Indemnity Costs Order Upheld Against Joint Liquidators

Indemnity Costs Order Upheld Against Joint Liquidators Overview

In Hellard & Anor (As Joint Liquidators of Guardian Care Homes (West) Ltd) v Graiseley Investments Ltd & Anor [2019] EWHC 2994 (Ch) an appeal was lost by the liquidators.

Notwithstanding acknowledgement of some inconsistencies in the Respondent’s position, Mr Justice Zacaroli was not persuaded to reverse the earlier order for indemnity costs. The Insolvency and Companies Court Judge Barber had been reasonably critical of the Joint Liquidators’ pursuit of the claims suggesting that the action was “misconceived, vexatious and irresponsible” and had handed them an order for indemnity costs.

Judgment Highlights:

73. In a short, oral judgment on 12 October 2018, the judge explained her reasons for awarding indemnity costs. She concluded that the action was “misconceived, vexatious and irresponsible” and a “plain case” for indemnity costs, noting that the appellants “could not plead or even articulate at trial, still less prove on the balance of probabilities, a coherent transaction at an undervalue claim.”

74. She provided, by way of example, the following factors which took the case out of the norm:

i) The case, as formulated, was wholly misconceived;

ii) The appellants had no meaningful evidence to support their application, and ignored what should have been clear from the company documentation considered at trial;

iii) The appellants did not take time to understand the journals that formed the bedrock of the application;

iv) The appellants ran a case which was an aggressive case and went materially beyond the pleaded case, notwithstanding clear warnings at the start of the trial that they should confine themselves to the pleaded case;

v) The appellants pursued in cross-examination a s.423 case and allegations that were tantamount to allegations of criminal offences (when none was pleaded);

vi) So far as Mrs Hartland was concerned, she had been put through the stress of a five-day trial in circumstances, without a case against her having been properly pleaded or thought through.

79. I do not regard any of the matters relied on in the grounds of appeal as justifying interfering with the exercise of the judge’s discretion in relation to costs. I have already addressed above, and rejected, the contention that the respondents succeeded on the basis of an unpleaded defence. I have also addressed in detail the alleged frequent changes in Mr Hartland’s version of events: in short, I do not accept that the changes between Versions 2, 3 and 4 were as fundamental as the appellants seek to make out, particularly when seen in the context of the numerous passages in cross-examination spread over three days some nine years after the events in question. I do not think that Mr Hartland’s professed ignorance of matters which it was his duty to understand reaches the threshold of showing the judge’s conclusion was perverse, seen in the same context.

80. I accept that Version 1 is indeed inconsistent with the defence advanced by the respondents and provided at least some support for the appellants’ case. I do not accept, however, that this factor (which is one the judge was well aware of, having specifically addressed it in her judgment) vitiates the judge’s conclusion as to the appropriateness of the claim being pursued in the manner it was, which was based on her review of the entirety of the case.

82. He said it was not clear what the judge meant by her reference to the aggressive manner in which the claim was pursued. Without more, however, I am unable to second guess the judge’s assessment in this regard, and I am certainly not in a position to conclude that it was one that no reasonable judge could have made.

85. So far as the point made in the appellants’ skeleton as regards Mrs Hartland is concerned, even if she was in dereliction of her duties as director (by over-reliance on her husband) this was legally irrelevant unless it caused the loss claimed by the appellants. The only pleaded case against her was for damages for permitting the impugned transaction to take place and was thus parasitic on the claim in respect of the alleged transaction at an undervalue. Accordingly, I consider the judge was justified in reaching the same conclusion, so far as the basis of assessment of costs was concerned, in relation to Mrs Hartland as in relation to the other respondents.

Hellard & Anor (As Joint Liquidators of Guardian Care Homes (West) Ltd) v Graiseley Investments Ltd & Anor [2019] EWHC 2994 (Ch)