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Professional Computer Group Ltd, Re

[2008] EWHC 1541 (Ch)

Neutral Citation Number: [2008] EWHC 1541 (Ch)
Case No: 2714 of 2008
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 04/07/2008

Before :

MR JUSTICE MORGAN

IN THE MATTER OF PROFESSIONAL COMPUTER GROUP LIMITED

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

Ms Marianne Perkins (instructed by Follett Stock) for Professional Computer Group Ltd

Mr Niall McCulloch (instructed by Pitmans) for Mountain Software Holdings Ltd

Hearing dates: 11th, 18th and 21st April 2008

Judgment

MR JUSTICE MORGAN

Introduction

1.

On 21st April 2008, following a contested hearing, I made an administration order in relation to Professional Computer Group Limited (“the Company”) and I gave a judgment dealing with the many points that had been argued before me first at a short hearing on 11th April 2008 and later at an all day hearing on 18th April 2008.

2.

This second judgment deals with certain applications which have been made as to costs following my earlier judgment.

3.

The applications as to costs were argued in the first instance immediately following judgment on 21st April 2008. At that time, it was suggested that the rival submissions made in support of those applications involved important questions of principle and of practice. Accordingly, I invited counsel to make submissions in writing on the matters arising. I have now received detailed written submissions on the applications.

4.

I will not restate all the matters which I dealt with in my earlier judgment. However, to make this second judgment intelligible I will briefly summarise the main points that were then dealt with. In my earlier judgment, I summarised the history of dealings between the Company and Mountain and the claims and cross-claims that had been made. I then referred to the three questions arising: (1) did the court have jurisdiction to make an administration order? (2) should the court in the exercise of its discretion make an administration order or was liquidation more appropriate than administration? and (3) who should be the administrator? I then summarised the relevant legal principles. I next recited the facts as to previous applications to the court in connection with Mountain’s winding up petition in relation to the Company.

5.

I then dealt with the question of jurisdiction which turned on whether there was a real prospect of the purpose of the administration being achieved. That involved a large number of detailed points arising from a comparison of the outcome of an administration with the outcome of a liquidation. In the course of examining the detailed facts, I stated that the sums involved were not substantial but that there was a real prospect of the creditors being better off with an administration rather than a liquidation.

6.

I then considered whether the court should in the exercise of its discretion make an administration order and, in particular, whether the court should decline to do so and instead make an order winding up the Company. That question also required some examination of the detailed facts and, in particular, the facts relating to claims made by Mountain that the conduct of the directors of the Company required to be investigated by a liquidator. I concluded that the right thing to do was to make an administration order.

7.

Finally, I dealt with the question of the identity of the administrator and I appointed the Company’s nominee notwithstanding the objections put forward by Mountain.

The procedural history

8.

My earlier judgment did not set out very much by way of procedural history of the application for an administration order. For the purposes of the various applications as to costs, I need to recite some of the relevant history.

9.

On 28th January 2008, Mountain presented a winding up petition in relation to the Company. On 1st April 2008, the Company made the application for an administration order. The application was made in accordance with rules 2.2, 2.3, 2.4 and 2.5 of the Insolvency Rules 1986 (“the 1986 Rules”). There was a lack of clarity as to whether the application was made by the directors of the Company or by the Company but that is not a point of any substance in relation to the outstanding matters as to costs. The application was served on Mountain in accordance with rule 2.6 (3)(a) of the 1986 Rules. The application was listed to be heard in the interim applications court on 11th April 2008. There was a degree of urgency in relation to the application because of the trading circumstances of the Company.

10.

On the 11th April 2008, the state of the evidence was that there was a witness statement from a director of the Company, a witness statement in response from Group Legal Counsel of Mountain (Ms Challinger), followed by a second witness statement from the director, a witness statement from the proposed administrator and two other witness statements on behalf of the Company. Although the 1986 Rules as amended do not require a report for the court from the proposed administrator, the director’s witness statement in support of the application did exhibit such a report. The witness statement on behalf of Mountain ran to some 15 pages and contained 2 lengthy exhibits. Mountain’s contentions raised many matters of detail as to the consequences of an administration order, the consequences of a liquidation and the suggested need for an investigation into previous actions of the directors of the Company. The witness statement of the proposed administrator, in response to Mountain’s evidence, ran to some 25 pages and in addition there were 7 exhibits.

11.

