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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Tackie & Anor v Morrison [2015] EWHC 3980 (Ch) (22 September 2015) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2015/3980.html Cite as: [2015] EWHC 3980 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY

		Manchester Civil Justice Centre 1 Bridge Street West Manchester M60 9DJ
		22nd September 2015

APPROVED JUDGMENT
1. JUDGE HODGE QC: This is my extemporary judgment on an appeal brought by Mr George Morrison against an order of District Judge Moss (sitting as a costs judge) on a detailed assessment of costs in insolvency proceedings on 20^th May 2015. The appeal reference is M15X140.
2. On this appeal, the appellant, Mr George Morrison, appears as a litigant in person, although he has had the benefit of the services of experienced counsel, Mr Andrew McGee, who has settled both the grounds of appeal and also a detailed written skeleton argument in support. Mr Morrison himself has the advantage of having been a practising solicitor until he retired from practice on 31^st October 1999.
3. The respondents are the liquidators of ATM Sales Limited, Paul Barber and Francesca Tackie. They are represented by Miss Cristin Toman (of counsel). She has produced a written skeleton argument in support of a respondent's notice that was filed on 17^th August 2015 and which seeks to support the District Judge's decision on additional grounds.
4. There are before the court two appeal bundles. I have had the benefit of pre-reading the relevant documents. In particular, I have read the appellant's and respondent's notices and the respective skeleton arguments of Mr McGee and Miss Toman. I have also read the relevant parts of the District Judge's reasons for his decision, which are effectively contained at paragraphs 3, 4 and 5 of the approved judgment (at pages A3 to A5 of the appeal bundle, volume 2).
5. Mr Morrison addressed me for about 25 minutes. I found it unnecessary to call on Miss Toman to respond given that I had already read the contents of her skeleton argument.
6. The background to the appeal is as follows: Between dates in March and May 2004 Mr Morrison had paid himself sums amounting to a little over £38,000 from the bank account of the company ATM Sales Limited by a series of cheques made out to cash. On 30^th June 2004 the company entered into creditors' voluntary liquidation and a Mr Alan Tomlinson was appointed liquidator of the company.
7. On 29^th December 2009, Mr Tomlinson, acting in his capacity as liquidator of the company, issued proceedings under sections 238 to 240 of the Insolvency Act to set aside the cheque payments as either constituting a preference or transactions at an undervalue. Those were causes of action which were, of course, vested in Mr Tomlinson in his capacity as insolvency officeholder, namely liquidator of the company.
8. During the course of those proceedings, Mr Tomlinson resolved to retire from practice as an insolvency practitioner and, on 20^th September 2009, District Judge Khan made a block transfer order pursuant to Insolvency Rule 7.10B and section 108 of the Insolvency Act 1986. The relevant provision of the order was paragraph 7 which provided that, in relation to all the appointments as liquidator of creditors' voluntary liquidations the details of which were set out in Part 4A of an annexed schedule (and which included ATM Sales Limited), Mr Tomlinson was to be removed and replaced by the appointment of Francesca Tackie and Paul Barber jointly. They, of course, are the present respondents to this appeal.
9. On 25^th January 2012, District Judge Obodai ordered that the newly appointed liquidators, Francesca Tackie and Paul Barber, should be substituted as claimants in the pending insolvency proceedings in place of Mr Tomlinson. I do not appear to have a copy of that order but its terms are set out in a transcript of the proceedings before District Judge Richmond following judgment on 8^th February 2012 at page J11. According to District Judge Richmond, the order signed by District Judge Obodai was that Miss Tackie and Mr Barber, both of Begbies Traynor, should be substituted for Mr Tomlinson as the applicant to the originating application with effect from the date of their appointment as joint liquidators on 20^th September 2011. There has been no appeal from the terms of that order.
