CHANCERY DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMPANIES COURT
Fetter Lane, London, EC4A 1NL |
||
B e f o r e :
____________________
(1) ACL NETHERLANDS B.V. (AS SUCCESSOR TO AUTONOMY CORPORATION LIMITED) (2) HEWLETT-PACKARD THE HAGUE B.V. (AS SUCCESSOR TO HEWLETT-PACKARD VISION B.V.) (3) AUTONOMY SYSTEMS LIMITED (4) HEWLETT-PACKARD ENTERPRISE NEW JERSEY, INC |
Claimant |
|
- and - |
||
(1) MICHAEL RICHARD LYNCH (2) SUSHOVAN TAREQUE HUSSAIN |
Defendant |
____________________
Richard Hill KC, Sharif A. Shivji KC, Tom Gentleman, Zara McGlone, Karl Anderson, with Lord (David) Wolfson KC and Nehali Shah (instructed by Clifford Chance LLP) for the 1st Defendant
Paul Casey (instructed by Simmons & Simmons LLP) for the 2nd Defendant
____________________
Crown Copyright ©
Mr Justice Hildyard:
Relevant Chronology
(1) "If by reason of any special circumstances it appears to the High Court to be necessary or expedient to appoint as administrator some person other than the person who, but for this section, would in accordance with probate rules have been entitled to the grant, the court may in its discretion appoint as administrator such person as it thinks expedient.
(2) Any grant of administration under this section may be limited in any way the court thinks fit."
The difficulties which arose and the process by which they were identified and addressed
(1) My initial concerns, which I shared with the parties in an email dated 11 March 2025, related to (a) the scope of the proposed Order as regards fees, costs and disbursements and (b) whether provision should be made as to what should be done if issues arose after I was 'functus officio' (after my judgment on quantum and my determination of consequential matters) or if issues arose whilst I was still charged with the matter which concerned privileged material which I should not see.
(2) As to (a) in sub-paragraph (1) above, my particular concern was to clarify a provision in the original draft section 116 Order which appeared to extend to authorising the appointed representative (defined as "the Administrator") to pay not only fees incurred by him or in respect of his appointment, but also the costs and disbursements outstanding at the date of Dr Lynch's death both of CCUK (in the sum of £367,578.14) and Clifford Chance's US office ("CCUS") (including costs and disbursements in the US proceedings in the sum of $599,235.51).
(3) As I elaborated in a further letter to the parties, my concern was (and has remained) as to my jurisdiction to make provision for costs/expenses which are not costs/expenses of or ancillary to the administration. That concern is the greater in circumstances where there could be an issue as to the solvency of Dr Lynch's Estate, and consequently an issue as to whether such payments should have been given priority.
(4) Obviously, that concern most impacted Clifford Chance as a firm (denoting the worldwide firm including both CCUK and CCUS). However, it also seemed to me that such a broad mandate as was originally proposed could well put Mr Sandelson in a difficult position, given his long association with that firm but his primary and overriding duty to the Estate.
By letter dated 24 March 2025, Clifford Chance clarified that: (a) the outstanding costs denominated in US Dollars ($) represent fees owed to CCUS's representation of Dr Lynch in the US criminal proceedings (where both Dr Lynch and his co-defendant, Mr Stephen Chamberlain, were acquitted); (b) CCUK and CCUS operate separate client accounts; (c) they accepted that any claims CCUS might have in respect of sums credited to Dr Lynch in client accounts operated by CCUS would probably be governed by US law; and (d) CCUS was and is "content to wait for the resolution of its claim over the monies in its client account". Accordingly, it was agreed that this judgment and the draft Order which has ultimately been proposed should not relate to sums owed to or held by CCUS. However, this did not address my broader concerns about costs not incurred in respect of the proposed administration.
