Oyston & Anor v Rubin & Anor

Mr David Rubin and Mr Paul Cooper of David Rubin and Partners Limited (DRP (Footnote: ¹ ) ) (the Receivers) were the court-appointed receivers of certain assets belonging to Owen Oyston and Denaxe Limited (the Receivership).

Denaxe Limited (company number 01970661) was known from 17 February 2017 to 24 June 2020 as Blackpool Football Club (Properties) Limited. For around 10 years prior to that it was called Segesta Limited. It is referred to as Blackpool Football Club (Properties) Limited in most of the evidence, but the names Denaxe and Segesta also crop up. I am going to refer to it as Segesta, simply because that is the name used at the original trial of the section 994 proceedings before me back in 2017.

I shall refer to Segesta, together with Mr Oyston, as the Claimants.

The assets over which the Receivers were appointed included shares in Segesta, shares in Blackpool Football Club Limited (BFC), which operates Blackpool FC, Blackpool FC’s stadium (the Stadium) and a hotel (the Travelodge). The Travelodge – as will become apparent – is an asset of particular significance in the matters before me.

The Receivers were appointed by an order dated 13 February 2019 (the Receivership Order) on the application of VB Football Assets (VBFA), by way of equitable execution of a judgment debt owed by the Claimants to VBFA.

In form, there are three matters before the Court:

The Receivers’ application for declaratory relief dated 28 May 2020 under the “liberty to apply” provision of the Receivership Order (the Declaration Application).

The Claimants’ Part 8 claim dated 30 January 2020 for an account and surcharge of the Receivers’ accounts in their receivership of Mr Oyston’s assets (the Claim).

An account of certain further remuneration and expenses incurred by the Receivers in the period since their conditional discharge.

In fact, there is considerable overlap between these three matters, and I propose to consider the many issues in dispute between the parties arising out of these matters in the order set out in Section E below. Before I do so, however, it is necessary to begin with some background.

In paragraph 26 of their written submissions, the Receivers say that the Receivership was discharged before completion of the assignment undertaken by the Receivers. That overstates the case. Certainly, it is true that the Receivers had been appointed to realise all of the Receivership Interests described in the Annex to the Receivership Order and – by paragraph 1(a) of the Receivership Order – were “appointed and entitled” to do so. But the realisations were for a purpose – essentially, to pay the Judgment Debt down to zero – and, once that purpose was achieved, further realisations would require careful justification. Certainly, the Court would not, without more, sanction realisations pursuant to the Receivership Order to no purpose.

I will come to the hearing at which the Receivership was discharged in a moment. For the present, I must consider the position which pertained at that time, and which is set out in the final Report of the Receivers dated 20 December 2019.

The following data is material and – to be clear – I accept its accuracy, which was not seriously challenged by the Claimants:

Realisations amounted to a total of £8,937,544.82. These figures are exclusive of VAT.

Total payments made during the period of the Receivership were £8,936,128.63. Of these payments:

£7,335,774 were distributions to VBFA. There were, in all, four distributions to VBFA, totalling this amount.

The remaining amount is £1,600,354.63, which is Costs. Costs – as I have described in paragraph 12(4) above – compendiously includes “fees, liabilities, costs, expenses and disbursements”. I propose – although the categorisation is perhaps not completely watertight, but it is convenient – to differentiate between:

Fees, that is, the Receivers’ remuneration (including, to be clear, the time costs of DRP, as well as those of the Receivers personally); and

Disbursements, that is, payments or obligations to third parties other than the Receivers and/or DRP.

Amounts outstanding as at 19 December 2019 amounted to £690,161.95. These items include one item of Fees and sixteen items of Disbursements.

Had the transactions concerning the Travelodge completed and the Travelodge lease and Travelodge sale gone through, the Receivers would have realised a further £8,023,366, comprising:

The £7.9 million Travelodge sale price; and

A £123,366 back-payment of rent due from THL at completion of the lease.

More specifically, the Receivers made two Fee payments to themselves in the course of the Receivership: a payment of £510,000 on 17 June 2019; and a payment of £90,000 on 1 October 2019. As at 19 December 2019, a further £360,137.40 was said to be due. These amounts are inclusive of VAT. Accordingly, as at 19 December 2019, their total remuneration was £960,137.40 including VAT or £800,114.50 plus VAT.

The Receivers made distributions totalling £7,335,774 to VBFA, as follows:

A distribution of £70,000 on 4 April 2019 (on the same day as £132,865.50 quarterly rental income was received from THL);

A distribution of £200,000 on 24 May 2019 (on the same day that £291,000 was received for the sale of Residential Properties on Henry Street, Martin Avenue and Bloomfield Road);

A distribution of £6,940,774 on 14 June 2019 (on the same day as £8,200,000 completion funds were received for the Football Assets);

A distribution of £125,000 on 26 June 2019.

As is readily apparent, distributions tended to follow realisations, with some Costs payments intervening between realisation and distribution.

Following a settlement between the Petitioner, VBFA, and the Claimants, on 17 December 2019 Mr Rubin and Mr Cooper were conditionally discharged from their duties, at a hearing originally listed to deal with an application to extend the Receivership.

