Ardawa v Uppal & Anor

Where insolvency costs arise from legal proceedings before the court, the court retains its ordinary jurisdiction under CPR Part 44 to determine who should pay and the amount payable. Insolvency rules governing payment of costs as an expense of the estate do not prevent the court from making a costs order or summarily assessing costs where appropriate.

The court may assess the costs of a trustee in bankruptcy incurred in proceedings before it. Those costs remain subject to reasonableness and proportionality. The court may reduce costs that are excessive, particularly where the trustee has taken a neutral position or the work claimed is disproportionate.

The appellant had unsuccessfully appealed from the dismissal by District Judge Thorpe of his application to annul his bankruptcy order and dismiss the bankruptcy petition. The appeal succeeded only on the issue of substituted service. The court had previously held that the substituted-service order was made without jurisdiction and that the petitioning creditor’s evidence had significantly misled the court.

The petitioning creditor and trustee sought their appeal costs as expenses of the bankruptcy. The central issues were which Insolvency Rules applied, whether the court could summarily assess costs payable from the estate, and whether it could assess the trustee’s legal costs despite the bankrupt’s separate remedy under the Insolvency Rules.

1. Applicable rules. The appeal was governed by the Insolvency (England and Wales) Rules 2016 under Schedule 2, paragraph 14(3), regardless of the outcome of the appeal. Applying a different procedural regime according to whether the appeal succeeded would be anomalous.
2. Petitioning creditor’s costs. Ms Uppal was the overall successful party because the bankruptcy order was not annulled. However, the appellant succeeded on the discrete substituted-service issue, and the court had found serious and inexcusable misleading conduct in obtaining that order. Applying CPR rule 44.2, her costs were reduced by 40 per cent.
3. Summary assessment. Rule 12.42(1) concerns costs payable as an insolvency expense outside court proceedings. Rule 12.42(5), which expressly permits the court to order detailed assessment in proceedings before it, shows that detailed assessment is not mandatory for costs orders made by the court hearing those proceedings. The court may therefore summarily assess such costs where appropriate.
4. Trustee’s costs. Costs payable from the bankrupt’s estate are not thereby removed from the court’s ordinary control over costs of legal proceedings. The trustee’s legal costs remained subject to reasonableness and proportionality. Rule 18.35 did not provide an exclusive route where the court itself was determining costs incurred in the appeal.
5. Assessment and orders. Ms Uppal’s costs were assessed at £18,020.64 inclusive of VAT, of which she recovered 60 per cent, namely £10,812.38. The trustee’s reasonable and proportionate costs were summarily assessed at £7,200 inclusive of VAT. The trustee was ordered to pay the appellant £1,250 for the costs hearing, set off against the trustee’s costs, leaving £5,700 payable from the estate.

• High Court (Chancery Division): On the earlier appeal, the court allowed the appeal concerning substituted service but otherwise dismissed it: [2019] EWHC 456 (Ch).
• County Court at Milton Keynes: District Judge Thorpe dismissed the application to set aside the substituted-service order, annul the bankruptcy order and dismiss the bankruptcy petition.