On 19^th June 2013, I heard an application by the Applicants, the receivers of the estate of the late Boris Berezovsky, for an order that the court give certain directions to the receivers and conferring certain express powers on the receivers. Prior to the hearing, the parties to the application had communicated at length as to the terms of the proposed order with the result that on 19^th June 2013, the Applicants were able to put before me a draft order which was agreed by the Applicants and by all the active Respondents to the application. I was satisfied that I ought to make an order in accordance with the agreed draft and I did so. However, the parties to the application were not agreed as to what should happen in relation to the costs which had been incurred by the various parties in relation to the application for directions and the grant of further powers. The question of costs was then argued and this judgment deals with the issues arising in relation to the costs of the application.

For the purpose of dealing with the issues as to costs which now arise, it is necessary to set out some of the procedural history in relation to this receivership.

The background to the receivership is the action in which the order appointing receivers was made. That is an action brought by Joint Stock Company “Aeroflot – Russian Airlines” (to which I will refer as “Aeroflot”) as Claimant against a number of Defendants. The first named Defendant was Boris Berezovsky. It is not necessary to describe the issues in that action. It is sufficient to say that the action is a complex one and potentially involves a substantial sum of money.

Boris Berezovsky died on 23^rd March 2013. He left a will, naming five executors. Three of those executors have renounced probate. The other two, more accurately they are executrices, are Ms Gorbunova and Ms Berezovskaya, the First and Second Respondents to this application. Ms Gorbunova is the former partner of Mr Berezovsky. Ms Berezovskaya is one of his daughters. They are both beneficiaries under his will. These two executrices have neither renounced, nor taken out a grant of, probate. No one has applied for a citation requiring them to elect as to whether or not they will take out a grant of probate. Accordingly, since the death of Mr Berezovsky, there has been no grant of probate and no one has been appointed to act as an administrator of his estate.

In these circumstances, Aeroflot applied by application notice dated 18^th April 2013 for the court to exercise its powers under section 37 of the Senior Courts Act 1981 and CPR 69 to appoint receivers of the estate of Mr Berezovsky on the ground that it would be just and convenient to do so. Aeroflot made that application at an ex parte hearing before me on 19^th April 2013. Aeroflot had given short notice of that hearing to certain interested persons and junior counsel appeared on behalf of Ms Gorbunova. Aeroflot had filed a substantial body of evidence in support of its application. The application on 19^th April 2013 was put on the basis that the court had power to appoint a receiver in relation to the estate of a deceased person before the grant of probate or letters of administration where that was needed to protect the assets in the estate. It was submitted that such an application could be made by a creditor of the estate and that Aeroflot was such a creditor. Aeroflot submitted that as there was no pending probate claim, it was not appropriate to appoint an administrator pendente lite pursuant to section 117 of the Senior Courts Act 1981. Aeroflot further submitted that there were good reasons, to do with the urgency of the matter and the nature of the jeopardy to the assets in the estate, why the appointment of an administrator ad colligenda bona would be inadequate. On 19^th April 2013, I could see that I probably had the jurisdiction which was identified by Aeroflot. However, I was very concerned about the scope of the draft order put forward by Aeroflot. It did not seem to me to be an appropriate order for the purpose of appointing a receiver of an estate in order to protect the assets of the estate on an interim basis. The draft order appeared to be an attempt by Aeroflot as the claimant in highly contentious litigation to seek a freezing order against the estate and, further, a freezing order containing very wide further provisions directly affecting third parties and then, in addition, the appointment of a receiver in support of the freezing order. I indicated to Aeroflot the basis of my concerns with such an order and I ruled that I would not make such an order on an ex parte application. I gave directions for the hearing of the application inter partes.

The inter partes hearing of Aeroflot’s application took place before me on 29^th April 2013. On this occasion, the draft order submitted by Aeroflot was radically different from the draft discussed on 19^th April 2013. I then made an order appointing Mr Wood and Mr Hellard, two members of Grant Thornton LLP, as receivers of the estate of Mr Berezovsky. By paragraph 1 of the order, the receivers were appointed:

Paragraph 2 of the order provided that the receivers did not have power to bring, defend or maintain any litigation, save for seeking the directions of the Court in relation to the conduct of the receivership, and did not have power to discharge any debts or liabilities of the Estate. The order continued by including usual provisions as to the keeping of records and accounts, the giving of security and the preparation of a report for the court. I directed that there should be a further hearing in relation to the conduct of the receivership on a date to be fixed. By paragraph 13 of the order, I directed that:

