Parkins v Hayes & Anor (Re Costs and Consequential Matters) [2025] EWCC 46 (31 July 2025)

Neutral Citation Number: [2025] EWCC 46 Case No: K00PE098 IN THE COUNTY COURT AT CENTRAL LONDON 31 July 2025 B e f o r e : Recorder Eaton Turner ____________________ JONATHAN ROBERT LLOYD PARKINS Applicant - and - (1) TIMOTHY FRANCIS LAGE HAYES (2) DARAGH DUFFY Respondents ____________________ The Applicant appeared in person Louise Delgado (solicitor advocate, of Benchmark Solicitors) appeared for the First Respondent Alexander Kingston-Splatt (instructed by Blaser Mills) appeared for the Second Respondent ____________________ HTML VERSION OF APPROVED JUDGMENT ON COSTS AND CONSEQUENTIAL MATTERS ____________________ Crown Copyright © Recorder Eaton Turner: This is my judgment on costs, and on a related consequential issue as to the recoverability of Mr Duffy's costs and expenses as supervisor of a Voluntary Arrangement, following my earlier judgment (my ' First Judgment ') the neutral citation number for which is [2025] EWCC 45 , handed down on 8 April 2025, on an application (the ' Application ') brought by Mr Parkins under s.262 of the Insolvency Act 1986 and Rule 15.35 of the Insolvency Rules 2016 to challenge an Individual Voluntary Arrangement (the ' Arrangement ') which was approved at a meeting of the creditors of Timothy Francis Lage Hayes (' Mr Hayes ') held on 16 May 2023. I found that there had been a material irregularity in the conduct of the meeting of creditors because the French & Co Debt, which at £631,799.94 had been determinative of the outcome of the vote on the Arrangement, had not been established on the balance of probabilities. The outcome of the Application was that I ordered that the approval of the Arrangement by Mr Hayes' creditors be revoked. For a full understanding of the background to the Application, and the remarkable arguments advanced in support of the disputed Debt, this further judgment should be read together with my First Judgment. At a hearing to deal with costs and consequential matters I rejected a submission advanced on behalf of Mr Hayes that I should, on the basis of a 'material change of position since the hearing', direct the holding of a further meeting of creditors in order that his creditors might vote on a revised IVA proposal. As the IVA was sought and approved at a time when there was a pending bankruptcy petition against Mr Hayes, which has not been disposed of and remains on the Court file, that petition will have to be listed for further hearing. At the consequentials hearing, beyond the substantive relief to be ordered on the Application, the remaining issues were (1) who should pay the various parties' costs of the Application, and (2) could and should any part of Mr Duffy's costs and expenses be recoverable by him from some monies that have recently been transferred to him by Mr Hayes? In the circumstances of this case these questions raise complex issues. As before, Mr Parkins acts in person, so I have not had the benefit of submissions from a legally qualified advocate on his behalf. The parties filed written submissions and further authorities prior to the consequentials hearing. A possible additional relevant authority was identified in the course of the hearing so that, particularly bearing in mind that Mr Parkins is acting in person, I gave all parties permission to file further written submissions, which they all did. Mr Parkins' written submissions went into great detail on that and other authorities. It is appropriate to summarise first the findings I made in my First Judgment, together with some of the procedural steps taken, or not taken, in the course of the Application. In addition to the dispute as to the French & Co Debt there were many other grounds relied upon by Mr Parkins in his challenge to the Arrangement. His Application also raised allegations that he was unfairly prejudiced by the terms of the IVA, and he was highly critical of Mr Duffy and his firm, in particular of their failure, as he saw it, adequately to investigate many of the representations made in the Proposal: see paras 23 – 27 of my First Judgment. I found that that Mr Duffy had been right to value another claim, the Marckita Claim, at £1: see paras 95-97 of my First Judgment. I found it unnecessary (in view of my conclusion on the Debt), and indeed impossible on the available evidence, to reach a final conclusion on the contention of unfair prejudice, but indicated that there was some strength in the contention on behalf of Mr Duffy that the matters relied upon by Mr Parkins as demonstrating unfair prejudice to him affected all creditors equally. So far as the conduct of Mr Duffy was concerned, I indicated that I would hear further submissions when I came to consider costs and other consequential matters, but that my initial view was that Mr Parkins had been overly critical of Mr Duffy. The disputed creditor French & Co supplied evidence relating to its claimed Debt by two statements (Hale 1 and Hale 2) of one of its partners, Ian Hale, but was not joined to the Application by Mr Parkins either at the outset or later, and did not itself take up an opportunity to seek to be joined. A further development – the Fund in the hands of Mr Duffy The terms of the IVA Proposal were relatively simple in that Mr Hayes said that his only significant asset was an estimated sum of £400,000 which he said was likely to be paid to him following the sale of his former matrimonial home. Of this sum, he said that £100,000 would represent 'pain and suffering'. That sum of £100,000 was thus to be excluded from the Arrangement, and retained by Mr Hayes. The balance of £300,000 (the ' Lump Sum Contribution ') would therefore be Mr Hayes' only contribution to the Arrangement. All other assets, which Mr Hayes said were in any case of negligible value, were to be excluded. The stated duration of the Arrangement was 12 months, and the Arrangement expressly provided: 'I intend to pay a lump sum contribution in accordance with Appendix B1 within a period of 12 months or less from the date of the approval of my proposal. If I fail to introduce my lump sum contribution within the specified timetable this will constitute a breach of the arrangement, my Supervisor will issue a notice of breach in accordance with the Standard Conditions.' Even though no lump sum contribution was made within the period of 12 months from 23 May 2023, Mr Duffy did not then or subsequently issue a notice of breach. By the time of the consequentials hearing Mr Hayes had received payment from his former wife in the rather lesser total sum of £178,379.67 (comprising payments of £17,559.01 and £160,819.66). There is no suggestion that he will receive any further payments. Of this sum Mr Hayes retained £100,000 'in accordance with the terms of the IVA' and paid the balance of £79,368.67 (the ' Fund ') over to Mr Duffy, in whose hands it remains. Costs of the Application Mr Duffy was the nominee and became the supervisor of the Arrangement. Some of Mr Parkins' criticisms of the events supporting the approval of the IVA are directed at members of Mr Duffy's firm other than Mr Duffy himself. When I refer to Mr Duffy I do so as a shorthand for Mr Duffy and the other members of his firm involved in the Proposal, in the responses to Mr Parkins' correspondence, and in the holding of the meeting of creditors. The chairman of the meeting adjourned it for an hour in order to discuss with Mr Duffy how to respond to some of Mr Parkins' complaints. As to the costs of the Application, all parties submitted that I have an unfettered discretion as to what order for costs I should make, although one authority relied upon for different reasons by all parties casts some doubt on this. The Orders as to Costs sought by the parties Mr Parkins seeks an order for his costs against both Mr Hayes and Mr Duffy, and resists any suggestion that either of them should recover any costs against him. Mr Hayes argued that he should not be liable for Mr Parkins' costs of the Application, alternatively should not be liable for his entire costs of the Application. Mr Hayes also argued that he should not be liable for Mr Duffy's costs of the Application, there having been no dispute between him and Mr Duffy, so that Mr Duffy could not be said to be a successful party as between the two of them. Mr Duffy sought costs against Mr Parkins and also against Mr Hayes, and submitted that any attempt by Mr Parkins to seek costs against him (Mr Duffy) would be 'entirely misconceived'. French & Co By his post-hearing written submissions Mr Parkins suggested that if any costs are awarded in favour of Mr Duffy, they should be awarded against French & Co, who are not a party to the Application. Recovery of Mr Duffy's costs from the Fund of £79,368.67? In addition to seeking his costs as above, Mr Duffy's position was that, in any event – but particularly should I decide that some or all of his costs should not be paid by Mr Parkins or by Mr Hayes – I should order that he may recover them out of 'Mr Hayes' estate', i.e. the Fund. Costs of appeals against decisions approving IVAs The usual principles relating to costs of litigation, with their emphasis on identifying the successful party, will not always fit easily with applications under s 262 IA 1986 and r. 15.35 IR 2016 where the nominee / supervisor will be drawn into the application and will have to decide whether to take a neutral or an active role in it. Exactly where the material disputes are to be found, who the true protagonists are, and where the burden of proof lies, will not necessarily be readily apparent, especially at the time of commencement of such an application. In Elser v Sands [2022] EWHC 1419 (Ch) ; [2022] BPIR 1193, a case where the approval of an arrangement was revoked, Chief ICC Judge Briggs adopted a useful summary in the decision of Gloster J (as she then was) in HLB Kidsons (A Firm) v Lloyds Underwriters [2007] EWHC 2699 ; [2008] 3 Costs LR 427 at [10] – [11]: '10. The principles applicable as to costs were not in contention. The court's discretion as to costs is a wide one. The aim always is to "make an order that reflects the overall justice of the case" ( Travellers' Casualty v Sun Life [2006] EWHC 2885 (Comm) at paragraph 11 per Clarke J. As Mr. Kealey