(5) It was urged on me by CCUK that the jurisdiction conferred by section 116 "is broad and unfettered" and although of course it must be exercised "on proper grounds and in a proportionate way", it should extend to making an order for the payment of costs incurred prior to the appointment of the administrator. CCUK cited in support of this a decision of Mr David Rees KC (sitting as a Deputy Judge of the High Court) in the Family Division, namely In the Estate of Eric Sydney King Deceased, Philip King v Stephen King [2023] EWHC 2822 (Fam).
However, in my view (of which I informed the parties in a formal Note dated 27 March 2025), that case concerned legal costs incurred by previous administrators in the administration of the deceased's estate (and thus costs/expenses incurred in the course of administration and enjoying preferential status in any bankruptcy/insolvency). It did not relate to the discharge of litigation costs and expenses incurred prior to the death and unconnected to the process of administration. I made clear that any order for payment would be restricted to costs in connection with the proposed administration.
(6) CCUK were, especially given that view, also anxious to protect any common law lien in respect of the amounts owed to them, and they invited me to make protective directions in this regard. In particular, they invited me to direct or at least include express recognition and approval in the proposed section 116 Order that CCUK's lien should be recognised as an entitlement "to be paid ahead of other creditors" on the basis that such a lien should be treated as "a secured claim over the monies in the client account."
In my view, however, which again I set out in my formal Note (dated 27 March 2025), a common law lien does not amount to a secured lien: and see Addleshaw Goddard LLP v Nicholas Stewart Wood and Anor. [2015] EWHC B12 (Costs); also Re Born [1902] Ch 433 and Clifford Harris & Co v Solland International Ltd and Ors. [2005] EWHC 141 (Ch).
It seems to me that CCUK might be entitled to seek a charge or even payment with leave of the Court under section 73 of the Solicitors Act 1974: but that would require a separate application by CCUK, supported by evidence.
I also warned that "The proposed Administrator needs to be separate in this regard and to keep an eye on any conflict." I was concerned that the Administrator should confine himself to the discharge of his duties arising from his role, rather than matters pre-dating the proposals for his appointment.
(7) A further concern which I mentioned in my Note dated 27 March 2025 was that it seemed to me, on reflection, that it would be usual, and perhaps more appropriate, for an application under section 116 to be made, not in existing litigation, but by Claim Form and application in the Property, Trusts and Probate List pursuant to CPR 57.2.1, in which the executors who had not renounced would be joined and would thus be bound.
Travers Smith urged me not to insist on this course and thus require fresh proceedings, given that the matter was in substance agreed. Fresh proceedings would inevitably cause delay, and also potentially run into difficulties because of Mr Gaunt and Mr Kanter's insistence that they could not participate in any way that could be interpreted as intermeddling or might be such as to prevent them renouncing their office.
Although appreciative of these difficulties, I remained concerned, in particular as to how the executors who had not renounced could be bound.
Further exchanges
(1) A revised draft Order was provided to me by Travers Smith on 31 March 2025; this had been provided to CCUK earlier that day.
(2) Travers Smith explained, in a covering letter to me, that, in light of my continuing concerns, the objective of the revised draft was to separate out (a) the issue of Mr Sandelson's appointment, which is obviously increasingly pressing, from (b) the issue of whether the draft Order should authorise Mr Sandelson to pay fees and disbursements incurred by CCUK (and it seems its office in the US) prior to Dr Lynch's death (which they defined as "Pre-Death Fees") and, if not, how Mr Sandelson's remuneration and professional fees and expenses could be paid without compromising the lien asserted by CCUK over monies held in its client account.
(3) Travers Smith went on to explain that to that end, the draft Order they proposed had been amended to:
(a) remove any reference to the Pre-Death Fees (removing also a provision recording an undertaking offered by CCUK to repay such fees if the Court should find that they should not have been paid), so that no authority is conferred on Mr Sandelson to permit their payment; and
(b) provide that Mr Sandelson's reasonably and properly incurred remuneration and professional fees and expenses of the administration pursuant to the Order be paid out of (i) the funds held in CCUK's client account, but subject to the proviso that the balance will not be reduced below the quantum of fees and expenses incurred prior to Dr Lynch's death in respect of which CCUK assert a lien (being £367,568.14) or (ii) other assets of the Estate.
