Trustee in Bankruptcy Fails to Stop Court Reviewing his Legal Costs

In Ardawa v Uppal & Anor [2019] EWHC 1663 (Ch) the trustee in bankruptcy of Mr Ardawa took what will almost always be the correct approach when a debtor applies to annul a bankruptcy order by submitting a brief skeleton stating he was neutral but wanted provision for his costs if the bankruptcy order is annulled. As attendance is required unless the court orders otherwise the trustee sent Counsel on a noting brief for the first day and he was released from any obligation to attend the second day.

The debtor lost most of the application and so the bankruptcy order remained in place. The costs of the application were to become expenses in the bankruptcy estate. Initially when deciding the level of costs for the petitioning creditor Mr Justice Roth found that the court’s ability to make a summary finding as to the level of costs to award was not precluded by rule 12.42 IR2016 and so reduced the petitioning creditor’s costs in relation to issues with the service of the statutory demand.

However, the court was particularly unimpressed that the trustee’s legal costs of staying neutral amounted to £19,176 (including VAT) when the petition creditor who actually fought the application had only incurred £19,923 (again inclusive of VAT). Mr Justice Roth pulled few punches when he stated at [39]:

Turning therefore to the amount of costs claimed, I regard them as wholly unreasonable and disproportionate. To repeat, the Trustee, very properly, played no part whatever in this appeal, other than to instruct junior counsel (i) to put in a brief skeleton argument explaining how the Trustee’s position on costs overall (i.e. his costs and expenses incurred in the bankruptcy, not simply in the appeal) should be protected in the event that the bankruptcy should be annulled, relying on Oraki; and (ii) to attend on the first day of the hearing on, in effect, a noting brief. In my view, that cannot remotely justify fees of £15,980 plus VAT, including solicitors’ fees of £11,430. My concern at the level of fees is reinforced by the fact that the total costs up to 26 March 2019 of dealing with this estate, where the total indebtedness as I have observed comprises just two debts amounting to £11,409.54, is stated by the Trustee to be £110,104 (inclusive of these legal costs and VAT).

 

As published on 17 July 2019 on LinkedIn by Andrew Goodson, Insolvency Practitioner at Griffins  https://www.linkedin.com/pulse/trustee-bankruptcy-fails-stop-court-reviewing-his-legal-goodson/