The application for an administration order came before me on 11th April 2008 in the interim applications court. The Company was represented by Counsel. Mountain was also represented by Counsel. Mountain was entitled to be heard pursuant to rule 2.12(1)(e) of the 1986 Rules. I had been able to pre-read some but not all of the evidence which was to be relied upon. I did not think that the application could be dealt with within the usual time allowed for ordinary interim applications. Both Counsel had prepared skeleton arguments. The skeleton argument of Counsel for Mountain ran to 8 pages and he produced a bundle of 18 authorities. I pressed both Counsel for their estimates of the time needed for the hearing. Both Counsel stated that the matter was suitable to be heard as an ordinary interim application. As the list was heavy on 11th April 2008, the hearing did not begin until mid afternoon on that day. I heard Counsel for the Company for a period in excess of one hour but by that time I was satisfied, notwithstanding the assurances of both Counsel, that it would require a hearing of approaching a day in length to give proper attention to the many points as to jurisdiction and as to discretion which were being argued. Because I had begun hearing the matter on that day, I did not require the Company to go away and start again before a different judge but I arranged for the matter to be adjourned to the earliest date when I was free to continue the hearing and that was the 18th April 2008.

12.

On the 18th April 2008, the evidence was supplemented by 3 further witness statements and a statement from an accountant on behalf of the Company. I had pre-read all of the evidence before the hearing started. Both Counsel had submitted fresh skeleton arguments. The skeleton argument of Counsel for Mountain ran to 20 pages. The hearing took a full day. Indeed, I had to press both Counsel to conclude their submissions in order that the hearing could be completed within the day.

13.

The 18th April 2008 was a Friday and I gave judgment on Monday 21st April 2008, as described above. Various applications for costs were made and argued on 21st April 2008. Those applications have been repeated or modified in the written submissions which have now been made to me.

The 1986 rules

14.

Before describing the various applications for costs, I should refer to rule 2.12(3) of the 1986 Rules which provides:

“If the court makes an administration order, the costs of the applicant, and of any person whose costs are allowed by the court, are payable as an expense of the administration.”

15.

Rule 2.67 of the 1986 Rules states the order of priority in which the expenses of the administration are payable. Rule 2.67(1)(c) refers to the costs of the applicant and of any person appearing on the hearing of the application. Rule 2.67 acknowledges that when the administration order was made the court may have allowed the costs of a person who then appeared but rule 2.67 does not, in my judgment, indicate that any such person has any entitlement to an order for costs on that occasion. Such an order will only be made if the court thinks fit to make it. Rules 2.67(2) and (3) provide for the court in certain circumstances to have power to alter the order of priorities set out in rule 2.67(1).

The applications in relation to costs

16.

The Company has applied for an order that the costs of the application be an expense of the administration. The Company has also applied for an order that Mountain do pay the Company’s costs of the application from the time that Mountain served its evidence in opposition to the application (8th April 2008). As a result of the Company’s application for its costs to be paid by Mountain, the Company’s application for its costs to be an expense of the administration is expressed as relating only to the costs of the application and the initial supporting evidence. However, I interpret the Company’s position to be that if I do not make an order for its costs against Mountain, the Company would wish to have all its costs as an expense of the administration. Indeed, if I were to make an order for the Company’s costs against Mountain, I could still order that the Company’s costs be an expense of the administration but in such a case the Company’s costs which would rank as an expense would be reduced by any recovery of costs from Mountain.

17.

It appears that Mountain does not oppose an order that the Company’s costs of the application be an expense of the administration. Mountain does oppose an order that it bear the Company’s costs from 8th April 2008.

18.

Mountain has its own application in relation to costs. It applies for an order that Mountain’s costs be an expense of the administration in accordance with rule 2.12(3) of the 1986 Rules. That is opposed by the Company.

The Company’s costs as an expense of the administration

19.

I will begin by considering whether to order that the costs of the Company be an expense of the administration. It appears that Mountain does not oppose such an order. I say “it appears” because in the course of some 23 pages of written submissions on costs, Mountain makes detailed submissions as to the way in which the Company made its application and the way in which it filed evidence dealing with points raised by Mountain. However, I understand that these submissions are put forward as relevant to the other applications for costs but not as undermining the Company’s entitlement to its costs as an expense of the administration. In any event, having considered the many points that have been made about the procedural history of the application I see no reason why I should not order that the Company’s costs of the application be an expense of the administration. Such an order will extend to all of the period of the application and not just the period up to 8th April 2008 and is without prejudice to the application I will later consider for an order that the Company’s costs be paid by Mountain.