submitted, the general rule remains that costs should follow the event, i.e. that "the unsuccessful party will be ordered to pay the costs of the successful party": CPR 44.3(2). In Kastor Navigation v Axa Global Risks [2004] 2 Lloyd's Rep 119 , the Court of Appeal affirmed the general rule and noted that the question of who is the "successful party" for the purposes of the general rule must be determined by reference to the litigation as a whole; see paragraph 143, per Rix LJ. The court may, of course, depart from the general rule, but it remains appropriate to give "real weight" to the overall success of the winning party: Scholes Windows v Magnet (No 2) [2000] ECDR 266 at 268. As Longmore LJ said in Barnes v Time Talk [2003] BLR 331 at paragraph 28, it is important to identify at the outset who is the "successful party". Only then is the court likely to approach costs from the right perspective. The question of who is the successful party "is a matter for the exercise of common sense": BCCI v Ali (No 4) 149 NLJ 1222 , per Lightman J. Success, for the purposes of the CPR, is "not a technical term but a result in real life" ( BCCI v Ali (No 4) ( supra )). The matter must be looked at "in a realistic … and … commercially sensible way": Fulham Leisure Holdings v Nicholson Graham & Jones [2006] EWHC 2428 (Ch) at paragraph 3 per Mann J. 11. There is no automatic rule requiring reduction of a successful party's costs if he loses on one or more issues. In any litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case. As Simon Brown LJ said in Budgen v Andrew Gardner Partnership [2002] EWCA Civ 1125 at paragraph 35: "the court can properly have regard to the fact that in almost every case even the winner is likely to fail on some issues". Likewise in Travellers' Casualty (supra) , Clarke J said at paragraph 12: "If the successful Claimant has lost out on a number of issues it may be inappropriate to make separate orders for costs in respect of issues upon which he has failed, unless the points were unreasonably taken. It is a fortunate litigant who wins on every point."' Costs as between Mr Parkins and Mr Hayes Mr Hayes resisted the submission that he should be liable for Mr Parkins' costs on the basis that the point on which Mr Parkins' Application succeeded, the French & Co Debt, was only a 'small part' of the matters argued in support of the Application, and was a dispute not between Mr Parkins and Mr Hayes, but rather between Mr Parkins and French & Co (who Mr Parkins did not join as a party to the Application, despite the possibility of him doing so being drawn to his attention, especially when the matter was raised by DJ Revere at one of the early hearings). It was argued that Mr Hayes, not being the relevant creditor, 'was not in a position to adduce all the evidence required [to meet the points made about the French & Co Debt] and had in any event no burden to do so'. It was not made clear however what evidence Mr Hayes considered himself to have been unable to adduce. Even though French & Co were neither joined by Mr Parkins nor themselves sought to be joined, evidence was provided by that firm and relied upon extensively by Mr Hayes in his vigorous opposition to the Application: a. Hale 1, exhibited the material that had been provided to Mr Duffy prior to the meeting of creditors in support of the French & Co Debt. That material was presumably provided initially by French & Co to Mr Hayes, as Mr Duffy did not then, or later, have any direct contact with French & Co. Hale 1 stated: '1. This statement is made in support of the application to dismiss an application by one of the other creditors Jonathan Parkins (JP) to set-aside the IVA entered into by Mr Timothy Hayes (TH). … 24. My firm therefore opposes this application brought against TH and his Supervisor by Mr Parkins.' b. Hale 2, which was provided after an adjournment, and after I had said that French & Co should apply to me in writing if they wished to participate in the adjourned hearing (see para 45 of my First Judgment), stated: '1. … I make this statement in support of the application to dismiss an application by another creditor of Timothy Hayes (TH) to set aside the IVA entered into by TH.' Even making allowance for the convention that a witness statement provided by a non-party witness will often state that it is provided 'in support of' the position of the party who puts it forward, these written statements by Mr Hale reflect the reality that: a. Mr Hayes, who strongly opposed the Application, was relying heavily on the evidence of Mr Hale; and b. French & Co was itself strongly opposed to the Application, but chose to manifest its opposition through Mr Hayes and his legal representative. In particular, the arguments set out in paragraphs 5 – 7 of Hale 2 (see paragraph 50 of my First Judgment) as to French & Co's supposed ability to recover against their own client Mr Hayes costs for which he had been legally aided, and/or which might be owed to predecessor firms, were relied upon in the skeleton argument submitted by Ms Delgado before the third hearing (see paragraphs 51-54 of my First Judgment), in oral argument, and in her later written submissions (see paragraphs 55 – 57 of my First Judgment). For the reasons set out in paragraphs 68 – 94 of my First Judgment I rejected the arguments that: a. Even where a client is legally aided, that client is nonetheless always 'prima facie' and 'primarily' liable for his solicitor's fees. b. A solicitor's equitable lien could create a debt enforceable against Mr Hayes to recover sums from him which had not, in fact, been paid to him. c. 'An inter-party costs order in favour of a successful party creates a judgment debt in favour of the successful party notwithstanding that they are an "assisted person" within the meaning of the Civil Legal Aid legislation: Re a debtor (No 68SD97) [1998] 4 All ER 779, with the effect that the litigant becomes liable to their solicitor for the costs at the commercial rates which they are entitled to recover from their opponent.' d. A 'general principle of assessment' said to be supported by (1) Carl Harris (2) Susan Collete Hartless v. Moat Housing Group-South Ltd [2007] EWHC 3092 (QB) had the effect that a solicitor seeking assessment of his own client's costs (whether or not they include costs attributable to the services of former solicitors) can maintain a claim in debt against his own legally-aided client. By his extensive written submissions provided after the consequentials hearing, Mr Parkins also contended that he should be awarded costs against French & Co. I cannot consider making any order against French & Co when it had not been joined to the Application, even for the purposes of costs. As between Mr Parkins and Mr Hayes however, it is wholly unrealistic for Mr Hayes to suggest that the only dispute was between Mr Parkins and French & Co. Further, even though Mr Parkins did not succeed on all the grounds that he relied upon in support of the Application, the reality is that the point on which he did succeed turned out to be the decisive point, the very large French & Co Debt, which was always obviously going to be determinative of the vote at the meeting of creditors. In the exercise of my discretion, given Mr Hayes' heavy reliance in opposition to the Application upon the evidence of, and arguments advanced by, Mr Hale, and the fundamental importance of the French & Co Debt to the approval or otherwise of the Arrangement: a. I do not think it appropriate to make an issue-based order in relation to costs as between Mr Parkins and Mr Hayes; and b. I order that Mr Hayes should be liable for all of Mr Parkins' costs of the Application. Costs as between Mr Parkins and Mr Duffy Liability for costs as between Mr Parkins and Mr Duffy raises much more difficult issues. They each seek costs against the other. Mr Parkins submits that the Court has power to orders costs against a nominee / supervisor under r.15.35 IR 2016 and s.262 IA 1986, whereas Mr Kingston-Splatt draws my attention to r.15.35(6) which provides, in relation to appeals: 'The person who made the decision is not personally liable for costs incurred by any person in relation to an appeal under this rule unless the court makes an order to that effect.' Mr Parkins renewed, at the costs stage, his extensive criticisms of Mr Duffy's conduct, although he focused them more narrowly on the lack of scrutiny of the French & Co Debt. Mr Parkins said at para 38 of his written submissions that: 'Given [Mr Duffy] admitted [the French & Co Debt] in full with full voting rights based only on [the evidence subsequently exhibited to Hale 1] and despite all contradictory evidence raised by me in concern [sic] of the claim, they must be criticised as falling far short of their duties.' Indeed, despite my preliminary indication, when I circulated my First Judgment in draft, that I considered that he had been unduly critical of Mr Duffy, Mr Parkins referred me to the observations of Henderson J in Mourant & Co Trustees Ltd v Sixty UK Ltd [2010] EWHC 18980 (Ch); [2010] BCC 882 and submitted that there was a prima facie case of misconduct, so that I should report Mr Duffy to his professional body. This, I make clear, I shall not do. Mr Kingston-Splatt submitted that there is no basis for criticism at all of Mr Duffy in relation to the admission of French & Co's Debt, let alone a basis for suggesting that Mr Duffy fell so far short of what could reasonably be expected of a professional in such circumstances that a costs order should be made against him. He reminded me that: a. Mr Duffy and MD were presented with the supporting documentation which has since been put before the court in relation to the alleged basis of French & Co's Debt, together with the schedules in relation to them which were prepared by that firm; and b. that information came from a solicitor at French & Co of many years' standing (Mr Hale having been admitted in 1996). In paragraphs 23 - 26 and 112 of my First Judgment I addressed the role of the supervisor when considering the admission of debts for voting purposes, referring in this context to AB Agri Limited [2016] BPIR 1297 and subsequent authorities. I note that in Elser v Sands Chief ICCJ Briggs cited with approval the following passage