Ian Gillan v (1) HEC Enterprises Ltd (in administration) (2) Deep Purple (overseas) Ltd (2017)
The court was required to determine consequential and costs issues after giving judgment on an application for permission to continue proceedings against two companies in administration, and an application by the administrators to be indemnified out of trust assets under the principle in Berkeley Applegate (Investment Consultants) Ltd (No.1), Re  Ch. 32.
The court was required to determine consequential and costs issues arising from a judgment delivered in December 2016.
In that judgment (Gillan v HEC Enterprises Ltd  EWHC 3179 (Ch)) the court had dealt with an application for permission to continue proceedings against two companies in administration, and an application by the administrators to be indemnified out of trust assets in respect of their remuneration and the costs of the administration under the principle in Berkeley Applegate (Investment Consultants) Ltd (No.1), Re  Ch. 32.
The court had to determine what orders should be made in respect of (1) the Berkeley Applegate application; (2) costs on the claimants' application for permission to continue; (3) the costs of the claimants and three other persons served with the Berkeley Applegate application.
(1) In its December 2016 judgment, the court left the administrators to consider their position, indicating that it would not make the declaration sought on the Berkeley Applegate application. The administrators had sought to be indemnified in relation to a number of categories of work done, and in relation to some the court indicated that costs would not be allowed. It left the door open in relation to others but did not declare an entitlement under the Berkeley Applegate jurisdiction, indicating that if and when the matter was examined, some of the work might be regarded as beneficial to the beneficiaries or otherwise chargeable, Berkeley Applegate referred to. When that stage was reached, there would have to be a quantification exercise. At that point, if the administrators wished to claim an allowance for their remuneration and disbursements in accordance with the December 2016 judgment, they would have to serve the beneficiaries with an itemised account setting out the basis of the claim. Thereafter, they would have to apply for an inquiry, and the instant court gave directions to govern that process (see paras 3-4 of judgment).
(2) A significant amount of time and expense had been expended on pursuing the proceedings to very little advantage, and certainly to no advantage to the administrators. It was lamentable that officers of the court had prioritised their own remuneration over performing their functions as administrators. The costs of the litigation were disturbing, and the case was a very bad example of inappropriate behaviour. The administrators should not have sought to resolve the differences between the rival claimants to the trust assets, and they should have consented to the continuation of the proceedings when asked back in February 2016. The starting point was that they should therefore pay all of the costs of the claimants' application for permission to continue. However, while they would be ordered to pay all of the claimants' costs up to 12 August 2016 on the standard basis, they would have to pay only half thereafter. It was only by reason of directions given in July 2016 that the ultimate issue had come before the court. Save for the costs of strictly complying with those directions, the administrators would not recover their own costs (paras 5-8).
(3) The administrators were to pay the claimants' costs of the Berkeley Applegate application, to be assessed on the standard basis if not agreed. They had made no real progress despite incurring, and causing others to incur, immense cost. Indeed, substantial parts of their application had been disallowed in the December 2016 judgment. As to the remainder, the Berkeley Applegate principle could not be applied in general terms or in the abstract. It could only be applied to particular circumstances in particular claims. The administrators had maintained a claim for much more than they were entitled to, and they had prioritised that claim over other matters. They had not achieved all that they had aimed for, whereas the claimants had achieved something of real importance by eliminating large parts of their claim (paras 9-11). No finding would be made as to whether the three others served with the application had incurred recoverable costs. There would be an assessment on the standard basis, and if they were found to have incurred recoverable costs they would be entitled to recover them (paras 9-14).