Should Mountain’s costs be an expense of the administration?

20.

That leaves Mountain’s application for its costs to be an expense of the administration and the Company’s application for costs against Mountain. Plainly, I would not end up granting both of those applications. I could however grant one only of the two applications or I could grant neither application. Normally, I would consider the rival applications as opposing applications, I would consider all the relevant matters together and then decide whether to grant either of the applications, and, if so, which one. However, in this case, it is submitted by Mountain that there are other procedural steps that need to be taken before I could make an order for costs against Mountain. In these circumstances, I will consider the applications separately. I will first consider Mountain’s application for its costs to be an expense of the administration.

21.

I have power to make an order in Mountain’s favour as it requests. Mountain relied on the decision in Re Structures & Computers Ltd [1998] 1 BCLC 292, a decision of Neuberger J. In that case, the court made an administration order. A major creditor of the company had submitted to the court that the company could not show that an administration order would be likely to achieve the purpose of the administration and, in any event, the court ought not to exercise its discretion to make an administration order. The creditor’s opposition failed. However, the creditor asked the court to order that the creditor’s costs should be an expense of the administration. The court acceded to that request. Neuberger J said that such an order was “unusual” where the creditor had unsuccessfully opposed the administration order. However, he thought that that case was itself unusual. It was just to allow the creditor’s costs as an expense of the administration. He referred to three specific matters. The first was that the creditor’s submissions caused him to have considerable doubts as to whether to make an administration order. The second was that those submissions had caused him to make certain observations about the conduct of the administration. He also referred to the facts as “exceptional”. The third specific matter was that the creditor was a major creditor who would bear the majority of any shortfall in that case.

22.

Mountain also relied on Re World Class Homes Ltd [2005] 2 BCLC 1, a decision of Lindsay J. In that case, the court made an administration order. A creditor appeared at the hearing. The creditor did not oppose the making of an administration order but objected to the proposed administrator. The judge did not uphold that objection. The judge allowed the costs of the creditor’s attendance at the hearing as an expense of the administration. The report does not set out any reasons why the judge thought that it was appropriate to make that particular order in favour of the creditor.

23.

In my judgment it would not be just to make an order in favour of Mountain that its costs be paid as an expense of the administration. My reasons are as follows.

24.

If Mountain had not objected to the application, then the court would have made an administration order in this case. On the basis of the material contained in the application and the evidence filed in support, the court would have been satisfied that such an order was appropriate. Such an application would have been dealt with by me in the interim applications court on 11th April 2008. I would have had time to pre-read the necessary material and the hearing on 11th April 2008 would not have been a lengthy one. If the application had not been opposed then the costs of the Company would have been less than they actually have been as a result of hearings on 11th and 18th April 2008 and the giving of a detailed judgment on 21st April 2008. If the Company is able to recover its costs against Mountain, then the extra burden on the company will be removed, at any rate to the extent that it recovers costs on the standard basis from Mountain. Of course, if I felt that this was a case where Mountain ought to bear the Company’s costs, I would not think it was just to give Mountain its costs as an expense of the administration. If I do not give the Company its costs against Mountain, then it follows that Mountain’s unsuccessful opposition has increased the burden of costs on the Company, and as a result, on the creditors.

25.

Mountain was unsuccessful in relation to all of the principal submissions it made in relation to the application for an administration order. As an unsuccessful litigant, it would (in my judgment) require something out of the ordinary to justify an order which would provide for its costs to be paid as an expense of the administration. I would question the suggestion in the Structures & Computers case that merely because the unsuccessful litigant causes the court to have doubts, which it overcomes, about whether to make the administration order is enough of a reason to give the creditor its costs as an expense of the administration. I do not say that Mountain’s points were unarguable or that there was any element of abuse of process. With any properly arguable point, the court needs to consider the point with proper care. With many arguable points, the court may entertain doubts as to the right course to adopt but in the end decides to make the administration order which the company seeks. In the present case, having thoroughly considered the many points made by Mountain in opposition to an administration order, I held that it was right to make such an order for the benefit of the creditors generally.

26.

