Surjit Singh Ardawa v Rajvinder Kaur Uppal
| Jurisdiction | England & Wales |
| Judge | Mr Justice Roth |
| Judgment Date | 28 June 2019 |
| Neutral Citation | [2019] EWHC 1663 (Ch) |
| Date | 28 June 2019 |
| Court | Chancery Division |
| Docket Number | Case No: CH-2018-00152 |
[2019] EWHC 1663 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY APPEALS (ChD)
ON APPEAL FROM THE COUNTY COURT AT MILTON KEYNES
Royal Courts of Justice
Rolls Building, London, EC4A 1NL
THE HONOURABLE Mr Justice Roth
Case No: CH-2018-00152
Alan Tunkel (instructed as direct access counsel) for the Appellant
Oberon Kwok (instructed by Sydney Mitchell LLP) for the First Respondent
Gavin McLeod (instructed by Morgan Phelps Solicitors) for the Second Respondent
Hearing Date: 10 April 2019
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.
COSTS
What approach may the Court take to the determination of costs following the hearing of an unsuccessful application to annul a bankruptcy order? That is the essential question raised in the argument on costs following handing down of judgment in this matter, as raised both by the First Respondent, the petitioning creditor (Ms Uppal), and the Second Respondent, the trustee in bankruptcy (“the Trustee”). Given the level of costs said to be incurred in this matter, in particular on behalf of the Trustee, the question is of some significance.
Mr Ardawa had appealed against the decision of District Judge Thorpe, dismissing his amended application to set aside the order authorising substituted service of the bankruptcy petition, annul the bankruptcy order and dismiss the bankruptcy petition. On 1 March 2019, I handed down judgment (“the Judgment”), allowing the appeal as regards the order for substituted service but otherwise dismissing the appeal: [2019] EWHC 456 (Ch). Both Ms Uppal, and the Trustee seek an order for their costs of the appeal to be paid as an expense of the bankruptcy, and contend that I have no power summarily to assess those costs. Mr Ardawa resists Ms Uppal's application, and in any event strongly challenges the level of costs being sought by both Respondents. The further hearing regarding these matters was delayed because of the unavailability of counsel.
The Relevant Rules
A preliminary question is whether this matter is governed by the Insolvency Rules 1986 (“IR 1986”) or the current Insolvency (England and Wales) Rules 2016 (“IR 2016”). In fact, the relevant provisions of the two sets of rules are effectively the same, so the answer to this question makes no practical difference, but it is nonetheless necessary to consider which regime applies.
The transitional provisions in Schedule 2, para 14 of IR 2016 state:
“14 Applications before the court
14(1) Where an application to court is filed or a petition is presented under the Act or under the 1986 Rules before the commencement date and the court remains seised of that application or petition on the commencement date, the 1986 rules continue to apply to that application or petition.
14(2) For the purpose of paragraphs (1), the court is no longer seised of an application when—
(a) it makes an order having the effect of determining of the application; or
(b) in relation to a petition for bankruptcy or winding up when—
(i) the court makes a bankruptcy order or a winding up order.
(ii) the court dismisses the petition, or
(iii) the petition is withdrawn.
14(3) Any application to the court to review, rescind or appeal an order made under paragraph 14(2)(a) is to be made in accordance with Part 12 of these Rules.”
The IR 2016 came into force on 6 April 2017. The relevant dates for these proceedings are as follows. The bankruptcy petition was presented on 20 January 2016 and the bankruptcy order was made on 6 April 2016. Mr Ardawa issued his application to annul the order on 30 June 2016. For reasons which it is here unnecessary to go into (see the Judgment at [18]), the substantive hearing of his application did not take place until 20 February 2018 and the order of the district judge dismissing the application was made on 19 April 2018. Mr Ardawa was granted permission to appeal to this court by order of Arnold J made on 24 July 2018.
It is clear that the hearing before the district judge, and the order which she made, were governed by IR 1986, since Mr Ardawa's application to annul was filed before the commencement date of IR 2016. However, both Respondents submitted that the appeal against that order is governed by IR 2016. They contended that the order of the district judge had the effect of “determining the application” within para 14(2)(a), so that the court was no longer seised of the matter. Mr Ardawa's appeal was started after the commencement date and accordingly was governed by the 2016 Rules. Mr Kwok, for Ms Uppal, indeed said that if the appeal had been decided the other way, so that the district judge's order had been set aside and the bankruptcy annulled, then IR 1986 would have applied to the question of costs, since in those circumstances this court would have remained seised of Mr Ardawa's original application. Mr Tunkel, for Mr Ardawa, made no submission on this matter since it made no difference to his client.
It would be very strange if a different set of procedural rules were to apply to the question of costs of an appeal according to the way in which the appeal is decided, and I do not think that para 14 IR 2016 should be interpreted to that effect. Although I do not find the position very clear, I think that the better views is that the order of the district judge indeed had the effect of determining Mr Ardawa's application, and so comes within para 14(2)(a). The appeal to this court against that order falls within para 14(3). That requires the appeal to be made in accordance with IR 2016, and I consider that it is those rules which therefore governed the appeal, irrespective of the outcome.
However, as I have observed, in practical terms the question is immaterial and I shall accordingly give references to IR 1986 in brackets following citation of the provisions of IR 2016.
Ms Uppal's Costs
As stated above, Ms Uppal asks for her costs on the basis that, overall, she was the successful party. Mr Tunkel submitted that there should be no order for costs, having regard to the facts that Mr Ardawa succeeded on the issue of substituted service and the comments of the court on the conduct of Ms Uppal in obtaining the order for substituted service.
Mr Kwok took a preliminary point on behalf of Ms Uppal, contending that as the bankruptcy estate is now vested in the Trustee, Mr Ardawa “has no real standing” to object to a costs order in favour of Ms Uppal. I do not accept that submission. The costs at issue relate to an appeal brought by Mr Ardawa, and he is therefore in the best position to present arguments opposing the costs sought by the respondents to his appeal. And where, as in the present case, it appears that subject only to the question of costs there will be a surplus in the estate after creditors are paid, that surplus would pass to the bankrupt on discharge of the bankruptcy. It seems to me that this gives Mr Ardawa a clear interest in the potential for a costs order against the estate. I consider that this combination of ability and interest means that he is entitled to be heard on an application for such an order, irrespective of the position adopted by the Trustee.
Costs are governed by Chapter 8 IR 2016 [Chapter 6 IR 1986]. Rule 12. 41 [r. 7.33A] states:
12.41 Application of Chapter and interpretation
12.41(1) [Application] This Chapter applies to costs of and in connection with insolvency proceedings.
12.41(2) [“Costs”] In this Chapter “costs” includes charges and expenses.
12.41(3) [Application of CPR Pts 44, 47] CPR Parts 44 and 47] CPR Parts 44 and 47 (which relate to costs) apply to such costs.
CPR rule 44.2(1) sets out the general discretion of the court as regards costs, including as to the amount of those costs, and rule 44.2(2) and (4)-(5) provide, insofar as is relevant:
“(2) If the court decides to make an order about costs –
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.
…
(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful;
…
(5) The conduct of the parties includes –
(a) conduct before, as well as during, the proceedings ….”
Here, I consider that on any sensible view of the appeal, Ms Uppal was the overall the ‘winner’, in that Mr Ardawa failed to have the bankruptcy order annulled. The starting point is therefore that she should have her costs. However, Mr Ardawa, as a distinct ground of his appeal, sought to challenge the order for substituted service of the bankruptcy petition, made by District Judge Hickman on 17 February 2016. That was strongly resisted, on various bases, by Ms Uppal, and none of those arguments succeeded: see the Judgment at [47]–[61].
Mr Kwok reminded me of the well-known observations of Gloster J (as she then was) in HLN Kidsons v Lloyds Underwriters [2007] EWHC 2699 (Comm) at [11], that there is no automatic rule requiring the costs of a successful party to be reduced because it has failed on certain issues, and that: “[i]n any litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case.” The appropriate approach therefore very much depends on the circumstances of the particular case. The present appeal cannot be described as complex...
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