Before: Recorder Eaton Turner
BETWEEN:
JONATHAN ROBERT LLOYD PARKINS
Applicant
-and-
(1) TIMOTHY FRANCIS LAGE HAYES
(2) DARAGH DUFFY
Respondents
___________________________________________
The Applicant appeared in person
The First Respondent appeared in person at the first hearing. Louise Delgado (solicitor advocate, of Benchmark Solicitors) appeared for the First Respondent at the second and third hearings
Alexander Kingston-Splatt (instructed by Blaser Mills)
appeared for the Second Respondent
___________________________________________
JUDGMENT
Recorder Eaton Turner:
This is an application (the ‘Application’) brought under s.262 of the Insolvency Act 1986 and Rule 15.35 of the Insolvency Rules 2016 to challenge an Individual Voluntary Arrangement which was approved at a meeting of the creditors of Timothy Francis Lage Hayes (‘Mr Hayes’) held on 16 May 2023.
Parties to the Application, and other relevant persons
The application is brought by Jonathan Robert Lloyd Parkins (‘Mr Parkins’), and Mr Hayes is the first respondent. The second respondent to the Application is Daragh Duffy (‘Mr Duffy’) an insolvency practitioner of McCambridge Duffy (‘MD’) who was the nominee, and following the approval of the IVA became the supervisor.
Other persons to whom extensive reference is made in the witness statements and submissions are Carol Hayes (Mr Hayes’ former wife), and her partner Graham Butters. They are often referred to as ‘CH’ and ‘GB’ respectively or together as ‘CH/GB’. Mr Hayes is often referred to as ‘TH’.
The background to the application is factually complex, and rooted in bitter family and business-related disputes. In very short summary:
Mr Hayes is Mr Parkins’ step-father. He and Mr Parkins have been estranged for many years. There were business dealings between them, including loans made by Mr Parkins to Mr Hayes. Mr Parkins obtained summary judgment on the loans, with interest. Mr Hayes brought a number of unsuccessful claims against Mr Parkins over many years. Mr Parkins obtained several costs orders against Mr Hayes.
When these orders were not paid, Mr Parkins petitioned for Mr Hayes’s bankruptcy. This prompted Mr Hayes to propose the IVA.
The Individual Voluntary Arrangement
The terms of the IVA are simple:
Mr Hayes says that his only significant asset is an estimated sum of £400,000 which he says is likely to be paid to him following the sale of his former matrimonial home. Of this sum, he says that £100,000 will represent ‘pain and suffering’. The sum of £100,000 is to be excluded from the IVA, and thus retained by Mr Hayes.
The remaining sum of £300,000 would therefore be Mr Hayes’s only contribution to the Arrangement. All other assets, which Mr Hayes says are in any case of negligible value, are excluded.
The IVA was to last for one year.
The ‘Comparison of Estimated Outcome’ in the IVA suggested that the costs of administration of an IVA would amount to £15,983, whereas the costs of a bankruptcy would likely amount to £130,125 (including trustees’ fees of £50,000 and trustees’ disbursements of £50,000).
The proposal therefore asserted that the IVA would be more beneficial to creditors than a bankruptcy.
By his closing written submissions in relation to this Application Mr Parkins clarified that while the IVA was entered into in May 2023, for a period of 12 months, that period expired without any payment being made by Mr Hayes, but that Mr Duffy had not declared that the IVA had failed.
Mr Parkins put forward a number of objections to the Proposal prior to the meeting of creditors. They included that there were numerous errors, omissions and inaccuracies in Mr Hayes’ proposal. He also questioned the amounts said to be owed to creditors, including the £573,529 stated in the Proposal to be owed to French & Co, Solicitors (‘French & Co’), in respect of unpaid legal fees as follows:
‘The nominee should make all reasonable attempts to verify the amounts due to creditors”
What attempts have been made to verify the amounts due to creditors in general?
What attempts have been made to verify the amount owed to French & Co, and whether these amounts are liquidated debts? I understand there is a CFA in place. What are the terms of this? Is this even due or only due once his litigation with third parties is concluded / successful. If they are not concluded then how can the bills be due?’
Mr Parkins drew attention to the discrepancy between the sum of £573,529 said in the Statement of Affairs to be owed to French & Co, and a witness statement dated 10 March 2022 provided by Ian Hale of French & Co in support of an application to set aside a statutory demand served on Mr Hayes by Mr Parkins in which he said that Mr Hayes owed his firm in excess of £100,000 (and in excess of £240,000 to another firm of solicitors, Reynolds Williams).
Mr Peoples, an employee of MD, replied to Mr Parkins’ questions on 12 May 2023 prior to the meeting. As to the specific issues with French & Co’s claim or claims Mr Peoples wrote:
‘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 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.’
The Votes Cast at the Meeting
Despite Mr Parkins’ questions and objections, the votes that were allowed by the chairman of the meeting (an employee of MD), meant that the IVA was approved by 92.48% of the creditors, significantly in excess of the 75% required by statute. The two creditors who made up that percentage were French & Co, with a claimed debt of (by this stage) £631,799.94 (the ‘Debt’), and a former member of the Bar who acted at one stage for Mr Hayes, with a claim of £12,195.70.
Mr Parkins was recorded as voting a claim of £44,302.53 against the proposal. He later took the point that he had a claim of, and should have been permitted to vote for, £86,439.90. This would not of itself have made any difference to the outcome of the vote. One other creditor, Barclaycard, with a debt of £8,067.82 is recorded as voting against the Proposal. Two other creditors with votes totalling £8,090 did not provide proxies, and a possible claim by Marckita Limited (‘Marckita’) was valued by the Chairman at £1.
Representation on the hearing of this Application
For reasons that I shall address below, the application has been pursued over three widely-spaced hearings, following the last of which further written submissions were provided, with permission, by all parties. Representation of the parties at the hearings was as follows:
Mr Parkins has acted in person throughout, with the assistance of a McKenzie Friend.
Mr Hayes appeared in person at the first hearing, but was represented by Ms Delgado, a solicitor advocate, at the second and third hearings, and for the purpose of further written submissions.
Mr Duffy was represented throughout by Blaser Mills, solicitors, and by Mr Kingston-Splatt of counsel.
Mr Kingston-Splatt on behalf of Mr Duffy drew my attention to the law relating to such applications. Ultimately, he took the position that the principal issues that now arise on this Application are ones arising between Mr Parkins, Mr Hayes and French & Co, on which Mr Duffy as supervisor should not take a stand. Given however that he was defending Mr Duffy’s and MD’s decisions as to the admission and valuation of the debts voted at the meeting, and their prior investigation (or lack of) regarding French & Co’s evidence in support of its Debt, this meant, and I mean no criticism by this, that he inevitably argued in favour of the existence and admission of the various sums comprised in that Debt. He pointed out that the evidence provided in the course of this Application as to French & Co’s Debt had not been the subject of cross-examination, so should be treated as untested.
Mr Parkins has conducted himself with great courtesy and skill in making his submissions, and clearly has had valuable assistance from his McKenzie Friend in formulating his evidence and submissions. Even so, owing to the neutral stance taken by Mr Duffy I have not had the benefit of submissions from a qualified advocate to test the factual and legal propositions relied upon by and on behalf of Mr Hayes and indirectly on behalf of French & Co.
The parties were agreed that:
The burden of proving that either ground under s.262 IA 86 is made out rests with the applicant: Young v Nero Holdings Ltd [2022] BPIR 189; [2021] EWHC 2600 (Michael Green J) at [141], citing the judgment of David Richards J in Re T&N Ltd [2006] 1 WLR 1728.
Misconduct by the chairman of the meeting which causes prejudice to creditors can be regarded as both a matter of ‘unfair prejudice’ for the purposes of s.262(1)(a) and also a ‘material irregularity’ for the purposes of s.262(1)(b): Muir Hunter on Personal Insolvency at §3-176, citing Debtor (No. Hale 2 of 1990), Ex p. Bank of Ireland [1992] BCLC 137.
The grounds for the Application
The application is brought under both limbs of s.262, namely that:
the IVA unfairly prejudices Mr Parkins’ interests as a creditor of Mr Hayes (s.262(1)(a)); and
there was some material irregularity in relation to the creditors’ decision procedure which led to the approval of the IVA (s.262(1)(b)).
It will be expedient to consider material irregularity first. Before that however, I take note of the orders made at two directions hearings.
The directions hearings
The application came before District Judge Revere for directions on 23 September 2023. I have been provided with a transcript of that hearing. Mr Parkins and Mr Hayes appeared in person. The issue of the fees payable to French & Co was raised during the hearing. Mr Hayes was asked whether he would disclose a Conditional Fee Agreement relating to solicitors’ fees that had been referred to, and all the invoices and fee notes relating to the legal advice provided to him on which French & Co’s Debt was based. He said that he had been advised not to disclose the CFA on the basis that it is a privileged document, and that he would object to disclosure of the fee notes and the like generally, leading the judge to say that he was being ‘obstructive’. It was explained to Mr Hayes that it was open to him to waive any privilege. The debate continued, with the judge explaining that it was open to the court to review the evidence to see whether a debt relied on was a legally enforceable one. Mr Hayes eventually responded ‘I am fully in favour of that’.
The Order made records that District Judge Revere ‘considered Moorgate Industries UK Ltd v Mittal [2022] EWHC 3009 (Ch) on the issue of whether the principal creditor in the IVA, French and Co solicitors, should be joined as a party to the application or given an opportunity to make representations as to whether they can prove their debt in the IVA on the balance of probabilities’.
On that occasion it was ordered that the directions hearing should be adjourned to give French & Co the opportunity to file evidence in support of their claimed debt of £631,799.94, with the other parties having the opportunity to file further evidence if so advised. French & Co were not, therefore, joined as a party to the Application. They subsequently filed evidence, to which I shall refer below.
Further directions were made on 15 December 2023 by Deputy DJ MacKenzie including, at para 6, that any party wishing to call the maker of a statement to give live evidence might apply to the court for a direction to that effect. In the event, no such applications were made.
There is one other point that arose in the hearing before District Judge Revere that is of note. Mr Hayes stated, in response to questions from the judge:
‘Mr Hayes: … No, well apparently French & Co are representing me on a, we will catch up with the bills when we get to it, so it is a –
…
Judge Revere: Right, and French & Co have been acting for you for two years on a standard retainer.
Mr Hayes: Yes, mainly because nothing has happened, and I have been paying where I could. I have been paying for the barrister on a direct access basis.’
Mr Parkins’ approach to the conduct of Mr Duffy
Before turning to the specific grounds relied upon, I should say something about Mr Parkins’ critical approach to the conduct of Mr Duffy, which underpins both grounds for his application. Without going into unnecessary detail at this stage, his views can be summarised as being highly critical of what he considers to be Mr Duffy’s failure adequately to investigate both many of the statements and representations made in the Proposal, and the French & Co Debt. Mr Parkins put it thus in his closing written submissions:
‘31. The professionals involved in the IVA and this application have, in my submission, failed to uphold their duties and their conduct has fallen so far below what should have been expected of them. The challenged creditor, an established firm of solicitors, should have been able to easily evidence the debt owed to them, in the full amount. They failed to produce the necessary evidence and failed to provide an explanation as to why not a single bill/invoice was produced. It is submitted that [Mr Duffy], another professional, should have been alerted to the issue upon receiving the documents provided by [French & Co] to substantiate their debt. A cursory look would have shown the documents to relate to legal aid, other solicitors, periods before 2021 when [Mr Hayes] engaged [French & Co] on a private basis and they themselves should have questioned why no bills/invoices were provided. It should have been apparent, as has now been conceded by [the Respondents] that any debt is as yet unliquidated and may not be for them, but other parties (LAA and Reynold Williams).
[Mr Duffy] has asserted to the Court in submissions that they adopt a neutral position however the evidence before the Court tells a different story. Their failings and misconduct has all been to the benefit of [Mr Hayes] and [French & Co] – all of whose interests appear to be aligned.’
On behalf of Mr Duffy Mr Kingston-Splatt argued that, on any basis, Mr Parkins greatly overstates the duties on Mr Duffy as nominee / supervisor. He submitted that the obligation of the chairman of a meeting is to determine the extent to which each creditor should be admitted for voting purposes: r.15.33(1) IR 2016. He may admit or reject a claim in whole or part: r.15.33(2) IR 2016. In the event of doubt about whether to admit or reject, the chairman must mark a debt as objected to and allow votes to be cast in respect of it, subject to such votes being subsequently declared invalid if the objection to the claim is sustained: r.15.33(3) IR 2016.
As to the exercise of this power, he referred me to the decision of HHJ Behrens in AB Agri Limited [2016] BPIR 1297 at [58], which in turn cited Lewison J (as he then was) in Power v Petrus Estates [2008] EWHC 2607 (Ch) (quoting in part from Harman J in Re a Debtor (No 222 of 1990) ex p the Bank of Ireland [1992] BCLC 137, 444):
‘11. In my judgment the scheme of the meeting rules in r.5.17 is quite plainly a simple one. As one would expect the meeting is not the place to go into lengthy debates as to the exact status of a debt, nor is it the time to consider such matters as this court, sitting as the Companies Court, frequently has to consider such as whether a debt is bona fide disputed upon substantial grounds, an issue which leads to a great deal of litigation and frequently takes a day or so to decide. None of that could possibly be a suitable process to be embarked upon at a creditor’s meeting.
The scheme is quite clear. The chairman has the power to admit or reject; his decision is subject to appeal; and if in doubt he shall mark the vote as objected to and allow the creditor to vote. […] It provides a simple clear rule for the chairman, not a lawyer, faced with at a large meeting with speedy decisions to be made to enable the meeting to reach a decision. On that basis the chairman must look at the claim; if it is plain or obvious that it is good he admits it, if it is plain or obvious that it is bad he rejects it, if there is a question, a doubt, he shall admit it but mark it as objected.’
Mr Kingston-Splatt noted also that Lewison J further said in Power v Petrus (at [15]), that the fact that the court undertakes a more leisurely scrutiny of the claim than the chairman explains why, on any later challenge, the court is not confined to the material that was before the chairman.
Mr Kingston-Splatt’s submission was that even if on this Application it is established that French & Co’s Debt is not established on the balance of probabilities, that is not a ground for criticism of Mr Duffy or the chairman of the meeting. It was not possible for him, at the time, to undertake an exhaustive analysis of the evidence relating to the claims asserted by any particular creditor.
Material Irregularity
I understood the parties to be agreed on the relevant principles, as set out in Mr Kingston-Splatt’s skeleton argument. Any material irregularity relied on must be with the decision procedure itself: see Watson, Individual Voluntary Arrangements - Law, Practice and Procedure at 9.09, although it appears that this includes false or misleading information in the proposal or statement of affairs: Muir Hunter at 3-179 and Individual Voluntary Arrangements at 9.12 (fn.43). ‘Materiality’ is aimed at situations where:
If the challenge is based upon the admission of debts for voting purposes, had the correct procedure been followed, this would have made – or at least would likely have made – a difference to the outcome: Individual Voluntary Arrangements at 9.13.
Where the challenge is to the provision of misleading or incomplete information, the question is whether the irregularity would be likely to have made a significant difference to the way the creditors would have considered the proposal (which is broader than asking if the vote would have gone the same way: Individual Voluntary Arrangements at 9.13).
On material irregularity Mr Parkins’ evidence and submissions focused largely, but not entirely, on the admission of French & Co as a creditor for the purposes of the decision procedure, unsurprisingly given that French & Co’s claimed Debt far exceeded all of the other creditors combined, and thus was determinative of the outcome of the meeting.
I was referred to the helpful guidance in relation to competing creditor challenges given byChief ICC Judge Briggs in Moorgate Industries UK Ltd v Mittal [2022] EWHC 2009 (Ch). (That was an appeal of a decision under r.15.35 IR 2016 – but it was submitted, and I accept, that the same principles apply to applications under s.262 IA 86.)
In Moorgate Industries, Chief ICC Judge Briggs explained the legal principles engaged by such an application as follows:
‘62.As Moorgate submitted, an IVA binds the creditors, whether or not they vote in favour or are aware of the decision procedure approving the proposals. An IVA is agreed by the requisite number of creditors who, inter se owe each other a duty of good faith.
…
The task of the court
The High Court has stated on numerous occasions that if a competing creditor challenges the acceptance of another creditor's proof, that other creditor will need to substantiate their claim: Elser v Sands [2022] EWHC 32 (Ch) , [76]-[77]; and Re Farrar Construction Ltd (in CVA) ; Levi Solicitors LLP v Wilson [2022] EWHC 24 (Ch), [19]-[20] .
It follows that where the appeal is a challenge to the decision as to the existence of a debt, the court's task is to determine whether a debt is proven on the balance of probabilities: Re McNally [2013] EWHC 1685 (Ch) .
In Re A Company (No 004539 of 1993) [1995] 1 BCLC 459 Blackburn J made the following useful observation [466]:
"In my view, the task of the court, on an appeal under r 4.70(4) of the Insolvency Rules 1986 , is simply to examine the evidence placed before it on the matter and come to a conclusion whether, on balance, the claim against the company is established and, if so, in what amount. I would only add that, in considering the matter, the court is not confined to the evidence that was before the chairman at the time that he made his decision but is entitled to consider whatever admissible evidence on the issue the parties to the appeal choose to place before the court."
…
Assessment of evidence
In Coyne v DRC Distribution Ltd [2008] EWCA Civ 488, [2008] BCC 612 Rimer LJ explained:
"The basic principle is that, until there has been such cross-examination, it is ordinarily not possible for the court to disbelieve the word of the witness in his affidavit and it will not do so. This is not an inflexible principle: it may in certain circumstances be open to the court to reject an untested piece of such evidence on the basis that it is manifestly incredible, either because it is inherently so or because it is shown to be so by other facts that are admitted or by reliable documents".’
Chief ICC Judge Briggs concluded with a warning to challenged creditors:
‘186. Creditors should be warned that if their claimed debts are challenged on an appeal from a nominee they should be joined to the proceedings and take advantage of any order made by the court to permit them to file and serve sworn evidence.
In this case the challenged creditors were on notice of the proceedings and chose not to participate in any case management hearing or ask to be joined. This is consistent with their approach when not filing or serving any evidence to support their claims. Where no evidence is filed and served it is open to the court to make adverse inferences.’
French & Co’s Debt of £631,799.94 – has it been proved on the balance of probabilities?
The issue in relation to French & Co’s Debt, in view of Mr Parkins’ challenge to it, is whether it has, on this Application, been proved on the balance of probabilities. In addressing this question, I can take account not only of the evidence that was available before and at the time of the meeting, but also of any evidence made available subsequently. In considering the evidence as to the Debt, I must bear in mind that the evidence filed by French & Co has not been the subject of cross-examination. This is one of several factors which have made the Court’s task especially difficult.
Mr Hayes’ evidence did not add anything of substance in relation to the Debt. French & Co filed a witness statement dated 25 October 2023 (‘Hale 1’) made by one of its partners, Ian Hale. Hale 1 explains that (emphasis added):
Mr Hayes had been involved in very long-running litigation with his former wife Carol Hayes and her partner Graham Butters. That litigation had generated multiple hearings in the County Court, High Court, Court of Appeal and the Supreme Court. In that litigation Mr Hayes had prevailed ‘in all material instances’.
French & Co had acted for Mr Hayes since 2013. Before that other solicitors were instructed.
‘[F]or the majority of the time [Mr Hayes] had the benefit of Legal Aid …’.
Various costs orders had been made against CH/GB, and claims for other relief against them have not yet been dealt with.
‘Following the cessation of Legal Aid in 2020, TH's former wife and her partner [Mr Butters] were ordered to pay costs in respect of their various applications and appeals. Barring some small sums, neither has to date paid any sum re the costs due to my firm nor the solicitors that acted prior to my firm being instructed in these matters.’ (emphasis added).
Both CH and GB have been declared bankrupt.
Hale 1 addresses the sums comprised in the Debt of £631,799.94 more specifically as follows (emphasis added):
‘12. I have previously prepared schedules of costs that have been served on Carol Hayes and Graham Butters.
Exhibit [IRH-1]: Proof of Debt in the IVA of Timothy Francis Hayes is a summary of costs claimed in various cases which bring a total I filed as proof of debt of £631,799.94. Behind the Summary are three supporting Schedules:
Schedule 1 provides for costs awarded and partially assessed in cases 2629 of 2012 and BR-2012-000939. £97,596.91 is claimed. Schedule 1 is supported by cost schedules, counsel's fee notes and court orders in exhibit [IRH-2] : Cost Orders 2629 of 2012 and BR-2012-000939.
Schedule 2 provides costs awarded and partially assessed in case 6CB00392. £488,033.46 is claimed. Schedule 2 is supported by cost schedules, counsel's fee notes and court orders in exhibit [IRH-3] : 6CB00392 - costs schedule to 08 04 19 and [IRH-4] : 6CB00392 Costs Post liability 08 04 18 to 24 03 21.
Schedule 3 is provided for appeals made in case CH-2018-000133. £28,169.57 is claimed. Schedule 3 is supported by cost schedules, counsel's fee notes and court orders in exhibit [IRH-5]: Statement of Costs A3/2020/0048 and 0378 and [IRH-6) : CH 2019 000133 13 Dec 2019.
For part of the time during the above cases TH was funded by legal aid but this was stopped and we then entered into a commercial agreement to cover the remaining costs of the harassment case.
Unless and until those costs are paid by Carol Hayes or Graham Butters [Mr Hayes] is liable to pay my firm for the work done.’
The exhibits to Hale 1 include a number of orders made in the litigation between Mr Hayes and CH/GB, 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, which later became RWPS (‘Reynolds Williams’). This, I was told, was the evidence provided to MD prior to meeting of creditors to support French & Co’s Debt.
Notably, however, the exhibits to Hale 1 do not include any retainer letters, invoices or fee notes from French & Co to support the Debt.Nor, and this applies to the fees referred to in Schedule 1 and Schedule 2, is there any breakdown between fees supposedly covered by legal aid, and those the subject of some commercial arrangement.
The First Hearing
The first hearing, which got off to a very late start owing to the disappearance of the bundles filed with the court for the hearing, was eventually adjourned part heard.
Mr Hayes’ skeleton argument for the first hearing was for the most part in the nature of a series of questions. So far as the Debt was concerned Mr Hayes asked:
‘9. Has the challenged creditor (French & Co Solicitors) satisfied the burden of proving their claims? A had an opportunity to respond to their statement and evidence but did not raise this issue. Where is A’s evidence to suggest they have not proven their claims?
…
Were the claims of French & Co … adequately proved / sufficient to have them admitted as creditors? This was considered in point 9 above.
Should French & Co … have had the voting rights they did? A has offered no evidence to the contrary. Should A have the voting rights he did?’
The Second Hearing
By the time of the second hearing of this application Mr Hayes was represented by Ms Delgado. She relied on the evidence in Hale 1, and drew my attention to the order made by DDJ MacKenzie to the effect that any party wishing to call the maker of a statement to give live evidence should apply to the court for a direction to that effect. She pointed out that Mr Parkins had not made any such application in relation to Hale 1 and submitted that where that evidence had not been challenged in cross-examination I could only reject it if it was inherently incredible. Mr Hale is a senior solicitor and it would, she said, be very hard for me to reach such a conclusion without hearing cross-examination.
At this hearing I raised many questions about the evidence as to the Debt set out in and exhibited to Hale 1. The most obvious point about this evidence and these schedules, to me at least, was that they are mostly schedules of costs relating to orders for costs made in favour of Mr Hayes, and against CH/GB, or relating to further costs sought by him, but not yet assessed or ordered against CH/GB. It was far from clear to me at the time of the second hearing how they supported French & Co’s claim or claims in debt against Mr Hayes for which French & Co had voted.
I raised also the fact that Hale 1 acknowledged that for most of the time that French & Co was acting for Mr Hayes, he was legally aided. Ms Delgado’s submission on this was that, even where a client is legally aided, that client is nonetheless always ‘prima facie’ and ‘primarily’ liable for his solicitor’s fees. This potentially highly significant point had not been raised in any skeleton argument and nor was any authority in support of it provided.
Other questions concerning me were how French & Co could claim costs against Mr Hayes when:
some, arguably a great deal, of the work was done not by French & Co but by previous firms (Reynolds Williams and Ginn & Co), again, in the case of Ginn & Co, with the benefit of legal aid;
some work was apparently done under the terms of a CFA; and
there was no evidence of the ‘commercial agreement’ into which French & Co and Mr Hayes had apparently entered when legal aid cover ceased.
I asked whether, in respect of fees incurred at times when Mr Hayes was legally aided, the solicitors involved had received any payments on account in respect of their fees in the course of the litigation, which stretched over many years, but got no answer.
Against some entirely understandable opposition from Mr Parkins, but in the interests of ensuring that the Court addressed the matter on the fullest evidence, and with the benefit of a much fuller explanation of the relevant law, I again adjourned the hearing part-heard with a direction permitting French & Co to file further evidence in support of their proof of debt, and permitting, indeed encouraging, the filing of further written submissions by any party following the provision of that further evidence, in particular to explain the position as a matter of law regarding liability for legally-aided fees. I also directed that French & Co should have permission to apply to me in writing if they wished to participate in the adjourned hearing.
Hale 2
Pursuant to those directions French & Co filed a second statement of Ian Hale (‘Hale 2’) dated 7 August 2024, and all parties filed further written submissions. French & Co did not however seek to be joined as a party to the Application or otherwise participate in the next hearing.
Hale 2 set out the following Table (the ‘Retainer Table’) summarising the ‘dates, firms and basis of retainer for each period and each case referred to in the schedules’ (i.e. the three Schedules exhibited to Hale 1), which I have reordered to follow the numbering of those schedules:
Schedule 1
2629 of 2012 | ||
2012 -2013 | Ginn & Co | Legal Aid |
2013-2020 | French & Co | Legal Aid |
Schedule 2
6CB00392 | |||||
2005-2012 | Reynolds Williams | CFA | |||
2012- 2013 | Ginn & Co | Legal Aid | |||
2013- 2021 | French & Co | Legal Aid | |||
2021 - Date | French & Co | Commercial |
Schedule 3
CH- 2019 - 00133 | ||
2019-2021 | French & Co | Legal Aid |
2021 - date | French & Co | Commercial |
Some preliminary points can be made about Hale 2:
First, it exhibited very little further documentation to support the Debt. Even though the absence of any documentation, whether by way of a retainer letter, or invoices, to support in particular the ‘commercial agreement’ under which French & Co apparently acted for Mr Hayes at one stage had been raised at the previous hearing (and indeed long before), Hale 2 neither commented meaningfully on that agreement nor exhibited any such documentation. It exhibited only part of a Reynolds Williams letter of engagement, and an unsigned CFA pursuant to which Reynolds Williams had apparently earlier acted for Mr Hayes.
Second, Mr Hale acknowledged that his previous statement had wrongly stated that his firm had acted for Mr Hayes under a CFA.
Third, although it now appeared that some of the fees comprised in both Schedules 2 and 3 were incurred on a ‘commercial basis’, the remainder being incurred when Mr Hayes was legally aided, or being represented on a CFA by Reynolds Williams, no attempt was made to distinguish between, and put figures, on the non-legally aided and the private elements of the sums claimed by French & Co.
In para 4 of Hale 2 Mr Hale stated ‘by way of reminder’ that (emphasis added):
As regards the costs referred to in Schedule 1, Carol Hayes’ claim against Mr Hayes had been dismissed by the Court of Appeal in 2014, and ‘Costs were assessed and the liquidated cost order was served on CH. The debt remains unpaid.’
Schedule 2 related to a harassment claim by Mr Hayes against CH. Mr Hayes had instructed Reynolds Williams under a partial conditional fee arrangement until 2011, following which he was represented by Ginn & Co under a legal aid certificate, which certificate was transferred to French & Co in 2013. The claim was decided in favour of Mr Hayes on liability in 2019, but apparently ‘remains open’ for remedy hearings to assess damages and for the issue of a final injunction.
Schedule 3 relates to other hearings, being appeals arising out of the claims referred to in Schedule 1. Mr Hale comments: ‘During the course of these appeals, I found it difficult to obtain extensions to the legal aid certificate, and on the instruction of TH, I terminated legal aid representation and continued his representation on a commercial basis (not as I have wrongly stated a "CFA", an error in drafting for which I apologise to the Court). TH's debt to French & Co. is unpaid.’
Mr Hale makes the following further observations in support of the Debt (with my emphasis added):
‘5. As of the date of making this statement, I confirm that I have received no payments from either CH or GB, who were and are TH's opponents in the two cases in which I have been acting for TH since 2013. GB was declared bankrupt in August 2016 following non-payment of around £23,000 in cost debts owed to TH and Mrs Margaret Hayes. CH was declared bankrupt in September 2021 following non-payment of around £16,000 in cost debts, which stood at the time of her petition in 2017. CH's debts have risen very substantially since then to a liquidated figure in excess of £200,000. All the sums I have set out as due remain due as there has been no final distribution from the Carol Hayes estate. TH is, therefore, liable to French & Co. for the full sum. If, on final distribution from the CH estate there is a shortfall, TH's liability to French & Co will be reduced. I have also, in case 6CB00392, not sought to have costs assessed as yet where there has not been a summary assessment. The reasons for this are first that I hope that in due course, it will be possible to agree on the costs payable by CH with her trustee in bankruptcy, and so avoid the costs of having bills prepared and of detailed assessment, secondly and in any event under CPR47.1 costs subject to detailed assessment are not to be assessed until the conclusion of the proceedings. The county court harassment case that TH brought against CH and GB is not at an end, as there has been no determination of damages to be paid.
The costs that are payable to TH are costs that are due to my firm as solicitor on record in each case. It is my firm's responsibility to collect those costs and then distribute them to counsel or previous solicitors on record unless such costs were already paid by TH as fees. TH has not paid my firm any private fees and, save for the partial CFA payments previously noted, I understand did not pay any previous solicitor who has acted in either of the two cases. My understanding of the law of costs is that all costs orders made are made in favour of the successful litigant - in this case TH - despite the fact that it is the litigant's solicitor who will be entitled to those costs when they are paid. The solicitor has an equitable lien over costs that are due to him but have been paid direct to the successful client - see Bott & Co Solicitors Ltd -v- Ryanair (SC 2022).In addition, in this case, TH is in receipt of legal aid and by virtue of Reg. 13 of the Civil Legal Aid (Statutory Charge) Regulations 2013, French & Co. is the only entity capable of giving good receipt for monies due under the cost orders.
It is possible for a solicitor to claim costs direct (as opposed to via their client) if the solicitor applies to the court for an order under s73 Solicitors Act 1974. I confirm that I have made no such application in relation to the costs due to TH in the two cases and as far as I am aware no such orders have been made either for previous firms of solicitors instructed by TH. Hence all costs due are due to TH as a matter of law and owed by him to my firm. TH is liable:
to French & Co for costs owed to RWPS or their successors, for the whole sum under the CFA regardless of recovery from CH. TH is able to recover from CH as the costs orders against CH are in his favour
where services have been provided under Legal Aid, to French & Co for costs owed by CH to Ginn & Co or French & Co, for the costs at a commercial rate. TH is able to recover these sums at commercial rates from CH by virtue of Reg 21 Civil Legal Aid (Costs) Regulations 2013 as legal services were provided under Legal Aid. The indemnity principle is expressly disapplied by Reg. 21.3, so CH is liable to TH, who is liable to French & Co for the same sum despite the fact that TH would not be liable for that sum in the absence of the costs order.
to French & Co its own work under a commercial retainer. TH is entitled to recover these from CH by virtue of the costs orders in his favour. As a matter of contract, TH will remain liable under the retainer if nothing is recovered, as is usual.’
The Third Hearing
On behalf of Mr Hayes Ms Delgado submitted a lengthy skeleton argument for the third hearing. I set out what appear to be the key passages in relation to the basis on which the sums comprised in the Debt are said to be owed to French & Co by Mr Hayes:
‘Basic principles as to liability for costs and provable debts
The basic principles which flow from [Hale 2] and the basic legal principles relevant to recovery of costs from [Mr Hayes] by his solicitors and admission of the French and Co debt for voting purposes are as follows:
A client instructing a solicitor under a commercial retainer is liable for their solicitor’s fees under that retainer in accordance with the terms of that retainer and that liability usually subsists irrespective of whether they are successful or unsuccessful in any litigation, and whether they recover any, all or only part of their costs from an unsuccessful opponent.
Where that retainer is pursuant to a CFA whether in whole or in part, any costs covered by that CFA only become due from the client in the event of success / a win as defined in the applicable CFA. Again, that liability usually subsists irrespective of whether they recover any, all or only part of their costs from an unsuccessful opponent and irrespective of whether a success fee is recoverable from their opponent.
All inter party costs orders made are made in favour of the successful litigant despite the fact that it is the litigant’s solicitor who will be entitled to the costs when they are paid.
In order to make good that principle, the solicitor is granted an equitable lien over costs recovered by the client but not paid on to them (Bott and Co Solicitors Ltd v Ryanair DAC [2023] A.C.635), and likewise a direct right of enforcement (such as under section 73 of the Solicitors Act 1974), should the client choose not to enforce.
Where a legal aid certificate is in place in respect of any work to be carried out under a solicitor’s retainer, then by virtue of Regulation 21 of the Civil Legal Aid (Costs) Regulations 2013 a successful legally aided litigant can recover costs of carrying out such work at commercial rates from the unsuccessful party.
That regulation (21(3)) disapplies any limit which would otherwise apply (the indemnity principle) and says that costs orders in favour of a legally aided party are to be determined as if that party were not legally aided(21(1)).
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.
By virtue of regulation 13 of the Civil Legal Aid (Statutory Charge) Regulations 2013: All money payable to or recovered by a legally aided party in relevant proceedings or a relevant dispute, whether under a court order or an agreement or otherwise, must be paid to the legally aided party's provider, and only that provider is capable of giving good discharge for the money.
By extension of the general principle of assessment which prevents a further assessment of a costs order where there has been a failure to include the costs of a previous solicitor benefiting from that order within the bill of costs, the firm currently providing services whether under a legal aid certificate is the firm which must list a former solicitor’s costs separately in a bill of costs and must then recover all monies to distribute whether those relate to costs and disbursements incurred by that firm or previous firm. (As to the general principle see (1) Carl Harris (2) Susan Collete Hartless v. Moat Housing Group-South Ltd [2007] EWHC 3092 (QB) applying Segalov (Deceased), Re (1952) P 241 PDAD)).
In a proposed IVA, the convener or chair has absolute discretion as to the value to be placed on a debt which is either unliquidated or an unascertained amount and a creditor may vote in respect of an unliquidated or unascertained amount if the convener or chair decides to put upon it an estimated minimum value for the purpose of entitlement to vote and admits the claim for that purpose (IR 2016 rules 15.31(2) and (3)).
He is not obliged to speculate nor is he obliged to investigate the creditor's claim in the case of an unliquidated or unascertained amount. But he must examine such evidence as the creditor puts forward and any relevant evidence provided by any other creditor or debtor. If the totality of that evidence leads him to the conclusion that he can safely attribute to the claim a minimum value higher than £1, then he should do so: National Westminster Bank Plc v Yagdaroff [2011] EWHC 3711 (Ch), 2011 WL 5903352 at [15] applying Re
Newlands [2006] EWHC 1511.
This discretion is consistent with the position in bankruptcy, in particular, in relation to the fact that provable debts include future liabilities (IR2016 rule 14.2(1)), which themselves include not only a present obligation to pay a sum certain in the future but also an obligation to pay an unquantified sum in the future or on a contingency, and where there was no present obligation prima facie included an obligation arising in the future (Banner Lane Realisations Ltd (in liquidation) v. Berisford Plc and Anor. [1997] 1 BCLC 380).’
Ms Delgado’s oral submissions were to the same effect:
So far as the period during which Mr Hayes was legally aided is concerned, she referred also to the legal aid statutory charge (without further explanation).
She referred to a solicitor’s equitable lien over costs awarded in favour of his client.
In support of the submission that French & Co could recover sums for which previous firms might have a claim, she relied on an extension to the ‘general principle of assessment’ referred to at para 19(i) of her skeleton argument.
Ms Delgado’s skeleton argument contained the following further propositions in relation to the debts identified in Schedules 1 - 3:
[Schedule 1]
‘25. … the proceedings are concluded, the amounts are assessed, they are due from Carol Hayes to [Mr Hayes], and accordingly they are due from [Mr Hayes] to French and Co.’
… As [Hale 2] explains, costs that are payable to [Mr Hayes] are costs that are due to [French and Co] as solicitor on the record and the current legal aid provider in each case and Mr Hale considers that it is his firm’s “responsibility to collect those costs and then distribute them to counsel or previous solicitors on the record unless already paid by TH as fees”.
[Schedule 2]
‘34… In the case of legal aid, only the provider can give good receipt for the monies and the only person who has a right to recovery is the litigant, in this case, [Mr Hayes], because he has a judgment debt in his favour, following the authority in Re a debtor (No 68SD97).
It follows that French and Co are entitled to seek payment from [Mr Hayes] in respect of costs to which their predecessor under the legal aid certificate (Ginn & Co.) are entitled, and also to costs due to RWPS under the CFA which is triggered.
As [Hale 2] paragraph 3 and 7.3 also explains, the legal aid funding which French and Co had ceased in 2021 and a commercial retainer was entered into in 2021 with [Mr Hayes]. This provided that [Mr Hayes] would remain liable for costs incurred by French and Co. even if nothing was recovered for his opponent.
…
[Schedule 3]
Given what is said above: the proceedings are concluded; a payment on account has been ordered in the sum of £100,000; the amounts unassessed still create a judgment debt in favour of the First Respondent due from Carol Hayes to the First Respondent and thus are due to French and Co. In circumstances where French and Co are the solicitor on record, and the provider for legal aid purposes they are the only firm who can collect in the monies, and give good receipt (in the case of the legal aid element).’
The nature of the liability of a client instructing a solicitor on a private (i.e. non-legally aided) basis to his solicitor in respect of fees is of course obvious, but I was not referred to any statement of principle in any authority or textbook to support the propositions that:
as it had been argued at the previous hearing, even where a client is legally aided, that client is nonetheless always ‘prima facie’ and ‘primarily’ liable for his solicitor’s fees; or
in the context of a legally aided retainer an obligation by an unsuccessful opponent, against whom a costs order has been made, to pay costs to French & Co’s client Mr Hayes creates, without more, a claim in debt enforceable by French & Co against Mr Hayes.
Written Closing Submissions
In the circumstances, and given that the hearing risked overrunning again, I gave permissions to all parties to file further written closing submissions. All parties did so, and Mr Parkins filed in addition a later addendum.
By her closing written submissions provided after the third hearing Ms Delgado submitted as follows in relation to the lack of evidence of French & Co’s retainer(s) and bills (emphasis added):
‘… the assertion [is] that a lack of a written retainer and a lack of bills means that no debt exists.
That of course is not the case in that:
A lack a written retainer does not mean no retainer exists, indeed [Hale 2] explains that a retainer does exist.
A lack of bills likewise does not mean that no debt exists, and indeed, the suggestion that it does, ignores the basic principles that unliquidated and unascertained debts, and contingent liabilities are all capable of being voted on in a decision procedure in connection with an IVA. This position is mirrored in bankruptcy, for good reason.
It is submitted that the unchallenged evidence contained in Ian Hale’s witness evidence including [Hale 2] and the submissions made in [Mr Hayes’s witness statement] are more than sufficient to establish that a significant sum in costs is due to the French & Co, and consequently that such sums are due from [Mr Hayes].’
Those closing written submissions repeated (as para 42) the submissions previously made as para 19 (quoted above) ‘by way of reminder’, and stated (emphasis added):
‘44. Taking all of the basic principles into account it is clear that:
The solicitor’s lien demonstrates that [Mr Hayes] is obliged to pay all money recoverable in his litigation to French & Co to satisfy their inter party costs order.
In Candey Ltd v Crumpler, [2023] 1 W.L.R. 342 (2022) …the court confirmed that “the appropriate test for a solicitor's equitable lien is whether the solicitor provides services (within the scope of the retainer) in relation to the making of the client's claim, with or without legal proceedings, which significantly contribute to the recovery of a fund by the client.”
There can be no doubt that the work done by French & Co. (and Ginn & Co/RWPS) significantly contributed to the recovery of a fund by the First Defendant, as each set of proceedings involving Carol Hayes was successful, as the court orders supplied in [Hale 1] demonstrate. This is the case notwithstanding that in the Hayes/Butters harassment case the amount of the fund is yet to be determined, since a fund will be recovered as a result of the work detailed in schedule 2 annexed to [Hale 1].
The lien exists in respect of any costs incurred and contributing to the recovery of a fund (whether those costs are unascertained or not) and the operation of the lien is a contingent liability.
The provable debts in a bankruptcy mirror those provable in an IVA, and as such include future liabilities which themselves include contingent liabilities.
It follows that French & Co are entitled to vote on their proof in the IVA because the First Defendant has to pay all money recovered in his litigation to French & Co., and French & Co. is a creditor for the full amount of the costs in respect of which they are the solicitors of record at assessment.
This is the case irrespective of whether the work was carried out by French & Co. or a previous solicitor because there is or can be only one bill of costs raised by the solicitor of record.
As a result, no previous solicitor holds a lien in respect of their costs as against monies recovered by the First Respondent, rather the lien they possess is against monies ultimately received by French & Co, who have the only right to enforce.
If the court were to deny that part of the money whose ultimate destination was a previous solicitor, that would undermine French & Co’s lien. This is because French & Co would have been entitled to enforce the entirety of the costs arising, including those costs due to previous solicitors.
Notwithstanding all of these points, if the court were minded to remove the parts of the proof covering work done by RWPS and Ginn & Co. that would not alter the outcome of the vote. A spreadsheet is enclosed showing these calculations.’
The spreadsheet (‘Spreadsheet’) attached to these further submissions suggested that removing the work billed by RWPS and Ginn & Co from the calculation of the Debt would still leave French & Co with a claimable debt against Mr Hayes of £397,224.13.
The evidence supporting the Debt
Although French & Co did not become a party to, or participate in, the Application, this is not a case where French & Co has taken no steps to substantiate the debt, as in Moorgate Industries where the creditors failed to file any evidence. Rather, French & Co has provided Hale 1 and Hale 2, and Ms Delgado, albeit acting for Mr Hayes, has argued vigorously in support of French & Co’s Debt.
That said, the evidence regarding the Debt in Hale 1 and Hale 2 is highly unsatisfactory, on any basis. The Court is entitled to be sceptical where no copy of any written retainer of any sort with French & Co has been provided. I would in particular have expected that a retainer letter or letters relating to those costs comprised in Schedules 2 and 3, apparently incurred from some time 2021 onwards, when legal aid had ceased and Mr Hayes and French & Co apparently entered into a ‘commercial arrangement’, could and would have been provided.
Many questions regarding the contents of Hale 1 and Hale 2 were raised by me in the course of the various hearings. The Spreadsheet submitted together with Ms Delgado’s written closing submissions (provided after the third hearing) might have been expected to bring some clarity, and at least to address clearly the breakdown between legally aided and ‘commercial’ fees charged by French & Co. The Spreadsheet merely added to the confusion.
Doing my best with such evidence and explanations as have been provided, my analysis of the various elements of the Debt is as set out below.
Schedule 1 Fees
Schedule 1 appears to relate to legal fees falling due between May 2017 and November 2019, totalling £97,596.91. On the Spreadsheet the Schedule 1 debt of £97,596.91 is shown as owed entirely to French & Co. The Retainer Table suggests however that some work on this matter was done by Ginn & Co. The evidence is unclear, but the dates given in the Retainer Table suggest that all of the fees comprised in Schedule 1, whichever firm of solicitors they may be owed to, are legally aided.
Schedule 2 Fees
So far as Schedule 2 is concerned, the Schedule itself suggests that fees are owed to RWPS from 26 August 2005 to 30 November 2009, to Ginn & Co for work done between February 2012 and September 2013, and to French & Co for the periods 1 September 2013 to 8 April 2019, and again to French & Co for the period 9 April 2019 to 24 March 2021, totalling £488,033.46 (including VAT). The Speadsheet says the same, with some £253,457.65 of that sum being claimed by French & Co:
Schedule 2 |
|
|
RWPS 26/08/2005 to 30/09/2009 | £187,063.14 |
|
Ginn 01/02/2012 to 01/09/2013 | £47,512.67 |
|
French and co 01/09/2013 to 08/04/2019 | £195,186.65 |
|
French and co 09/04/2019 to 24/03/2021 | £58,271.00 |
|
|
| £488,033.46 |
The Retainer Table states that Reynold Williams acted for Mr Hayes under a CFA until some time in 2012 (rather than 2009), Ginn & Co then acted on a legally aided basis, following which French & Co acted for Mr Hayes in relation to this matter under a legal aid certificate from 2013 to 2021, and acted on a commercial basis from ‘2021 – Date’. It is unclear when exactly in 2021 the change from legal aid to a commercial arrangement happened, but the dates suggest that all the fees in Schedule 2 shown as owed to French & Co are legally aided, and that no fees are payable to them on a commercial basis.
Schedule 3 Fees
The fees set out in Schedule 3 total £28,169.57 (including interest and VAT) comprising £5,028.38 due on 13 December 2019 and £23,141.19 due on 25 February 2021. This again suggests, given that the Retainer Table states that French & Co only acted in this matter on a commercial basis from an unspecified date in 2021, that all sums shown in Schedule 3 are legally aided.
In short, all the fees set out in Schedules 1 – 3 would appear to me to be legally aided, save for those owed to Reynolds Williams under a CFA. This conclusion is also consistent with what Mr Hayes said to District Judge Revere, quoted above, at the directions hearing in September 2023.
The basis on which Mr Hayes’ alleged liability to French & Co arises
Privately funded fees
As above, the only fees for which Mr Hayes appears to be liable to any solicitors on a private basis are those owed to Reynolds Williams (Schedule 2). The figure put upon the fees owed to Reynolds Williams is £187,063.14. That appears to represent costs claimed of £142,614.35, plus interest and VAT. The figure of £142,614.35 is taken from a ‘DRAFT Claimant’s Bill of Costs’ included within the exhibits to Hale 1, apparently prepared by RWPS at an unspecified date, and said to be a ‘preliminary draft bill and subject to amendment on review of the pleadings, orders and papers which are not presently to hand’.
Hale 2 (which corrected Mr Hale’s evidence to clarify that French & Co had never acted under a CFA) exhibited copies of (i) part of a retainer letter dated 29 August 2005 from Reynolds Williams to Mr Hayes, referring to a willingness to act on a ‘discounted conditional fee basis’ (ii) some standard terms and conditions, (iii) some further terms and conditions said to be applicable to Personal Injury Claims, and (iv) the CFA under which RWPS apparently acted.
None of these documents is signed. The inter-relationship between them is unclear. Ms Delgado submitted that the CFA had been ‘triggered’ as a result of a decision on liability having been made in favour of Mr Hayes in the litigation with GB/CH.
These documents, taken together, state:
Reynolds Williams’ hourly rate will be £100, but also that their ‘basic rate’ will be £200 per hour.
Mr Hayes would only be liable to pay half of the basic rate unless he won his claim. This presumably explains the discrepancy between the figures of £100 and £200 in different documents.
In the event of a win, Mr Hayes would be liable to pay the full basic rate, together with a success fee of 100%. ‘Win’ is defined as follows:
‘Win
your claim for damages is finally decided in your favour, whether by a court decision or an agreement to pay you damages. 'Finally' means that your opponent:
is not allowed to appeal against the court decision; or
has not appealed in time; or
has lost any appeal.’
Turning back to Reynolds Williams’ draft Bill of Costs referred to above, it is notable that the figure of £142,614.35 is (i) based upon an hourly charging rate of £213 (not £100 or £200), and (ii) includes a 100% success fee, both of which would appear to assume that a ‘win’ has occurred. The solicitors’ base costs are, at £213 per hour, stated to be £47,946.30, and the success fee a further £47,946.30. Further sums are claimed for VAT and counsel’s fees.
Hale 2 states at para 4.2 in relation to these (Schedule 2) proceedings ‘The case remains open for remedy hearings to award damages and for the issue of a final injunction’. So far as I am aware there has yet to be any award of damages made in Mr Hayes’s favour. The point was not argued before me, but it would seem questionable whether a win, as defined, has been necessarily triggered so as to require payment of anything other than the discounted fee of £100 per hour. If so, Reynolds Williams’ claim for £95,892.60 (£47,946.30 x 2) would become, I think, a claim for £23,618.87.
There is in any event a further fundamental problem with any claim by French & Co based upon the sums (whatever they might be) supposedly owed under the Reynolds Williams CFA. There is no suggestion that any such indebtedness has been contractually assigned to French & Co.
Absent assignment, the only basis upon which Ms Delgado suggested that sums owed to Reynolds Williams under its CFA might be sums for which French & Co might maintain a claim against Mr Hayes appeared to be the ‘general principle of assessment’ to which Ms Delgado referred in paras 19(i) and 42(i) of her written submissions. As this point would appear to be relied upon equally in relation to legal aid fees, I address it below.
Legally aided fees
Other than the fees owed to Reynolds Williams, my understanding as explained above is that all other fees shown in Schedules 1 – 3 are legally aided, and are owed to Ginn & Co or French & Co.
For ease of reference I repeat the relevant parts of para 19 of Ms Delgado’s written submissions (with my emphasis added):
‘c. All inter party costs orders made are made in favour of the successful litigant despite the fact that it is the litigant’s solicitor who will be entitled to the costs when they are paid.
In order to make good that principle, the solicitor is granted an equitable lien over costs recovered by the client but not paid on to them (Bott and Co Solicitors Ltd v Ryanair DAC [2023] A.C.635), and likewise a direct right of enforcement (such as under section 73 of the Solicitors Act 1974), should the client choose not to enforce.
…
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.
By virtue of regulation 13 of the Civil Legal Aid (Statutory Charge) Regulations 2013: All money payable to or recovered by a legally aided party in relevant proceedings or a relevant dispute, whether under a court order or an agreement or otherwise, must be paid to the legally aided party's provider, and only that provider is capable of giving good discharge for the money.
By extension of the general principle of assessment which prevents a further assessment of a costs order where there has been a failure to include the costs of a previous solicitor benefiting from that order within the bill of costs, the firm currently providing services whether under a legal aid certificate is the firm which must list a former solicitor’s costs separately in a bill of costs and must then recover all monies to distribute whether those relate to costs and disbursements incurred by that firm or previous firm. (As to the general principle see (1) Carl Harris (2) Susan Collete Hartless v. Moat Housing Group-South Ltd [2007] EWHC 3092 (QB) applying Segalov (Deceased), Re (1952) P 241 PDAD)).’
There was also, in the course of oral submissions, a passing reference to the Legal Aid Agency’s statutory charge.
So far as a lien is relevant, is there any Fund in the hands of Mr Hayes?
Before addressing the effect of any lien or charge relied upon it is relevant to question what monies or assets would be subject to such lien or charge, and to note in this context that there is no suggestion that Mr Hayes has recovered any of the costs he has been awarded in any of the proceedings in which he has been involved, and also that he has not yet been awarded, let alone recovered, any damages.
It is also relevant, I consider, to note that it has not been explained whether the estimated sum of £400,000, £300,000 of which would be paid into the CVA if and when received, is a fund that would be regarded as subject to any equitable lien. It is not apparent that if it is paid it should be regarded as recovered as a result of any litigation undertaken by French & Co. It seems to be an expected share of the proceeds of the sale, when it occurs, of Mr Hayes’ former matrimonial home. None of the proceedings referred to in Schedules 1 – 3 seem to me to be likely to fall in this description, being proceedings that related to a bankruptcy petition brought by Carol Hayes against Mr Hayes, and to harassment claims brought by Mr Hayes against CH and GB.
A Solicitor’s Equitable Lien
Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8; [2023] AC 635, is a decision of the Supreme Court, in which it applied the earlier decision of the Supreme Court in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21, [2018] 1 WLR 2052. For present purposes, the relevant element of the decision in Bott is summarised in the headnote as follows:
‘… a solicitor acting for a potential claimant would be entitled to an equitable lien when the solicitor had provided services (within the scope of the retainer with its client) in relation to the making of the client’s claim (with or without legal proceedings) which significantly contributed to the successful recovery of a fund by the client;’.
Most cases dealing with solicitors’ equitable liens relate to situations where a fund (as distinct from orders for costs) has been recovered or protected by reason of the solicitors’ services. It appears however to apply equally where costs are recoverable or recovered from an opposing party: see Khans Solicitor (a firm) v Chama Chifuntwe, Secretary of State for the Home Department [2013] EWCA Civ 418; [2014] 1 WLR 1185.
What is important however in my judgment is the nature of the interest created by an equitable lien. In Gavin Edmonson Lord Briggs JSC explained at [1] - [3] as follows:
‘1. This appeal tests the limits, in a modern context, of the long-established remedy known as the solicitor's equitable lien. In its traditional form it is the means whereby equity provides a form of security for the recovery by solicitors of their agreed charges for the successful conduct of litigation, out of the fruits of that litigation. It is a judge-made remedy, motivated not by any fondness for solicitors as fellow lawyers or even as officers of the court, but rather because it promotes access to justice. Specifically it enables solicitors to offer litigation services on credit to clients who, although they have a meritorious case, lack the financial resources to pay up front for its pursuit. …
Solicitors have, since time immemorial, been entitled to a common law retaining lien for payment of their costs and disbursements. That is an essentially defensive remedy, which merely enables them to hold on to their clients' papers and other property in their actual possession, pending payment. It affords no assistance where there is nothing of value in the solicitor's possession, and is powerless where, in a litigation context, the defendant to the claim pays the judgment debt or agreed settlement amount direct to the solicitor's client, the claimant. But equity deals with that deficiency in the common law by first recognising, and then enforcing, an equitable interest of the solicitor in the fruits of the litigation, against anyone who, with notice of it, deals with the fruits in a manner which would otherwise defeat that interest.
Originally the fruits of the litigation were first identified in the judgment debt. Later this was extended to the debt due under an arbitration award and, later still, to the debt due to the claimant under an agreement to settle the claim. Each of those types of debt was identified as a form of property, a chose in action, in which equity could recognise and enforce an equitable interest in favour of the solicitor. It was called a lien because the chose in action represented the fruits of the solicitor's work. But it is better analysed as a form of equitable charge. Traditionally, the solicitor's interest could not be identified as a beneficial share in the chose, because that would have offended the laws against maintenance and champerty. Rather it was, from the earliest times, recognised as a security interest, enforceable against the fruits of the litigation up to the amount contractually due to the solicitor, in priority to the interest of the successful client, or anyone claiming through him. It did not depend upon the fruits of the litigation including a specific amount for party and party costs, such as a judgment for costs, or an element in a settlement sum on account of costs.’
The interest is therefore a security interest. It would enable French & Co to assert a lien over any sums payable to Mr Hayes by CH or GB. It might enable French & Co to assert a claim to any sums actually paid directly to Mr Hayes despite French & Co’s lien, (or pursue CH/GB if they paid sums to Mr Hayes with notice of French & Co’s equitable lien). It does not in my judgment create a debt enforceable against Mr Hayes to recover sums which have not, in fact, been paid to him. There is no suggestion that any sums have actually been paid over to Mr Hayes. Beyond the £400,000 supposedly likely to be paid following the sale of the former matrimonial home, it is far from clear that any further sums necessarily ever will be paid to Mr Hayes, given that both CH and TH are bankrupt.
The effect of the Civil Legal Aid Legislation
Para 19(g) and (h) of Ms Delgado’s submissions state:
‘g. 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.
By virtue of regulation 13 of the Civil Legal Aid (Statutory Charge) Regulations 2013: All money payable to or recovered by a legally aided party in relevant proceedings or a relevant dispute, whether under a court order or an agreement or otherwise, must be paid to the legally aided party's provider, and only that provider is capable of giving good discharge for the money.
Reg. 13 of the CLA(SC) Regulations does indeed provide as suggested in para 19(h), and Re a debtor (No 68SD97) does indeed hold that a costs order establishes a judgment debt recoverable by the assisted person (in this case Mr Hayes). But in my judgment neither provides, or is authority for the proposition, that that assisted person then becomes, without more, and without himself even receiving any ‘fund’, liable in debt to his own solicitor.
The ‘general principle of assessment’ relied upon; Harris v Moat Housing
The suggested extension to the ‘general principle of assessment’ is relied upon by Ms Delgado, as I understood it, in relation to both the privately funded and the legally aided elements of the Debt. It is said to be supported by (1) Carl Harris (2) Susan Collete Hartless v. Moat Housing Group-South Ltd [2007] EWHC 3092 (QB) applying Segalov (Deceased), Re (1952) P 241 PDAD)).
So far as the legally-aided element of the Debt is concerned, it would appear to amount, in effect, to a contention that where more than one firm of solicitors has been involved in a matter, the solicitor seeking an assessment of costs:
should include the fees of any former solicitors in the bill of costs; and
is under a duty to ‘recover’ all monies to distribute to previous firms; and
is therefore entitled to maintain a claim in debt against its own legally-aided client for those fees, even where the client has never recovered any monies from the paying party.
I do not see any arguable basis for any such extension to the ‘general principle’. Harris, Hartless v Moat Housing, reported as Moat Housing Group-South Ltd v. Harris and another (No. 2) at [2008] 1 WLR 1578 (QBD), is authority for the principle that a receiving party who is entitled to recover the costs of more than one solicitor who has acted for him should, in accordance with para 4.2(2) of the Practice Direction supplementing CPR Pts 43-48, include the costs of all such solicitors in a single bill, or risk not being able to a seek a further assessment of, or recover, the costs that were not included in the bill: see Harris at [33] – [35]. In my judgment neither Harris nor Re Segalov can be regarded, even by extension, as authority for the suggestion that the 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.
The Legal Aid Authority’s Statutory Charge
There was also a glancing reference by Ms Delgado to the Legal Aid Authority’s Statutory Charge, without elaboration. I was not referred to it, but I discovered in the Hearing Bundle a copy of a Legal Aid Certificate relating to Mr Hayes. I note that it says, under the heading ‘Important information about your Public Funding’:
‘Will I have to pay the Legal Aid Agency any money at the end of my case?
You may have to pay the LAA some money at the end of the case because of the statutory charge. You may also have to pay your solicitor some money if your solicitor did work for you not covered by the certificate. If you have any queries about this, your solicitor will be able to explain.
What is the statutory charge?
Civil Legal Aid is a loan. If you gain any money or property or successfully defend it from attack, you will have to repay it. This is the statutory charge. Otherwise, you will not have to repay. You may have to repay the cost up to the total costs.’
I have considered also the Legal Aid Authority’s ‘Statutory Charge Manual’. It states, under the heading ‘What is the statutory charge?’ (my emphasis):
The statutory charge is designed to:
put a legally aided party, i.e. an individual or legal person to whom civil legal services have been made available under Part 1 of the Act, as far as possible in the same position as successful non-legally aided persons (who are responsible at the end of their cases to pay their own legal costs if their opponent in the litigation does not, or is unable, to pay them). The statutory charge is sometimes described as converting legal aid from a grant into a loan (see Davies v. Eli Lilly & Co [1987] 3 All ER 94 at 97 to 98), although care must be taken to avoid viewing it as a debt of the legally aided party;’.
I do not see any basis upon which it can be suggested that the Statutory Charge might create a debt owed by a legally-aided client to the Legal Aid Authority, let alone a debt to his own solicitor, when that client has not received any funds as a result of the litigation.
Returning momentarily to the fees owed on a privately-funded basis to Reynolds Williams pursuant to their CFA, I reject the suggestion that any extended ‘general principle of assessment’ relied on could, if established, possibly effect an assignment of any liability of Mr Hayes under the CFA to Reynolds Williams from that firm to French & Co.
I am very conscious that Mr Hale’s evidence has not been challenged in cross-examination, but for the reasons set out above I find it impossible to accept Ms Delgado’s submissions that it must follow from the principles to which she refers me that French & Co has a claim in debt against Mr Hayes, for which it was entitled to vote in the sum of £631,799.94 (or indeed for £397,224.13 on the assumption that fees owed to RWPS and Ginn & Co are removed from the calculation).
Marckita’s Claim
In view of my conclusion on the French & Co Debt it is unnecessary for me to consider in detail whether a liability said by Mr Parkins to be owed by Mr Hayes to Marckita Limited should have been valued at more than £1, or treated as voted against the Proposal. Objections were made by Mr Parkins to the decision to exclude Marckita’s proof of debt for voting purposes. The debt was described by Mr Parkins (who is a director of Marckita) as follows:
‘In 2017 Marckita became insolvent following the withdrawal of £56,057 by Mr Hayes, and further unexplained and undocumented expenses of £12,991. The Company remains insolvent with trade creditors of nearly £100,000. It also is in deadlock, with Mr Hayes on the board but - in breach of his fiduciary duty - refusing to engage in Company matters.’
The report of the outcome of the meeting records that the claim was “listed at £1 as it is being disputed by the debtor”.
In brief, however, Marckita’s claim against Mr Hayes, if it has one, is based upon unjust enrichment, and prior to adjudication is one for an unliquidated sum: see Hope v Premierpace (Europe) Ltd [1999] BPIR 695 (Rimer J), and Dusoruth v Orca FinanceUK Ltd [2022] EWHC 2346 (Ch). It seems to me that the chairman was correct to value it at £1. Further, even if Marckita’s claim should have been valued at some higher figure, Mr Hayes and Mr Parkins are the only two directors of Marckita, and are 50:50 shareholders in the company. It is deadlocked at board and shareholder level, and no resolution had been passed for Marckita to vote whether in favour of, or against, the Proposal at the time of the meeting of creditors.
Contingent liabilities
There were glancing references in Ms Delgado’s written submissions (see paras 19(k)-(l) and 42(k)-(l)), in the context of the chairman of the meeting’s entitlement to investigate creditor’s claims, to the suggestion that provable debts might include future liabilities, including an obligation to pays unquantified sums due on a contingency. These references were not developed in oral submissions, and I do not consider them of assistance or relevance on the facts of this case. It is unclear to me what ‘contingency’ might trigger any obligation on Mr Hayes to pay fees to the solicitors acting, or formerly acting, for him on a legally aided basis.
Conclusion on material irregularity
In my judgment the various sums comprised in French & Co’s Debt have not been established on the balance of probabilities on this Application. French & Co has failed to discharge the burden of proof. It follows that there was a material irregularity at the meeting of creditors.
Unfair prejudice
In view of the conclusion I have reached on the French & Co Debt in the context of material irregularity it is not strictly necessary that I should consider the alternative ground for the Application, namely unfair prejudice advanced under section 262(1)(b) IA 1986. Given that the matter was the subject of detailed factual submissions I shall address it, below, albeit relatively briefly.
The concept of ‘unfair prejudice’ in this context is not defined by the IA 86. The parties were agreed that the courts have regularly applied two tests, that have become known as the ‘vertical’ and ‘horizontal’ comparators (see Mourant & Co Trustees Limited v Sixty UK Limited [2010] EWHC 1890(Ch); [2010] BCC 882):
The former compares the position of creditors under the IVA with what their position would be had it not happened (i.e., usually, had the debtor been made – or had remained – bankrupt, or sometimes had there been an alternative IVA on different terms).
Even if prejudice is made out under the first test, the court must then go on to consider the horizontal comparator, which is to say the position of creditors as between themselves. The differential treatment of creditors is the touchstone for assessing prejudice, but such treatment is not in itself sufficient.
In Mourant & Co Trustees Limited v Sixty UK Limited Henderson J (as he then was) summarised the earlier decision of Etherton J in Prudential Assurance Co Ltd v P R G Powerhouse Ltd [2007] EWHC 1002 (Ch), [2007] BCC 500, a case regarding a CVA which would have the effect of releasing guarantees in favour of the company’s landlords:
‘67. Having decided that the release of the guarantees could in principle be effected through a CVA, Etherton J then had to consider whether the proposed arrangement was unfairly prejudicial to the interests of the guaranteed landlords. He reviewed the authorities on unfair prejudice, and in paragraphs 71 to 96 of his judgment distilled from them a number of principles which may be summarised as follows:
(a) Any CVA which leaves a creditor in a less advantageous position than before the CVA will be prejudicial to the creditor. The real issue is generally whether the prejudice is “unfair”.
(b) There is no single and universal test for judging unfairness in this context, and the question must depend on all the circumstances of the case, including in particular the alternatives available and the practical consequences of a decision to confirm or reject the arrangement.
In assessing the question of unfairness, a number of techniques may be used, including what may be described as “vertical” and “horizontal” comparisons. A vertical comparison is a comparison between the position that a creditor would occupy and the benefits it would enjoy in a hypothetical liquidation, as compared with its position under the CVA. The importance of this comparison is that it generally identifies the irreducible minimum below which the return in the CVA cannot go. As David Richards J said in Re T & N Limited [2004] EWHC 2361 (Ch), [2005] 2 BCLC 488 at paragraph 82 of his judgment:
“I find it very difficult to envisage a case where the court would sanction a scheme of arrangement, or not interfere with a CVA, which was an alternative to a winding up but which was likely to result in creditors, or some of them, receiving less than they would in a winding up of the company, assuming that the return in a winding up would in reality be achieved and within an acceptable time-scale: see Re English, Scottish and Australian Chartered Bank [1893] 3 Ch 385 .”
(d) A horizontal comparison, on the other hand, is a comparison between the position of the applicant and the position of other creditors, or classes of creditors. The fact that a CVA involves differential treatment of creditors is a relevant factor which calls for careful scrutiny, although it will not automatically render a CVA unfairly prejudicial: see Re a Debtor (No.101 of 1999) [2001] 1 BCLC 54 (Ferris J). In considering the question of differential treatment, it is necessary to ask whether the imbalance in treatment is disproportionate, and also whether the differential treatment may be justified, for example by the need to secure the continuation of the company’s business by paying essential suppliers or service providers.
Applying these principles, Etherton J held that the CVA was clearly unfairly prejudicial to the guaranteed landlords. On a vertical comparison, the landlords were left in a much worse position than in a liquidation, because they no longer had the benefit of guarantees which the parent company was apparently in a financial position to honour. On a horizontal comparison, the non-scheme creditors were to be paid in full under the CVA, while the present and future claims of the guaranteed landlords were to be discharged at a fraction of their value. There was no justification for this difference in treatment.’
The application of such comparisons is often very fact-specific. Mr Parkins’ evidence did not really distinguish between material irregularity and unfair prejudice. In submissions, Mr Parkins identified numerous ways in which he says that the IVA is prejudicial to him.
On a vertical comparison, he says (in very short summary) that:
the fact that Mr Hayes would get to retain £100,000 is something that ‘does not exist outside of IVA, clearly depriving creditors’.
There is no timescale in the IVA for the conclusion of Mr Hayes’ litigation with CH and GB, which has been going on for more than 30 years. The implication of this argument is that a trustee in bankruptcy might bring about a more rapid conclusion of that litigation.
Two companies, Marckita and Quinjo Limited, in which Mr Hayes has interests, are excluded as assets, but would be considered by a trustee in bankruptcy.
In a bankruptcy Mr Hayes would cease to be a director, thus breaking the deadlock at board level in Marckita, which would enable Mr Parkins to liquidate that company and wind up its affairs and the claims of its creditors.
His litigation with Mr Hayes, and any continuing inability to resolve and pursue any orders he has obtained against Mr Hayes, is damaging to him financially, professionally and personally. He referred to the emotional and mental toll on him.
On a horizontal comparison, he says (again in summary) that:
French & Co, the major creditor, will receive payment in the IVA at the end of the litigation with CH and GB, whereas he is deprived by the IVA of even the periodic payments of £200 per month that he was previously receiving.
There are ‘private agreements’ between Mr Hayes and French & Co, which suggest prejudice to other creditors: see Gertner v CFL Finance [2018] EWCA Civ 1781. In this context French & Co should be considered an ‘associate’ of Mr Hayes.
It is exceptionally difficult to reach a conclusion on this alternative limb of the application in circumstances where Mr Parkins has not been professionally represented at the hearings, and none of the evidence, whether that of Mr Hayes or of French & Co, has been the subject of cross-examination.
Mr Parkins is highly critical of the suggestion that all creditors will be better off under the IVA owing to the difference in costs involved by comparison with a bankruptcy. He doubts that the costs of a bankruptcy would be so high. This is impossible for me to take an informed view on. There is also some strength in the contention, on behalf of Mr Hayes, that all the matters relied upon by Mr Parkins as showing prejudice on a vertical comparison are matters that affect all creditors equally, and so are not unfair to Mr Parkins, so that the Court need not move on to consider the horizontal comparison.
I do not consider that it has been established, at least on the evidence available, that there has been an unjustifiable discrimination between Mr Parkins on the one hand, and the other creditors, in particular French & Co, on the other hand. The principal reason for this is that the evidence as to the possible outcomes is wholly insufficient to enable me to do so. There is no information as to when, and in what circumstances, the suggested sum of £400,000 will be received from the proceeds of sale of Mr Hayes’ former matrimonial home, and as to when, if at all, any other sums, from which the various costs orders made in favour of Mr Hayes might be paid, are likely to be realised in the estates in bankruptcy of CH and GB.
It was argued, in support of the submission that an IVA would be much less expensive than a bankruptcy, thus improving the recovery by creditors, that by contrast with the Supervisor, a trustee in bankruptcy would have to pursue proceedings at great expense to recover the sum of £400,000. The basis for this is wholly unclear to me. If the former matrimonial home is in the course of being sold, and Mr Hayes has an unarguable entitlement to a share of the proceeds, then it is unclear what further proceedings would need to be undertaken in order to bring about receipt of that share, whether by the Supervisor or by any trustee in bankruptcy.
I therefore make no finding on the issue of unfair prejudice which, as I said before, it is strictly unnecessary for me to resolve given my findings on material irregularity.
Mr Parkins’ criticisms of the conduct of Mr Duffy
As recorded briefly at paras 23 – 27 above, Mr Parkins is highly critical of the conduct of Mr Duffy in relation to the Proposal and the meeting of creditors at which it was considered. It is appropriate that I should now return to consider whether those criticisms are well-founded. These criticisms go primarily to the issue of costs which will be considered at a consequentials hearing.
I have already 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, 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).
As this judgment makes clear, considering whether French & Co’s claimed Debt was proved beyond a reasonable doubt has been a complex exercise. The question is whether Mr Duffy should have realised that before and at the meeting of creditors, and rejected it for voting purposes.
I shall hear further submissions when I come to consider costs. On balance, however, my preliminary view is that Mr Parkins’ criticisms of Mr Duffy are overstated. Mr Duffy and MD were, as Mr Kingston-Splatt, has submitted:
presented with the supporting documentation which has since been put before the court in relation to the alleged basis of French & Co’s Debts, together with the schedules in relation to them which were prepared by that firm.
That information came from a solicitor of many years’ standing (having been admitted in 1996).
The task of attempting to unpick the basis of French & Co’s purported Debt has taken considerable court time and the court has not found the task to be a straightforward one, even on the ‘more leisurely’ basis of scrutiny which it has the opportunity to adopt. It is unrealistic to expect that Mr Duffy could have performed the same exercise at the time of the meeting of creditors, on, as Mr Parkins puts it, a ‘cursory view’.
Of greatest significance, however, is what Mr Duffy would have done if he had been more doubtful about the Debt. As Mr Kingston-Splatt has submitted:
The obligation of the chairman of a meeting is to determine the extent to which each creditor should be admitted for voting purposes: r.15.33(1) IR 2016. He may admit or reject a claim in whole or part: r.15.33(2) IR 2016. In the event of doubt about whether to admit or reject, the chairman must mark a debt as objected to and allow votes to be cast in respect of it, subject to such votes being subsequently declared invalid if the objection to the claim is sustained: r.15.33(3) IR 2016.
If there had been doubt about the Debts claimed, the only proper course would have been for it to have been admitted for voting purposes, but marked as disputed, so that a later debate about its validity might play out.
The challenge to French & Co’s Debt which has been the subject of this Application would have been inevitable, albeit arrived at by a different route.
Consequential Orders
All parties asked that in the event that I found in favour of the Applicant I should restore the matter for further argument as to what consequential orders should follow, including the appropriate orders as to costs.