Nimat Halal Food Ltd v Nimish Patel (in his capacity as administrator of Tariq Halal Meat (Ilford) Ltd)
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 03 April 2020 |
| Neutral Citation | [2020] EWHC 734 (Ch) |
| Court | Chancery Division |
| Date | 03 April 2020 |
| Docket Number | Case No: CR-2018-011010 |
[2020] EWHC 734 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST
Rolls Building
Fetter Lane
London
EC4A 1NL
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Case No: CR-2018-011010
Zoe O'Sullivan QC (instructed by ADL LEGAL) for the Applicants
Thomas Robinson (instructed by PINSENT MASONS LLP) for the First Respondent
Hearing date: 4 March 2020
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.
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Chief ICC Judge
This matter has taken an unusual turn. It started as a petition made pursuant to section 994 of the Companies Act 2006 and concerned the same business, Tariq Halal Meat (Ilford) Ltd (the “Company”) and most of the same personalities. On 25 June 2018 and prior to judgment being handed down on 3 July 2018 by ICC Judge Jones, the Company entered administration upon a paragraph 22 of schedule B1 to the Insolvency Act 1986 application. Mr Patel was appointed administrator. Mr Patel set about investigating claims against the Company. On 30 November 2018 he rejected two proofs of debt submitted by the Applicants.
By an application dated 20 December 2018 the Applicants appealed the decisions of Mr Patel pursuant to Rule 14.8(1) of the Insolvency Rules 2016. In short the first decision was to reject a proof of debt submitted by the second applicant Nimat Halal Meat Limited (Meat) in the sum of £140,696.34 in respect of the supply of meat and management fees. The sum breaks down so that the supply of meat is for a sum of £90,296.34 and the management fee claim £50,400. The second decision appealed was the rejection of a sum of £250,000 submitted by Meat and Nimat Halal Food Limited (Food) claimed in respect of estimated loss of profits.
On the second day of the hearing listed on 21 and 22 January 2020 the Applicants discontinued their appeal against the rejection for loss of profits. An agreement was reached between Mr Patel and the Applicants that new proofs of debt in relation to the supply of meat would be submitted and the court was asked to rule on the issue of management fees. In order to put their house in order the Applicants were required to resubmit their accounts and provide the Administrator with a proof of debt that matched the accounts for each of the Applicants. The second Respondent contested the proofs of debts but his position at the hearing and during the proceedings was both confused and unhelpful. He first claimed to support Mr Patel in rejecting the proofs of debt but added nothing to Mr Patel's analysis. When Mr Patel agreed to reconsider freshly submitted proofs he wished to continue to contest. The matter was adjourned until 4 March 2020 for the purpose of submission of new proofs, a decision on the management fees and consequential matters.
On 4 March 2020 I gave an oral judgment finding on the balance of probabilities that the management services claim by Meat and Food pursuant to an agreement was properly due and they were entitled to claim for the management fees claimed. Costs were awarded against the Second Respondent who was refused permission to appeal. The remainder of the hearing was occupied with argument concerning costs. It is the Applicants' case that Mr Patel should pay the costs of the application personally and not be able to recover any costs from the insolvent estate. It is Mr Patel's position that the insolvent estate should have the costs of the discontinued application and no order as to costs should be made between Mr Patel and the Applicants in relation to the first proof of debt appeal. It was conceded that the overall costs should be reduced by a proportion owing to the discontinued element of the claim. Due to shortness of time judgment on the remainder of the costs issue was reserved. This judgment deals with who should bear the costs, and if Mr Patel is to bear the costs whether he should be able to be indemnified from the insolvent estate or pay them personally.
The Insolvency rules
Rule 12.47 of the Insolvency Rules 2016 (“2016 Rules”), which is entitled “Awards of costs against an office holder, the adjudicator or the official receiver” provides:
“Without prejudice to any provision of the Act or Rules by virtue of which the official receiver or the adjudicator is not in any event to be liable for costs and expenses, where an office-holder….is made party to any proceedings on the application of another party to the proceedings, the office-holder…is not to be personally liable for the costs unless the court otherwise directs.”