in Insolvency Practitioners - Appointment, Duties, Powers and Liability, Sims KC et al (Elgar) on the role of a nominee: 'A nominee is (as the name suggests) an individual who is nominated to act as a supervisor of an IVA. Although the proposal is as a matter of law proposed by the individual who wishes to take advantage of the statutory process, this is something of a legal fiction. In practice, the proposal will usually be drawn up by the same IP who will then act as supervisor in the event that requisite majority of creditors agree to the proposal. The nominee is to ensure that the creditors have the necessary information before them in order to form a view and vote on the proposal…if there are aspects of the information that appear to require an explanation, then it is the IP's duty to ask further questions.' There is arguably some tension between that description of the duties of a nominee, especially the degree of investigation that might need to be undertaken by a nominee, and the somewhat 'light-touch' approach to the admission of debts for voting purposes as explained in AB Agri Limited [2016] BPIR 1297, Power v Petrus Estates [2008] EWHC 2607 (Ch) and Re a Debtor (No 222 of 1990) ex p the Bank of Ireland [1992] BCLC 137, 444). It will not always be easy to see where the line should be drawn. Mr Kingston-Splatt submitted that Mr Parkins' complaints were, in effect, that Mr Duffy did not undertake a forensic examination of Mr Hayes' financial position and that this revealed a misunderstanding of the nature of a nominee's role. He referred to Watson on Individual Voluntary Arrangements at 8.06: 'In compiling the report, the nominee is not expected to undertake a full-scale inquiry: it is recognised that they are constrained by limited resources and a tight statutory timetable. Nevertheless, within these limitations, the nominee is expected to carry out a careful review of the material supplied by the debtor; where there are doubts or questions in relation to the information provided by the debtor, the nominee must try to assess the strength and materiality of such concerns and carry out such investigations as may be reasonable as to be able to address them in the report and reject the proposal if necessary. Such concerns need only be addressed explicitly where the nominee considers that reasonable doubts still remain as to the accuracy of the material that has been presented.' He submitted that it is was 'clear and obvious' that a nominee's powers to compel the production of further information need only be invoked where there are doubts and questions about the information provided by the debtor but that, as Mr Duffy explained in his evidence, in the present case 'no such doubts existed as to that information'. Mr Parkins referred me to Elser v Sands [2022] EWHC 32 (Ch) at [66] and Tradition (UK) Ltd v Ahmed [2008 EWHC 2946 (Ch) ; [2009] BPIR 626 , and to the summary of the latter case given in the looseleaf work ' Individual Voluntary Arrangements ': 'The judge in that case … found that the nominee had failed in his duties to provide independent professional scrutiny of the proposal. The prospects for the approval of the proposed IVA depended on the validity of family claims which: (a) had not been properly investigated; (b) were in the nature of things vulnerable to manipulation in order to rescue the debtor; (c) had been subject to substantial variation; and (d) were being challenged by the principal dissenting creditor. The judge also referred to Lindsay J's list of variables [1] which were relevant to deciding what steps it was reasonable for a nominee to satisfy themselves as to the following minima: (1) The strength of the grounds for questions or doubts; (2) The materiality of such questions and doubts to the propriety or feasibility of the debtor's proposals; (3) The quality of the debtor's answers to the nominee's questions; and, (4) The ease or difficulty of independent inquiry by the nominee, the expense of such inquiry and the availability of funds.' Mr Parkins submitted that there is no evidence that Mr Duffy undertook any scrutiny or evaluation of Mr Hayes' Proposal. I therefore need to return to Mr Parkins' criticisms of Mr Duffy's conduct in more detail. In the days prior to the meeting of creditors Mr Parkins engaged in correspondence with Mr Duffy's office. In particular, on 26 April 2023 he submitted a detailed 11-page document entitled 'Issues on the Proposed IVA of Timothy Francis Hayes'. The contentions or issues raised included that Mr Hayes' debts and assets were by their nature unsuitable for an IVA. In addition, that email raised or made: a. Questions as to Mr Duffy's investigation of Mr Hayes' assets and liabilities, including his interest in two companies Quinjo Limited and Marckita Limited; b. Questions as to how Mr Duffy had concluded that an IVA would be more beneficial to creditors than a bankruptcy. c. Allegations that assets were unjustifiably excluded from the IVA. d. Allegations that Mr Hayes had been dishonest regarding the source of funds that might be available. e. Detailed allegations regarding the French & Co Debt, including why French & Co had extended so much credit to Mr Hayes, identifying conflicting previous evidence as to the quantum of that Debt, and questioning whether there was some side deal between Mr Hayes and French & Co regarding the £100,000 to be excluded from the proposed IVA. f. Allegations of abuse of process, and dishonesty and inaccuracies in the IVA. g. The suggestion that a sum owed by Mr Hayes to a barrister previously instructed by him might be questioned on the basis that the barrister had been disbarred following his imprisonment for 3.5 years following his conviction of 'child sex offences'. h. Allegations regarding numerous matters that had arisen in relation to previous litigation between Mr Hayes and Mr Parkins. Of greatest relevance is that Mr Parkins' email of 26 April 2023 stated that in previous proceedings Mr Hayes had referred to money apparently owed to the legal aid authority which was not detailed in the IVA, and had referred to sums owed under a CFA with solicitors which was not mentioned in the IVA. Further, it pointed out that while the Proposal claimed that £573,529 was owed to French & Co, in a witness statement given by Mr Hale of French & Co just the previous year in other proceedings he had stated that Mr Hayes was indebted to his firm for only about £100,000. Mr Parkins questioned whether the discrepancy might be explained by sums owed to the legal aid authority. Mr Peoples of Mr Duffy's office responded to Mr Parkins' email of 26 April 2023 by an email dated 12 May 2023 which responded to the many questions raised by Mr Parkins. He addressed issues relating to Marckita Limited, Quinjo Limited, Mr Hayes' income, an error in the proposal in omitting to refer to a previous bankruptcy, other errors in terminology used (relating to 'divorce equity'), and the sums said to be owed to counsel previously instructed by Mr Hayes. He further commented on other matters, including the French & Co Debt, as follows (emphasis added): 'The debtor supplied a list of creditors to us with various statements going back a number of years. He then compiled a list of what he believed that he owed at this time which formed the basis of his statement of affairs. He has spoken with creditors to ascertain the level of their debts and we have no reason again to disbelieve his figures. Some creditors have voted and supplied substantiating documentation and the Chairman of the Meeting has no reason to question such claims especially when they come from a firm of solicitors, a barrister or a bank. … The costs in bankruptcy are higher than in an IVA which would deplete the estate for the benefit of unsecured creditors. The figure of £120,000 costs is an estimate based on the complexity of the case and also taking into account that the fees and costs of the Carol Hayes bankruptcy are already around or even in excess of this figure. A Trustee in Bankruptcy would be obliged to take over the bankruptcy claim plus any of the attendant costs so the £120,000 estimate is not unreasonable. … The £100,000 is what the debtor has requested to retain to use in retirement and it is up to creditors to decide whether they believe this to be fair or not. He has pursued this case for many years and has advised us that an element of the award is for 'pain and suffering' but in addition, it would be incumbent on the debtor to continue to assist the legal advisors and Trustee in Bankruptcy so that the return to creditors is maximised. There is clearly a dispute in relation to the debt allegedly owed to Marckita. However, as this company is apparently insolvent and likely to be liquidated, this would be a matter for the liquidator to investigate and not for the Nominee. The debtor insists that the sum is not owed and ultimately it his proposal which we put to creditors. The debtor will be resigning from Marckita Limited should the IVA be approved so you can then take steps to appoint a liquidator should you feel that this is the most appropriate action to take. The Nominee has no knowledge of how any CFA has been operating but ultimately French & Co need to be paid for their work. They may be acting as an agent for the Legal Aid Authority but regardless the funds are owed and we have no reason to deny French & Co's claim. I cannot comment on why French & Co extended credit to the debtor as that is a matter for them as it would be for any creditor extending terms . We have received their proxy form and proof of debt together with their substantiating documentation and their claim appears to be entirely valid. We also have no reason to disbelieve [counsel previously instructed by Mr Hayes] or the debtor in relation to the work carried out or the amount owed to him as his actions elsewhere would not be relevant to this case.' As I understood Mr Duffy's witness statement, neither he nor Mr Peoples of his firm took any steps to raise any questions directly with French & Co, even though their claimed Debt (stated at £573,529 in the proposal, but increased to £631,799.94 by the time of the meeting of creditors) was clearly going to be determinative of the vote. It was, he said, Mr Hayes who had provided the list