Mountain also submitted that the submissions it had made had caused me to make certain observations about the conduct of the administration and so the case could be considered to be an unusual one, similar to Structures & Computers. It is true that I drew attention to the passage in the judgment in that case, at page 303, where the judge commented on the duties of the administrator in the course of carrying out the administration. Whilst I thought it was appropriate to refer to that passage, I did not think that the evidence showed that there was a real risk of something going wrong unless I had warned against it. The mere fact that I referred to the comments in the other case does not, in my judgment, make the present case an “unusual” or “exceptional” one.

27.

Mountain also submits that because it is a major creditor of the Company, it will bear a large part of the burden of any order that its costs be an expense of the administration. In my earlier judgment, I described the issues as to the amount owing by the Company to Mountain. Whatever the debt due from the Company to Mountain turns out to be, Mountain is not the only creditor and making an order for costs in favour of Mountain will adversely impact on other creditors.

28.

When giving my reasons for making an administration order in this case, I referred to the fact that the Company had modest assets but that it was still worthwhile making an administration order to improve the prospects of the creditors generally receiving a more advantageous dividend. I have not been told the amount of Mountain’s costs which it wishes to have as an expense of the administration but it seems likely that the impact of such an order on the other creditors will be appreciable.

29.

Standing back from the individual considerations which I have described, it does not seem to me to be just to give to Mountain the benefit of an order that the costs which it has incurred in unsuccessfully opposing the administration order, which I have held was the appropriate order to make, should be an expense of the administration.

30.

In the course of its submissions on the present applications, Mountain raised questions as to how a creditor served with an administration application might respond. As I understand its submissions, Mountain wished to suggest that it would be very unfortunate if a creditor who does oppose an administration application would thereby expose itself to the risk of an order that it should pay the applicant company’s costs. It may be that Mountain’s submissions were not confined to resisting an order for costs against it but that Mountain would wish to rely on those submissions as a reason why, even though its opposition to the administration order was unsuccessful, it should nonetheless receive its costs as an expense of the administration. In my judgment, a creditor who does oppose an administration application should reason as follows. If its opposition succeeds then it has secured the benefit which it wished to secure. It will also in a typical case obtain an order for costs against the company applying for the administration order. If its opposition fails then the creditor should not expect that it will automatically obtain an order for its costs as an expense of the administration. However, an unsuccessful creditor may be able to persuade the court that the facts of the particular case are exceptional and that it is in all the circumstances just that its costs of its opposition to the order should be paid as an expense of the administration. In my judgment, that state of affairs is unlikely to deter a creditor from putting forward reasonable arguments in opposition to an administration application. I will deal separately, later in this judgment, with the cases in which the court might make an order for costs against an unsuccessful opposing creditor.

31.

Mountain also made lengthy submissions about the way in which the Company had conducted the application and time at which it had filed evidence and the length of the hearings. It may be that those submissions are primarily if not exclusively directed at the Company’s application for an order for costs against Mountain rather than Mountain’s application for its costs as an expense of the administration. However, I will comment on those submissions at this stage in case they are put forward as relevant to the application I am now considering. I have considered the extensive detail of the submissions made. In my judgment, the criticisms of the Company are not justified. The Company made its application in a satisfactory way with adequate supporting evidence. It received (on 8th April 2008) shortly before the hearing on 11th April 2008 lengthy evidence from Mountain which the Company properly wished to respond to. I am not surprised that the Company was unable to respond to Mountain’s evidence before 11th April 2008 itself. As regards the substance of Mountain’s evidence, I held in my earlier judgment that the Company had provided sufficiently persuasive answers to it for the purposes of the administration application. Although, it was unrealistic to think that the application could be effectively dealt with on 11th April 2008, it was inevitable that there would be an attendance on that day if only to have the matter ordered to be dealt with as an interim application by order. The attendance on 11th April 2008 had the benefit from the Company’s point of view that the matter in effect went over as an interim application by order to a very early date and, in addition, the Company was able to begin its presentation of the application. I do not think that there is anything in Mountain’s detailed criticisms which makes it unjust to hold that its cost should not be an expense of the administration.

32.

In these circumstances, I decline to make an order that Mountain’s costs of the administration application be an expense of the administration.

The application by the Company that part of the costs of the application be paid by Mountain

33.