Rule 14.9 (2) of the 2016 Rules expressly deals with challenges (or appeals) to proof of debt decisions made by an officeholder:
“An officeholder other than the official receiver is not personally liable for costs incurred by any person in respect of an application under rule 14.8 unless the court orders otherwise”.
The starting point is that Mr Patel is not personally liable. The issue is whether the court should order otherwise. The Applicants submit that the test for making a different order has a low threshold. At one point during submissions it was contended that a mistake or blunder was sufficient to “order otherwise”. Support was garnered from Re Silver Valley Mines (1882) L.R. 21 Ch D 381 which concerned the Rules of Court 1875. The liquidator had made two unsustainable applications to court that were dismissed as misconceived. In dismissing the applications, the court refused to give the liquidator his costs out of the estate the effect of which was to make the liquidator personally liable. It was submitted that as the liquidator is a trustee for the contributories and creditors he is entitled to costs out of the estate unless he had been guilty of misconduct. The Master of the Rolls said that he understood the term “blunder” was stronger than a “mistake” and:
“The Judge was of the opinion, and I am not disposed to disagree with him, that the application made on the part of the liquidator was a blunder, he puts it in fact rather more strongly, for he says that in his opinion it was altogether improper and wrong.”
He added that it “is no doubt settled that it requires a very strong case to deprive an ordinary gratuitous trustee of his costs” making a distinction between an official liquidator and gratuitous liquidator. Brett LJ and Cotton LJ thought that it would not be unreasonable for the liquidator to seek permission to appeal and obtain his costs for doing so unless the appeal is frivolous. In Capital Films Limited [2010] EWHC 3223 Mr Richard Snowden QC (as he was) held the view that it would be “unjust” to permit recoupment from an insolvent estate, citing Silver Valley Mines, if there has been a “serious mistake”. He found that the approach of the administrators to an application made pursuant to paragraph 71 of Schedule B1 to the Insolvency Act 1986 had been “irrational and misconceived”. The Judge clearly articulated the reasons for reaching his decision [87] which included (i) the interests of the secured creditors were to be affected by an application to court; (ii) there was a failure to engage with the secured creditors prior to launching the application; (iii) concerns raised by the secured creditors were brushed aside without more; (iv) there was a complete failure to investigate the effect of an assignment notwithstanding they had told creditors that they would and (v) the administrators pressed on seeking an expedited hearing in the teeth of sustained opposition.
Coyne v DRC Distribution Limited [2008] EWCA Civ 488 is cited in Capital Films Limited. In Coyne an application was made by a substantial creditor to remove the joint administrators. At the first hearing the matter was adjourned and then it no longer became necessary to press for removal. The costs of the application remained in issue. His Honour Judge Purle QC imposed a personal costs liability order on the joint administrators and ruled that they should have no right of indemnity. The Court of Appeal upheld the decision agreeing with the Judge who found:
“…the application that was before me and in respect of which I have to decide the costs issues, was properly founded and would have succeeded. That is on paragraph 1 alone. So far as the other paragraphs are concerned, I would have removed the administrators had I needed to act under paragraph 88 on the basis that the purpose of administration was unlikely to be achieved, and on the basis that the administrators did, in my judgment, fail to take the steps they should have taken and which they themselves threatened they would take before offering the company for sale. They did not act expeditiously and with the robustness of purpose that one would have hoped for and which one is entitled to expect. Moreover, they must, had they thought about it properly, have concluded that the administration purpose was unlikely to be achieved so long as past transactions remained unscrambled. The decision was taken on 23 August not to seek interlocutory relief. Yet the next day they sought offers while making no attempt to unscramble past transactions…”
The Court of Appeal did not regard any of the criticisms levelled at the Judge “as undermining the integrity of his decision”.
Reliance was also placed on a more recent case, Promontoria (Chestnut) Ltd v Craig [2017] EWHC 2405 (Ch) where His Honour Judge Hodge QC ordered “otherwise” on the basis that the administrators had acted unreasonably. The judgment provided to the court is headed...
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