Metalloy Supplies Ltd v M.A. (U.K.) Ltd

JurisdictionEngland & Wales
Judgment Date12 December 1996
Neutral Citation[1996] EWCA Civ 671
Docket NumberQBENI 95/1607/E
CourtCourt of Appeal (Civil Division)
Date12 December 1996
Metalloy Supplies Limited (in Liquidation)
M A (UK) Limited

[1996] EWCA Civ J1007-6


Lord Justice Butler-Sloss

Lord Justice Millett

Lord Justice Waller

QBENI 95/1607/E






Royal Courts of Justice


London WC2

MR. T. MOWSCHENSON QC & MR. M. ROLLASON (Instructed by Messrs Hartley Linfoot and Whitlam, Sheffield, S1 2EJ) appeared on behalf of the Appellant

MR. P. IRVIN (Instructed by Messrs Richmonds, Doncaster, DN4 5JH) appeared on behalf of the Respondent


I will ask Waller LJ to give the first judgment.


This is an appeal from His Honour Judge Hutton sitting as a Deputy High Court Judge, who ordered the liquidator of the Plaintiff company to pay certain of the costs of an action personally, allowing in so doing an appeal from an order of District Judge Peters in so far as he had refused to so order.


The Plaintiffs have at all material times been a company in liquidation, the liquidator having been appointed on 11th January 1991. A writ was issued by the Plaintiffs on 2nd March 1993 claiming the remainder of the price of certain goods. Originally judgment was entered in default. An application to set that judgment aside was initially refused by District Judge Lambert on 28th October 1993; but on 14 February 1994 Gage J. allowed an appeal from that order, giving the Defendants leave to Defend and Counterclaim on the basis of alleged deficiencies in the goods on condition that they paid into court £10,000. The Defendants served a Defence and Counterclaim on 30th March 1994 and at the same time indicated in correspondence that they would seek an order for security for costs. A summons seeking security was issued on 14th May 1994 supported by an affidavit which asserted inter alia

1. that costs of £9,000 had already been incurred by the Defendants in setting aside the default judgment;

2. that the total costs including the trial of the Defendant were estimated at £24,000;

3. that it was believed that the liquidator had only £12,500 available.


The affidavit sought an order for security and there was no suggestion in it that a costs order would be sought against the liquidator personally or that he was acting in any way improperly, irresponsibly or unreasonably.


An affidavit was sworn by Jeremy Nuttall, a solicitor acting for the Plaintiff in response dated 7th July 1994. It resisted any order for security. It urged points which went to the merits of the Plaintiff's claim in the action; it suggested that the estimates for costs put forward by the Defendants were excessive; and it exhibited the Plaintiff's latest statement of affairs and stated that the liquidator estimated that, after deduction of relevant fees, funds of approximately £5,000 were currently available. It further asserted that on that basis the action would be stifled by any substantial security order.


There was a further interlocutory skirmish in that on 6th July 1994 the security for costs summons was adjourned by District Judge Smythe who made a costs order against the Defendants which resulted in an appeal on which the Defendants were successful. This resulted in further costs being expended and it was in that context that the Defendants' solicitor wrote a letter of 15th September 1994 to the solicitors acting for the Plaintiff saying (and I summarise).

1. that in the light of the fact that further costs had been incurred since the liquidator said he had £5,000, that sum would be likely to have been exhausted;

2. that such funds as the liquidator had should not be dissipated having regard to the costs orders made in the Defendants' favour;

3. that an order for security was absolutely necessary;

4. that if by chance an order for security was not made, it would be their intention to apply for a costs order against your firm (my emphasis) for the future cost of preparation of the action.


That letter was exhibited to a further affidavit of Rose Egarr supporting the application for security for costs, which came on before District Judge Peters on 21st September 1994. The District Judge in fact dismissed the application for security for costs. According to the note of his judgment he took the view that the letter of 15th September 1994 put the matter too strongly in favour of the Defendants; he took the view that the original transaction between the Plaintiff company and the Defendants was a strange transaction and needed investigation, and that an order for security would stifle the Plaintiff's claim.


His order was however reversed on Appeal when on 24th October 1994 His Honour Judge Harrison Hall ordered security of £10,000 to be paid into court within 28 days, and the action to be stayed meanwhile.


The Plaintiff failed to put up security within 28 days, and on 21st February 1995 the Defendants issued a summons applying to dismiss the action with costs to be paid by the liquidator personally. That summons was supported by a further affidavit from Rose Egarr in which she referred to the letter of 15th September 1994 and to the concerns raised therein in relation to costs, and saying that particularly as the liquidator had via his solicitors had notice of the Defendants' concerns but clearly must have instructed them to proceed, that the liquidator should be personally liable for the cost of the action (without, it should be noticed, any limitation of time).


An affidavit from the liquidator, dated 17th March 1995, stated that in the liquidator's experience the application to render him personally liable was without precedent; he confirmed that the action had been funded by the Plaintiff company's assets; and that the action had not been supported by funds from his firms nor by funds from the creditors secured or unsecured.


The matter came once again before District Judge Peters on 17th March 1995. It was accepted that the action should be dismissed, and the only matter argued was whether a costs order should be made against the liquidator personally. It is clear that the relevant authorities were cited to the District Judge, and he is recorded as recognising that he had jurisdiction to make the order sought, but was of the view, following the guidelines in Symphony Group PLC v Hodgson [1994] QB 179, that he would be breaking new ground if he were to make an order against the liquidator personally, and he said indeed that this approach would be highly exceptional.


The matter then came on appeal to His Honour Judge Hutton sitting as a Deputy High Court Judge and was heard on 19th May 1995. There was clearly extensive argument before him and again full citation of authority. He concluded


1. that the District Judge had formed the view that he would be breaking new ground to order a liquidator to pay costs personally, even if it were otherwise right to make him do so, and that thus the District Judge had exercised his discretion on a wrong basis; 2. that there was jurisdiction to order a liquidator to pay the costs personally;


3. that the liquidator was right to initiate the action but that there came a stage when he should have changed his mind; that stage was identified by the learned Judge in the following words:

"There came a time, as was pointed out to me by Mr. Irvin for the appellant, when it was quite clear that the defendant had an arguable defence to the action brought against him and was counterclaiming and was pursuing vigorously his defence and counterclaim. At that stage it appears that the company in liquidation had insufficient funds to cover the costs of the defendant if the defendant should win and the plaintiff lose.

In those circumstances, I find that it was unreasonable for the liquidator to continue, as he did, to manage this action before subsequently discontinuing and that, for a period he should be ordered to pay the defendants' costs when judgment was finally given in their favour from the time when it became unreasonable for the liquidator to continue. Having heard submissions from Mr. Irvin I place that as 30th March 1994. In the exercise of my discretion, therefore, I order that the liquidator, personally, pay the defendants' costs of the action from and after that date. "


It should be noted:

1. that the first occasion when any notice was given to the liquidator that it would be contended that he might be liable for the costs personally was in February 1995;

2. that the first occasion when any suggestion was made that someone other than the Plaintiff company might be liable to pay costs was in September...

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