The Discharge Order, dated 17 December 2019 and sealed on 19 December 2019, provided as follows:

Apart from paragraphs 8, 10 and 16 of the Receivership Order (which I have described in paragraph 12 above), the Receivership Order was discharged at 12:39 on 17 December 2019 (paragraph 1).

The Receivers were to be at liberty to register a caution against the Travelodge in respect of the lien securing the fees, liabilities, costs, expenses and disbursements of the Receivers.

Third party creditors of the Receivership estate were to be paid interest on sums due to them at the commercial rate in their agreement with the entities in the Receivership or – if there was no such rate – at 2% above the base rate from time to time (paragraph 3).

The Receivers were obliged to submit their final account by 16:00 on 20 December 2019 (paragraph 4), which occurred. The final account formed part of the Receivers’ final Report, which I have already referred to.

Provision was made for the release and discharge of the Receivers, but also for the commencement and issue of claims against the Receivers (paragraphs 5 and 6). It is pursuant to these provisions that the Claim is made.

As I have already noted, the Receivers filed their final Report and final account on 19 December 2019.

The Claimants made the Claim on 30 January 2020.

The Receivers are not yet fully released: paragraphs 8, 10 and 16 of the Receivership Order continue in force.

In the period after the Discharge Order, both the Receivers’ time-costs and their legal costs have continued to rise, although realisations have (obviously) not been made. It will be necessary to consider these costs, which I shall refer to as the Post-Discharge

As well as questions relating to the Receivers’ Fees and Disbursements (both before and after the Discharge Order), I must consider the position of third party creditors. Although the Receivers have settled some liabilities from DRP’s office account and some using a loan facilitated by VBFA, I understand that a number of third party creditors remain unpaid, and that interest is accruing on their entitlements at their contractual rates (or at 2% above the base rate if there is no provision as to interest in the relevant contract), pursuant to paragraph 3 of the Discharge Order. The Receivers invite me to deal with the settlement of the account in this regard, and it seems to me entirely right that this matter be dealt with at this hearing. It seems to me appropriate to

A number of matters or issues are controversial between the parties and fall to be resolved in this Judgment. Listing them in the order in which I propose to deal with them, they are as follows:

Issue 1. Whether the hourly rates by way of which Fees of the Receivers are to be remunerated are inclusive or exclusive of VAT. Issue 1 is considered in Section G below.

Issue 2. Whether Disbursements invoiced to DRP, and not to the Receivers personally, are recoverable. Issue 2 is considered in Section H below.

Issue 3. As is common ground between the parties, the Fees are subject to a “cap”. The parties were not, however, ad idem as to how the level of this cap was calculated. This issue, Issue 3, is considered in Section I below.

Issue 4. This issue concerns the question of whether the Receivers can recover Fees and Disbursements incurred during the Receivership but unpaid as at the discharge of the Receivership. Putting the question another way, are the Receivers entitled to claim their Fees and Disbursements out of the Receivership Interests, the Receivership now being discharged pursuant to the Discharge Order? Or are they precluded from doing this, on the basis that, having failed to discharge these Fees and Disbursments out of recoveries made (having instead distributed these recoveries), these are Fees and Disbursements that cannot now be recovered out of the Receivership Interests? This issue is considered in Section J below.

Issue 5. There was a dispute between the parties as to whether certain agents’ costs were recoverable as Disbursements. This issue is considered in Section K below.

Issue 6. This issue concerns whether the Receivers are entitled to have their preappointment legal costs and their Post-Receivership Fees and Disbursements paid. These questions, which I consider to be related, are considered together in Section L below.

Issue 7. Whether there should be a further inquiry or detailed assessment of the sums claimed by the Receivers. This issue is considered in Section M below.

Before I turn to these issues, it is necessary to say something more general about the Receivers’ duties and their performance of them.

In both his written and oral submissions, Mr Collings, QC, laboured the status of the Receivers as officers appointed by the Court and as fiduciaries, owing stringent fiduciary duties in their conduct of the Receivership. He stressed that the taking of an account is a serious and important matter, and that it was for the Receivers both to document the sums that had been and were being claimed as Fees and Disbursements (whenever incurred), and to bear the burden of proving that these Fees and Disbursements were properly incurred.

This was not challenged by the Receivers, and I accept everything that Mr Collings, QC stated in this regard.

However, it is important to note that neither the Declaration Application nor the Claim obliges me to conduct or to order the conduct of a line-by-line detailed scrutiny of the Receivers Fees and Disbursements. The burden of proof on the Receivers does not necessarily require this. Of course, where the materials produced by the Receivers suggests a level of incompetence or dishonesty or some other kind of failure as to warrant a line-by-line scrutiny, the Court will not hesitate to order it. However, such line-by-line scrutiny should only take place when appropriate and proportionate, and will not be directed by the Court automatically or as a matter of course.

In this case, although wide-ranging, the points articulated by the Claimants were directed to certain points, which I have identified in Section E above, and which (with one exception) are capable of a clear and distinct answer, without conducting a line-byline scrutiny.