of creditors together 'with various statements going back many years', and ' He [being a reference to Mr Hayes] had spoken with creditors to ascertain the level of their debts and the nominee had no reason to disbelieve [Mr Hayes'] figures' (my emphasis). The statement that Mr Duffy had no reason to question claims when they came from a firm of solicitors is criticised by Mr Parkins as 'naive'. I have, with the benefit of hindsight, considerable sympathy with that observation. Further, with an eye to the criteria identified by Lindsay J in Re a Debtor (No 140 IO of 1995) (Greystoke v Hamilton-Smith) [1996] 2 BCLC 429: a. The questions raised by Mr Parkins, set out above, as to the French & Co Debt were certainly material, as the Debt would plainly be determinative of the approval of the IVA if voted in the claimed amount. b. There is no reason to think it would have been difficult or expensive for Mr Duffy to probe the basis of this very large Debt directly with French & Co, especially once Mr Parkins had pointed to the conflict with evidence previously provided by Mr Hale, and the relevance of Mr Hayes having been legally aided. c. But he did not, instead relying entirely on the evidence put forward by Mr Hayes without any independent investigation of the Debt with French & Co. As I made clear in para 113 of my First Judgment, considering whether French & Co's claimed Debt was established on the balance of probabilities ultimately proved to be a highly complex exercise, even with the benefit of further information and argument. The question is whether Mr Duffy should have realised that before or at the meeting of creditors, and rejected the Debt outright for voting purposes. The information provided to Mr Duffy prior to the meeting of creditors in support of the French & Co Debt was that subsequently put before the Court as exhibits to Hale 1: see paras 35-37 of my First Judgment. It consisted of a four page 'Proof of Debt' consisting of the three Schedules I referred to in para 35 of my First Judgment (under cover of a one page summary of those Schedules), together with various orders made in the litigation between Mr Hayes and his former wife, various Statements of Costs in Form N260 prepared on behalf of Mr Hayes for the purpose of summary assessments in the course of that litigation, a legal aid assessment certificate dating from 2017, and a draft bills of costs apparently prepared by another previously instructed firm, Reynolds Williams/RWPS. What it did not include, notably, was any retainer letters, invoices or fee notes from French & Co to support their Debt. Although Schedule 2, if read carefully, revealed that some of the fees referred to had in fact been incurred with other solicitors (Ginn & Co and RWPS) the Schedules did not reveal that some of the fees claimed were ones for which Mr Hayes had been legally aided, there being no breakdown between fees supposedly covered by legal aid, and those the subject of some later 'commercial' arrangement. The absence of retainer letters and straightforward invoices are, to a lawyer, again with the benefit of hindsight, and in the context of the challenge later brought by Mr Parkins, striking omissions, but nominees are not (usually) trained lawyers. I have to consider what might have been different had the absence of retainer letters and invoices, and the lack of breakdown between legally aided and non-legally aided work, been investigated further by Mr Duffy prior to the meeting of creditors, especially once Mr Parkins had drawn questions regarding such matters to his attention. Given the potentially determinative size of the French & Co Debt, it clearly called for some scrutiny. In view however of the comments in the authorities addressing the role of the supervisor when considering the admission of debts for voting purposes ( Re a Debtor (No 222 of 1990) ex p the Bank of Ireland [1992] BCLC 137, 444 and the other authorities referred to above), and the practical limitations on what a nominee can be expected to investigate and resolve prior to a meeting of creditors, I have come, after some hesitation, to the conclusion that even if he had undertaken further investigation of the French & Co Debt Mr Duffy would still, properly, have come to broadly the same conclusion. Even had he been provided then with, say, the further information and explanation later provided in Hale 2, and had endeavoured to analyse it, he would, rather than being sure he should reject the French Co Debt outright, likely have ended up in a position where he regarded it as doubtful, and so, in accordance with r. 15.33(3), would have admitted it for voting purposes, but would have marked it as disputed, so that a later debate about its validity might play out. As I said in para 116 of my First Judgment, the challenge to French & Co's Debt which has been the subject of the Application would have been inevitable, albeit arrived at by a different route. While I was not referred to it, the most recent decision on the issue on what conduct by a supervisor might justify an adverse order for costs would appear to be that of Adam Johnson J in Brian Burke, Sean Bucknall, Andrew Andronikou (In Their Capacity as Joint Supervisors of the CVA of Mizen Design/Build Ltd) v Peabody Construction Limited [2024] EWHC 392 (Ch) ; [2024] BPIR 460, where he review the authorities concluding (emphasis added): '13. Such cases are rare. Logic and principle suggests that some element of personal misconduct is needed to justify a costs Order against a nominee, and even that may not be enough. The possibility of a costs order against a nominee was noted by Hoffmann J in Re Naeem (A Bankrupt) (No. 18 of 1988) [1990] 1 WLR 48 at p, 51, but he did not make any such Order. Harman J did make one in Re a Debtor (No. 222 of 1990) ex parte Bank of Ireland (No. 2) [1993] 1 BCLC 233 , but the case was exceptional and the conduct of the nominee had fallen very far below the proper standard of duty required of a professional licensed insolvency practitioner. In Carraway Guildford (Nominee A Limited) & Ors v. Regis UK Limited & Ors [2021] EWHC 2064 (Ch) , Zacaroli J. declined to make an order against a nominee under a CVA even though his conduct had (in one respect at least) fallen below the standard required, because in the context of the case as a whole the conduct was not so egregious as to attract a costs order against him (see at [11]).' The emphasis remains on misconduct, and I do not, in the circumstances, think Mr Duffy's conduct fell so far below the standard required as to amount to misconduct. I do not therefore make any costs order against him in favour of Mr Parkins. Whether I should make any order for costs in Mr Duffy's favour, and against whom, are however separate questions that I address below. Mr Duffy's costs Mr Duffy seeks, in the first instance, an order for his costs of the Application against Mr Parkins. He seeks also, or alternatively, his costs against Mr Hayes. By his post-hearing written submissions Mr Kingston-Splatt put it thus: '… the court has an unfettered discretion as to who should pay the expenses incurred by Mr Duffy in respect of the application, including requiring Mr Hayes to meet those costs (even though he may, or may not, be thought to be 'innocent' in relation to the lack of proof of French & Co's impugned debt; as the court commented, Mr Hayes did seek to maintain the legitimacy of the debt).' As mentioned above, he further contended that in any event Mr Duffy should be entitled to recover his costs from the Fund. Should Mr Parkins bear any of Mr Duffy's costs of the Application? Mr Kingston-Splatt argues that many of the complaints relied upon by Mr Parkins (e.g. those regarding the Marckita Debt, the sums owed to Mr Hayes' former counsel, and the misleading information set out in the Proposal) did not succeed, in that I did not find them to be material irregularities, and that many of the criticisms of Mr Duffy have not been successful, so that costs should follow those events. Mr Kingston-Splatt referred me to the decision of Chief ICC Judge Briggs in Elser v Sands [2022] EWHC 32 (Ch) where the judge rejected at [42] – [46] what he described as 'aggressive criticisms' of a nominee. A later decision in the same matter, reported at [2022] EWHC 1419 (Ch) ; [2022] BPIR 1193, reveals in passing at [17] that an order for costs was made in favour of the nominee against the applicant , even though the applicant had succeeded in obtaining the revocation of the approval of the arrangement by the meeting of creditors. There is no discussion of the reasons for this decision, but one can infer that it was as a result of the applicant's unnecessarily aggressive criticism of the nominee, and indeed his initial stance, later abandoned, that he would seek costs against the nominee. Mr Parkins also referred me to the second decision in Elser v Sands , where Chief ICC Judge Briggs declined, after further reflection, to make an order for costs in favour of the nominee either against the debtor or against the creditor whose debt had successfully been challenged, and observed at [23], as part of his reasoning for refusing such an order for costs, as follows: '[23] A nominee/chairman knows well that a dissatisfied creditor may challenge a decision made at a meeting of creditors. He or she is likely to have regard, when negotiating a fee with the debtor, to the possibility of providing evidence to the court and complying with any legal obligations resulting from his or her position as chairperson if a challenge is initiated.' This is a comment on which Mr Parkins relies in resisting an order for costs against himself. Mr Kingston-Splatt points out however that the observation is criticised by the editors of Muir Hunter at 3-189 as 'wholly unrealistic'. I have not ordered that Mr Duffy should be liable for Mr Parkins' costs, and the key reason for that was that I considered that had Mr Duffy investigated the concerns raised by Mr Parkins with regard to the French & Co Debt, he would probably, and properly, have come to the decision that the vote should be allowed, but marked as disputed. It does not follow however that Mr Parkins should be liable for any of Mr Duffy's costs. This is a case where I consider that Chief ICC Judge Briggs' observations