Glatt & Ors v Sinclair

The principal question, although by no means the only question, sought to be raised on this appeal is this. Can a receiver who was appointed by order of the court under the Criminal Justice Act 1988 recover remuneration, disbursements and expenses for work done relating to the receivership after the order has been discharged?

The appellants, represented by Mr Kennedy Talbot, say that he cannot. The respondent receiver, represented by Mr Edmund Cullen QC, says that he can.

The issue arises in this way.

The respondent is a chartered certified accountant and a licensed Insolvency Practitioner. On 15 February 2001 he and Lee Manning were, on the application of the Commissioners of Customs and Excise, appointed by Order of Morison J to be receivers and managers of the assets of Louis Glatt, a solicitor. The Order conferred the usual wide powers on the receivers. Paragraph 5 of the Order provided that “the costs of the receivership shall be paid out of the assets received or managed by the receivers….” It was also provided, by paragraph 7, that the receivers should be allowed remuneration in accordance with the appended letter of agreement. That letter provided, among other things, that the receivers’ remuneration was to be paid out of the monies brought in during the receivership. The remuneration was to be agreed by the Commissioners and ultimately determined by the High Court. An indemnity for remuneration and expenses was given by the Commissioners in the event that they exceeded sums realised. The Order was made (a Restraint Order having previously been imposed by Keene J as long ago as 16 April 1997) pursuant to s.77(8) of the Criminal Justice Act 1988. In due course, Mr Manning was discharged from the receivership. Nothing turns on that. I will hereafter refer in this judgment solely to “the receiver”.

The assets scheduled to the Order were significant. They included a number of properties; several bank accounts; numerous shareholdings; and the assets of the solicitors’ practice of Louis Glatt & Co.

The receivership was highly complex. Numerous applications to court were made, including an application for committal of Mr Glatt for contempt. There were also significant disputes as to the ownership of assets said to be within the ambit of the Order appointing the receiver.

Mr Glatt had been convicted on 12 February 2001 at Southwark Crown Court of a count of conspiracy to launder money. He was sentenced to seven years’ imprisonment. On 29 May 2002 the trial judge also made a confiscation order under the provisions of the Criminal Justice Act 1988 in the sum of £3,787,330.

In 2003 Mr Glatt sought discharge of the receiver. He made extensive criticisms of the receiver’s conduct. On 14 July 2003 Munby J delivered a detailed judgment rejecting these criticisms. He declined to discharge the receiver.

Munby J noted that by this time the receiver had lawfully incurred very substantial remuneration, expenses and disbursements which remained unpaid and which in principle he was entitled to have paid. Mr Glatt was however seeking to appeal against his conviction (which subsequently, it is to be gathered, was dismissed), sentence and the confiscation order. In such circumstances, Munby J directed that the remaining litigation in the receivership be stayed and the receivership should be restricted to what was described as a “care and maintenance” basis. An appropriate order was drawn up accordingly on 25 July 2003.

For some reason there was great delay in the appeal against the confiscation order itself. But ultimately it resulted in success for Mr Glatt. The Court of Appeal Criminal Division ruled on 17 March 2006 that the confiscation order should be set aside: [2006] EWCA Crim 605.

In the light of that disposal by the Court of Appeal Criminal Division, on ex parte application subsequently made and (it is to be apprehended) on the papers, Stanley Burnton J on 25 April 2006 ordered that the Receivership Order of Morison J of 15 February 2001 (and the prior Restraint Order of Keene J of 16 April 1997) be discharged. The receiver was apparently not notified in advance of that application. The Order said nothing about the resolution of outstanding matters in the receivership or about remuneration.

The disputes between the receiver and Mr Glatt (and interveners, being individuals or trusts connected with Mr Glatt and who were said to be beneficial owners of various of the identified assets) did not abate. Amongst other things, on 28 September 2007 Mr Glatt made an application for the detailed assessment of the receiver’s costs and remuneration. The receiver had by now asserted a lien for his charges over the assets covered by the Receivership Order. One dispute was whether the receiver’s lien extended to certain assets said to be beneficially owned by persons (including family members) other than Mr Glatt: albeit legal title had been vested in him. Munby J decided on 17 April 2008 that it did. That decision was upheld by the Court of Appeal on 13 March 2009. The Court of Appeal ruled that the lien for remuneration, arising out of the original Order of 15 February 2001, extended to assets legally vested in – even if not beneficially owned by – Mr Glatt: [2009] EWCA Civ 176.

On 3 December 2009 the receiver applied for permission to realise assets to meet his remuneration and costs. Interest was also claimed. Settlement proved not to be possible and the application was pursued to a court hearing. A witness statement of the receiver (his 15^th) dated 7 December 2010 prepared for the purposes of that hearing made clear – as previously submitted documents had also made clear – that the claim for remuneration and costs included a significant element, particularly in what was called “the fourth tranche”, for the period up to 19 November 2010.

The matter came before Mitting J on 14 December 2010. Mr Glatt was represented by leading and junior counsel (as was the receiver). The interveners had been named as parties and had notice of the proceedings but decided not to attend and were not represented at the hearing. As the Order of 14 December 2010 expressly recites, however, they relied on the submissions and arguments of Mr Glatt.

In his judgment, Mitting J recorded, among other things, that leading counsel for Mr Glatt in argument accepted that the receiver was entitled to be paid a substantial sum on account of costs and remuneration. Leading counsel is recorded as submitting that “the sum which should be allowed on the third and fourth tranches” should be 75%. Mitting J made an order for payment of remuneration, expenses and disbursements and also interest. His Order (as to the meaning and effect of which there is now a dispute) in the relevant respects provided as follows:

The respondent is entitled to simple interest on sums due but not paid at the rate of 5% per annum until payment. The application of interest is to be calculated by reference to the following principles and is currently calculated in respect of the interim payment ordered to be made under paragraph 4 below as itemised in the spreadsheet annexed hereto:

On the amount ordered to be paid to the former receiver with effect from 25 July 2003, from that date totalling £96,813.34 to 14 December 2010 and accruing daily thereafter;

On the budgeted amounts ordered to be approved on 25 July 2003 and 8 April 2004 to be paid to the former receiver with effect from 30 November 2005 until 14 December 2010 totalling £23,341.60 and accruing daily thereafter;

On the further amounts incurred between 25 July 2003 and 26 April 2006 with effect from 26 April 2006 until 14 December 2010 totalling £17,594.51 and accruing daily thereafter;

On the sums ordered to be paid post discharge of the former receiver, on the aggregate amount incurred in each 3 month period between 26 April 2006 and 19 November 2010 with effect from the end of each three month period totalling £45,199.58 and accruing daily thereafter;

The current aggregate daily rate on which interest continues to accrue from 14 December 2010 being £71.26.

The application by the respondent for an interim payment of his outstanding costs be granted and the respondent be permitted to draw against the lien that he has the sum of £520,201.00. Payment of this sum and the interest referred to above are enforceable without further application and with effect from 31 January 2011.

The former receiver do as soon as practicable after the sale of each and any asset provide an account of the proceeds of sale of the relevant asset to the intervener in whom the asset is vested.

The costs of the former receiver of and occasioned by this order and by the applications which were before the court be payable as a cost in the former receivership and subject to the lien held by the former receiver.”

There were more court applications. So far as the detailed assessment was concerned, as directed by Mitting J, that proceeded before a costs judge. Numerous issues were raised in the course of the assessment. In December 2011 a further point was raised on behalf of the interveners during the assessment as to whether the Order of Mitting J of 14 December 2010 extended to remuneration, expenses and disbursements of the receiver for work done after the discharge Order of 25 April 2006. The costs judge sensibly suggested that the point be referred back to Mitting J for clarification. On 29 June 2012 Mitting J ruled that, on its correct interpretation, his previous order of 14 December 2010 did extend to the receiver’s post-discharge remuneration, expenses and disbursements. He further directed in terms that the receiver was entitled to payment in respect of all remuneration, expenses and disbursements out of the receivership assets (paragraph 2 of the Order). He also ordered that the receiver’s “costs and remuneration” of the applications be paid as a receivership expense and subject to the receiver’s lien over the receivership assets (paragraph 3 of the Order). In his accompanying judgment of that date, Mitting J among other things said that “there can be no doubt about the interpretation of paragraph 2” of the Order of 14 December 2010 “as extending to remuneration, expenses and disbursements both before and after discharge”.

The interveners now seek to appeal against both the Order of 14 December 2010 and the Order of 29 June 2012. Lloyd LJ granted permission to appeal on the papers, granting any necessary extension of time for that purpose.

The three issues raised on this appeal are as follows:

Does the Order of 14 December 2010 (as affirmed by the Order of 29 June 2012) have the effect, as a matter of interpretation, of permitting the receiver to recover out of the assets post-discharge remuneration, expenses and disbursements?

If it does, can the interveners be heard now to raise an argument that the court has no power to order payment of post-discharge remuneration, expenses and disbursements?

If they can, did the court have power to order payment out of the assets of post-discharge remuneration, expenses and disbursements?

On the first point, I am in no doubt at all that the Order of 14 December 2010 has the meaning ascribed to it by Mitting J by his further Order of 29 June 2012.

The context of the first Order was the application before the court and the arguments and submissions being advanced on that application. In the course of those submissions, leading counsel for Mr Glatt was proceeding on the footing that post-discharge remuneration and expenses could and would indeed in principle be claimed and recovered. That is precisely what, in his 15^th witness statement, the receiver had himself been claiming. In his judgment of 14 December 2010 Mitting J expressly included the fourth tranche as part of the remuneration sanctioned.

It is plain that the Order as drawn up so directed. Paragraph 2 of the Order in terms states that, if an application for directions was not made, the costs (as defined) claimed “up to and including 19 November 2010” – the date given in the 15^th witness statement of the receiver – were deemed determined in the indicated sum. That necessarily must include post- (as well as pre-) discharge remuneration, disbursements and expenses. The provisions of paragraph 3(d) of the Order are also only consistent with such a conclusion. Paragraph 4 – relating to the interim payment – proceeds on the same basis.

It is not necessary to say more. This ground of appeal, in my opinion, must fail.

I turn to the second ground of appeal.

Mr Cullen forcefully submitted that the interveners simply cannot be heard now to dispute that the receiver is entitled to post-discharge remuneration, expenses and disbursements out of the assets or to argue that the court has no jurisdiction to permit that. He relies on their position – they (as the Order records on its face) having adopted Mr Glatt’s arguments and submissions – on 14 December 2010 and on subsequent events thereafter. He refers to, and relies upon, the principles set out in cases such as Pittalis v Grant [1989] QB 605. In that case, at p.611 C-F, Nourse LJ, giving the judgment of the court, said this:

Mr Cullen went on to submit that the receiver will indeed have suffered very real detriment by reason of the interveners not having taken the present point before Mitting J. He made the following points as illustrative of the detriment arising:

In the intervening period after 14 December 2010 the receiver has necessarily conducted much work in connection with the former receivership, both dealing with the many continued claims of Mr Glatt and the interveners and in giving effect to the court Order of 14 December 2010 itself.

On the application of the interveners, an Order was ultimately made on 16 May 2011 (in agreed terms) whereby a series of tasks was agreed to be undertaken by the receiver, including the provision of an account of receipts in respect of certain assets. Thus the receiver was – as with the Order of Mitting J – taking steps with the sanction of the court.

The receiver has necessarily had to engage in, and spend a considerable amount of time (as well as making disbursements and incurring expenses) in connection with, the detailed assessment ordered by Mitting J.