I now turn to consider the application by the Company that Mountain be ordered to pay a part of the company’s costs of the administration application. The Company accepts that it cannot claim from Mountain all of the Company’s costs. This is because it would have been necessary for the Company to incur some of those costs in order to make its application even if Mountain had not opposed the making of an administration order. The Company would have incurred the costs of the preparation of the administration application and the costs of presenting it to the court. But on 8th April 2008, the Company received the lengthy witness statement of Ms Challinger and from that time the Company’s costs were significantly increased. The Company asks for its costs from 8th April 2008. Such an order would include the Company’s costs of the attendance on the 11th April 2008. It seems to me that on any view that request for costs goes too far and the Company should not be able to recover that part of the costs on the 11th April 2008 which is represented by the amount of costs that the Company would in any event have incurred in presenting an application unopposed by Mountain.

34.

The Company’s submissions in support of its application against Mountain can be shortly stated. Mountain’s stance in this application significantly increased the burden of costs on the Company. That burden will in due course be borne by the Company’s creditors. Those creditors include Mountain but they are not confined to Mountain. The court has power to make an order for costs against Mountain where it is just in all the circumstances to make such an order. The normal rule in litigation is that costs follow the event. The event here is that Mountain’s opposition to the administration application has failed. The court has rejected Mountain’s submissions and has acted in the interests of the creditors generally. It is therefore just that Mountain pays the additional costs incurred by the Company, as that is in the interests of the Company and of the creditors generally.

35.

Mountain has strenuously opposed the order for costs sought by the Company. Mountain’s submissions are made at great length and I will attempt to summarise the main points.

36.

Mountain points to Rule 2.12(3) which refers to the costs of the Company being an expense of the administration. Mountain suggests that that shows or tends to show that the Company will not be able to receive its costs from anyone else. However, Mountain then substantially concedes the point by accepting that if the Company is otherwise entitled to recover its costs from someone else then the net burden on costs on the Company will be reduced or even eliminated. In my judgment, the words of the rule are not material to the outcome of the application for costs against Mountain.

37.

Mountain then submits that this application is governed by section 51 of the Supreme Court Act 1981. That seems to me to be right. Section 51 gives the court power to award costs against a person who is a party to the litigation or against a person who is not a party to the litigation. Mountain submits that it was never a party to the administration application. It was a person who exercised its entitlement to be heard but it was not a party. Of course, as Mountain itself recognises, whether it was or was not a party is not material to the issue of the court’s jurisdiction to order it to pay the Company’s costs.

38.

What Mountain says next is that because it was not previously a party, it has to be made a party under CPR r.48.2 and it should not be made a party. Further, it says that even if it is made a party under r.48.2, the court should apply the guidelines in Symphony Group plc v Hodgson [1994] QB 179 so that the court should only make an order for costs against it if this case is a sufficiently exceptional case and Mountain was warned in advance that an order for costs would be sought against it.

39.

The purpose of r.48.2 is to lay down a procedure whereby someone who has not previously been a party to litigation is given an opportunity to be heard on an application against him that he pay the costs of that litigation. Mountain was of course entitled to be heard on the administration application itself. When I gave judgment on that application on 21st April 2008, I heard submissions from Mountain as to the appropriate orders for costs. I later agreed with counsel a procedure whereby Mountain would make further submissions in writing and Mountain has done so. Mountain did not originally suggest that it was unable to make these submissions without being a party or that there was a need to make it formally a party under r.48.2.

40.

Because I have power under r.48.2 to join Mountain as a party to the administration application and because Mountain will then undoubtedly be able to make submissions on the application against it for an order for costs, it seems to me that it is unnecessary to lengthen this judgment with a discussion as to whether Mountain has already in effect been treated as a party to the administration application. I will instead consider whether I should now join Mountain as a party under r.48.2. Mountain says in its solicitors’ letter of 26th June 2008 that it resists an order being made under r.48.2 but it does not give any reasons why I should accede to that submission. Given the purpose of r.48.2 and the fact that Mountain has already made oral and written submissions on the application against it for costs, I can see no reason why I should not make Mountain a party forthwith under r.48.2 and I do so. Mountain was invited in correspondence to make any further submissions it wished to make on the application for costs against it and Mountain has stated that it does not wish to make any further submissions. In these circumstances, I can now proceed to deal with the merits of the application for costs.

41.

As to Mountain’s reliance on Symphony Group plc v Hodgson, I do not regard the guidelines in that authority as particularly apposite in the present case. Those guidelines deal principally with a case where there is litigation between A and B, and A (having succeeded against B) wishes to make an application that C, who was not a party to the litigation, should pay A’s costs of defeating B. That is not the present case. In the present case, the relevant costs were incurred by the Company in dealing with evidence given by Mountain and submissions made by Mountain, and by Mountain alone, that the court should accede to the request by Mountain, and by Mountain alone, that the Company’s administration application should be dismissed.