(4) Travers Smith also explained that, in deference to CCUK's concern lest that nevertheless there might be "at least some prejudice to CCUK's rights under the lien", the proposed draft Order had been amended to include an express statement that nothing in it is intended to prejudice any lien that CCUK may assert.
(5) CCUK reacted constructively to these proposals, stating that the proposed draft provisions "appear sensible to us in principle". However, unsurprisingly, they needed further time to consider the position as a firm, and indicated that they were seeking independent advice accordingly.
(6) Whilst CCUK were seeking independent advice, I also put forward a possible way round my concern that some mechanism was necessary to ensure that the executors nominated under the Will who had not renounced would be bound by the Order. This was for the executors who had not renounced to provide a formal undertaking to be bound.
(7) Travers Smith welcomed this proposal; but it was (correctly) considered necessary for the executors concerned to instruct solicitors both for the purpose of seeking advice and (if so advised) to convey formally their undertaking in this regard.
(8) By letter addressed to me and dated 10 April 2025, CCUK:
(a) confirmed that the costs described in the draft Order as being costs "in relation to this litigation following Dr Lynch's death" are "costs incurred by CCUK solely in relation to the appointment of Mr Sandelson as Administrator and for the purpose of ensuring that there is a representative of the estate of Dr Lynch able to deal with the proceedings";
(b) they added that "[f]or the avoidance of doubt, we confirm that no costs have been incurred in this period by this firm in relation to any other aspects of the administration of Dr Lynch's estate or the substance of the underlying proceedings themselves", their understanding being that the "proposal in the Draft Order is that the Administrator be entitled to pay these fees which were preparatory to his appointment provided that he is satisfied that they were reasonably and properly incurred";
(c) welcomed and accepted the proposals made in that regard and with respect to the issue relating to CCUK's asserted lien, considering them to be "a practical and pragmatic way in which CCUK's rights in respect of the funds which it holds can be maintained while allowing the balance of the funds over and above the pre-death costs to be utilised by the Administrator";
(d) concluded their letter with the hope that the solution would commend itself to the Court as allowing "both for the appointment of the Administrator and for any further issues in relation to CCUK's entitlement to apply the ring-fenced funds in payment of the costs incurred prior to the death of Dr Lynch to be determined separately in due course."
(9) For their part, Travers Smith confirmed their concurrence in the approach I had floated of binding the executors appointed under the Will who had not renounced by way of an undertaking. On 16 April 2025 (the last day of the Hilary Term), I received a letter from Broadfield as solicitors for Messrs Gaunt and Kanter confirming their approval of and willingness to give an undertaking to be bound by the Order.
(10) In circumstances where Broadfield was not on the record, and neither of their clients is a party to the existing proceedings, I required formal compliance with paragraph 14.70 of the Chancery Guide, and accordingly that (a) each of Broadfield's clients should endorse with their signature a letter from Broadfield recording the undertakings, and (b) the Broadfield partner concerned should certify those signatures as being those of her clients, and confirm that she had explained the undertaking to each of them and each appeared to understand it. On 23 April 2025, I received compliant documentation.
(11) In the meantime, on 14 April 2025 Travers Smith had provided me with a further version of the proposed draft Order. Further revisions to that draft were made subsequently, and a final version in an agreed form ("the agreed draft Order"), which was sent to me on 12 May 2025, is attached to this judgment.
Disposition and conclusion
(1) My jurisdiction under section 116 has been properly invoked, without the necessity of a separate action joining the executors appointed under the Will, provided that some mechanism is provided for any order made being binding on the relevant executors.
(2) The undertakings to be given and recited by Mr Gaunt and Mr Kanter, they both having been advised by their Solicitors as to the effect of the proposed Order and the consequences of giving such undertaking, and each of them having endorsed a letter from their Solicitors recording these matters by signatures certified to be theirs in accordance with paragraph 14.70 of the Chancery Guide, will be sufficient to bind them notwithstanding that they have not been impleaded as parties.
(3) There is no doubt that the circumstances I have described are "special" and that it is "necessary or expedient" to "appoint as administrator some person other than the person who, but for this section, would in accordance with probate rules have been entitled to the grant…" within the meaning of the quoted provisions of section 116(1).
(4) It is "expedient" to appoint Mr Sandelson as the Administrator, he being willing to act and being someone whom all persons interested have agreed is suitable, especially given his experience and familiarity to Dr Lynch and his family. I am satisfied that he is indeed a well-qualified and suitable candidate. I was concerned that he should specifically and conscientiously have addressed whether he feels or perceives there to be any conflict between his proposed role and his relationship with Clifford Chance; and I am satisfied both that he has done so and will continue to have in mind that in the discharge of his role it is the best interests of the estate that must be paramount. By way of elaboration, I have considered carefully his affidavit evidence and note especially in that regard that:
(a) he became a partner in CCUK in 1988;
(b) he was, for some years, CCUK's Global Head of Litigation;
(c) in that capacity he became familiar with this litigation. However, he never handled Dr Lynch's defence as an active day-to-day partner; and although he did remain involved in both these and the US criminal proceedings, and provided high-level strategic advice to Dr Lynch as and when required, he is not part of the current litigation team;
(d) he retired from the partnership in April 2024;
(e) he is no longer a partner at CCUK, though he has a consultancy role, for which he is remunerated. He has explained in that regard that this consultancy agreement was put in place principally to enable him to assist in long term litigation in which CCUK acts on behalf of News Group Newspapers Limited, but that there has been no substantive work arising from that consultancy arrangement since April 2024 and he does not expect there to be any significant work in the future;
(f) he has confirmed that he does not believe there could be any conflict or disruption in his ability to perform his duties if appointed as administrator even if he were to continue with the consultancy arrangement. However, he has also confirmed that he is willing to terminate his consultancy agreement if any party or the Court has any reservations about this role;
(g) he has also confirmed, for the avoidance of doubt that he has no other financial interest in CCUK and that any remuneration he receives in respect of his consultancy is not in any way dependent on the revenues or profits of CCUK.
(5) The terms on which Mr Sandelson is to be appointed, as set out in the attached agreed draft Order, are within the power of the Court to prescribe as conferred by section 116. I consider that those terms and provisions (none having been objected to) are expedient and reasonable. I draw comfort in that regard from the judgment and (comparable) orders made by Sales J (as he then was) in Inna Gudavaze & Ors v Joseph Kay [2012] EWHC 1683 (Ch).
(6) Mr Sandelson's duties and obligations are sufficiently adumbrated in the agreed draft Order, and I am confident are well understood by him. However, it is appropriate for Mr Sandelson's personal liability to be limited as proposed.
(7) In light of the concerns about the overall solvency of Dr Lynch's estate, it is appropriate, in order to make the provisions above described workable and reliable, to make the validation order under section 284 of the Insolvency Act 1986 provided for by paragraph 8 of the agreed draft Order.
(8) It is also expedient and necessary that Mr Sandelson should immediately be provided with a copy of the Will and any codicil or letter of wishes of Dr Lynch, and any professional advice given to Dr Lynch in connection with these proceedings (as provided for in paragraph 3 of the agreed draft Order).
(9) The agreed draft Order attached, as requested by CCUK, includes a provision authorising Mr Sandelson to act immediately on the terms of the agreed draft Order, even before a formal grant of representation is issued by the Probate Registry: and see the elaboration of the reasons for this in paragraph 30 below.
(10) Lastly, and for the avoidance of any doubt, the limited grant to Mr Sandelson being to represent the Estate in these proceedings, power should be reserved to Mr Gaunt and Mr Kanter, after considering my forthcoming judgment on quantum and according to its effect, either formally to renounce their appointment, or to apply for a full grant and power should expressly be reserved to them both accordingly.