On 6^th June 2013, the receivers made the application which came before me on a number of occasions and which I finally dealt with on 19^th June 2013. By this time, the receivers had appointed solicitors and the receivers were represented by counsel. The application of 6^th June 2013 came before me on short notice on 10^th June 2013. The only Respondents to the application were Ms Gorbunova and Ms Berezovskaya. Ms Gorbunova was represented by leading and junior counsel. The receivers put forward two draft orders which they invited the court to make. The first order, called “the General Powers order” contained a large number of express powers. The draft order also contained mandatory provisions. One such was a draft order that former solicitors of Mr Berezovsky should hold all documents which were the property of his estate to the order of the receivers and should deliver up those documents to the receivers. A second draft order was called “the Advisers’ order”. This draft order also contained mandatory provisions in relation to third parties. In particular, the draft order contained a provision that the receivers should have the power to obtain from Addleshaw Goddard LLP (“AG”), who had acted for Mr Berezovsky in relation to a number of matters, all documents which they had which related to the business and affairs of Mr Berezovsky and that AG should deliver up those documents to the receivers. The draft order also sought a direction that the receivers should have power to take possession of a number of different settlement agreements which Mr Berezovsky had entered into, including a settlement agreement with the persons who are now the Fourth to Seventh Respondents. They are members of the family of Arkadi Patarkatsishvili and I will refer to them as the “AP Family”. Before the hearing on 10^th June 2013, the receivers had been in contact with AG and with Signature Litigation LLP (“Signature”), the solicitors for the AP Family but neither AG nor the AP Family were made respondents to the application of 6^th June 2013.

On 10^th June 2013, the receivers were represented by Mr Atherton QC. He had provided a skeleton argument in advance of the hearing. He explained why the receivers had reached the conclusion that further orders were needed. In his skeleton argument he stated that AG had failed to provide the assistance that might reasonably have been expected by the receivers. He said that substantive assistance from AG had not been forthcoming. He said that if the court made the orders which were sought, AG and others might prove to be “rather less recalcitrant”.

Having read the draft orders in advance of the hearing, I was concerned about the width of the orders sought, particularly in the absence of third parties who were, it would seem, intended to be subject to mandatory orders of the court. It had been submitted to me at an earlier hearing that an interference by a third party with the exercise of his powers by a court appointed receiver would be a contempt of court. It seemed to me to be essential to consider carefully whether to make orders which would directly or indirectly bind third parties and further to consider whether to make such orders on an ex parte application. Further, it seemed to me to be likely that AG would be able to assert a lien for their fees over papers in their possession which belonged to the estate.

A few minutes before coming into court on 10^th June 2013, I was shown a letter written to the court by AG. They said that they had not been served with the application of 6^th June 2013 but had become aware of it. They stressed their readiness to cooperate with the receivers but they wished to express a number of concerns which they had. One concern was that the evidence filed by the receivers in support of the application and served on certain other persons contained material which AG had provided to the receivers on a confidential basis. Further, AG had a lien for its unpaid fees over papers in its possession which belonged to the estate. Yet further, much of the material which AG had which was the subject of the draft order was privileged, the privilege belonged to the estate, that privilege had not been waived by the estate and AG had a duty to assert the privilege of a former client. Finally, AG suggested that the orders sought went beyond what was necessary and proportionate.

At the hearing on 10^th June 2013, I expressed the view to counsel for the receivers that I was not satisfied that it was appropriate for the matter to be heard on short notice only to the named respondents. I further expressed the view that there appeared to be differences between the receivers and AG on the question of the status of the receivers in relation to the estate, AG’s lien, privilege and confidentiality so that I was not prepared to deal with those matters ex parte and in any event I was not prepared to make what seemed to me to be mandatory orders against AG at an ex parte hearing. I directed that the application should be heard on notice to AG, who should be made respondents to it. As a further issue arose in relation to the confidentiality of the settlement made by Mr Berezovsky with the AP Family, I directed that the AP Family should also be given notice of the hearing of the application of 6^th June 2013 so that they could make representations in advance of or at that hearing, as to what was needed in response to the concerns they had about confidentiality. The receivers pressed me to fix a very early hearing of the application. As I was about to start a witness action, I indicated that I would hear the parties at 9.30 on 13^th June 2013 in the hope that all relevant parties could discuss matters before that date and shorten the time needed for a hearing on that day.

On 13^th June 2013, the parties were represented in the same way as they were later on 19^th June 2013, as appears from the beginning of this judgment (apart from Aeroflot who did not appear on 13^th June 2013). AG filed evidence as to its position. I received skeleton arguments on behalf of the receivers and on behalf of AG. The receivers provided a new draft order which was very different from the two draft orders which accompanied the application of 6^th June 2013. Significantly, the new draft order asked the court to appoint the receivers as administrators ad colligenda bona and to allow the receivers to continue to act as receivers. If that were done the receivers would then have two capacities. There was no application notice seeking such an order. At the hearing on 13^th June 2013, the court and the other parties raised a large number of points as to the new draft order. Further, on 13^th June 2013, the receivers submitted that the court in exercise of its supervisory jurisdiction over solicitors should order AG to provide documents to the receivers notwithstanding AG’s lien and a number of authorities were cited in support of that proposition. In their skeleton argument, AG gave notice that it would seek its costs, at least in certain respects. Although the hearing on that day took more than 1 hour, it was obvious that a proper hearing of all the points in play would require a full day’s hearing and that was not possible on 13^th June 2013. I was therefore constrained to adjourn the application to a further date with a time estimate of 1 day.

