National Westminster Bank Plc v Msaada Group (a firm) & Ors

Costs incurred before a creditor learned of an invalid out-of-court administrator appointment may properly be treated as an expense of the administration where the application would have been necessary in any event. The court may make no order for costs concerning an urgent, inadequately notified interim hearing where the hearing was partly useful but could reasonably have been avoided. Costs incurred thereafter may be ordered personally against those whose conduct drove the unsuccessful opposition, while a purported administrator is not personally liable where the dispute concerned the validity of the appointment and the competing appointment.

The judgment concerned the costs of the Bank’s application relating to the appointment of administrators for Msaada Group. The Bank had begun preparing an administration application before learning that Mr Craig had been purportedly appointed as administrator out of court. The Bank challenged that appointment and sought the appointment of its own nominees. The court had upheld the challenge to Mr Craig’s appointment in the earlier judgment. The issue was how the costs should be allocated between the administration, Mr and Mrs Keet, and Mr Craig, including the costs of an interim hearing before Morgan J on 2 November 2011.

1. Costs before 31 October 2011. The Bank could not compel Mr and Mrs Keet to appoint an administrator out of court or to appoint the Bank’s nominees. An administration application would therefore have been necessary in any event. The Bank’s costs incurred before it learned of Mr Craig’s appointment were consequently to be treated as an expense of the administration, rather than ordered personally against Mr and Mrs Keet or Mr Craig.
2. Hearing on 2 November 2011. The application before Morgan J had been made without proper notice and was almost inevitably adjourned. Although directions for a speedy hearing and undertakings from Mr Craig were obtained, fairness and justice were best achieved by making no order for the costs of that hearing.
3. Costs after the interim hearing. Mr and Mrs Keet were to pay the Bank’s subsequent costs. Their conduct had driven the defence of Mr Craig’s appointment and the resistance to appointing the Bank’s nominees. Their failure to notify Mr Pettit and their insistence that Mr Craig should be appointed justified personal liability for those costs.
4. Mr Craig’s position. No order was made against him. Although he had an interest in establishing the validity of his appointment, the Bank’s costs in defeating the Keets’ case were not fairly attributable to him personally.

The Bank was therefore entitled to its pre-31 October costs as an expense of the administration, there was no order for the 2 November hearing, and Mr and Mrs Keet were ordered to pay the Bank’s later costs.