10. The insolvency claim against Mr Morrison proceeded to trial, apparently on 7^th and 8^th February 2012. At the conclusion of that trial, District Judge Richmond made an order giving judgment for the joint liquidators for £38,147.77 plus interest of £11,814.31, making in total £49,962.08. Paragraph 2 of the District Judge's order required Mr Morrison to pay the joint liquidators' costs, to be assessed if not agreed, on the standard basis up to 7^th September 2011 and on the indemnity basis thereafter. It should be noted that the date from which costs on the indemnity basis were awarded in fact predated the appointment of Mr Barber and Miss Tackie as joint liquidators of the company.
11. The assessment of those costs came before District Judge Moss, sitting as a costs judge, on 20^th May 2015. It is against his decision that this appeal is brought. The order of District Judge Moss is to be found at page F10 of the appeal bundle. Mr Morrison had appeared before District Judge Moss in person. Paragraph 1 of the order was that the joint liquidators' costs were assessed at £71,407.65. Mr Morrison was, in addition, ordered to pay the applicants' costs of the detailed assessment proceedings, which were summarily assessed at £10,720. There was also an order for payment by Mr Morrison of interest on costs to date in the sum of £4,382.27.
12. It is against that order that the present appeal is brought. The appellant's notice was filed on 17^th July 2015. The sole grounds of appeal are: (1) that the District Judge wrongly allowed the present liquidators to advance a claim for costs incurred by their predecessor, who is not a party to the present proceedings and has not authorised the respondents' solicitors to recover his costs; and (2) that the District Judge wrongly ordered the respondent [sic] to pay the costs of the detailed assessment.
13. In his written skeleton argument in support of the appeal, Mr McGee indicated that the point taken on the appeal had been taken only very briefly before District Judge Moss. He urged the court to allow Mr Morrison to take the point. He recognised that the respondents might conceivably want to adduce new evidence of their own to deal with the issue. He indicated that that would be a matter for the court's discretion; but he recognised that Mr Morrison could not possibly oppose their application to adduce evidence relevant to the point. At paragraph 13 of Mr McGee's skeleton argument, he recognised that it was, by then, far too late to attempt any challenge to the principle of District Judge Richmond's original costs order.
14. The picture presented in the skeleton argument was that Mr Tomlinson had retired from insolvency practice and his cases had been transferred, by order of District Judge Khan, to the respondents, Tackie and Barber, at a time when the costs order had already been made but had not then been enforced. His argument was described at paragraph 16 of the skeleton as "simple": Costs awarded to a liquidator were a personal right of that liquidator. As an insolvency practitioner, the liquidator had a personal liability to his solicitors for the costs. The indemnity principle applied. Mr Tomlinson could bring proceedings to enforce the costs order and to indemnify himself for the reasonable costs of his solicitors but he had not done so. Instead, the proceedings had been brought by the present respondents. They had no liability for the costs and the costs order was said in any event not to be in their favour. There was no evidence to suggest that Mr Tomlinson has assigned his right to those costs, assuming that he could do so. Nor was there any evidence that Mr Tomlinson had authorised Laytons LLP to bring the proceedings to enforce the costs order. In those circumstances, it was said to be impossible to see how the court could have assessed Mr Tomlinson's costs in the present proceedings.