42.

In any event, more recent decisions of the courts, in particular Dymocks Franchise Systems v Todd [2004] 1 WLR 2807, have emphasised that the ultimate question for the court is whether the court thinks it is just to make the order sought.

43.

In his oral submissions on 21st April 2008, counsel for Mountain submitted that an order for costs against a creditor such as Mountain in a case such as this would be contrary to the settled practice of the court. Part of the reason for allowing the parties to make written submissions following 21st April 2008 was to allow Mountain to develop its case as to the settled practice of the court. In the end, notwithstanding the length of Mountain’s written submissions, there was no material put forward to show any such settled practice. Mountain did refer to the transcripts of two cases involving administration applications but the transcripts did not show, one way or the other, what the court (after judgment on the application) was asked to do in relation to costs. Those decisions are of no assistance in the present circumstances. So far as the practice of the court is concerned, I have no material which would suggest that there is any settled practice of the kind suggested by Mountain. In my judgment, the question for me is what is just in this particular case.

44.

Mountain’s submissions then described the detail of the dispute it had with the Company. I referred to that in my earlier judgment on the administration application. It was suggested by Mountain that the Company’s reasons for seeking administration were tactical and it was not inspired by concern for the creditors generally. I am ready to accept that the Company was motivated by a desire to prevent itself being wound up pursuant to Mountain’s petition and that the Company and its directors were, amongst other things, thinking of their own positions. But even that involved the Company and its directors considering whether the Company and its creditors generally would be better off with administration rather than liquidation. In order to make the administration application in this case, it had to be demonstrated that the order was in the interests of the creditors generally. I was satisfied that that was the case. In any event, I reject any suggestion from Mountain that the behaviour of the Company or its directors in relation to the administration application is material to the justice of the application for costs.

45.

Mountain then submitted that it was justified in opposing the application and that its stance was of assistance to the court. I do not say that Mountain did not have arguments which it was proper for it to put. I did find however, that I was not able to accept those arguments and I preferred rival arguments as to what was in the interests of the creditors generally, rather than what Mountain perceived to be its own best interests.

46.

Mountain then submitted that its ability to oppose the administration application and its ability to make such submissions at the hearing of that application were all subject to the control of the court. It is said that it was for the court to stop Mountain making its submissions if it felt that they were not helpful. Since the court did not stop Mountain, the additional burden of costs was placed on the Company by the court’s neglect to intervene and that burden is not attributable to Mountain. I find that submission quite remarkable. Mountain is essentially saying that any fault in this matter lies with the court and Mountain itself is free of any criticism or consequence for the extra burden of costs placed on the Company. This is not the time to consider the powers of the court to restrain prolix or vexatious matters. Mountain does not, of course, allege that its behaviour was prolix or vexatious. In the present case, the court had absolutely no option but to allow Mountain a fair hearing on the many points which it wished to make and which it said would, when fairly considered, lead the court to decide as a matter of jurisdiction or as a matter of discretion not to make an administration order. Despite Mountain’s most unattractive attempt to shuffle off its responsibility for what has happened, I find that Mountain cannot escape the fact that it was its stance which increased the burden of costs on the company and that Mountain ought to have been prepared to accept responsibility for the consequences of that.

47.

Mountain next submitted that its intervention was helpful and that for that reason alone it should not be required to pay the Company’s increased costs. I have dealt with that submission when considering Mountain’s application to have its costs as an expense of the administration. At this stage, I simply state that I do not think that Mountain’s unsuccessful submissions were of a character which should prevent me making an order for costs against it, if I otherwise felt it was just to do so.

48.

Mountain then submitted that an order for costs against it in this case would place creditors who wish to oppose administration applications in the future in an impossible position. If such a creditor were to be exposed to any risk that an order for costs might be made against it, that might influence that creditor not to oppose an administration application and indeed, the court might not have the assistance that was appropriate from the submissions of such a creditor. In my judgment, the answer to that concern is that the court will only make an order for costs against the creditor where the court considers it is just so to order. I can see that there will be cases where even though the creditor’s submissions do not lead to the rejection of the administration application, nonetheless the court feels that the creditor made a worthwhile contribution which was of real assistance to the court. Indeed the decision in Re Structures & Computers Ltd (where the unsuccessful opposing creditor’s costs were allowed as an expense) shows that much. If the court can in an exceptional case allow such costs as an expense of the administration, it can also make no order as to costs but, in my judgment, it can also in an appropriate case make an order that the creditor pay the increased costs of the Company. I hold that there is no fixed rule which says that orders for costs can never be made against an unsuccessful opposing creditor. Instead, the test is whether the court considers it just in all the circumstances to make such an order.

49.

Mountain then submitted that proceedings like the present are not like other kinds of adversarial litigation. Mountain in particular referred to the type of orders for costs that might be made if it had succeeded in defeating the administration application. Mountain also stressed that it was a creditor of the Company so that an increase in the burden of costs imposed on the Company will be felt by it as well as by the other creditors.

50.

I can accept Mountain’s submission to the effect that administration applications are not a typical form of adversarial litigation. But adversarial litigation comes in many different shapes and sizes. Some parties to such litigation are not solvent or have some element of costs protection. If such a party were to succeed in such litigation, and were to seek an order for its costs against the opposing party, it would not be much of an argument for the opposing party to say that if it had won (which it did not) it might have had difficulty in obtaining or enforcing an order for costs against the other party.

51.

As to the point that Mountain is a creditor, it must be remembered that it is not the only creditor and that the court made the administration order in this case in the interests of the creditors generally.

52.

Mountain next submitted that the company’s conduct of the application is to be criticised as wasteful of costs. I have earlier dealt with, and rejected, that submission.

53.

Mountain also submitted that its stance did not increase the costs borne by the Company. I have already rejected that submission also.

54.

Finally, Mountain submitted that it had not been warned that it might be liable for the Company’s costs to the extent that they were increased by reason of Mountain’s unsuccessful opposition. Indeed, Mountain blames the court for not warning Mountain of this possibility.

55.

As regards the suggested need for a warning, in so far as Mountain relies on the guideline to that effect in the Symphony Group plc case, I have already expressed my view that those guidelines are not of direct application in the present different class of case. I have also held that there is no practice to the effect that a creditor can unsuccessfully oppose an administration application and be immune from an adverse order for costs. I therefore do not see it as appropriate that I should lay down a pre-condition that a creditor can only be liable if it has been warned in advance of the possible consequences of its actions.

56.

Having set out the submissions of both sides and indicated my reaction to them, I can now proceed to my conclusion on the application for costs against Mountain.

57.

The question is whether it is just in all the circumstances of the case to make an order against Mountain that it should pay the costs of the Company to the extent that those costs have been increased by the unsuccessful opposition of Mountain. In my judgment, it is just to make that order.

58.

First, the Company’s costs have been undeniably increased by the opposition of Mountain. Secondly, the burden of that increase falls directly on the Company and indirectly on the creditors generally. Thirdly, I made the administration order in this case because I held such an order was in the interests of the creditors generally. Fourthly, I rejected the submissions made by Mountain as to the jurisdiction to make the administration order; that involved a detailed analysis of the many points made by Mountain; I also found that the test as to the existence of jurisdiction was different from the more onerous test contended for by Mountain. Fifthly, I rejected Mountain’s submissions as to the correct exercise of my discretion; I found that the stance urged by Mountain was not in the best interests of the creditors generally. Sixthly, I did not accept Mountain’s nominee as an administrator; indeed, the material in support of Mountain’s nomination had not been sufficiently prepared. Seventhly, the Company’s assets are modest and the burden of the increased costs may be significant. Eighthly, the principle that costs follow the event is generally recognised as an effective way to do justice between the different parties, or the different sides, in litigation. Finally, I have considered the many points made by Mountain but I do not find in those points any sufficient reason to hold that it is just to leave the Company to pay its own costs.

The overall result

59.

I order that the Company’s costs are to be an expense of the administration. I dismiss Mountain’s application for an order that its costs be an expense of the administration. I order Mountain to pay the Company’s costs of the administration application from and including 8th April 2008 but with a reduction to reflect the costs that would have been incurred by the Company on 11th April 2008 for the purpose of presenting an unopposed administration application. For the avoidance of doubt, that order for costs should include the costs of the submissions in relation to the various applications for costs. Such costs are to be the subject of a detailed assessment on the standard basis if not agreed.

Professional Computer Group Ltd, Re

[2008] EWHC 1541 (Ch)

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