Premier Motor Auctions Ltd, Re

Applications under rules 4.218E and 39 of the applicable procedural rules should ordinarily be served on the floating-charge creditor, who is entitled to be heard. Excluding that creditor requires compelling justification. Confidentiality, potential partiality and the conditional nature of litigation funding do not, without more, justify an application being heard without notice. The open justice principle permits a private hearing only where the circumstances are exceptional and privacy is necessary and proportionate to protect a legitimate interest. Confidential or privileged material can generally be protected by narrower measures, including confidentiality undertakings, reporting restrictions or limited inspection arrangements.

The joint liquidators of Premier Motor Auctions Limited and Premier Motor Auctions Leeds Limited sought court approval or authorisation of litigation expenses under rule 4.218E of the Insolvency Rules 1986. The proposed expenses related to proceedings against Lloyds Bank plc and others, and could rank ahead of Lloyds’ floating-charge rights if the statutory conditions were met.

The application was made without serving Lloyds. The liquidators also sought a private hearing and delayed service of any order. The central issues were whether Lloyds should be excluded from the application and whether the material justified derogation from open justice.

1. Notice and participation. The court held that the default position under rules 4.218E(5) and (6) was that Lloyds should receive the application and be entitled to be heard. The burden was on the liquidators to justify departing from that position.
2. The principle that both sides should be heard was fundamental. Applying the approach in National Commercial Bank Jamaica v Olint [2009] 1 WLR 1405, a without-notice application is justified only where notice could enable the respondent to defeat the purpose of the order, or where there was literally no time to give notice before relief was required. Those circumstances were absent.
3. The asserted confidentiality and privilege were insufficient. Most of the relevant information was already known to Lloyds, and any genuinely confidential material could be handled by measures contemplated by rule 4.218C(2). Lloyds’ lack of impartiality was no ground for exclusion, and the conditional nature of the litigation expenses concerned the court’s jurisdiction and not Lloyds’ entitlement to participate.
4. Open justice. The general rule was that hearings take place in public. Following the guidance discussed in G v Wikimedia Foundation Inc [2009] EWHC 3148 (QB) and V v T [2014] EWHC 3432 (Ch), a private hearing required exceptional circumstances and a derogation no wider than strictly necessary and proportionate.
5. The possible confidentiality of an unsigned draft costs schedule did not meet that threshold. The applications for privacy were therefore rejected. The approval application was to be dismissed or adjourned so that Lloyds could be served and heard; the judgment did not determine the substantive entitlement to approval of the litigation expenses.

First-instance decision. No earlier appellate decision is stated in the judgment.