Crumpler & Anor v Candey Ltd

For the purposes of Insolvency Act 1986, s 245, post-liquidation legal work confers relevant value only where it was properly undertaken with the liquidators’ authority. Work directed towards obtaining wider litigation funding without that authority is excluded, although authorised work securing immediate funding may be valued.

In costs proceedings, the court should identify the overall winner, account for issues on which that party lost, and ordinarily make a proportionate costs order where practicable. A Calderbank offer does not justify indemnity costs unless its refusal, viewed in the circumstances existing when it was made, was unreasonable to the required high degree.

This was a supplemental judgment concerning the valuation of legal services secured by Candey Limited’s floating charge over Peak Hotels and Resorts Limited. The court had previously determined that the value of services under the fixed fee agreement was to be assessed by time costs under Insolvency Act 1986, s 245.

The remaining issues concerned disbursements, work undertaken after liquidation to obtain litigation funding, the incidence and basis of costs, interest on costs, and payment on account. The central questions were whether particular post-liquidation funding work was authorised and therefore conferred value, and how the parties’ relative success should affect the costs order.

1. Funding work. The court maintained its earlier conclusion that Candey’s post-liquidation efforts to broker funding for the continuation of litigation were not authorised by the liquidators and therefore did not confer value within s 245 of the Insolvency Act 1986. An exception applied to work securing £200,000 for an immediate review of the litigation, because that work was authorised. The value of that work was assessed at £4,000 rather than the £8,260 claimed.
2. Disbursements. No determination was required because the only remaining disbursement issue had become academic after the liquidators accepted responsibility for paying the relevant sum as an expense of the liquidation.
3. Costs. The liquidators were the overall winners because Candey’s secured claim was reduced from more than £3 million to approximately £1.09 million. Candey nevertheless succeeded on the issue whether monies paid into court were covered by the charge. The appropriate course was a proportionate order rather than an issues-based order. Candey was ordered to pay 85% of the liquidators’ costs on the standard basis.
4. The court applied the general principles under CPR r 44.2, including the usual starting point that costs follow the event and the preference for a percentage reduction where practicable. The Calderbank offers did not alter the result or justify indemnity costs. Their refusal was not unreasonable in light of the uncertainties existing when the offers were made.
5. Interest on costs was refused. Candey was ordered to make a payment on account of £677,900 under CPR r 44.2(8).

The judgment was supplemental to the court’s earlier decision on the valuation issue. It also records earlier proceedings before HHJ Raeside QC and the Court of Appeal, including the remittal of costs issues, but gives no citation for those decisions.