Marcellus Adrianus Antonius Kooter v The Official Receiver & Ors

Costs following annulment of a bankruptcy order are governed by an unfettered discretion. There is no presumption that the trustee’s costs must be paid by a successful applicant, although the trustee’s court-appointed role and entitlement to remuneration are important factors.

The court must consider the particular facts, including the basis and timing of the annulment application, the trustee’s involvement, the likely recovery from the bankrupt, the conduct of the parties, and the proportionality of the costs claimed. In a jurisdictional challenge based on centre of main interests, annulment follows as of right once the jurisdictional defect is established. A successful creditor is not thereby treated as the petitioning creditor for costs purposes.

The applicant, a substantial creditor, had successfully obtained annulment of the bankrupt’s bankruptcy order because her centre of main interests was not in England and Wales. The bankruptcy order had been made on the bankrupt’s own application.

The trustees in bankruptcy subsequently sought an order that the applicant and the bankrupt be jointly and severally liable for their costs, remuneration and expenses. The court had already determined the annulment and the bankrupt’s liability for the trustees’ costs. The remaining issue was whether, and to what extent, the successful applicant should contribute to the trustees’ costs of the annulment application and the bankruptcy.

1. Applicable discretion. The court has an unfettered discretion concerning the costs, remuneration and expenses of trustees following annulment. The discretion must be exercised by reference to the facts and circumstances of the individual case. [2010] EWHC 1105 (Ch), Butterworth v Soutter and [2013] EWCA Civ 1629 were considered.
2. No presumption. There is no presumption in favour of awarding costs to the trustee. The trustee’s court-appointed function and the need to ensure that trustees can act without remuneration being contingent on the bankruptcy’s survival are relevant factors, but they do not determine the result.
3. Jurisdictional annulment. The application was based on Insolvency Act 1986, section 282(1)(a), and challenged jurisdiction on the basis that the bankrupt’s centre of main interests was outside England and Wales. Once that defect was established, annulment followed as of right. This distinguished cases in which the court retained a broader discretion over whether to annul.
4. Assessment of the parties’ positions. The applicant was not to be treated as a petitioning creditor merely because he was a creditor who applied for annulment. His success and the limited nature of his culpability were relevant. The trustees’ early appointment, the prompt and meritorious jurisdictional challenge, their neutral role, the high level of costs claimed, and their failure sufficiently to tailor their work to the circumstances were also relevant. The court was not required simply to identify which party was culpable.
5. Order. The least unjust result was a limited contribution rather than an order for all the trustees’ costs or no order at all. The applicant was ordered to pay £7,500 plus VAT towards the trustees’ costs under limbs 2 and 4, with an indemnity enabling him to seek recovery from the bankrupt. The parties were encouraged to agree the form of order.

First-instance costs determination following the court’s earlier annulment judgment dated 24 October 2022. No appellate history is stated in the judgment.