 32 Branksome Crescent dated 7 December 2009 and

(b) Defending the applications dated 1 July 2010 and 23 July 2010 and;

(ii) Their legal costs of defending this Appeal

be limited to 30% of the costs that they would have been entitled to recover from the estate in Bankruptcy but for this order. For the avoidance of doubt nothing in this paragraph limits the recovery by the Respondents from the 1^st Appellant's estate in Bankruptcy of their costs and expenses related to their general conduct of the bankruptcy, including all efforts at any time to locate the title deeds to, prepare documents and conduct investigations in support of enabling the first registration and procure the sale of 19 Sawrey Place, Bradford."

22. Sir Robin Jacob gave permission to appeal on the papers on 27 March 2012.
23. The respondents have served a Respondent's Notice setting out a substantial number of factual matters and arguments as to the calpable conduct of the first appellant as additional grounds for supporting the decision of the Judge.
24. As I have said, Mr Pennock appears for both appellants today. His arguments can be briefly summarised as follows. First, he says that it was contrary to Section 11(1) of the Access to Justice Act 1999 that any order for costs to be made which had the effect of making the first appellant pay the costs. That was, he said, the effect of not imposing a complete cap on reimbursement by the respondents. Secondly, he says that IR Rule 6.224(1)(a) does not apply because the respondents' costs were not properly incurred. Thirdly, he says that IR Rule 7.39 is irrelevant because that provision only applies to proceedings between the trustee in bankruptcy and a person not a party to the insolvency proceedings. Fourthly, he says that it was contrary to fundamental principle for the Judge (and, indeed, the District Judge) to have taken any account of the fact that either the first appellant or the second appellant was legally aided. Fifthly, he said that, applying the principles in CPR 44, both appellants should have been awarded their costs of the two applications because they were entirely successful on those applications; there was no basis for any criticism of the conduct of either appellant during the 180 day period specified in the December 2009 order; the first appellant did everything that he was required to do under that order since he made his witness statement as required and within the time specified in the order; there was no justification of any criticism of him for having been dilatory, and in respect of any earlier dilatoriness he had been unduly penalised by the costs order in the December 2009 order; he had done his best to locate the deeds but it was not his fault that he had been unable to do so or to recover there.
25. Mr Pennock said that the culpability was entirely that of the respondents, who had had the means, ability and duty to register Sawrey Place at HM Land Registry and to proceed to market it for sale irrespective of any problem in locating and recovering the title deeds and irrespective of any attempts by the first appellant to mortgage or re-mortgage the property in order to raise funds to pay off the bankruptcy debts and expenses, and moreover, they had acted "wholly disproportionately" in issuing the warrant for possession of Branksome Crescent, the family home.
26. Ms Dainty has put up a spirited defence of the Judge's costs order and places reliance on the additional matters in the Respondent's Notice.
27. I acknowledge that the Judge was undertaking a careful exercise, trying to do what he perceived to be justice in the round. It seems to me clear, however, that while his order in respect of the first appellant was within the ambit of a proper exercise of discretion, it is impossible to justify his order for costs so far as concerns the second appellant.
28. As the Judge rightly said, the starting point must be CPR 44, which IR Rule 7.51(A)(1) makes clear applies in insolvency proceedings. The first appellant applied to amend the December 2009 order and to suspend execution of the warrant for possession. He was successful in both respects. The starting point, therefore, must be that he should be paid his costs unless there is some good reason for the court to order otherwise. There is no doubt that the fact that the first appellant was legally aided is irrelevant to that consideration. The District Judge criticised the conduct of the first appellant describing him as "dilatory in the extreme". The Judge, on appeal, did not say that the District Judge was not entitled to reach that conclusion. Paragraph 7 of the December 2009 order required the first appellant to join with the respondents to do all such things as may be necessary to procure the sale of Sawrey Place. The first appellant, however, wished to mortgage or re-mortgage that property so as to pay off the bankruptcy costs and expenses. He plainly did not wish the respondents to sell the property while he was continuing with those efforts. There was further assistance that he could have given them in the meantime. That is reflected in the extensive requirements for further information regarding Sawrey Place, which the District Judge's order required him to set out in a witness statement to be made by the first appellant. I accept that, as Mr Pennock told us, those provisions were inserted in the order by consent. Having regard to all the evidence, including the correspondence before the District Judge and the Judge, including the matters in the Respondent's Notice, however, it is quite impossible to say that the District Judge and the Judge were wrong in their assessments that, all other things being equal and ignoring the specific insolvency aspects, this would be a case in which there should be no order for costs as between the first appellant and the respondents.
29. The next question is whether such an order needed to be qualified or supplemented in any way by virtue of the insolvency expect. I reject Mr Pennock's interpretation of section 11(1) of the Access to Justice Act 1999. That provides as follows :

"Except in prescribed circumstances, costs ordered against an individual in relation to any proceedings or part of proceedings funded for him shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including—

(a)the financial resources of all the parties to the proceedings, and

(b)their conduct in connection with the dispute to which the proceedings relate;

and for this purpose proceedings, or a part of proceedings, are funded for an individual if services relating to the proceedings or part are funded for him by the Commission as part of the Community Legal Service."

