Bryan Alan Jackson and Another v Cannons Law Practice LLP and Others
| Jurisdiction | England & Wales |
| Judge | Mr Registrar Jones |
| Judgment Date | 16 December 2014 |
| Neutral Citation | [2014] EWHC 4237 (Ch) |
| Docket Number | Case No: No 3976 of 2012 |
| Court | Chancery Division |
| Date | 16 December 2014 |
2014 EWHC 4237 (Ch)
Mr Registrar Jones
Case No: No 3976 of 2012
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
In The Matter Of HARVEST FINANCE LIMITED (In Liquidation)
And In The Matter Of THE INSOLVENCY ACT 1986
7 Rolls Buildings,
Fetter Lane, London EC4A 1NL
Mr Rory Brown (instructed by Francis Wilks and Jones) for the Applicants
Mr Andrew Fletcher QC (instructed by Barker Gilette LLP) for the Respondents
Hearing dates: 19 November and 16 December 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
A) The Issues
This application ("the Application") for relief under sections 234 and 236 of the Insolvency Act 1986 ("the Act") returns for me decide whether the Respondents should be paid the expenses incurred in complying with Orders previously made and to determine the payment of legal costs.
The costs of compliance claimed are considerable, £40,381 including VAT. These are largely attributable to time spent by the First Respondent, Mr Francis Cannon, in his capacity of a solicitor admitted by the Supreme Court in Scotland, identifying and retrieving files retained electronically within systems which are not best suited for searching and file recovery.
The first issue is whether I have jurisdiction to order payment of such costs. If so, the second issue is whether I should do so. Issues of quantum will be raised at a subsequent hearing if it comes to that.
A similar approach has been taken to the issue of payment of the legal costs of the application. I am asked to decide who should pay and to leave quantum until later.
B) Costs of Compliance
B1) Submissions
As to the costs of compliance, Mr Brown, counsel for the Applicants ("the Liquidators"), submits that I should follow Mr Justice Vinelott's decision in Re Cloverbay Ltd. [1989] BCLC 724, (1989) 5 BCC 732 that there is no jurisdiction to make provision for payment of the costs of compliance of a section 236 Order.
Mr Fletcher QC for the Respondents (who did not appear in previous hearings) submits that I should instead follow the decision of Mr Justice Hoffmann (as he then was) in Re Aveling Barford Ltd and Others [1988] 3 All ER 1019, [1989] 1 WLR 360 that there is jurisdiction. He relies upon the favouring of that decision over the decision of Mr Justice Vinelott by Mr Justice Robert Walker (as he then was) in Re BCCI, Morris and others v America National Trust & Savings Association & Others [1997] BCC 561. He also relies it upon it having been common ground between experienced counsel that there was jurisdiction in an appeal before the Court of Appeal in Re British & Commonwealth Holdings [1992] Ch 342, [1992] Ch 342.
Mr Fletcher Q.C. further submits that a section 236 application is analogous to applications for CPR pre-action disclosure and/or Norwich Pharmacal applications both of which normally require payment of the "innocent" respondent's costs of compliance (see CPR Part 46, Rule 46.1(2) and Part 44, Rule 44.2.3 respectively). In his skeleton argument he makes reference to the decision of Mr Justice Mann in Verjee v Miller [2004] EWHC 2388 (Ch) at paragraph [17] and submits the learned judge (another who is extremely experienced and highly respected in this field) considered s236 applications fall within a similar category to Norwich Pharmacal applications. He submits the Respondents are entitled to the costs of compliance unless they acted unreasonably.
Mr Fletcher QC also referred me to a passage from the judgment of Mr Justice Hoffmann in Re Aveling Barford Ltd and Others (above) in which he says there are stronger analogies with a subpoena duces tecum or ad testificandum because of the element of public duty to aid the administration of justice.
Insofar as there is jurisdiction and also in the context of the issue of legal costs, both sides contend that merit is on their side:-
9.1 Mr Brown submits that "the Respondents' stance — contrary to the cooperation and neutrality one might expect of officers of the Court responding to an application of this nature by officers of the Court – has (in reality) been one of consistent opposition to the Application and the sensible case management steps proposed by the Court …. Much of this opposition has been misconceived, unreasonable (in the sense of being irrational) and/or intended to delay disclosure" (see paragraph 4 of his skeleton argument).