in Elser v Sands at [47] as to the ability of a nominee to factor in the risk of involvement in a challenge brought by a dissatisfied creditor are of relevance. Had Mr Duffy marked the French & Co Debt as disputed Mr Parkins' subsequent Application might well have been simpler and much more focused. I consider that Mr Duffy's decision not to investigate the specific questions raised by Mr Parkins about the French & Co Debt, which turned out to be well-founded, and to allow the vote probably led Mr Parkins to cast his Application as widely as he did. While the grounds for Mr Parkins' Application were wide-ranging, and not all of them succeeded, his complaints regarding the French & Co Debt, which occupied the majority of court time, did succeed, and against that background it would be inappropriate for any order to be made against Mr Parkins in favour of Mr Duffy. Costs as between Mr Duffy and Mr Hayes Mr Parkins opposes any order that Mr Duffy should have an order for costs against Mr Hayes or be entitled to claim them from 'the estate' as either of these outcomes would, he says, in effect punish Mr Hayes' creditors, including himself, for the material irregularity that occurred under Mr Duffy's supervision. Ms Delgado 'vehemently' opposed that there should be any order for costs against Mr Hayes in favour of Mr Duffy. She also referred to the decision of Chief ICC Judge Briggs in Elser v Sands [2022] EWHC 1419 (Ch) ; [2022] BPIR 1193. She submitted that Mr Hayes was however neutral as to whether Mr Duffy should recover his expenses qua supervisor from the Fund. The report of the decision on costs in Elser v Sands is short and not entirely clear, needing to be read together with an earlier decision reported at [2022] EWHC 32 (Ch) . The report of the later decision needs to be read with some care because although the headnote states, correctly I think, that costs were being sought by the First Respondent nominee against the Third and Fifth Respondents (there were seven respondents in total), the judgment states in [1] and [17] – [22] that the order was being sought against the Second and Fifth Respondents. Further, several references in the report to CPR 42.2 are clearly intended to be references to CPR 44.2. [2] In Elser v Sands the nominee had obtained, as mentioned above, an order for costs against the successful applicant (see [17]). What the nominee was seeking in addition was an order for costs against both the debtor (the Third Respondent) and the challenged creditor (the Fifth Respondent), effectively on a joint and several basis with the applicant. Judge Briggs referred to and adopted the useful summary of CPR 44.2 and the principles relating to costs in the decision of Gloster J in HLB Kidsons (A Firm) v Lloyds Underwriters [2007] EWHC 2699 (Comm) , paras [10]- [11] of which I set out above, stating that: a. CPR 44(2)(b) provides the court with the power to depart from the usual order that the unsuccessful party pays the costs of the successful party. b. the discretion provided to the court by CPR 44(2)(b) is wide, and allows the court to fulfil the aim to 'make an order that reflects the overall justice of the case'. c. no authority had been cited to the effect that CPR 44 provided the court with a power to make an order between respondents where one respondent or defendant had made no allegations against the other, and no Part 20 claim existed. The factors in CPR 44(4) and CPR 44(5) (i.e. all the circumstances, especially conduct of all the parties) do not apply as between respondents. Chief ICC Judge Briggs said at [10]-[12]: '10. Further, the 2022 edition of the White Book does not contemplate such an order in its notes. The authors of the text do comment on what would be a highly unusual order: "The most strikingly different order would be an order which was completely the reverse to an order in accordance with the general rule, that is to say, an order requiring the successful party to bear its own costs and in addition pay the unsuccessful party's costs. Less so would be an order (as r.44.2(6) provides) that the unsuccessful party pay only "a proportion of" the successful party's costs (r.44.2(6)(a)) (sometimes colloquially known as "percentage orders"), or only "a stated amount in respect of" those costs (r.44.2(6)(b)), or only those costs "from or until a certain date" (r.44.2(6)(c)), or costs relating only "to a distinct part of the proceedings" (r.44.2(6)(f)), or any combination of such different orders." 11. If the authors consider a reversal of the general rule between the parties "strikingly different" an order between Respondents would be even more striking, yet no commentary contemplates such an order. 12. In my judgment the term "parties" is more likely than not to refer, when reading CPR 44 as a whole, to the parties between whom there is a dispute. There was no dispute between the First, Second and Fifth Respondents in this case.' The commentary in the White Book quoted remains, unaltered, in the 2025 edition. Elser itself is not referred to. The judge held that the chairman (the First Respondent) was not a 'successful party' vis-à-vis those other parties (the Third and Fifth Respondents) for the purposes of making such an order for costs, and declined to make the orders sought against them. He explained his conclusion thus: '20. It is correctly conceded that the First Respondent is unable to demonstrate in any meaningful way that it is the successful party vis-à-vis the Second and Fifth Respondents. The CPR provides a wide discretion to permit the court to do justice between the parties in respect of costs. It does not contemplate an award of costs such that the First Respondent be entitled to a "different order" from the "general order" as against the Second and Fifth Respondents. These parties were all respondents to the application made by the Applicant. There was no dispute between them. 21. As regards discretion, if there is a discretion to exercise, contrary to my finding above, the First Respondent claims it would be "grossly" unfair not to be able to recover the costs of preparing and attending court where the First Respondent was neutral as to the outcome. It is true that the First Respondent was neutral. There was no dispute between him and the other Respondents. In these circumstances, my judgment, it would be unfair to visit the First Respondent's costs of attending court on these Respondents. 22. To award costs in favour of the First Respondent would be contrary to the underlying principle to: "make an order that reflects the overall justice of the case." For this reason, if I have discretion, I exercise it against making an order as an injustice would be visited upon the Second and Fifth Respondent if an order was made in favour of the First Respondent.' As I understand his judgment it is clear that Chief ICC Judge Briggs greatly doubted, on the facts of that case, that he had a discretion to make an order as between respondents, but he did not entirely rule out that he had such a discretion. His decision as to costs was clearly influenced by the fact that the respondents in question had not in any sense entered into the fray. Their involvement in the application had been passive, and their conduct appeared to have had no adverse bearing on the way in which the hearing of the application progressed. On the specific facts of the present case I respectfully differ from the approach adopted by Judge Briggs, and consider that I do have a discretion to exercise, for the following reasons. French & Co were not joined as a party, but Mr Hayes relied on the evidence provided by Mr Hale, and Ms Delgado made detailed submissions, and with extensive reference to authorities regarding the basis of a solicitor's ability to claim costs awarded against other parties from its own legally-aided client, which arguments I rejected. The very unsatisfactory nature of the evidence as to French & Co's alleged Debt, and the nature of some of the legal propositions advanced on behalf of Mr Hayes, led to an additional hearing and to an increase in the overall costs of all parties, including Mr Duffy, even though he was neutral on the validity of the Debt. Mr Hayes is clearly an unsuccessful party vis-à-vis Mr Parkins. Whether or not he is strictly an unsuccessful party vis-à-vis Mr Duffy, I consider that his conduct, and active participation in defending the French & Co Debt, is conduct that caused additional costs to all parties and, in accordance with CPR 44(4) and (5), justifies the making of 'a different order'. Although the normal approach to costs focuses on who is a successful party in the context of parties between whom there is a dispute, I remind myself in this context that s.51 of the Senior Courts Act 1981 states that costs of all proceedings are, subject to the rule of court, 'in the discretion of the court' and that the breadth of that discretion permits the court in some circumstances to make an order even against a non-party: see Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 HL. The summary by Gloster LJ in HLB Kidsons (A Firm) v Lloyds Underwriters quoted above emphasises that '[t]he aim always is to "make an order that reflects the overall justice of the case"', and that '[t]he question of who is the successful party "is a matter for the exercise of common sense"'. Applying that approach I consider that Mr Duffy's costs of participating in the Application were plainly increased by Mr Hayes' conduct, such that I should make an order in his favour against Mr Hayes. Mr Hayes should be liable for 50% of Mr Duffy's costs. Should Mr Duffy be entitled to have his costs from the Fund? Mr Kingston-Splatt's further submission was that regardless of any costs order made in Mr Duffy's favour his costs should be paid 'as an expense of the IVA' from the Fund (save that this should not lead to any double recovery by him). This issue was raised at the consequentials hearing, but developed further in written submissions provided post-hearing. It has led to a blurring of the distinction between Mr Duffy's costs of the Application, and his expenses incurred as supervisor of the Arrangement. It is surprising that this point has not been considered in any authority of which counsel are aware, and is apparently not the subject