Late on Friday 14^th June 2013, the parties reached agreement on the terms of a draft order pursuant to which AG were to provide to the receivers copies of settlement agreements which Mr Berezovsky had entered into with various persons including the AP Family. The receivers in return were to undertake to the court in accordance with a strictly drawn confidentiality agreement. On 17^th June 2013, I made an order in the terms of an agreed draft.

The one day hearing of the application of 6^th June 2013 was fixed for 19^th June 2013. By that date, the parties had made further progress in relation to a proposed order. The receivers did not pursue their earlier suggestion that they be appointed administrators ad colligenda bona. On 19^th June 2013, I was able to make a further order in the terms of an agreed draft. The order was a detailed one. It recited that no power conferred by the order should give the receivers power to obtain any property, document or information which a duly appointed representative of the estate could not have obtained and the receivers were not given power to obtain any document subject to legal professional privilege which had not been waived. The powers in relation to documents and other matters were expressed to be powers to “seek to obtain” the same. The order did not contain mandatory orders requiring action from third parties.

What remained to be dealt with on 19^th June 2013 were various issues as to costs. The AP Family filed evidence as to its position, which was said to be relevant to the question of costs. I now turn to consider the various issues as to costs.

It is helpful to divide the various applications which have been made in relation to costs into the following categories: (1) applications for orders that the receivers do pay another party’s costs; (2) applications for costs to be paid out of the estate; and (3) an application by the receivers to be indemnified against orders for costs made against them pursuant to (1) above and in relation to their own costs.

As to category (1) above, AG and the AP Family, as respondents to the application of 6^th June 2013, seek orders that their costs of that application be paid by the receivers. The receivers say that they should not have to pay those costs, alternatively that there should not be an order against the receivers “personally” but that the order should be that the receivers pay such costs out of the assets in the estate. I will have to consider later in this judgment, whether the receivers would be entitled to indemnified out of the assets of the estate in relation to any adverse order against them in relation to the costs of AG and of the AP Family. The receivers do not seek an order that AG and/or the AP Family pay the receivers’ costs of the application.

Also in category (1), but possibly involving different considerations, is an application by Ms Gorbunova for an order that her costs should be borne by the receivers. She couples that with an application that the receivers should not be entitled to indemnify themselves out of the estate against this adverse order for costs. She points out that the combined beneficial interests of herself and her children in the estate amount to some 54% of the estate. If her costs are paid out of the estate, then in substance, she will herself contribute some 54% of that payment.

As to category (2) above, in the alternative to the orders as to costs in her favour as explained in paragraph 19 above, Ms Gorbunova seeks an order that her costs be paid out of the estate. This alternative order is not opposed by anyone.

As to category (3) above, the receivers say that they should not be ordered to pay the costs of AG or of the AP Family but if they are ordered to do so then they should be indemnified against such a liability out of the assets in the estate. Further, the receivers say that they should be indemnified in relation to their own costs of the application. Such orders are opposed by some of the respondents, in particular, by AG.

Aeroflot attended the hearing on 19^th June 2013 but did not ask me to make any order as to their costs although I indicated that if they wished I would expressly keep open the possibility that they could seek to persuade the court dealing with their action against the late Mr Berezovsky and others to direct that their costs of the application of 6^th June 2013 could be included in Aeroflot’s costs of that action.

In some cases, there might not be much practical difference between: (1) an order that a third party do recover its costs against a receiver and that the receiver be indemnified out of the assets of the estate; and (2) an order that the receiver should pay the third party its costs out of the assets of the estate. However, there would be an obvious difference as to the effect of these orders in a case where the estate had insufficient assets to meet the liability. In the first case, the third party is able to look to the receiver for payment. In the second case, the third party will not be paid in full. This distinction might be important in the present case. At the hearing on 19^th June 2013, no one was able to say very much about the extent of the assets in the estate nor whether the estate was solvent.

It may be helpful to make some general points about the position of a receiver appointed by the court. The position of a receiver appointed by the court is in many respects different from the position of a receiver appointed out of court. What follows therefore does not necessarily apply to receivers appointed out of court.

Receivers may be appointed by the court in a wide range of circumstances. The receiver is an officer of the court who derives his authority from the court’s order appointing him. The duty of the receiver is to act impartially in accordance with the directions of the court in administering the property to which the receivership extends: see Capewell v Revenue and Customs Commissioners [2007] 1 WLR 386 at [19] per Lord Walker. A receiver appointed by the court is not an agent or a trustee for the party at whose instance the appointment has been made. In the present case, AG contended that the appointment of receivers to get in the estate of Mr Berezovsky did not make the receivers the agents of that estate. This proposition may not have been initially understood by the receivers but Mr Atherton QC expressly accepted it in his skeleton argument for the hearing on 13^th June 2013.