9.2 Mr Fletcher Q.C. submits that the court should take account of "(1) the reasonable nature of the Respondents' position as to costs and privilege, (2) the neutral stance taken by the Respondents in respect of the privilege issue, and (3) that the Respondents otherwise made no challenge to the s. 236 application" (see paragraph 39 of his skeleton argument).
B2) Previous Events and Decisions
The issues are raised in the following, summarised circumstances:-
10.1 From about May 2012 the parties corresponded concerning the issue of disclosure of files held by the Respondents which the Liquidators required for the purposes of the liquidation because they suspected that and needed to investigate whether a very large number of conveyancing transactions involving Harvest Finance Limited ("the Company") and primarily off-shore special purpose vehicles were fraudulent. I will consider those communications below but at this stage it is sufficient to note they led to the Application being issued on 4 February 2013.
10.2 The Application was based upon the contention that the Respondents as successors to a limited liability partnership of solicitors who acted in the conveyancing transactions held documents either belonging to the Company or which would provide information concerning the Company relevant to its liquidation.
10.3 The parties by email to the court on 1 May proposed the first hearing, the following day, should be disposed of by consent with directions as to evidence which would lead to a 1 day trial before a Judge. I was not willing to make such an order. As a matter of case management I proposed: (i) the order should require the evidence in answer to identify the relevant documents held and to state which, if any, will be delivered up without objection; (ii) there should be a non-attendance pre-trial review before listing to ensure the issues were identified; and (iii) this was not a matter to transfer to a Judge because such applications are routinely dealt with by Registrars (see paragraphs 4–6 of the 7 May 2013 judgment).
10.4 The approach taken by the Respondents at the first hearing on 2 May 2013 was: the Order sought is draconian and/or unreasonable and/or incomprehensible; the terms of the order proposed by myself could not be carried out in the time provided or without very substantial resources both as to time and costs because of the need to identify, recover and inspect hundreds of files; and the only direction should be for evidence in answer followed by the further agreed directions.
10.5 The Respondents raised 2 essential problems: the scale and cost of the exercise; and the need to deal with legal privilege of the special purpose vehicles for whom the solicitors acted. They denied there were any documents belonging to the Company or any hard copies of the conveyancing files other than those held by the police. Files were held electronically but in an antiquated computer system or on old personal computers that together held the records for the whole of the predecessor's practice and could not be searched using key words. The relevant conveyancing files concerned about 100 special purpose vehicles with the result that the task was excessively time-consuming and expensive.
10.6 At the hearing on 2 May 2013 I decided that an order should provide for the evidence in answer to identify the documents in issue subject to a proviso being drafted to prevent draconian effects. The proviso subsequently proposed by the Respondents did not match my order and I heard further argument on 7 May. I directed the Respondents to file and serve evidence explaining their objections for a further hearing on the 10th.
10.7 On 10 May I made an Order requiring: (i) delivery up of documents to which the Company appears entitled under section 234 of the Act; (ii) delivery up under section 236 of the electronic files for a sample of 10 special purpose vehicles; and (iii) a procedure whereby the court would examine those files (not the Liquidators) in order to consider the issue of third party, legal privilege subject to further argument.
10.8 On 20 June counsel, Mr Hinks, was appointed by the court to review the files and produce a report to the court to assist identification of any documents subject to third party legal privilege.
10.9 On 27 September I heard argument on behalf of the Liquidators concerning privilege. For reasons set out in my judgment for that hearing, I decided that privilege should not prevent disclosure. I took account of its limited weight and the context of fraud.
10.10 The Respondents did not attend that hearing. The court had accepted this would not be seen as discourteous but it was for them to decide whether to attend. In their absence counsel for the Liquidators asked for an order for the delivery up of all files now that privilege was no longer an issue. The files no longer had to be inspected by the Respondents and the order would require electronic transfer in the manner provided for the 10 sample files. I made the order in those circumstances (it having the advantage of...
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