Claim no. HC-2015-001324
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
BEFORE THE HONOURABLE MR JUSTICE HILDYARD
DATED …………………………
BETWEEN:
Claimants
Defendants
UPON the death of the First Defendant, Michael Richard Lynch ("Dr Lynch"), on 19 August 2024
AND UPON Dr Lynch having left a will by which he appointed as his executors his widow, Angela Bacares ("Ms Bacares"), Frances Smith ("Ms Smith"), Andrew Kanter ("Mr Kanter") and Richard Gaunt ("Mr Gaunt")
AND UPON Ms Bacares and Ms Smith having renounced
AND UPON Mr Kanter and Mr Gaunt not having renounced but having indicated that they are currently, pending sight of the quantum judgment in these proceedings, undecided as to whether they will renounce or take up their appointment
AND UPON the Claimants' application by application notice dated 7 March 2025 ("the Application") seeking an order:
(a) pursuant to section 116 of the Senior Courts Act 1981 appointing Jeremy Vaughan Sandelson as administrator of Dr Lynch's estate ("the Estate") for the limited purpose of representing the Estate in these proceedings; and
(b) pursuant to CPR rule 19.2 substituting the newly appointed administrator as First Defendant in place of Dr Lynch
AND UPON Mr Sandelson ("the Administrator") having consented to being so appointed and substituted
AND UPON the Second Defendant not having raised an objection to the proposed appointment
AND UPON Ms Bacares, Mr Kanter and Mr Gaunt having indicated that they support the proposed appointment
AND UPON Mr Kanter and Mr Gaunt, without prejudice to the question of whether they ultimately renounce or take up their appointment, both undertaking to be bound by this Order
AND UPON the Court being satisfied that there are special circumstances such that it is necessary and expedient to make an appointment pursuant to section 116 of the Senior Courts Act 1981
AND UPON the Court considering the Administrator to be a suitable appointee
AND UPON the Court considering the Application on the papers without a hearing
IT IS ORDERED THAT:
(a) a copy of any will, codicil and/or letter of wishes of Dr Lynch; and
(b) any professional advice given to Dr Lynch in connection with these proceedings, including any such material that is, was or would have been subject to legal professional privilege for the benefit of Dr Lynch (including but not limited to the file or files held by Clifford Chance LLP in respect of its instruction by Dr Lynch in his own right in these proceedings).
(a) Time spent in anticipation of being appointed; and
(b) His administration of the Estate pursuant to this Order.
(a) the funds held in Clifford Chance LLP's UK client account, provided:
(i) that the Administrator is satisfied that the costs and expenses are reasonable; and
(ii) that the balance of Clifford Chance LLP's client account will not be reduced below the quantum of costs and expenses incurred prior to Dr Lynch's death in respect of which Clifford Chance LLP assert a lien (being £367,578.14); or
(b) other assets of the Estate.
Nothing in this Order is intended to operate to prejudice any lien that Clifford Chance LLP may assert over monies in the client account in respect of their costs and disbursements.
(a) This Order shall not affect Mr Kanter or Mr Gaunt's ability to apply for a grant of probate, should they decide to do so.
(b) This Order shall not affect Mr Kanter or Mr Gaunt's ability to renounce probate, should they decide to do so.
(c) A grant of probate will not affect the Administrator's appointment unless the Court orders otherwise.
(a) The resolution of these proceedings, whether by settlement or final judgment. Upon such resolution and written notice having been provided to the Court, to representatives of the Claimants and to the beneficiaries under Dr Lynch's will, the Administrator shall be deemed functus officio, and his duties and responsibilities under this Order shall cease; or
(b) The resignation of the Administrator, written notice having been provided to the Court, representatives of the Claimants and the beneficiaries under Dr Lynch's will. Such resignation shall take effect 30 days after the date of the notice, unless the Court orders otherwise.
Service of the Order
The Court has provided a sealed copy of this Order to the serving party:
Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL