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Cite as: [2017] EWHC 462 (Ch)

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		Neutral Citation Number: [2017] EWHC 462 (Ch)
		Case Nos: 314 and 315 of 2016

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL

26/01/2017

B e f o r e :

MR. JUSTICE MORGAN
____________________

Between:

	(1) IAN GILLAN (2) ROGER GLOVER (3) IAN PAICE (4) VICTORIA LORD AND KEITH GLOVER (as Executors of the Estate of JON LORD)	Claimants
	- and -
	(1) HEC ENTERPRISES LIMITED (IN ADMINISTRATION) (2) DEEP PURPLE (OVERSEAS) LIMITED (IN ADMINISTRATION) (3) MARK SUPPERSTONE (4) SIMON HARRIS (Joint Administrators of HEC ENTERPRISES LIMITED and DEEP PURPLE (OVERSEAS) LIMITED)	Defendants

____________________

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____________________

MR. EDMUND CULLEN QC (instructed by Russells Solicitors) appeared for the Claimants
MR. ANDREW SUTCLIFFE QC (instructed by Fieldfisher LLP) appeared for the Respondents
MS. TINA KYRIAKIDES (instructed by Seddons Solicitors) appeared for
Manuela Edwards
MR. RAZI MIRESKANDARI (of Simons, Muirhead and Burton) appeared for
Richard Blackmore
MR. MICHAEL YATES (of Lee & Thompson LLP) appeared for David Coverdale
____________________

HTML VERSION OF JUDGMENT
____________________

MR. JUSTICE MORGAN:

It seems to me that there are three broad topics I have to address. The first is what order to make in relation to the Berkeley Applegate application which has been made by the administrators; the second topic is what to do in relation to the costs of the claimants' application for permission to continue the 2015 proceedings; and the third matter is what to do in relation to the costs of various persons and parties in relation to the Berkeley Applegate application.

So far as I am able, I will avoid repetition of matters that are set out in greater detail in the judgment which I gave on 9^th December 2016. So far as the Berkeley Applegate application is concerned, I indicated at paragraph 112 that I would not make the declaration sought by the applications. I indicated that the best course might be to make no declaration but to leave it to the administrators to consider their position in the light of the judgment. Elsewhere in the judgment between 106 and 111, I dealt with the seven categories identified by the administrators' counsel, Mr. Sutcliffe QC, when presenting the Berkeley Applegate application. In relation to a number of those categories I have indicated that the costs should not be allowed. In relation to others where the door has been left open I have not declared an entitlement under the Berkeley Applegate jurisdiction, I have admitted that there is a possibility that when the matter is examined, if it is examined, that there will be work done which comes within the principle which was beneficial to the beneficiaries, or otherwise is chargeable. At that stage there will have to a quantification exercise.

To reflect as fairly as I am able the findings I made, I will give the following directions as to the continuation of the Berkeley Applegate matter.

If the administrators wish to claim an allowance for their remuneration and disbursements in accordance with the findings in my judgment then: (1) they are to serve the beneficiaries under the trusts with an itemised account setting out the basis of that claim with all supporting detail within 28 days of today; (2) in the absence of agreement from all relevant beneficiaries under the trusts within 28 days after service of the itemised account, the administrators are at liberty to apply to the registrar by an insolvency application notice for an inquiry into their entitlement and any quantification of such entitlement; (3) if the administrators do apply for an inquiry, then I will give the following directions to begin the process in respect of that inquiry. The directions are that the administrators are to serve points of claim in the inquiry within 28 days of the application notice to the registrar; all persons named as respondents shall serve points of defence within 28 days thereafter with any points of reply within 21 days thereafter. Further directions may be sought and given by the registrar. That is the order I will make on the Berkeley Applegate application.

I now deal with the two separate heads of costs that have been argued yesterday and today. In the course of the submissions I expressed the court's very grave concern about how much time had been spent and how great costs were incurred in pursuing these matters to very little advantage, certainly it seems no advantage to the administrators. It is lamentable that officers of the court have given such priority to their own remuneration at the expense of performing their functions as administrators. It has undoubtedly led to a very considerable increase in the proper costs that ought to have been involved. The costs of litigation are very disturbing, particularly to the litigants. This case I fear is a very bad example of inappropriate behaviour which the litigants will find, I think correctly, very difficult indeed to understand.

The order I will make in relation to the application by the claimants for permission to continue the proceedings is as follows: the administrators will pay the claimants' costs of the application up to 12^th August 2016 on the standard basis, thereafter the administrators will pay the claimants' costs of the application as to 50% only. I will make a direction that the administrators are entitled to recover out of the trust assets the costs of complying with the registrar's directions given by him on 15^th July 2016. When I say the costs of complying with his directions, I include, and I expect it will be the principal head of cost, the cost to the administrators of putting in Mr. Supperstone's witness statement of 12^th August but only to the extent that that witness statement complies with the direction and not otherwise. I do not include as part of these costs any sum for the administrators attending the hearing on two days in September last year.

I will give brief reasons for those conclusions as to costs. In the judgment given in December, I dealt in detail with my assessment of the rights and wrongs of the various stances in relation to the application for permission to continue with the proceedings. In particular, I summarised my reactions in paragraph 68 of the judgment. I indicated that the administrators should not have given themselves the task of seeking to resolve the differences between the rival claimants to the trust assets. What was clear is that the company did not have ownership of the trust assets. I also held that the administrators ought to have consented to the continuation of the 2015 proceedings when they were asked to consent. That consent had been sought as early as February 2016, shortly after the appointment of the administrators. I also held that in the absence of consent from the administrators the court would have granted the claimants permission to continue the 2015 proceedings. Those findings would indicate that the appropriate order is that the administrators should pay all of the costs of the claimants' application for permission. However, as I have indicated, from 12^th August 2016 until the end of September or thereabouts in 2016, the claimants will recover one half only of their costs. The administrators will not recover any of their costs during that period, apart from the costs of strictly complying with the registrar's direction. The reason that I have deprived the claimants of one half of their costs is that, because of the registrar's sensible initiative imposing directions on the administrators, which they did not seek, and by reason of the administrators' compliance with the directions imposed upon them, there came before the court, certainly for some of the time at the hearing in September, the ultimate issue which would have been litigated in the 2015 proceedings. That ultimate issue was debated between the beneficiaries then appearing and the court was able to resolve the matter. It seems to me that in those circumstances the claimants should not have against the administrators all of the costs of what happened after 12^th August 2016. Initially I was minded to disallow all of the claimants' costs for that period, but I have been reminded of the course of events. I have been reminded of the skeleton argument which the administrators' counsel supplied to the court for the hearing in September wherethe administrators continued to put forward the stance that the matter should not be the subject of the 2015 proceedings. When it came to the dispute between the beneficiaries, the administrators properly were neutral on that, but they should have been neutral all along, as I have held.

Those are sufficient statements of my reasons for the decision I have made as to the costs of the permission application.

I now deal with the costs of the Berkeley Applegate application. In the first instance I will treat this as if it arose simply between the administrators and the claimants. I will order the administrators to pay the claimants' costs of the Berkeley Applegate application. I do that because, as I indicated in the course of argument, the administrators have taken no step forward and made no real progress as a result of the immense cost they have incurred and the immense cost to which they have put other parties in this respect. What they rely on is a decision at first instance in the Chancery Division. No one has ever suggested for one moment that Berkeley Applegate is not a correct statement of the law or that it should not be applied to whatever the facts turn out to be. There was one point made by the claimants which I dealt with in paragraph 98 of the judgment. As I recall it, that point was not being maintained, run or promoted during the run up to the hearing but it was raised at the hearing where it got deservedly short shrift. To say that something turned upon it and that costs should be separated out in relation to it is, in my assessment, inappropriate.

I have indicated that the administrators have not made progress with their application. The opposite is also true. In fact, substantial parts of it have already been disallowed in the judgment I have given. As to the rest, Berkeley Applegate is the principle to be applied, but it cannot be applied in general terms or in the abstract. It can only be applied to particular circumstances in particular claims. In my assessment, in view of the negative findings I have made about the Berkeley Applegate principle, the administrators maintained all the way through a claim which was very far in advance of that to which they were entitled, and they promoted that claim making it a priority matter which had to be dealt with before any other party's rights and obligations could receive attention. They have not achieved everything, whereas the claimants have achieved something of real importance. They have eliminated large parts of the claim that the administrators wish to put forward. That was apparent from the submissions made yesterday where one could see that the administrators regarded my judgment as a real reverse for them in important respects.

I have been taken with great care by counsel on both sides to the correspondence which was without prejudice save as to costs. Normally when one goes to without prejudice save as to costs correspondence one compares the outcome with any offer which has been made and one considers whether it would have been appropriate for a litigant to accept an offer rather than to incur further costs. I was not shown anything which involves an improvement on the claimants' position compared with the real achievement they have secured in the judgment. So, there is no reason to disallow any part of the claimants' costs.

For that reason, I will give the claimants their costs of the Berkeley Applegate application. They will be assessed on the standard basis, if not agreed.

It remains to deal with similar applications for costs by three other persons who were served with the Berkeley Applegate application. They are Mr. Blackmore, Mrs. Edwards and Mr. Coverdale. I intend to make no findings as to whether those three incurred recoverable costs or in what respects they incurred recoverable costs. If I direct that they are entitled to such costs as are recoverable and direct an assessment on the standard basis, then the costs judge will determine the amount if the matter is not agreed.

Mr. Mireskandari, who appears for Mr. Blackmore, has pointed out that Mr. Blackmore, who has in fact made what on the face of it appears to be a generous offer of settlement in relation to the Berkeley Applegate application by the administrators, he may be right that it would be open to me to award Mr. Blackmore his costs on the indemnity basis rather than to confine him to the standard basis. There is no inevitability about an award on the indemnity basis. My own conclusion is that a fair and just result, having regard to all the circumstances, including the fact that Mr. Blackmore was able fortunately to take a relative back seat in the matter, that an award on the standard basis represents a just result for him to achieve.

Those are the orders I will make.