Anthony McGann v Eldonian Community Trust Limited

Insolvency proceedings are civil proceedings for the purposes of statutory pro bono costs orders. Where counsel represents a successful party free of charge, the court may require the unsuccessful party to pay the prescribed charity under section 194 of the Legal Services Act 2007, applying the procedure in CPR 46.7. The court must consider the costs order that would have been made had the representation not been free. CPR 46.7 may apply in insolvency proceedings where the Insolvency Rules contain no inconsistent provision. A regulator who participates in charity-related insolvency proceedings should receive costs only where its involvement was reasonably necessary. Misuse of the winding-up petition procedure, combined with other improper features, may justify indemnity costs.

The judgment followed an earlier decision dismissing Mr McGann’s winding-up petition against Eldonian Community Trust Limited and an order adjourning costs and permission to appeal for determination on paper. The court considered the Company’s solicitors’ costs, a payment to the Access to Justice Foundation for pro bono counsel, the Charity Commission’s costs, the basis and amount of assessment, and the proposed grounds of appeal.

The central issues were whether the court could make a statutory pro bono costs order in insolvency proceedings, whether the Charity Commission should recover any costs despite not having been a substantive party, whether indemnity costs were justified, and whether permission to appeal should be granted.

1. Company’s costs. The Company was the successful party because the winding-up petition had been dismissed. Under CPR 44.2(2), and having regard to all the circumstances, Mr McGann was ordered to pay the Company’s costs. No sufficient reason existed to apportion or limit them.
2. Payment to the Foundation. Section 194 of the Legal Services Act 2007 applies to civil proceedings, including insolvency proceedings. CPR 46.7 provides the procedure for assessing the payment under section 194(3), and there was no inconsistent insolvency provision disapplying it. The court was satisfied that, had counsel not acted free of charge, Mr McGann would have been ordered to pay the Company’s costs of counsel. The statutory payment was therefore appropriate.
3. The relevant considerations included the Company’s good reason for defending the petition, the absence of evidence that the pro bono arrangement was improper, and the absence of any convincing reason to dispense with the order. The payment to the Foundation was assessed at £20,325.
4. Charity Commission’s costs. The Charity Commission was added as a party for costs only. Its attendance at the first hearing was reasonably necessary because the petition might otherwise have pre-empted the statutory inquiry and the appointment of new trustees. The later hearings were different because the Company was properly represented. Only the costs of the first hearing were awarded.
5. Indemnity basis and assessment. The petition was pursued in circumstances amounting to conduct out of the norm, including misuse of the petition procedure and deployment of a false invoice. The Company’s and Charity Commission’s costs, and the hypothetical costs relevant to the Foundation payment, were therefore assessed on the indemnity basis. The Company’s costs were summarily assessed at £7,852 plus VAT if applicable, and the Charity Commission’s costs at £1,586.25.
6. Permission to appeal. Permission was refused. The proposed grounds had no real prospect of success and disclosed no other compelling reason. Payment of the sums ordered was directed within 14 days, subject to any immediate submissions.

First-instance judgment following an earlier judgment dismissing the petition, identified as [2025] EWHC 3103 (Ch). Permission to appeal from that decision was refused.