I am in no doubt that the receiver has undertaken work and acted on the footing of the Order of 14 December 2010 and subsequently on the presumed basis, shared by all concerned at the time, that the receiver could recover post-discharge remuneration and expenses. He will have undoubtedly suffered significant detriment if the point of law now sought to be taken on appeal by the appellants were now to be argued and established.

Why, then, should it be just to allow the point now to be taken by the interveners? I do not think it would be just. Mr Talbot submitted that the point was not expressly conceded on behalf of Mr Glatt (whose arguments the interveners adopted) before Mitting J. That may be so. But it was in reality a point which was accepted: the argument before Mitting J could not have proceeded as it did had that not been so. Nor could leading counsel for Mr Glatt have accepted – as he did – liability in principle for the fourth tranche of remuneration claimed if the question of jurisdiction was not accepted: his argument was simply as to quantum.

Nor had the point (if available) been overlooked. On 5^th November 2010, the solicitors then acting for Mr Glatt wrote to the solicitors then acting for the receiver, among other things saying this:

Thereafter, as I have said, the receiver proceeded on the basis that he was indeed entitled to claim post-discharge remuneration and expenses. Mr Glatt and the interveners could have been in no doubt on that. The receiver had filed evidence and lodged submissions including such a claim accordingly. The power of the court so to order was, I repeat, thereafter never controverted by Mr Glatt or the interveners. It might also be added that, as we were told, an appeal against the Order of 14 December 2010 was pursued by Mr Glatt (albeit it was ultimately abandoned). The appeal related only to interest. The appeal did not seek to raise the present point: which, as I have indicated, only surfaced before the costs judge, on the detailed assessment, many months later.

Given all these considerations, in my judgment it would be unjust to permit the interveners now to raise the proposed point of law as to Mitting J’s jurisdiction to make the Order of 14 December 2010 as he did.

That conclusion would mean that the third ground falls away. However I would not, for myself, wish to rest the overall disposal of this appeal simply on that second ground. Nor would I necessarily wish the interveners to think that they have failed on a procedural ground owing to the failure of Mr Glatt’s former legal advisers to take a jurisdictional point which was available to be taken. Accordingly, I turn to the third ground: which, if the appellants are right, is a point of some potential importance. I do so not simply by way of obiter remarks but as an alternative ground for my decision.

In my judgment, Mitting J did indeed have jurisdiction to make the Order of 14 December 2010.

The starting point is that the Order of Morison J of 15 February 2001 sanctions the payment of remuneration to the receivers then appointed (consistently with the powers then conferred by RSC 0.30). Mr Talbot makes the point that the order did not purport expressly to sanction the payment of costs and remuneration after discharge. That is true. But it is at best a neutral point. The Order is (subject to paragraph 5) silent on that particular matter. The discharge Order of 25 April 2006 is likewise silent on the matter.

Receivers appointed under the Criminal Justice Act 1988 are officers of the court and subject to the supervision of the court. The House of Lords authority of Capewell v Revenue and Customs Commissioners [2007] UKHL 2; [2007] 1 WLR 386 establishes that receivers so appointed generally act in accordance with the common law save to the extent that the Act stipulates otherwise.

It is an established common law principle that such a receiver ordinarily is entitled to look to the assets of the receivership estate to indemnify him for his remuneration, costs and expenses, and may have a lien over such assets for that purpose. It is also established – and this is important for present purposes – that the right to an indemnity is not extinguished by discharge of the receivership order and the lien can continue to exist for that purpose after discharge: Mellor v Mellor [1992] 1 WLR 517; re Andrews [1999] 1 WLR 1236.

Mr Talbot’s essential submission was that these principles, as established by authority, only apply to remuneration attributable to the acts of a receiver during the currency of his appointment. They simply do not apply to remuneration for acts of a former receiver undertaken after the appointment has been discharged. He says there is no authority which suggests that a receiver can recover remuneration for acts done after his discharge. Nor is there any authority supporting the proposition that a receiver has a lien over the assets in respect of the time costs of enforcing his lien.

Mr Talbot referred to the judgment of Longmore LJ (with which Stanley Burnton LJ and Elias LJ agreed) in Sinclair v Glatt (supra) where at paragraph 1 of his judgment he said, in seemingly general terms:

The same point can be made about the obiter remark of Laws LJ in the case of Crown Prosecution Service v Eastenders Group Ltd [2012] EWCA Crim 2436, where at paragraph 44 of his judgment he said (with regard to a receiver appointed under the provisions of the Proceeds of Crime Act 2002):

There is, however, first instance authority which tells against the point advanced by Mr Talbot. That is found in the decision of Kenneth Parker J in Glatt v Sinclair [2010] EWHC 3069 (Admin). In that case, Mr Glatt had made an application for permission to continue an action against the receiver for alleged breach of duty committed in 2002 during the course of the receivership. Kenneth Parker J had previously ruled ([2010] EWHC 3082 (Admin)) that the action had no realistic prospects. The dispute at this further hearing was whether the receiver’s legal costs of the application should come out of the receivership assets which were subject to the receiver’s lien. It was said by counsel then appearing for Mr Glatt (the interveners were not involved) that the application to which the costs related had not been launched until 5 September 2008, long after the receivership order had been discharged. The costs of the receiver in defending it were accordingly not costs of the receivership and thus could not be paid out of the assets of the receivership. As to that argument (which to some extent foreshadows the present argument) Kenneth Parker J, among other things, said this:

That authority, as a first instance decision, is of course not binding on us. Furthermore, the prior ruling of Kenneth Parker J to the effect that the action had no prospects of success was subsequently reversed in part by the Court of Appeal; and the costs order was in consequence also set aside, without further debate: [2011] EWCA Civ 1317. Moreover, the issue there raised related to legal costs rather than remuneration as such. Nevertheless, the statements of Kenneth Parker J at paragraph 8 connote that, in the circumstances, the receiver, post-discharge, continued to be a court officer and that the application issued in September 2008 related to the administration of the receivership and the conclusion of its affairs.

In my view the approach of Kenneth Parker J in this passage of his judgment was correct in principle. Where a receivership order made under the Criminal Justice Act 1988 is discharged, the receiver continues to be an officer of the court (and subject to the supervision of the court) to the extent that he still has functions to perform with a view to a final conclusion of the administration of the receivership. It would be a wholly unsatisfactory and arbitrary state of affairs were it to be otherwise.

That there are functions still liable to be performed by the receiver in such capacity upon discharge is, as I see it, confirmed by the provisions of CPR Part 69 (which apply after 2002 to receiverships under the Criminal Justice Act 1988). Rule 69.11 expressly sets out certain matters which the court may require a receiver to carry out upon a receivership being discharged or terminated. These matters (for example a requirement to transfer assets) may well involve time and expense and disbursements on the part of the receiver. There also may be other time-consuming matters which the court may require of a discharged receiver: since rule 69.11 is not to be construed as exhaustive of what the court may order on discharge, any more than rule 69.10 is exhaustive of the circumstances in which the court may order discharge (cf. McCracken v Crown Prosecution Service [2011] EWCA Civ 1620). The preparation and filing of closing accounts, which can be ordered under rule 69.8 or rule 69.11, may well be one such matter: and that could of itself be quite time-consuming. It is, at all events, entirely foreseeable that an amount of expenditure will be likely to be incurred and a number of services will be likely to be required to be performed by a receiver consequent upon an order of discharge.

There is, in my view, no principled basis for denying a receiver any right even to claim remuneration or expenses for such post-discharge services which are necessarily performed with a view to winding-up (if I may use that word) the receivership. The common law neither requires nor imposes such a restriction. Moreover, no such restriction can be spelled out of the wide language of rule 69.7 and supporting Practice Direction relating to remuneration. Indeed, the wide and unfettered language of rule 69.7 is to opposite effect. Nor does this conclusion leave the individual who has been made subject to the receivership order without protection or remedy. On the contrary, rule 69.7 makes clear that remuneration claimed by a receiver is subject to approval of the court. Accordingly, in my view the court retains its supervisory jurisdiction over the receiver, as a court appointed receiver, after discharge in matters relating to the conclusion of the receivership, the transfer of assets and any enforcement of the lien.

