Professional Computer Group Ltd, Re

In an administration application, an unsuccessful opposing creditor has no automatic entitlement to have its costs paid as an expense of the administration. Such an order is exceptional and depends on whether it is just in all the circumstances. Conversely, the court may order the creditor to pay the applicant company’s increased costs where the opposition caused those costs, was unsuccessful, and an adverse order is just. No prior warning is an absolute precondition. The court must assess the particular circumstances, including the effect on creditors generally and whether the opposition materially increased the burden of costs.

Following an earlier judgment making an administration order for Professional Computer Group Ltd, the court considered competing applications concerning costs. Mountain Software Holdings Ltd had opposed the administration application and sought to have its own costs paid as an expense of the administration. The Company sought an order that Mountain pay the additional costs caused by its opposition.

The court also considered whether Mountain should formally be joined under CPR r.48.2 and whether the authorities relied upon established restrictions on adverse costs orders against an unsuccessful opposing creditor.

1. Costs of the applicant. The Company’s costs of the administration application were ordered to be an expense of the administration under rule 2.12(3) of the Insolvency Rules 1986.
2. Costs of an unsuccessful opposing creditor. Rule 2.12(3) and rule 2.67 of the Insolvency Rules 1986 give the court power to allow a creditor’s costs as an expense, but do not create an entitlement. An unsuccessful creditor should not expect its costs to be paid automatically. An order may be justified where the circumstances are exceptional and it is just to make the order. The suggestion in Re Structures & Computers Ltd that causing the court to entertain doubts is, by itself, sufficient was questioned.
3. Adverse order against the creditor. There is no fixed rule protecting an unsuccessful creditor from an order to pay the applicant’s increased costs. The governing question is whether such an order is just in all the circumstances. The court rejected the suggestion that a prior warning is an essential precondition. Dymocks Franchise Systems v Todd supported the focus on justice in the particular case.
4. The relevant circumstances included that Mountain’s opposition materially increased the Company’s costs, the burden ultimately affected creditors generally, the opposition failed on jurisdiction and discretion, the Company’s assets were modest, and the Company’s nominee was preferred as administrator. The Company was therefore entitled to its additional costs from 8 April 2008, subject to deduction for costs that would have been incurred on 11 April 2008 in an unopposed application.
5. Mountain was joined as a party under CPR r.48.2 because it had already been given a full opportunity to make oral and written submissions on the costs application.

Mountain’s application was dismissed. The costs order was subject to detailed assessment on the standard basis if not agreed.

This was a first-instance costs judgment following the court’s earlier administration order in the same proceedings.