As indicated above, AG and the AP Family seek orders that the receivers do pay their costs in relation to the application of 6^th June 2013. The receivers say that the court should not so order, alternatively, that the only order for costs that should be made against the receivers is one to the effect that the receivers pay costs out of the assets of the estate so that they are not personally liable for those costs.

It seemed to me at an early stage in the oral argument that it was important to be clear as to the legal principles which I should apply in relation to the applications for orders that the receivers do pay another party’s costs. In particular, was I to apply the usual rule in contentious litigation that costs follow the event or should I only order a court appointed receiver to pay costs if the receiver had been at fault in some way, and if so, what degree of fault was required? As the parties’ submissions on this point of principle changed during the course of argument, I ought to describe briefly how the rival cases were put.

In his skeleton argument served in advance of the hearing on 19^th June 2013, Mr Atherton QC on behalf of the receivers had submitted that the court should not order the receivers to pay the costs personally. He said that the costs being claimed by AG had not been caused by any inappropriate or culpable conduct of the receivers; if they had been culpable then perhaps an order against them personally might be appropriate. Mr Atherton referred to the decision at first instance in Ex p Brown, Suffield v Watts (1888) 36 WR 303 (reversed on appeal on other grounds: see (1888) 20 QBD 693). In that case, the judge gave directions on the application of the receiver. The receiver was at fault in giving the wrong information to the court. This led to a third party applying to the court to vary the directions which had been given. The judge varied the directions and ordered the receiver to pay the costs of the third party “out of his own pocket” and not out of the fund and also to bear his own costs. Accordingly, I understood from his skeleton argument that Mr Atherton was intending to submit that the court should not make a receiver pay a third party’s costs personally, unless the receiver had been culpable in some way. Mr Atherton’s skeleton argument also stated that AG had made their own choice to participate in the hearing in defence of their own interests and that it would be inappropriate for the receivers as officers of the court to bear the burden of their costs.

I invited Mr Crane QC, leading counsel for AG, to address me first on AG’s application for costs, with Mr Atherton to respond to that application. Mr Crane referred to the decision cited by Mr Atherton and appeared to proceed on the basis that an order against the receivers personally required the court to find that they had been culpable in some way. Mr Crane then sought to show that that was the case.

I noted that the decision cited by Mr Atherton was referred to in Kerr and Hunter on Receivers and Administrators 19^th ed., at 8-6. The text states:

Accordingly, I asked Mr Crane whether he accepted that the statement in Kerr represented the law. He said that he did. Mr Atherton intervened to say that he relied on the passage in Kerr and Hunter. I asked counsel to consider whether the matter was described in the same way in Halsbury’s Laws of England, 5^th ed., Vol 88, Receivers, at paragraph 133 where it is stated:

The passage in Halsbury is open to interpretation. It was not clear to me whether it is saying that the general rule that costs follow the event applies to applications made by a receiver against third parties or, conversely, saying that a receiver will only be obliged to pay a third party’s costs of such an application when the receiver is guilty of misconduct or default. The clarity of the passage is not assisted by conflating the liability of a receiver to a third party with the receiver’s entitlement to be indemnified out of the relevant assets. Indeed, the footnotes to this passage, which I have not set out, discuss a yet further question as to when a third party costs order can be made against a liquidator or a receiver when he is acting as the agent of a company which brings unsuccessful proceedings.

When Mr Atherton began his oral submissions, he submitted that where a receiver is a litigant or an applicant, in his capacity as a receiver, and he loses the litigation or the application, then costs follow the event. He cited the decision of Oliver J in Re Wilson Lovatt & Sons Ltd [1977] 1 All ER 274 which deals with the position of a liquidator who initiates proceedings in his own name against a third party and those proceedings are dismissed. The issue was whether the liquidator should be treated like any other litigant so that the general rule that costs follow the event applied and the liquidator should be ordered to pay the costs of the successful party or whether the order should limit the liability of the liquidator to the assets of the company. After reviewing a great deal of authority, which sometimes failed to distinguish between the liquidator’s liability to a third party and the liquidator’s ability to be indemnified out of the assets of the company, Oliver J held that in the case of proceedings instigated by a liquidator in his own name against a third party, the general rule should be that costs should follow the event. Thus, the third party’s entitlement to costs should not be limited to the assets of the company. The judge distinguished the case of a liquidator initiating proceedings in his own name from the case of a liquidator resisting proceedings brought against him. He said at 285e – j:

Mr Atherton stressed the part of that passage which referred to the position where a liquidator is being sued. However, the present case is not one where the receivers are being sued by a third party. Indeed, because of that, I do not intend to comment on what attitude the court should take where a court appointed receiver is sued by a third party and whether the approach in Re Wilson Lovatt & Sons Ltd would be appropriate in such a case.