of any textbook commentary. I was not referred to any statutory provision or authority directly supporting this submission, but Mr Kingston-Splatt relied upon a combination of the following: a. provisions of the Standard Conditions for IVAs produced by R3 which are incorporated by reference into the IVA; b. Statement of Insolvency Practice 9; c. certain provisions of the Insolvency Rules 2016; and d. two authorities to which I refer below. The Standard Conditions As far as the Standard Conditions are concerned, Mr Kingston-Splatt referred me to paragraphs 11, 13, 14, 17, 28 and 57. It is helpful to address them in the following order: a. Paragraph 13 provides, inter alia, for a supervisor to appoint agents (such as, it is submitted, solicitors). b. Paragraph 17 provides for the supervisor's fees, costs and expenses, and provides that he is entitled to charge for them at his ordinary hourly rates, and by 17(2) that 'The fees, costs, charges and expenses of the supervisor shall be paid out of the assets of the Arrangement'. c. Paragraph 9 ('Completion of Arrangement') provides for a supervisor to issue a Completion Certificate, in the event that a debtor has fully complied with his obligations, in which event a debtor obtains his release from all debts which are subject to the Arrangement. d. Paragraph 11 ('Termination of Arrangement') provides, by contrast with completion pursuant to paragraph 9, that an Arrangement shall terminate in certain circumstances, being if the supervisor issues a Certificate of Termination under paragraph 71, or on the death or bankruptcy of the debtor, 'none of which circumstances shall affect the trusts created under Paragraph 28'. e. Paragraph 71 ('Procedure following breach') provides for a supervisor to issue a Notice of Breach in the event of breach by the debtor. The notice may require the debtor to remedy the breach if it is capable of remedy: para 71(2). In the event that the breach is not remedied, para 71(3) and (4) provide: '71(3) [Certificate of Termination/bankruptcy petition] If the Debtor has not done those things specified in Sub-paragraph (2) by the time specified or allowed, the Supervisor shall as soon as practicable convene a meeting of Creditors to resolve whether or not to do the following things: (i) issue a certificate ("Certificate of Termination") terminating the Arrangement by reason of the Debtor's breach; (ii) present a petition for the Debtor's bankruptcy; (iii) vary the terms of the arrangement under Paragraph 81; (iv) take no action. f. Paragraph 71(4) [Supervisor's duty] provides 'If the Creditors resolve to issue a Certificate of Termination and/or to present a bankruptcy petition against the Debtor, the Supervisor shall do so as soon as practicable.' g. What follows a breach depends therefore upon a resolution of the creditors. They may require the supervisor to issue a certificate of termination or a bankruptcy petition, but they may resolve that no action should be taken. h. Paragraph 14 deals with the 'Supervisor's powers on completion/termination' and provides that in the event of completion/termination the supervisor may retain such moneys as he reasonably thinks fit on account of his fees, charges, liabilities and expenses'. i. Paragraph 28(2) provides 'Property constituting an asset of the Arrangement in the possession, custody or control of the supervisor shall be held by the supervisor upon trust for the purposes of the Arrangement'. j. Paragraph 28(3) provides that 'The trusts referred to in paragraphs (1) and (2) shall not come to an end upon the termination of the Arrangement'. Mr Kingston-Splatt submitted that there had been no termination of the Arrangement in the present case, despite Mr Hayes's breach in failing to pay anything into the Arrangement within 12 months of its commencement, and the express term of the Arrangement: 'If I fail to introduce my lump sum contribution within the specified timetable this will constitute a breach of the arrangement, my Supervisor will issue a notice of breach in accordance with the Standard Conditions.' but that it had, rather, expired through effluxion of time. Mr Kingston-Splatt's submission was that if a supervisor's claim to recover costs and expenses from Arrangement assets held upon trust would, in accordance with Standard Condition 28, survive the termination of an IVA, it would be perverse if it did not survive the revocation of the IVA on an application pursuant to s. 262. Statement of Insolvency Practice 9 Mr Kingston-Splatt relied also upon Statement of Insolvency Practice 9. SIP 9 relates to Insolvency Office Holders generally, and assumes that there will be payments made to such office holders from the relevant estate. It does not however specifically address nominees/supervisors, let alone make any provision for payment of costs and expenses in the case of revocation of an IVA. Provisions of the Insolvency Rules – 'Parity' between arrangements and bankruptcies? Mr Kingston-Splatt also referred to several provisions of the Insolvency Rules 2016, namely rule 8.30(c)(ii) which provides: '8.30. The fees and expenses that may be incurred for the purposes of the IVA are— (a) … (b) … (c) fees or expenses which— (i) are sanctioned by the terms of the IVA, or (ii) where they are not sanctioned by the terms of the IVA, would be payable, or correspond to those which would be payable, in the debtor's bankruptcy.', rule 10.148 ('All fees, costs, charges and other expenses incurred in the course of the bankruptcy are to be treated as expenses of the bankruptcy') and rule 10.149, which addresses priorities. Taken together, he says, these create parity between bankruptcy and IVAs in relation to the fees and expenses which may be incurred for the purposes of an IVA. Mr Kingston-Splatt also referred in passing to section 31 of the Trustee Act 2000. The Authorities relied on In support of his submission that Mr Duffy should be entitled to recover his costs from the Fund, Mr Kingston-Splatt referred me to comments of Hoffman J (as he then was) in Re Mohammed Naeem (A Bankrupt) (No. 18 of 1988) [1990] 1 WLR 48 in the context of a challenge pursuant to s. 262: 'Unless there has been some personal conduct on the part of the nominee which would justify an order for costs against him, the costs of a successful application under section 262 should ordinarily be paid out of the bankrupt's estate.' submitting that while this principle usually concerns an applicant's costs 'the principle cuts both ways'. In other words, a supervisor should also be entitled to costs out of the 'estate' in the event of a successful application to revoke approval of an Arrangement. As I explored this issue in the course of counsel's oral submissions I raised the question of the orders that might be made in the event of the annulment of a bankruptcy order that ought not to have been made. Mr Kingston-Splatt's pupil helpfully identified online an authority of possible relevance: Oraki v Dean & Dean and Defty [2013] EWCA Civ 1629 . It was clear that the hearing was going to overrun, yet again, so I permitted all parties to provide further written submissions, on this point generally and in relation to Oraki . Oraki was case where bankruptcy orders were made against a husband and wife on petitions based on a judgment obtained against them by their former solicitor. A trustee was appointed. A Deputy Registrar refused to annul the Orakis' bankruptcies on the grounds that they ought never to have been made. On appeal, following the admission of fresh evidence, Mr Robert Ham QC sitting as a Deputy High Court Judge allowed their appeal on the grounds that there had been fraud, collusion or a miscarriage of justice, which allowed the bankruptcy court to go behind the original judgment upon which the petition and bankruptcy order were based. He ordered that the bankruptcies should be annulled. But he did so conditional upon the payment by the Orakis of the costs of the trustee in bankruptcy. Those costs were very substantial due to the length and complexity of the bankruptcy proceedings which had lasted more than six years. It is important to note that by the time of the annulment application the former solicitor had been struck off, and it was clear that it was most unlikely that anyone would recover any costs against him. The deputy judge ordered that, without prejudice to any application against the solicitors' firm, and without prejudice to any dispute about the trustee's remuneration and conduct, the costs of the Official Receiver and the trustee should be paid by the Orakis, saying: 'So far as the Official Receiver and the trustee are concerned, the bankruptcy orders were regularly made, they have on the face of it no personal interest in the matter and there is no ground to mulct them of their costs unless and until the Orakis have established that they have acted improperly.' Dr and Mrs Oraki appealed on two grounds, the first being that the annulments should not have been made conditional upon the payment by them of the trustee's costs where they were completely innocent in every aspect of the matter; before the court could make such an order some degree of culpability on the part of a bankrupt needed to be shown. The Court of Appeal (Arden, Davis and Floyd LJJ) dismissed the appeal, Floyd LJ observing: '[28] So far as the costs and expenses of the trustee are concerned, absent an annulment these are payable out of the estate in accordance with the priority laid down in the Insolvency Rules: see rules 6.138 and 6.224. On an annulment of a bankruptcy, provision may still be made for them. The court has an unfettered discretion as to whether the trustee should have his expenses paid and who is to pay them. There are many dicta to this effect in the cases. Thus in Butterworth v Soutter [2000] BPIR 582 at 585, an annulment case, Neuberger J (as he then was) said: The parties' arguments have all proceeded on the basis that I have unfettered discretion to decide who, if anybody, should pay the trustee's costs. To my mind that must be right. The bankruptcy is pursuant to a court order and the court is still seised of the matter. In my judgement the question of whether the trustee should have his costs, and the question as to who should pay the costs, are at large when the court makes an order annulling the bankruptcy." … [30] Immediately after the passage from Neuberger J's judgment in Butterworth v Soutter which I have cited, he went on: "Prima facie it cannot be envisaged that a trustee in bankruptcy will work for nothing, and normally, when a bankruptcy order has been properly made, subject to questions of reasonableness and subject to special facts, the trustee will be paid out of the estate."' [40] In my judgment, when considering whether to make an order that the bankrupt pay the trustee's costs in the light of an actual or anticipated annulment under section 282(1)(a), the court needs to be careful to examine the matter not only from the perspective of the bankrupt, but also from the perspective of the trustee. The court has an unfettered discretion to decide whether, and if so by whom, the trustee's costs should be paid. Normally, a trustee who has acted properly can expect to have his reasonable remuneration provided for. In my judgment, there is no general rule that the trustee's costs cannot be ordered to be paid by a party who has successfully applied to annul his bankruptcy when that party is entirely innocent vis a vis the petitioning creditor. I would therefore reject the first ground of appeal. The words shown italicised in paras 28 and 40 quoted above were emphasised in Mr Kingston-Splatt's written submissions. In Oraki Arden LJ said at [62] - [63] (emphasis added): 62. That brings me to the question of who should bear the expenses of the abortive bankruptcy when an annulment order is made on the grounds that the bankruptcy order ought not to have been made. The judge ordered that the trustee's expenses be paid by Mr and Mrs Oraki personally. I consider that the judge was entitled to make that order for the following reasons. 63. The guiding principle, in my judgment, is that the proper expenses of the trustee should normally be paid or provided for before the assets are removed from him by an annulment order. This guiding principle flows from the fact that, prior to the annulment, the trustee has a valuable right of property, namely the right to retain such sums as may be necessary to pay the expenses of the bankruptcy : see section 323 [3] of the [Insolvency Act 1986]. It would be unusual for this court to take that right away without providing for the trustee's position to be adequately protected. Mr Kingston Splatt summarised his position as follows: '[The] Insolvency Rules 2016 [create] parity between bankruptcy and IVAs in relation to the fees and expenses which may be incurred for the purposes of the IVA: see rr.8.30(c)(ii); 10.148; and 10.149. [T]herefore, the situation in the present case should be treated as equally analogous: the court has an unfettered discretion as to who should pay the expenses incurred by Mr Duffy in respect of the application, including requiring Mr Hayes to meet those costs … In the circumstances of the present case, given the fact of the funds which McCambridge Duffy has received from Mr Hayes and which that firm is presently holding, the order should permit Mr Duffy to be paid from those funds (rather than simply ordering Mr Hayes to make the payment but not authorising the use of those funds).' Mr Parkins strongly opposed any suggestion that Mr Duffy should have his costs from the Fund. His extensive further written submissions focused, as ever, on Mr Duffy's conduct, submitting in great detail that while the trustee in Oraki was wholly unconnected with the misconduct of the petitioning creditor that caused the making of the bankruptcy orders, Mr Duffy had failed in his duty properly to scrutinise the Proposal and the French & Co Debt, leaving him with no alternative but to bring on his Application. He also pointed to a distinction between Arrangements and bankruptcies: 'A second material difference, related, is the commercial reality of an IVA proposal, contrasted with appointment of civil servants - official receiver and potentially trustee after a bankruptcy Order of the court. That this commercial enterprise has an inherent risk should the IVA have been found to be improper is an obvious reality, however it is implicitly noted in Subsection 6 of the IVA (Nominee and Supervisor Remuneration including Creditors Guide to fees), where it states "The supervisor considers that the percentage they are seeking approval for reflect the risk that they are taking, the nature of the assets involved, and the complexity of the case." This acknowledges there is a risk. It must include the risk of not recovering monies in the circumstances we find ourselves. This reflects the position in Elser v Sands [2022] EWHC 1419 (Ch) ].' I do not consider that the decision of Hoffmann J Re Mohammed Naeem is in point. It is a short report, and no authorities were cited in argument or referred to in the judgment. It is correct that the case concerned the revocation of the approval of an arrangement, but the arrangement was one that had been proposed by a debtor who was already bankrupt. When the arrangement was approved further proceedings in the bankruptcy were stayed. The approval of the arrangement was later revoked on the grounds that it unfairly prejudiced the applicant. Presumably the stay of the bankruptcy proceedings was lifted. The registrar also ordered the nominee to pay the costs of the successful applicant. That order was overturned on appeal. The case did not deal with any claim by the nominee / supervisor to recover his costs from the 'estate', but there was a continuing bankruptcy, pursuant to an order of the court, a matter of which the court was seised, and thus an estate in bankruptcy subject to the jurisdiction and supervision of the court, from which the applicant could recover his costs as an expense. Similarly, in Oraki bankruptcy orders had been made, albeit quite wrongly, and the court was seised of the matter: see paras [28] and [30] quoted above. There were estates in bankruptcy to which recourse could be had. The court was faced with the difficult task of protecting the position of the trustee in bankruptcy, who had no involvement in the wrongful conduct that led to the making of the bankruptcy orders, in circumstances where it was clear that no party was likely to recover any costs or expenses against the petitioning creditor. The position in the present case is quite different. There is no bankruptcy estate. There is at best a sum of money which has been paid to Mr Duffy for the purposes of the Arrangement (even though the Arrangement had expired by effluxion of time before it was paid), and the approval of the Arrangement has been revoked. I have not had the benefit of argument on behalf of Mr Parkins from a legally qualified representative, so the argument was somewhat one-sided. In addressing this point in such circumstances I have inevitably considered authorities beyond those that I was referred to by the parties. In my judgment it is important not to lose sight of the fact that an Arrangement, unlike a bankruptcy, is rooted in contract. The point is explained thus (albeit obiter) by Chadwick LJ in Johnson v Davies [1999] Ch 117 (CA) where he said at p.131: 'It is, perhaps, significant in this context that the recommendations of the Cork Committee (1982) (Cmnd. 8558) which led to the introduction of individual voluntary arrangements were based on the need to provide an alternative to bankruptcy proceedings, a need not then met in practice by consensual deeds of arrangement; see, in particular, at paragraph 359: "a satisfactory form of proceedings for dealing with the insolvent debtor otherwise than directly through the machinery of the bankruptcy court . . . would fulfil an important social need."' and at p.138 'Unlike the earlier legislation, section 260(2) of the Act of 1986 does not purport, directly, to impose the arrangement on a dissenting creditor whether or not he has agreed to its terms; rather, he is bound by the arrangement as the result of a statutory hypothesis. The statutory hypothesis requires him to be treated as if he had consented to the arrangement. The consequence, as it seems to me, is that the legislature must be taken to have intended that both the question whether the debtor is discharged by the arrangement and the question whether co-debtors and sureties are discharged by the arrangement were to be answered by treating the arrangement as consensual; that is to say, by construing its terms as if they were the terms of a consensual agreement between the debtor and all those creditors who, under the statutory hypothesis, must be treated as being consenting parties.' An Arrangement is fundamentally a multilateral contract: see Raja v Rubin [1999] 1 BCLC 621 (CA), esp at 630g – 631d, and Mann J in Tanner v Everitt [2004] EWHC 1130 (Ch), [2004] BPIR 1026 at [75]: 'Under section 260(2) of the 1986 Act, the approved arrangement: "binds every person who in accordance with the rules had notice of, and was entitled to vote at, the meeting … as if he were a party to the arrangement." The arrangement is therefore contractually based, with the statute providing the consent or deemed consent of the otherwise dissenting parties.' In The Co-Operative Bank plc v Phillips [2017] EWHC 1320 (Ch) ; [2017] BPIR 1156 HH Judge Paul Matthews, sitting as a Judge of the High Court, considered, among other things, whether the approval of an Arrangement suspended the running of a limitation period. He considered, applying Tanner v Everitt , that an agreement to suspend the running of time could be implied into the Arrangement. His analysis and conclusion reflected the contractual nature of an Arrangement. He also addressed the distinction between completion and termination of an Arrangement, and also its possible expiry by effluxion of time. He noted (at [45]) that in his explanation of the basic structure of an Arrangement in Green v Wright [2017] EWCA Civ 111 , [2015] BPIR 806, [5]- [6], [8]-[10], David Richards LJ (as he then was, and with whom Irwin LJ agreed) had drawn a distinction between the completion of an IVA and the termination of an IVA. In the former case the debtor is released from the debts that are the subject of the Arrangement. In the latter case, where no certificate of completion has been issued, he is not. He explained further at [50] – [51]: '50. In my judgment, in the ordinary case an IVA is not an unconditional composition by creditors with their debtor. The creditors are willing to make a composition with their debtor, on the basis that their debtor will perform the obligations under the IVA. If those obligations are performed, and a certificate of completion is given by the supervisor, the debtor is released from his debts falling within the IVA. If on the other hand, there is no compliance, and no certificate of completion, but instead the supervisor issues a certificate of termination before the effluxion of the IVA by time, it is clear that the creditors are no longer bound by the moratorium contained in condition 4(3) of the standard conditions, and (subject only to ordinary defences, such as limitation) they can thereafter take action against the debtor in the usual way. 51 … Does it make any difference if the termination occurs because the term of the IVA simply expires? In my judgment it does not. The completion certificate has not been issued, and therefore the event upon which the debtor is released from his debts in the arrangement has not occurred. Accordingly, in the ordinary case, there is no release.' The Status of the Fund In the present case there was no termination of the Arrangement in the sense contemplated by the Standard Conditions. Rather, Mr Kingston-Splatt submits, the Arrangement expired through effluxion of time. By the orders made subsequent to my First Judgment I revoked the approval of the Arrangement. What, in those circumstances, is the status of the Fund? Although I did not receive any submissions on the point, I have, given Mr Kingston-Splatt's reliance on the trust created by Standard Condition 28, considered also whether any useful analogy might be drawn from the authorities on the claims to assets that have been paid into an Arrangement in the event of a subsequent bankruptcy or liquidation. There is no guidance in the legislation. The natural home for such a provision would be s.263 of the 1986 Act. Sealy & Milman's Annotated Guide to the Insolvency Legislation (28 th ed.) states, in its commentary on that section: 'It is disappointing that the IVA legislation does not address the scenario where an IVA established under Pt VIII of IA 1986 fails and the debtor is declared bankrupt. We are told by s.264(1)(c) that a supervisor may present a bankruptcy petition but bankruptcy may occur in other circumstances—e.g. by default towards post-IVA creditors. What is the impact of bankruptcy upon the earlier IVA? More importantly, what happens to the funds collected by the IVA supervisor—are they reserved exclusively for the IVA participants or can they be claimed by the trustee in bankruptcy for the benefit of the creditors at large? The case law here is voluminous: Re McKeen [1995] B. C. C. 412 (Morritt J); Re Bradley-Hole [1995] 1 W. L. R. 1097 (Rimer J); Davis v Martin-Sklan [1995] 2 B. C. L. C. 483 (Blackburne J); Kings v Cleghorn [1998] B. P. I. R. 463 (HHJ Behrens) ; and Re Coath [2000] B. P. I. R. 981 (DJ Field). … Some clarity in the law has now been introduced by the Court of Appeal ruling in Re N. T. Gallagher & Son Ltd [2002] EWCA Civ 404 . Although this case is concerned with CVAs the principles developed in that case were expressly intended to apply mutatis mutandis to IVAs. In short it is clear that an IVA may survive subsequent bankruptcy and that funds collected by the supervisor may be retained and kept out of the hands of the trustee in bankruptcy. The IVA documentation will be important here.' Re N. T. Gallagher & Son Ltd [2002] 1 WLR 2380 was a case where a company continued to trade subject to a CVA which required the payment of contributions to the supervisors. The company later put itself into voluntary liquidation before the arrangement completed. Its liquidators applied to court for directions as to whether the contributions previously paid to the supervisors, and certain other assets expressed to be subject to the Arrangement, were held on trust for the creditors bound by the Arrangement, or available for the purposes of the liquidation including distribution to all creditors (not just those bound by the Arrangement). The Court of Appeal considered the authorities, noting: '[42] In a number of the cases unease had been expressed at the fine distinctions drawn in the authorities. Neither Counsel before us sought to derive much assistance from the authorities, both Counsel being agreed that the cases display a misplaced concentration on the form of liquidation (in CVA cases) and the identity of the petitioner in IVA as well as CVA cases. [43] We agree. Those distinctions and that concentration on the form of liquidation and the identity of the petitioner are at least in part based on the terms of r. 4. 21A and s. 276 (2). Mr. Zacaroli does not suggest that in themselves those provisions establish that trusts created by a CVA or IVA must come to an end on liquidation or bankruptcy. He only says that they are consistent with that result. For our part we agree with the comments of Judge Maddocks in Halson and of Mr. McCombe in Kudos on the effect of those provisions. It makes little sense for the form of the liquidation to affect the question of the effect of liquidation on trusts created by a CVA. A creditors' voluntary liquidation is often preferred to a compulsory winding up on practical grounds related to expense and delay, as in this case. We would question whether the mere fact that a supervisor presents a petition entails that the CVA or IVA creditors have elected to terminate the CVA or IVA trust in their favour. Even if there is evidence that all the CVA or IVA creditors supported the presentation of a petition, it does not follow that they were thereby evincing an intention that the trust should come to an end and that the trust assets should revert to the company or debtor.' Peter Gibson LJ summarised the Court's conclusions at [54]: '(1) Where a CVA or IVA provides for moneys or other assets to be paid to or transferred or held for the benefit of CVA or IVA creditors, this will create a trust of those moneys or assets for those creditors. (2) The effect of the liquidation of the company or the bankruptcy of the debtor on a trust created by the CVA or IVA will depend on the provisions of the CVA or IVA relating thereto. (3) If the CVA or IVA provides what is to happen on liquidation or bankruptcy (or a failure of the CVA or IVA), effect must be given thereto. (4) If the CVA or IVA does not so provide, the trust will continue notwithstanding the liquidation, bankruptcy or failure and must take effect according to its terms. (5) The CVA or IVA creditors can prove in the liquidation or bankruptcy for so much of their debt as remains after payment of what has been or will be recovered under the trust.' The Court's conclusions in N. T. Gallagher that: a. it is the terms of the Arrangement that determine whether any trust of Arrangement assets survives liquidation or bankruptcy; and b. in [42] – [43] that it is irrelevant who the petitioner is (i.e. in the case of an IVA whether it is the supervisor who petitioned by reason of a breach of the terms of the Arrangement, or another creditor who is not bound by the Arrangement who presented a petition); might perhaps suggest that in the present case, where the Standard Conditions do expressly provide for a continuing trust of 'Arrangement assets' in the event of the termination of the Arrangement, the trust would also survive revocation of the Arrangement. I would not consider this to be the correct analysis. In my judgment there is a distinction between the termination of an Arrangement and its revocation by order pursuant to s. 262. Termination is a possible outcome contemplated by the agreement that is the Arrangement, whereas revocation of the approval given to the Proposal by the Court means that the agreement by which the creditors were bound under the statutory hypothesis falls away in all respects. In my judgment it follows that any trust of Arrangement assets ceases to exist. Any assets once subject to that trust cease to be subject to it for any purpose, including meeting any claim by the former supervisor for expenses or costs. Section 31 of the Trustee Act 2000 is of no application. The provisions of the Insolvency Rules, and the 'parity' with bankruptcy relied upon by Mr Kingston-Splatt, do not lead to any different conclusion. Once the approval of the Arrangement has been revoked any parity falls away. The analogy with bankruptcy to which Mr Kingston-Splatt points is a false one. There is, and never was, any equivalent 'estate' subject to the supervision and jurisdiction of the Court. In my judgment there is, following revocation of the Arrangement, no basis upon which I can order that Mr Duffy should have his costs (or indeed his expenses) from the Fund. No party took this point, and it is not essential to my decision, but I am reinforced in this conclusion by the fact that the Arrangement, and in my view any trust of 'Arrangement assets', had in any case expired by effluxion of time before the Fund was paid to Mr Duffy. Summary In summary therefore I order that: a. Mr Hayes shall pay Mr Parkins's entire costs of the Application, and shall pay Mr Duffy 50% of his costs of the Application. b. There will be no order for costs as between Mr Parkins and Mr Duffy. c. Mr Duffy is not entitled to recover his costs of the Application, or his costs and expenses as nominee / supervisor, from the Fund. It was accepted by all parties that if I make any order for costs, I should assess the costs payable, and I have been provided with schedules. I invite written submissions on Mr Parkins' and on Mr Duffy's schedules, following which I shall assess those costs. Note 1 Set out in Re a Debtor (No 140 IO of 1995) (Greystoke v Hamilton-Smith) [1996] 2 BCLC 429 at 434a-436b. [Back] Note 2 The later decision in Elser also states that the third respondent had appeared in person and that the fifth respondent had not appeared at all. This is at variance with the report of the earlier decision, which states that the fifth respondent also appeared in person. [Back] Note 3 Presumably intended to be a reference to s.324(1) of the 1986 Act. [Back] BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII