Summary

Although administrators' costs were generally justified as the point upon which they sought directions required a definitive answer, their retention of leading counsel where two other leading counsel had been retained was clearly inappropriate. Accordingly, the administrators' costs of briefing leading counsel were disallowed.

Facts

The court was required to determine the costs arising out of an application by administrators of a company (W) for directions as to whether W's assets were subject to a charitable trust.

The issues were the (i) costs entitlement of the Attorney General; (ii) costs entitlement of the administrators; (iii) basis on which costs were to be determined.

Held

(1) The Attorney General ought ordinarily to be entitled to his costs out of the relevant fund in charity proceedings involving an insolvent company, Liverpool and District Hospital for Diseases of the Heart v Attorney General [1981] Ch. 193 applied. It would be potentially damaging to the due administration of justice for the court to adopt a hostile approach to the participation of the Attorney General in proceedings such as the instant proceedings, where such participation was required in the public interest; it was a matter of common occurrence for the parties' costs in relation to applications for directions by office-holders to be paid out of the assets, even where the party had been unsuccessful, so long as that party had acted properly. Moreover, the provisos in the Administration of Justice (Miscellaneous Provisions) Act 1933 s.7 recognised the appropriateness of the Attorney General's costs being provided for. Accordingly, it followed that it was not right to order the Attorney General to pay the costs of the trustees and the pension fund (see paras 9-10 of judgment). (2) The administrators' costs of the application generally were clearly justified as the point upon which they sought directions required a definitive answer. However, it was clearly inappropriate for the administrators to brief leading counsel in case two other leading counsel between them proved deficient; it was not the function of administrators to supervise the Attorney General in his role of representing charities in the public interest. Once the Attorney General had decided to participate in the hearing and brief leading counsel, the administrators should have recognised that there was no longer any need for them to appear at the hearing, and certainly not by leading counsel. Accordingly, the administrators' costs of briefing leading counsel were disallowed, BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc [2011] EWCA Civ 227, [2011] 1 W.L.R. 2524 followed (paras 12, 19, 22). (3) All parties' costs, if not agreed, were to be assessed and paid out of W's assets were payable as part of the costs and expenses of the administration. To the extent of any disallowed costs, the administrators were to have no right of recoupment. Costs were to be assessed on the standard basis as against the respondents, and on the indemnity basis against the administrators. There was also a possibility that the administrators may have been less vigilant than they ought to have been in relation to incurring unnecessary costs outside of those disallowed costs incurred by briefing leading counsel; that justified an assessment process, albeit on an indemnity basis. As officers of the court, administrators were expected to scrutinise legal costs with some care, if they were to be charged to the estate, Mirror Group Newspapers Plc v Maxwell (No.1) [1998] B.C.C. 324 applied. There was no unfairness in the relevant disallowance of the administrators' costs; to the extent that any costs were shown to be unreasonable, they ought not have been authorised, and any priority rights under the Insolvency Rules 1986 r.2.67(1)(a) only related to expenses properly incurred (paras 20, 23, 25, 31).

Costs determined