15. At paragraph 25, Mr McGee said that the position might be simply stated as follows: The costs awarded to Mr Tomlinson were his costs. He could have enforced, and apparently still could enforce, that order, but no one else was liable for the costs, certainly not the present respondents, and no one else had any authority to bring proceedings for those costs , whether in their own name, which was what had been done, or in Mr Tomlinson's name. Further, Laytons LLP were not authorised to act in Mr Tomlinson's name. So it is said that District Judge Moss should have assessed only those costs incurred by the present respondents from the date of their appointment and that his order should be set aside. The parties should then be invited to agree what the appropriate costs for the period from 20^th September 2011 were and, if unable to do so, the matter should be remitted to District Judge Moss. He concludes that the claim as brought was fundamentally flawed and, therefore, the liquidators should not have their costs of the assessment.
16. That was how the matter was presented to His Honour Judge Pelling QC, sitting as a Judge of the Chancery Division of the High Court, before whom the application for permission to appeal came on paper. On 23^rd July 2015, Judge Pelling gave Mr Morrison permission to bring his appeal out of time and he also granted permission to appeal. He listed the appeal for a substantive hearing, in the event before me today, with a time estimate of two and a half hours. He directed the filing of an appeal bundle, which was duly done.
17. On 17^th August 2015, the liquidators filed a respondents' notice setting out additional grounds for upholding District Judge Moss's decision. That respondents' notice asserted that the indemnity principle did not prevent the respondent liquidators recovering costs for the period before 25^th January 2012 (when they were substituted as applicants in place of the previous liquidator, Mr Tomlinson) and/or 20^th September 2011 (when they were appointed liquidators) because, first, the liquidators were liable by the express terms of their agreement dated (it says) 4^th January 2011 but, in fact, it should be 4^th January 2012 with Laytons Solicitor for all time costs, work in progress and disbursements incurred to date under the earlier conditional fee agreement which had been entered into by Mr Tomlinson and dated 28^th November 2007; secondly, on the basis that solicitors' costs incurred both before and after those two dates were payable out of the assets of the company because they ranked as liquidation expenses under Insolvency Rule 4.218 and the respondent liquidators, as the current liquidators, would be liable to pay them out of the company's assets. Those alternative grounds for the District Judge's decision were expanded upon in Miss Toman's skeleton argument of 18^th August 2015.
18. That, then, is the background to the present appeal. As I have indicated, the way in which the matter had been presented to Judge Pelling on the permission application was essentially that Mr Tomlinson had secured an order for costs in his favour and had then been replaced by Mr Barber and Miss Tackie and they were seeking to enforce a costs order not made in their own favour. On that basis, I can see why Judge Pelling thought it appropriate to give permission to appeal; but in fact, as the chronology I have set out indicates, that is not the true position. The true position is that the order for costs was, in fact, made in favour of the present respondents by name after they had been appointed joint liquidators in Mr Tomlinson's place and after they had been substituted as applicants in the insolvency proceedings against Mr Morrison. I assume that such substitution had been effected pursuant to CPR 19.2(4) (as applied to insolvency proceedings by Insolvency Rule 7.51A(2)) on the basis that the interest of Mr Tomlinson, as insolvency officeholder, had devolved upon Mr Barber and Miss Tackie upon their appointment in his place as joint liquidators.
19. It remains for me only to refer, first, to the terms of a retainer letter from Laytons to Miss Tackie and Mr Barber dated 19^th December 2011 and also to the relevant part of the District Judge's judgment.
20. The retainer letter provided, at page 2 (page K6 of the appeal bundle) that the joint liquidators were aware that the terms of Laytons' retainer had previously been set out under a conditional fee agreement dated 28^th November 2007:

"It is intended that all time costs, work in progress and disbursements incurred to date pursuant to that conditional fee agreement shall also be recoverable by this agreement and the attached conditional fee agreement. By signing this representation agreement and the attached conditional fee agreement, you therefore agree to proceed on that basis."

That letter was signed by Miss Tackie and Mr Barber, acting as joint liquidators of the company, on 4^th January 2012. They also signed the conditional fee agreement on the same day, as did Mr Stuart John Farr as a partner for Laytons.

21. Mr Morrison had prepared a written skeleton argument for the purposes of the detailed assessment. Section 6 of that skeleton argument (at pages B13 to B14) had addressed the issue of Mr Tomlinson's retainer of Laytons. The matter was considered at paragraphs 3 through to 5 of the approved judgment of District Judge Moss (at pages A3 to A5). The District Judge said that the next item that he was required to deal with related to the retainer, which had been dealt with in the points of dispute in reply and in the skeleton argument. He said that he had had regard in particular to Mr Morrison's skeleton argument, as the paying party, and he recorded that Mr Morrison had explained to the District Judge the basis of his opposition to that part of the claim for costs. What Mr Morrison was said to be seeking to do was to restrict the recoverability of costs on the part of the applicants to the period beyond 4^th January 2012. The basis upon which he did so was by arguing that there could not be a retainer that operated retrospectively.
22. After some further explanation from Mr Morrison, the District Judge recorded that Mr Morrison was submitting that the CFA could be backdated to the date of the retainer but it could not "be backdated to where there was no retainer in place". The background to the argument was said to be that there had been a change in the identity of the liquidator during the course of the proceedings, Mr Tomlinson being replaced by Mr Barber and Miss Tackie.
23. The District Judge referred to District Judge Khan's order of 20^th September 2011. He also referred to District Judge Obodai's order of 25^th January 2012. The District Judge recorded that Mr Morrison had challenged the backdating of District Judge Obodai's order but the District Judge recorded that that was the order that had been made. As I have already indicated, that order had never been appealed successfully. At paragraph 4, the District Judge said this:

"The position has to be considered in the light of the information before me in relation to the retainers, there having been a conditional fee agreement entered into with Mr Tomlinson as liquidator on 28^th November 2007 and then a subsequent retainer, which is contained within the bundle of documentation before me, dated 19^th December 2011, which is a document which is sought to have retrospective effect in terms of the liability of Miss Tackie and Mr Barber for costs and in relation to the success fee."

24. The submission that was made by Mr Morrison was that the moment that Mr Tomlinson was unable to continue as liquidator was the time when the liability upon him (that is, Mr Morrison) to pay costs, as Mr Morrison put it, "went missing". He alleged that there was a failure to transfer the benefit of the costs of the liquidator and that there was nothing that had been produced that dealt with the mechanism of, as he put it, "protecting those costs". He complained that Miss Tackie and Mr Barber were appointed while Mr Tomlinson was still a party to the proceedings and he put forward a mechanism by which he said that what was sought to have been achieved should have been achieved. He had given the District Judge an analogy that involved a mountaineer; but the substance of what Mr Morrison said was that there was a failure on the part of the liquidators to deal with the matter in the proper way. As a consequence, Mr Morrison said, there should be no recovery of costs against him for the period prior to 4^th February 2012.
25. At paragraph 5, the District Judge said that he did not accept the submission that Mr Morrison made that there was no entitlement to recover costs for the period up till 20^th September 2011, when Mr Tomlinson's appointment as liquidator ended. There was said to be no substance whatsoever to Mr Morrison's complaint in relation to that:

"There was a conditional fee agreement entered into, an agreement which, it seems to me, subsists, and there is simply no basis, irrespective of the change in liquidators of the company, and the change in the identity of the applicants, to conclude that there was lost to Mr Tomlinson his entitlement to recover the costs incurred on his behalf and payable by Mr Morrison pursuant to the costs order that was made against him.

Secondly, in relation to the period after 20^th September 2011 when the order to which I have referred was made by District Judge Obodai, a fresh retainer was entered into as to the terms on which the solicitors, Laytons, continued acting in relation to the ongoing claim of the liquidators of the company against Mr Morrison and a retainer which, on its face, was effectively commencing on 20^th September 2011 and seems to me plainly to entitle the applicants to recovery of costs from 20^th September 2011, that being the effective date of the termination of Mr Tomlinson's appointment and role in these proceedings as applicant."

I am not sure that I would express the matter in the same way as the District Judge; hence the reason for the respondents' notice seeking to affirm his decision on additional grounds.

26. Absent the retainer letter of 19^th December 2011, signed by the respondent joint liquidators on 4^th January 2012, it seems to me that there would have been a powerful argument to the effect that, since the cause of action against Mr Morrison had been vested in the liquidators from time to time as insolvency officeholders, the change in the identity of those liquidators made no difference. The costs incurred in the litigation were expenses of the liquidation payable out of the company's assets; and it seems to me that there is powerful argument for saying that it matters not who the particular insolvency officeholder was. Mr Tomlinson would have been entitled to an indemnity out of the company's assets for costs incurred whilst acting as liquidator prior to 20^th September 2011. The new liquidators were liable to reimburse Mr Tomlinson and could have recovered those costs out of the company's assets.
27. However, fortunately, I do not need to consider the position independently of any agreement seeking to regulate the position because there is the agreement contained within Laytons' letter of 19^th December 2011 and expressly accepted by the joint liquidators on 4^th January 2012. They thereby agreed to assume responsibility for the costs previously incurred by their predecessor. Given that those costs were payable out of the assets of the company in liquidation, that was a sensible course for them to take.
28. The order for costs, contrary to the impression created by Mr McGee's skeleton argument, was then made by District Judge Richmond expressly in favour of the respondent joint liquidators. District Judge Richmond clearly contemplated that those costs would extend to the costs incurred by the present joint liquidators' predecessor because he awarded indemnity costs from a date pre-dating that of their appointment. Be that as it may, it seems to me clear that there was no breach of the indemnity principle. The present joint liquidators had assumed responsibility for all of the costs of the liquidation, including the costs incurred by their predecessor, Mr Tomlinson. Therefore, it seems to me clear that those costs are properly recoverable pursuant to the costs order made by District Judge Richmond on 8^th February 2012 and expressly in favour of the present respondents.
29. Mr Morrison sought to restate the argument that he had advanced to the District Judge. With respect to Mr McGee, it does seem to me that the point had been fully raised before the District Judge by Mr Morrison when acting as a litigant in person. It had also been met by the joint liquidators by reference to the terms of the retainer letter written by Laytons on 19^th December 2011 and accepted by the joint liquidators on 4^th January 2012.
30. I can understand why Judge Pelling granted permission to appeal because he had been under the impression that the present respondent liquidators were seeking to enforce an order for costs made expressly in favour of their predecessor when that is not the present position; but I am entirely satisfied that the District Judge was right, although for the reasons I have sought to explain rather than, perhaps, for the reasons as he expressed them to be in saying that the costs order made by District Judge Richmond clearly covered all of the costs incurred by the insolvency officeholders in relation to the company from time to time, both Mr Tomlinson prior to the appointment of the new joint liquidators and the present respondents thereafter.
31. Mr Morrison sought to argue that there had been no transfer from Mr Tomlinson to the present respondent liquidators of Mr Tomlinson's former entitlement to costs because the parties had not carried through the necessary novation. I do not accept that submission for the reasons I have given. The present respondent liquidators had assumed responsibility for all of the costs and they are entitled to recover all of those costs pursuant to District Judge Richmond's order of 8^th February 2012. There was no error on the part of the District Judge in his decision on 20^th May in assessing all of those costs.
32. For those reasons, I dismiss the appeal; and I accede to Miss Toman's invitation to say that the appeal, as now properly understood – which is not the way in which it was presented by Mr McGee to Judge Pelling – is totally without merit.
33. Miss Toman has also invited me to make a limited civil restraint order against Mr Morrison. She submits that this is the second occasion on which proceedings in this litigation have been recorded as being totally without merit. The court does not have to make a limited civil restraint order; and it seems to me that it would not be appropriate, in the exercise of the court's discretion, to do so in the present case. This is not an instance of repeated without merit applications. There has only been one previous such application, and that was over three years ago. Moreover, this appeal was supported by grounds of appeal settled by reputable and experienced chancery counsel and a skeleton argument from that counsel. In those circumstances, it would not be right for the court to make a limited civil restraint order against Mr Morrison.
34. Therefore, my order is that (1) the appeal is dismissed; (2) the court records that the appeal was totally without merit; (3) the court declines to make a limited civil restraint order against Mr Morrison.
(End of judgment) (Submissions followed in respect of charging orders and costs)