Oliver J referred not only to the position of a liquidator but also to the position of trustees and personal representatives. The position of trustees involved in litigation with third parties is described in Lewin on Trusts, 18^th ed., at paragraph 21-51. In summary, costs follow the event of such litigation. The position of personal representatives involved in litigation with “outsiders” is described in the same way in Williams, Mortimer & Sunnucks on Executors Administrators and Probate, 20^th ed., at paragraph 68-01.

Mr Atherton did not identify any reason why a receiver appointed by the court should be dealt with in a different way to the way the court approaches a case involving a liquidator or a trustee or a personal representative who initiates proceedings against a third party or an outsider. I conclude that I should treat a receiver appointed by the court in relation to an application made by such a receiver against a third party in the same way as with litigants in these other capacities.

The order made on 29^th April 2013 expressly provided that the receivers were entitled to reasonable remuneration and reasonable costs and expenses properly incurred in the performance of their duties and in the exercise of their powers as receivers. I am not at present dealing with the remuneration of the receivers but only with their right to be paid their costs and expenses out of the assets in the estate. The order expressly limited that right to “reasonable” costs which were “properly” incurred.

The terms of the order reflect the long established position in relation to a receiver’s right to be indemnified out of the relevant assets. The position was authoritatively described by Warrington J in Boehm v Goodall [1911] 1 Ch 155 at 161, in a passage which is frequently cited. In particular, it was set out by Lord Walker in Capewell v Revenue & Customs Commissioners [2007] 1 WLR 386 at [21] where he said:

It is to be noted that Warrington J referred to “expenses properly incurred”. The position has a parallel in the position of trustees. Section 31(1) of the Trustee Act 2000 provides that a trustee is entitled to be indemnified out of the trust funds in relation to “expenses properly incurred by him when acting on behalf of the trust”. This provision replaced section 30(2) of the Trustee Act 1925 which referred to “all expenses incurred”, but the word “properly” was implicit: see Lewin on Trusts at 21-04. These provisions gave statutory force to what would have been the position under the general law. In the context of costs incurred by trustees in connection with litigation, there has of course been a considerable number of decisions over the years which are summarised in Lewin on Trusts at 21-52. That summary is helpful when a court is asked to consider whether the costs and expenses incurred by the trustee, including the cost of complying with an order for costs made against the trustee, were properly incurred.

I will first consider AG’s application that their costs be paid by the receivers. I begin by referring to the facts relevant to this matter which are in addition to the procedural history set out earlier in this judgment.

On 3^rd May 2013, the receivers wrote to AG. They signed the letter “for and on behalf of the estate of Boris Berezovsky (Deceased)”. The letter stated that the receivers were appointed joint receivers of the estate of the Deceased and enclosed a copy of the order of 29^th April 2013. The receivers then asked AG for information falling into a large number of categories. One category referred to certain settlement agreements entered into by Mr Berezovsky and others. The letter acknowledged the “volume of information requested” and suggested a meeting.

On 10^th May 2013, AG replied to the receivers. They quoted the terms of the appointment in the order of 29^th April 2013. They referred to the way in which the receivers had signed the letter of 3^rd May 2013. They said that the receivers were not the agents of the estate but they were the receivers of the estate. They said this distinction was not academic and they sought to explain their view. They referred to the estate’s privilege in relation to documents in the possession of AG. They stated that the information in the letter was confidential. They stated that they did not wish to be unhelpful. They inquired as to the scope of the request for information and suggested that some information could be provided relatively quickly. They suggested that much of the information in the wide categories requested by the receivers was unlikely to be relevant. They then referred to certain settlement agreements and stated that the agreements contained confidentiality clauses binding the estate. They said that it was not for AG to raise any objection as that was for the other parties to the agreements. Finally, they asked for confirmation that the receivers would cover AG’s reasonable costs and expenses in dealing with the request for information, particularly since AG had no client from whom to seek remuneration.

One of the receivers, Mr Wood, telephoned AG on 14^th May 2013. He said that he did not understand the point about agency. He said that the receivers had effectively stepped into the shoes of the deceased. AG explained their understanding of the position. Mr Wood said that the receivers had appointed solicitors who would contact AG. Those solicitors would write to AG and deal with the agency point in their letter. Mr Wood said that the receivers might go to court to get an order extending their powers. AG said that was a matter for the receivers. AG then said that they would await a letter from the receivers’ solicitors. No such letter was in fact sent. Instead, on 3^rd June 2013, the solicitors for the receivers rang AG. AG referred to the conversation with Mr Wood on 14^th May 2013. AG stated that they wished to be helpful but they felt they had to tread carefully. AG explained their view that the receivers did not become vested with the estate property and that their powers derived from the court order. The receivers were not the estate so they were third parties as regards confidentiality, which AG was duty bound to preserve. The receivers’ solicitors then stated that they proposed to go back to court to get appropriate orders including one against AG to hand over documents. They said that they had a draft order which would provide for AG’s costs to come out of the estate and asked whether AG objected to this. AG said that they would need to see a draft order before commenting. The receivers’ solicitors said that they would let AG see a draft order.

As earlier explained, on 6^th June 2013 the receivers made the application for various orders including mandatory orders against AG. AG were not made a party nor shown a draft order with an invitation to them to consent. On 10^th June 2013, AG wrote the letter to the court to which I have already referred.

Following the hearing on 10^th June 2013, AG were made respondents to the application. Mr Hastings of AG served a witness statement dated 12^th June 2013. He commented on the draft orders. He gave detailed information about the matters which AG had handled for Mr Berezovsky. He described the scale of the documentation held, which was massive. He then referred to the position of AG as regards confidentiality, their lien and the breadth of the order sought and the inappropriateness of orders relating to all the documents held by AG.

On 12^th June 2013, the receivers’ solicitors wrote to AG focussing on their desire to obtain a copy of certain settlement agreements. They said that they would apply to the court for the court to order delivery up of some or all of these settlement agreements. Later that day, the receivers’ solicitors wrote again to AG stating that their respective counsel had spoken and that AG would not object to delivery up of the settlement agreements.

In addition to the involvement of AG in the court proceedings which I have already described, they and their counsel were involved in detailed negotiations as to the terms of the orders which were made by agreement on 17^th and 19^th June 2013.

I can now give my reaction to these events, applying the legal principles which I have earlier described. I take the view that AG have behaved properly throughout. They stated that they were willing to cooperate with the receivers, subject to the constraints they were under. Mr Atherton said that AG were just paying lip service to the idea of cooperation. I do not agree. I am not able to detect anything done or not done by AG which would justify that comment. The fact is that AG were subject to constraints and it was proper for them to acknowledge those constraints and explain them to the receivers, which they did. The comments in Mr Atherton’s skeleton argument for the hearing on 10^th June 2013, a hearing for which AG had not been made a respondent, suggesting that AG were being “recalcitrant” were also unjustified.

The points made by AG in their initial response of 10^th May 2013 seem to me to be correct in law; at any rate, Mr Atherton accepted much of what was then said and did not make submissions to the contrary in any respect. Given the draft orders which were placed before the court on 10^th June 2013, which contained provisions of a mandatory nature requiring action by AG, the only possible course for me to adopt was to direct that AG be made a respondent to the application of 6^th June 2013. Further, the mandatory orders against AG sought in those draft orders were not appropriate and they were not in the end pursued by the receivers. The orders which I made on 17^th and 19^th June 2013 were consistent with the position adopted by AG throughout. The order of 17^th June 2013 dealt with the position of the settlement agreements. When the receivers focussed on those agreements in their letter of 12^th June 2013, AG immediately agreed that so far as they were concerned, these documents could be provided to the receivers.

The application of 6^th June 2013 was initiated by the receivers and AG were a necessary respondent to it. For the purposes of this application, AG are third parties or outsiders, to use the language in the statements of principle to which I have earlier referred. AG are not the representatives of the estate. They were being proceeded against because they were in possession of property of the estate but they had their own independent rights (a lien) in relation to that property. Mr Atherton points out that AG did not raise the subject of a lien on 10^th May 2013 although they did raise it in their letter to the court on 10^th June 2013. However, the possibility of AG having a lien for unpaid fees should have been foreseen by the receivers. When the receivers wrote to AG on 3^rd May 2013, they asked if the estate owed AG any unpaid costs. Further, AG were legally obliged to assert the privilege of the estate and the orders which I have made by consent have respected that privilege. The orders sought against them, if they had been granted, would have overridden their rights and duties.

I consider that the above considerations require me to order that the receivers pay AG’s costs of the application of 6^th June 2013. This conclusion relates to the costs of the application and I am not dealing with AG’s costs prior to that application being made.

Mr Crane submitted that I should order the receivers to pay AG’s costs on the indemnity basis. He was very critical of the conduct of the receivers in a number of respects. As is well known, there are two differences between costs on the standard basis and costs on the indemnity basis. The differences are to do with who bears the burden of proving reasonableness and the requirement (on the standard basis) that the costs be proportionate. In my judgment, I should only award costs on the indemnity basis in this case if I thought that the receivers’ conduct of the application was such that they should be deprived of the benefit of the requirement that AG’s costs would be limited to what was proportionate. The requirement that costs be proportionate is a most important one. I do not think that there was anything in the receivers’ conduct which would justify AG recovering costs which were not proportionate. Indeed, I think the reverse. The present is a case where the important policy considerations in favour of limiting recoverable costs to a proportionate amount should be given full force. I conclude that AG should not recover their costs on an indemnity basis.

