Oyston & Anor v Rubin & Anor

The Court determined competing contentions about the receivers’ entitlement to fees and disbursements under the Receivership Order and the contractual letters between the receivers’ firm (DRP) and the petitioner (VBFA). Key legal principles applied were the contractual construction of the Receivership Order and related engagement letters, the court’s supervisory jurisdiction over receivers under CPR Part 69.7, and the established lien and right of receivers to recover proper costs from assets subject to a receivership even after discharge.

Material grounds for decision: the engagement letters (26 November 2018 and 11 December 2018) form part of the basis for payment under paragraph 10 of the Receivership Order; the hourly rates in those letters are to be read as inclusive of VAT; disbursements invoiced to DRP (the receivers’ firm) are recoverable where they properly relate to the receivership; the contractual "cap" on fees is to be construed as 5% of the realisations necessary to discharge the judgment debt as at the commencement of the receivership (with an alternative construction applying if that is wrong); sums incurred during the receivership but unpaid at discharge remain recoverable by enforcement of the receivers’ lien; pre-appointment legal fees are not recoverable from the receivership fund; post-discharge fees and expenses are recoverable but are treated outside the contractual cap.

This was a first instance hearing arising from a complex receivership over assets of Owen Oyston and Denaxe Limited (formerly Blackpool Football Club (Properties) Limited). The receivers, Mr David Rubin and Mr Paul Cooper of David Rubin & Partners Limited (DRP), applied for declaratory relief under the liberty-to-apply provision of the receivership order. The claimants issued a Part 8 claim seeking an account and surcharge and challenged various items of fees and disbursements. A related application sought an account of further remuneration incurred since conditional discharge.

Nature of the proceedings: (i) a Declaration Application by the Receivers under the Receivership Order; (ii) the Claimants’ Part 8 claim for an account and surcharge of the receivers’ accounts; and (iii) an account of further remuneration and expenses post-discharge.

Issues framed by the court: the judge identified seven principal issues: (1) whether the hourly rates for fees are inclusive or exclusive of VAT; (2) whether disbursements invoiced to DRP (not the receivers personally) are recoverable; (3) the correct calculation of the contractual "cap" on fees; (4) whether fees and disbursements incurred during the receivership but unpaid at discharge remain recoverable; (5) who bears agents’ fees (residential v non-residential); (6) recoverability of pre-appointment legal costs and of post-receivership fees and expenses; and (7) whether a line-by-line assessment of the receivers’ costs was required.

Concise account of the court’s reasoning and conclusions:

• Construction and documents: the Receivership Order (paragraph 10) referred to a December 2018 letter and to the November 2018 letter of engagement; both letters must be read together with the order and the explanations given at the receivership hearing.
• VAT on rates: the deleted express reference to "plus VAT" in a superseded engagement letter led the judge to hold that the later 26 November and 11 December 2018 letters converted the tabled hourly rates into VAT-inclusive figures. Accordingly the hourly rates were held to be inclusive of VAT.
• Recoverability of disbursements invoiced to DRP: the receivers were personally appointed but operated within DRP; it was therefore proper for the receivers to incur disbursements through DRP and such disbursements are recoverable in principle if properly incurred for the receivership.
• Level and meaning of the fee "cap": after construing the relevant documents and considering what was said in open court when the receivership order was made, the judge preferred the primary construction that the 5% cap meant 5% of the realisations necessary to discharge the judgment debt owed to VBFA at the commencement of the receivership (producing a cap in the region of £1.25 million). The judge set out an alternative construction (5% of realised sums plus values of assets on which substantial work had been done but prevented from completing by events outside the receivers’ control) which would produce a lower cap if the primary construction were wrong.
• Recovery of unpaid items at discharge: the Court held that fees and disbursements incurred during the receivership but unpaid at discharge remain recoverable. The receivers possess and retain a lien over receivership assets and may enforce it; the Receivership Order did not abrogate that lien and paragraph 9 required distributions to the petitioner "as soon as reasonably practicable" while paragraph 10 allowed retention of sums prior to distribution but did not create the strict priority the claimants urged.
• Agents’ fees: the November Letter stated that DRP would meet all property agents’ costs from its fees; the December Letter modified that point to make clear residential property agents’ costs were to be paid from realisations. The judge gave effect to the objective wording: non-residential agents’ costs (subject to precise definition in consequential proceedings) were not recoverable as disbursements, while residential agents’ costs were payable from realisations.
• Pre-appointment and post-discharge costs: pre-appointment legal fees were not recoverable from the receivership fund because the engagement and liability for fees are co-extensive with the appointment; post-discharge fees and disbursements were held recoverable but rather as part of the receivers’ general right to recover proper administration costs (the contractual cap was not appropriate to apply to post-discharge costs).
• Line-by-line assessment: having surveyed the material and the nature and complexity of the receivership (including the Claimants’ obstructive conduct), the judge concluded there was no proper basis to order a line-by-line assessment. The receivers had produced detailed reports and time records and, on balance, the costs were reasonable and proportionate.

The judge directed the receivers to prepare a draft order implementing the findings and listed the matter for a short further hearing to resolve consequential details.

The Court determined the Declaration Application and the Claim by resolving the seven issues identified. The Court allowed in part the receivers’ entitlement to recover fees and disbursements from the receivership assets, with the following principal conclusions: (i) the published hourly rates in the engagement letters are inclusive of VAT; (ii) disbursements invoiced to DRP are recoverable if properly incurred for the receivership; (iii) the contractual 5% cap on fees is to be construed as 5% of the realisations necessary to discharge the judgment debt as at the commencement of the receivership (with an alternative construction set out if that is incorrect); (iv) fees and disbursements incurred during the receivership but unpaid at discharge remain recoverable by enforcement of the receivers’ lien; (v) pre-appointment legal fees are not recoverable; and (vi) post-discharge fees and expenses are recoverable but outside the contractual cap. The Claimants’ broad challenges to the receivers’ conduct and costs were rejected and no general line-by-line assessment was ordered.