DPM Property Services Ltd & Ors v Kiani & Ors

The claim concerns an application by the second claimant, Mr Cooper, for an interim payment from the third defendant company, Woodlands, under CPR 25.7. The court applied the statutory conditions for interim payments (in particular CPR 25.7(1)(c), and paras (4) and (5)) and the court's discretion to award only a reasonable proportion of the likely final judgment.

The judge considered whether Woodlands' potential obligation to indemnify the derivative claimant, Mrs Kiani, for costs should operate as a relevant set-off or counterclaim and whether an interim payment might prejudice her position in the derivative proceedings. Although inclined to accept that such an indemnity could amount to a relevant counterclaim, the judge decided the point need not be finally determined because the exercise of discretion required protection of the company's ability to meet potential indemnity liabilities.

On the assumed financial scenario favouring Mr Cooper, the judge found a substantial judgment in the region of £190,000 was likely. After allowing for existing costs orders in Mrs Kiani's favour and a prudential provision for future derivative costs, the judge concluded that an interim payment of £90,000 was appropriate. The court therefore allowed the application in part and ordered payment of £90,000 within 21 days.

Background and parties: Mr and Mrs Cooper and Mr and Mrs Kiani entered into one or more joint ventures to develop residential properties, sharing net profits equally. DPM Property Services Ltd (DPM), controlled by Mr Cooper, carried out renovation work. Three properties were held through a special purpose vehicle, Woodlands Properties (2006) Ltd. Disputes arose about whether DPM charged only cost or included mark-ups and whether DPM grossly inflated costs; there were also disputes about unequal capital contributions and loans.

Procedural posture and relief sought: This is a first instance application by the second claimant, Mr Cooper, for an interim payment from Woodlands (originally seeking c. £180,000). Separately, Mrs Kiani had issued a derivative claim on behalf of Woodlands alleging breaches of directors' duties by Mr Cooper; earlier orders (by Proudman J) had allowed continuation of the derivative action and granted indemnity orders for costs to Mrs Kiani in respect of what she had incurred to date.

Issues framed:

• Whether the statutory conditions for an interim payment under CPR 25.7 were satisfied, in particular whether the claimant would obtain judgment for a substantial amount against the defendant.
• Whether Woodlands' existing and potential indemnity to Mrs Kiani for costs in the derivative action amounted to a relevant set-off or counterclaim under CPR 25.7(5) and, relatedly, whether an interim payment would prejudice the derivative claimant and frustrate the relief she seeks.
• How the court should exercise its discretion to order an interim payment and what amount would be a reasonable proportion of the likely final judgment having regard to the company's assets and likely liabilities for costs.

Court's reasoning and findings: The judge reviewed CPR 25.7 and reiterated that the power is discretionary and focused on the likely amount of judgment rather than actual recoveries. The judge noted that there was at least a strong possibility that, if the claims by DPM against Woodlands failed, Mrs Kiani would secure an indemnity from Woodlands for costs she had incurred and might incur in pursuing the derivative claim; that potential indemnity could operate as a relevant counterclaim or set-off for the purposes of CPR 25.7(5), but the judge did not need to resolve the legal point finally because discretion required protection of the derivative claimant's position.

The judge accepted the financial figures assumed for the purposes of the application and found a likely judgment in the region of £190,000 in favour of Mr Cooper. From the company's assets he deducted existing costs orders in favour of Mrs Kiani (about £82,000) and allowed a prudent provision of about £200,000 for future derivative costs. Balancing the company assets and likely liabilities, the judge concluded that an interim payment could be made without prejudicing the derivative claim, but only in part. The interim payment was fixed at £90,000, to be paid to Mr Cooper's solicitors within 21 days.

Subsidiary findings and directions: The judgment records subsidiary issues including the involvement of a company called Cranham Facilities Limited and potential breaches of duties under sections 174–177 Companies Act 2006. The judge reserved costs disputes and offered directions for resolving any disagreement about form of relief or costs, including a limit on written submissions if parties chose that route.

The application for an interim payment was allowed in part. The judge exercised the discretionary power under CPR 25.7, having regard to the likely amount of judgment against Woodlands, the company's assets and the company's potential liability to indemnify the derivative claimant for costs; balancing those matters, the court ordered payment of £90,000 to Mr Cooper within 21 days.