I have been asked to carry out a summary assessment of AG’s costs. I have not yet heard submissions on the amount of those costs although AG has provided me with a statement of costs. If the parties are unable to agree the recoverable amount of those costs, then the matter can be dealt with at the further hearing which is now scheduled for 18^th July 2013, rather than when I hand down this judgment. In an effort to assist the parties, and in advance of hearing submissions, I can give a provisional indication that the costs which it would have been proportionate for AG to incur in relation to this application would have been modest costs only.

The AP Family seek an order that the receivers pay their costs of the application on the indemnity basis. I will summarise the most relevant communications which took place between the receivers and the AP Family (or their respective solicitors).

On 3^rd May 2013, the receivers wrote to Signature, the solicitors for the AP Family, asking for certain information. On 15^th May 2013, Signature sent a detailed reply. They referred to a settlement agreement between Mr Berezovsky and the AP Family, which contained a confidentiality provision. Signature stated that this provision was subject to any order of the court requiring it to be disclosed to a non-party and that if the receivers were to apply to the court for such an order, the AP Family would not object to such an order subject to a condition requiring the receivers to preserve the confidentiality of the agreement. On 30^th May 2013, Signature wrote again to the receivers referring to the fact that a payment was due from the AP Family under the settlement agreement but subject to certain terms which could only be understood by considering the settlement agreement. The receivers’ solicitors and Signature then communicated with each other on a number of occasions. On 6^th June 2013, the receivers’ solicitors stated that the receivers would agree to keep confidential the settlement agreement when it was provided to the solicitors by the AP Family. However, the draft confidentiality undertaking referred to certain paragraphs in a draft order which was not at that time shown to Signature.

At the hearing on 10^th June 2013, counsel for the receivers submitted that one of the reasons for giving short notice of the hearing of the application of 6^th June 2013 was the urgency in obtaining or safeguarding the payment due to the estate from the AP Family under the settlement agreement. As I was persuaded to order an early inter partes hearing of the application and I was considering who should be made respondents to the application, I directed that the AP Family should be added as respondents as I did not wish there to be unnecessary delay in understanding their position and dealing with it if there continued to be any difficulty in agreeing an appropriate confidentiality undertaking.

On 10^th June 2013, the receivers’ solicitors contacted Signature, reporting on what had happened in court that day. They pointed out that the matter was not intended to be adversarial as regards the AP Family and that the AP Family need not attend the subsequent hearing if the confidentiality provision could be agreed. There were further communications in which Signature indicated it would offer comments on the draft of the orders which were then being sought; these were the General Powers order and the Advisers order to which I earlier referred.

On 12^th June 2013, the receivers’ solicitors notified Signature that at the hearing scheduled for 13^th June 2013, the receivers would seek an order appointing them administrators ad colligenda bona. Signature told the receivers’ solicitors later that day that such an appointment would affect the need for the other orders which the receivers had been seeking. They asked the receivers’ solicitors to agree to adjourn the hearing to enable matters to be progressed by discussion. The hearing on 13^th June 2013 was not adjourned. Following that hearing, Signature sent to the receivers’ solicitors a detailed confidentiality undertaking (based on an order made in litigation between Ms Gorbunova and Mr Berezovsky) and indicated that Signature would agree the same form of undertaking in the present case. That matter was later agreed without difficulty.

I can now give my reaction to these events. Signature on behalf of the AP Family acted properly throughout. They fully cooperated with the receivers’ request for information. They offered to submit to an order requiring disclosure of the settlement agreement subject to a condition as to confidentiality. They made constructive suggestions as to how the matter could be handled. They provided a draft confidentiality undertaking which proved to be acceptable to the receivers. That undertaking was more specific than a simple agreement on the part of the receivers to keep the agreement confidential. Mr Atherton criticised Signature for not proferring the draft undertaking a little earlier than was done. I do not think that there is any real basis for that criticism. The draft could have been proferred earlier but I consider that Signature were reacting quickly enough to events not of their making or under their control.

I consider that the receivers should pay the AP Family’s costs of the application. I refer to the costs of the application as I am not dealing with any costs before the application was made. The AP Family are third parties so far as the receivership is concerned. The receivers instigated an application for an order, in effect, that they were to be entitled to obtain a copy of the settlement agreement notwithstanding the confidentiality agreement in favour of the AP Family. They properly asked the receivers to enter into a confidentiality undertaking. It may be that if the receivers were dealing with the AP Family alone that the matter could have been sorted out without the need for the AP Family to be represented at a court hearing in this matter. However, the AP Family were caught up in the application and the various court hearings. The receivers told me that the application was urgent and a hearing could not be delayed because of the payment due from the AP Family under the settlement agreement. I felt that it was necessary to give the AP Family the opportunity to make representations to the court before orders were made on the receivers’ application. I doubt if the matter was initially urgent on the ground of the payment due from the AP Family. I should mention that Mr Atherton told me at a subsequent hearing that that ground for urgency no longer applied.

Applying the principles which I have earlier identified to the relevant facts, I consider that the receivers should pay the AP Family’s costs of the application. I do not consider that the receivers should pay costs on the indemnity basis. I see no reason why the AP Family should receive more than a proportionate sum in relation to their costs. As with AG, if I am asked to do a summary assessment of these costs, that matter can be dealt with on 18^th July 2013, if it is not agreed. I would expect a proportionate sum in relation to these costs to be modest. To give guidance to the parties, I will indicate my provisional view that it should include a sum for the AP Family being represented at the hearing of the application as I consider that was a necessary expense to which they were put.

Ms Gorbunova’s first application is for an order that the receivers pay her costs of their application of 6^th June 2013. She couples this with a further application that the receivers should not be permitted to indemnify themselves out of the estate in relation to such an adverse order for costs. Mr Legge QC submits on her behalf that the way in which the receivers have gone about this application has resulted in her incurring unnecessary costs, which they should pay. He points to the fact that the combined beneficial interests of Ms Gorbunova and her children amount to some 54% of the estate. Thus, if all that the court does is to direct that she should be paid her costs out of the estate, she and her children will in substance bear 54% of the burden of such an order, whereas all or some of the burden should be borne by the receivers.

Ms Gorbunova is not a third party or an outsider. The starting point is that she should have her costs out of the estate. That remains the starting point even though she and her children have substantial beneficial interests in the estate and part of the burden of the order will fall upon her and them. When I come to consider the receivers’ claim to be indemnified out of the estate, I will take fully into account the criticisms made by Ms Gorbunova and others as to the way in which the receivers have handled the application. If I decide to disallow a right of indemnity in relation to some of the receivers’ costs, that decision will to that extent be beneficial to Ms Gorbunova. I acknowledge that it would be open to me to order that the receivers should pay a part of Ms Gorbunova’s costs (without being indemnified out of the estate) and that the remainder of Ms Gorbunova’s costs should come out of the estate. My conclusion is that substantial justice is done to all parties by: (1) directing that Ms Gorbunova’s costs should come out of the estate; (2) making no direction that the receivers themselves pay any part of those costs; and (3) giving appropriate weight to Ms Gorbunova’s criticisms of the receivers when considering the receivers’ application for an indemnity out of the estate.

The receivers have asked the court to direct that the sums which they will have to pay to AG and to the AP Family and indeed their own costs and expenses in connection with the application should be paid to them out of the assets of the estate. AG have opposed that request. AG are creditors of the estate and it was not suggested to me that they did not have locus standi to put forward submissions on that point. The AP Family have not made submissions contrary to the receivers’ request. As I have explained, Ms Gorbunova has submitted that the receivers have incurred more costs than were necessary.

I have to determine whether the costs and expenses in relation to which the receivers seek an indemnity were reasonable sums properly incurred. It is clear that if a receiver litigates and is not successful that fact does not necessarily mean that the costs of the litigation were not reasonable sums properly incurred: see Lewin paragraph 21-52 in relation to the position of a trustee. Further, the receivers are officers of the court and I am not minded to be hyper-critical of their conduct. I have to bear in mind that the receivers found themselves in difficulties prior to the making of the present application. They considered, I think for good reason, that the receivership had stalled and something major needed to be done to enable it to make progress. However, I think that some of the decisions made by the receivers were unwise and were sufficiently unwise to justify the court in partially withholding a right of indemnity in relation to the costs which have now been run up. I consider that the receivers did not sufficiently acknowledge the substance of the points being made by AG. The receivers persuaded themselves that AG were being recalcitrant. It was unwise to try to obtain the wide ranging orders put before the court on 10^th June 2013. It was, in addition, unwise to seek those orders without making AG a respondent.

In relation to the order for costs in favour of AG, I recognise that some of those costs would have been incurred by the receivers in any event. I will allow that part of the costs but I will disallow an element of the costs to reflect the extent to which AG’s recoverable costs have been increased by reason of the inappropriate conduct of the application by the receivers. It is plainly difficult to assess the right proportion to allow. On the basis that AG’s costs are to be assessed at a modest amount, as I have indicated earlier, then I will allow the receivers to indemnify themselves out of the assets of the estate to the extent of 2/3 of the costs they have to pay AG.

The position in relation to the AP Family is more straightforward. I think it is unfortunate that costs have been incurred as a result of the AP Family being caught up in this application. However, I do not consider it would be right to disallow any sum recoverable by the receivers pursuant to their indemnity in relation to those costs.

As to the receivers’ own costs, I consider that these will have been increased above a reasonable and proper amount as a result of the way in which this application has been inappropriately handled. However, as I have indicated, I would wish to be realistic as to the difficulties the receivers found themselves in and their proper desire to get the receivership moving. Further, they are entitled to a large part of the costs which would have been incurred in any event. I consider that the right response to all the relevant factors is to allow the receivers to recover 85% of their own costs in relation to this application.