England and Wales High Court (Senior Courts Costs Office) Decisions

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You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> McLean & Anor v Woolf & Ors [2003] EWHC 9046 (Costs) (2 November 2003)
URL: http://www.bailii.org/ew/cases/EWHC/Costs/2003/9046.html
Cite as: [2003] EWHC 9046 (Costs)

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This summary of a judgment has been obtained from the Supreme Court Costs Office pages on the HM Courts Service web site. The citation used by BAILII is not an officially approved citation. The full text of the judgment may have an official Neutral Citation issued by the court, and may be available elsewhere on BAILII.

 

 



No.26 of 2003

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McLean & Anor v Woolf & Ors
2 November 2003
Court of Appeal (Peter Gibson and Mance LJJ)

D & J were directors of a company (BML) which traded as a health and leisure club, and which owned premises near Chesterfield. Under a scheme set up in order to avoid payment of VAT on membership fees, BML entered into two separate leases with D & J. The first lease demised part of BML’s premises to a company run by D and the remainder of the premises was leased to a separate company run by J.

BML’s bankers appointed receivers when the money they had advanced was not repaid pursuant to a debenture, and those receivers commenced proceedings challenging the validity of the two leases in which allegations were made against D & J of breaches of fiduciary duty, and also that the leases were shams set up to ensure that the bank was left without security. Both D & J served defences to the pleaded allegations denying breach of fiduciary duty and wrong doing, the essential basis of those defences being that the bank had agreed to the scheme of reorganisation.

The trial issue concerning the leases was fixed for 13 January 2003, but, on 5 and 10 January 2003 respectively, D & J withdrew their intention to contest the validity of the leases, but maintained their denials of wrong doing. The Judge made adverse costs orders against D & J. He held that D, as the controlling force behind BML, was the real target of the proceedings commenced by the receivers, but neither D nor J had suggested that they were not the appropriate parties to the proceedings, but rather their individual companies, and that up until the very last minute they had sought to uphold the validity of the leases.

D & J appealed those adverse costs orders, saying that the costs order should have been made against the companies to whom the leases were granted, but the Court of Appeal dismissed the appeal.

So far as D’s appeal was concerned they held that from the outset he had engaged himself in the proceedings as a director of his company and in a personal capacity. He put forward a defence on behalf of his company, and sought to adopt that defence in his personal capacity. He was a crucial witness in relation to the fundamental issue on whether the bank had consented to the scheme that had been put into place.

So far as J was concerned the court accepted that she was not a prime mover in the scheme, but it was plain that she sought to uphold the lease granted to her company, and also adopted the defence put forward in that regard. Both D and J took active steps in the proceedings, and neither applied to discharge themselves from the litigation as inappropriate parties.

Accordingly the order for costs made against D & J was upheld.