Mr Talbot submitted that if a receiver spent time and occurred expenses post-discharge that in effect was just too bad (he did not put it in those terms, but that is what it came to). That is not acceptable. He also said that the receiver could always seek, in his terms of appointment, to get an indemnity for post-discharge remuneration and expenditure from the person procuring the original appointment. But there is no reason why the original applicant for appointment of a receiver – absent a shortfall in the assets – should be expected to bear such (deterrent) liability. Moreover, that approach would not be consistent with the general position enunciated in the much quoted and approved passage from the judgment of Warrington J in Boehm v Goodall [1911] 1 Ch 155 at p.161:

Mr Talbot also submitted that the receiver could secure his remedy by requiring that a proposed discharge Order not take effect until the receiver had concluded all outstanding matters (a submission which in fact rather tends to acknowledge that things very often will still be outstanding at the time of the proposed discharge). That also will not do. For one thing, it would be a triumph of form over substance. For another, it would not fit well with the scheme contemplated by rule 69, and in particular rule 69.11. For another again, such an approach could have very unsatisfactory implications: in effect requiring a discharge of the receivership not to take effect even when all concerned desire it to do so. As Mr Cullen wryly pointed out, on Mr Talbot’s approach – even assuming the terms of some kind of appropriate “conditional” or “suspended” discharge Order could have been agreed and drafted in this case – the receivership might well still be continuing to this present day.

As Mr Cullen also pointed out, on Mr Talbot’s approach a receiver post-discharge might do better to delegate to external lawyers many of the functions required to be performed for preparing final accounts and in dealing with the detailed assessment and so on: because then he could at least seek to recover them as legal costs or disbursements. But that would involve an otherwise needless increase in expenditure, in circumstances where the receiver can undertake such tasks more cheaply and swiftly himself. As to that, Mr Talbot – who had seemed initially to accept that a receiver was, post-discharge, at least entitled to recover from the assets his post-discharge disbursements and expenses – indicated that he disputed that even such disbursements and expenses could be claimed. That at least avoided potential inconsistency in his argument: but it further demonstrates the injustice in the position he was advocating.

It is to be repeated that the person against whose assets the original receivership order was made is not without remedy. He has proper protection. A receiver who has been discharged can only recover remuneration, expenses and disbursements if the court approves them. (Directions in advance can also be sought from the court where appropriate.) If they are unnecessarily or unreasonably incurred, are disproportionate or unreasonable in amount, or do not properly relate to the receivership or the concluding of the administration of the receivership affairs, the court has ample powers to disallow them.

Mr Talbot did briefly make reference to Article 1 of the First Protocol (cf. the observations of Elias LJ in Glatt v Sinclair (supra)). I would, no less briefly, state my view that that cannot avail the appellants on this particular appeal.

So I would hold that the point raised as to the alleged lack of jurisdiction of Mitting J to make the Order that he did make with regard to post-discharge remuneration, expenses and disbursements fails.

I add, for the avoidance of doubt, that so far as litigation costs incurred in connection with the receivership, before or after discharge, are concerned, these will normally be subject to the order of the courts made at the relevant times in the litigation itself, and the appropriate order is a matter for the court’s discretion. In the present case, for example, there have been occasions where (post-discharge) the court has, perfectly properly, ordered the receiver’s costs of an application by Mr Glatt to be costs in the receivership and/or to be paid out of the receivership assets: for example, that is what Mitting J himself has ordered (as, of course, did Kenneth Parker J, albeit that particular Order was set aside on the substantive appeal). The quantum of such litigation costs, of course, also remains subject to the assessment of a costs judge, where not agreed.

I would dismiss the appeal on all grounds advanced.

I agree.

I also agree.