30. It seems to me perfectly clear that section 11(1) is dealing with an adverse order for costs, not as in the present case a cap on a trustee's legal right to reimbursement of costs and expenses out of the trust fund or, as here, the bankruptcy estate. The latter is something for the benefit of the bankrupt, if there is likely to be a surplus, not an adverse financial order against him or her. As Ms Dainty pointed out, that analysis and conclusion is reinforced by subsections (4)(a) and (b), which are as follows :

(4) The regulations may, in particular, make provision—

(a)specifying the principles to be applied in determining the amount of any costs which may be awarded against a party for whom services are funded by the Commission as part of the Community Legal Service,

(b)limiting the circumstances in which, or extent to which, an order for costs may be enforced against such a party,…"

31. Mr Pennock's interpretation would have extraordinary and, to my mind, plainly unintended consequences whenever a trustee or trustee in bankruptcy (where there is potential surplus) successfully makes or defends an application by a beneficiary or a bankrupt who is legally aided.
32. The next and separate issue is whether it was right for the Judge to qualify the respondents' usual right to reimbursement out of the bankrupt's estate. So far as concerns IR Rule 6.224(1)(a)(I). It is clear that a trustee in bankruptcy is only to be required to bear costs and expenses personally if he or she has fallen below the standard of a reasonable insolvency practitioner acting reasonably. Both the District Judge and the Judge considered that it would be right, in view of the culpable conduct of the respondents both in relation to their dilatory efforts to sell Sawrey Place and their opposition as to the application of the first appellant, to qualify their right to recoup any costs incurred by them in relation to those applications out of the bankrupt's estate. Again, I do not consider that they can be criticised for that conclusion. They varied, however, in the extent of the qualification to the respondents' right to recoupment, the District Judge apparently intending to impose a cap of 60 per cent of their recoverable costs and the Judge imposing a cap of 30 per cent. There is room for a legitimate disagreement between different judges on that point.
33. Mr Pennock says that the Judge should have prohibited the respondents from recovering any costs at all out of the bankrupt's estate attributable to the two applications. If, however, the correct order is that there should be no order for costs as between the first appellant and the respondents, that is an impossible argument. The order reflects a finding that the respondents acted in part reasonably and in part unreasonably. Indeed, logically the respondents might have complained that the Judge should have limited the cap to 50 per cent. It appears that he may have reduced the cap in view of his costs order concerning the second appellant, to which I shall refer in more detail in a moment. The respondents have not, however, cross-appealed against the cap of 30 per cent.
34. For those reasons, I do not consider that any appeal lies against the order of the Judge so far as concerns the first appellant.
35. The position of the second appellant is, however, quite different. Ms Dainty sought to persuade us that the conduct of the second appellant was culpable. The District Judge did not, however, state anywhere in his judgment that he was depriving her of the usual order for costs in favour of a successful litigant due to her conduct. The Judge said in paragraph [24] of his judgment that she was wholly successful and there was no criticism in respect of her. He was entitled to take that view. More importantly, having taken that view, there was then no basis for depriving her of the usual right of a successful litigant under CPR 44 to an award of costs in her favour. The Judge seems to have thought that it was in some way relevant that she was legally aided and that it was right to reflect her position by reducing the cap on the right of the respondents to recover their costs out of the bankrupt's estate. I can see no principled basis, however, for either. She was not insolvent and the cap in respect of the first appellant's bankrupt estate is irrelevant to her position. There is a potential charge on her property in respect of the legal aid on her account.
36. For those reasons, I would allow the appeal so far as concerns the second appellant and would substitute an order that the respondents pay her costs of the applications. The 30 per cent cap will, of course, apply not only in relation to the respondents' own costs, but also in relation to the costs thereby ordered to be paid by them to her.

Lord Justice Mummery :

37. I agree.

Sir Scott Baker:

38. I agree.

Order: First Appellant's appeal dismissed; Second Appellant's appeal allowed