The exception is Issue 7 which consists of a generalised suggestion on the part of the Claimants that the Fees and Disbursements (whenever incurred) are too high (or excessive, unreasonable or disproportionate – the precise thrust of the attack varied). Of course, such suggestions must be taken seriously by the Court, and I have considered the materials adduced by the Receivers with some care, and specifically in light of the Claimants’ points. Although I address this aspect of the Claimants’ contentions in greater detail in Section M below, it is important that I make clear my general conclusion as to the conduct of the Receivership by the Receivers and by DRP. It is my view that – looking at all of the evidence before me – the Receivership was carefully and prudently exercised and run by the Receivers, and properly documented, both in the Reports submitted by the Receivers to the Court during and at the end of the

Since this conclusion has the effect of framing the more specific issues, which I consider next, it seems to me important that I state it at the outset. As I have noted, I consider the point again, in greater detail, in Section M below.

Paragraph 10 of the Receivership Order refers to the Receivers being paid their Costs in accordance with the terms set out in the December Letter.

For present purposes, the relevant part of the December Letter states:

As is clear, the Fees are calculated by reference to two alternative bases:

Time costs; or

5% of gross realisations.

So far as Fees are concerned, the lower of the two bases applies. Although Mr Collings, QC baulked at the label, it is right to say that the higher basis of charge is “capped” by the lower basis of charge. In this case, the Claimants’ case was that the Receivers’ time costs were higher than 5% of gross realisations, and that the Receivers’ remuneration was therefore capped at 5% of gross realisations. The question before me is precisely how “5% of gross realisations” is calculated and what that figure is in the present case.

I should be clear that there was no suggestion by anyone that if the cap was higher than time costs, it should prevail. Should I conclude that the cap in fact exceeds the time costs of Fees, then only the time costs will be recoverable. Whilst that may be selfevident, it is nevertheless worth stating.

As I have described, realisations were £8,937,544.82 (net of VAT, which seems to me to be the correct figure: recovery should not be inflated because of tax). (Footnote: ¹¹ ) 5% of this sum is £446,877.24.

The Claimants contend that the contract calculates the 5% cap by reference to actual realisations, and that therefore any time costs above this amount are irrecoverable. Thus, according to the Claimants, the cap (in monetary terms) is £446,877.24.

In terms of the Fees to which the cap applies, I should make clear that I do not, in this Section, consider whether the cap extends to:

Time costs incurred prior to the Receivership; (Footnote: ¹² )

Time costs incurred after the Receivership.

If the Claimants are right, then the cap will (even if regard is had only to Fees incurred on a time cost basis during the Receivership) have a significant effect on the recoverability of the Receivers’ time costs. I have set out the Receivers’ Fees in paragraphs 34 and 36 above. In summary, the Receivers made two payments to themselves in the course of the Receivership:

A payment of £510,000 on 17 June 2019; and

A payment of £90,000 on 1 October 2019.

Given the conclusion that I have reached on Issue 1, it is clear that the net figure put forward by the Receivers of £800,114.50 is actually to be regarded as a figure inclusive of VAT. I consider that the cap ought to apply in relation to net fees (this was not, as I understand it, disputed by the Claimants) because the recoveries that define the cap are themselves net of VAT. Accordingly (and I am not making a finding as to the correct figure, but will leave the precise calculation to the order consequential on this Judgment) the net figure is something like £666,762. Clearly, even having regard only to time costs incurred during the Receivership, and on the basis of the hourly rates as they are in light of my conclusion on Issue 1, the cap bites to a significant extent if the Claimants are right.

Indeed, the Claimants – quite logically – say that not only can the Receivers not recover any unpaid amounts above the cap, but that – to the extent that they have received Fees in excess of the cap – such payments constitute improper over-payments, which should be restored as part of the account. Subject to the correct level of the cap being established, I did not understand the Receivers to disagree with this proposition (and it is difficult to see how they sensibly could).

The primary contention. The Receivers’ primary contention was as follows:

The role of DRP and – within DRP, Mr Rubin and Mr Cooper – was to “[a]ct as Court Appointed Receivers over all assets determined by VBFA”. (Footnote: ¹³ ) That was the scope of the services being provided by DRP according to the November Letter; and the December Letter did not alter that position.

As Court Appointed Receivers, the Receivers’ primary function was to realise sufficient of the assets the subject of the Receivership (i.e., the Receivership Interests) (Footnote: ¹⁴ ) in order to discharge the Claimants’ debt to VBFA. (Footnote: ¹⁵ )

The Receivers contended that the cap was defined by reference to the realisations needed to satisfy the Claimants’ debt to VBFA. Mr Phillips, QC referred me to the way in which Counsel for VBFA (Mr Isaacs, QC) had explained the operation of the cap when the application for the Receivership Order was made (to me) on 13 February 2019: (Footnote: ¹⁶ )

The Receivers contended that what I was told, in open court, about the Receivers’ remuneration needed to be taken into account for the purposes of construing the contract and that – in light of what I had been told, as well as the terms used in the contract – “5% of realisations” meant:

The alternative contention. In the alternative, the Receivers contended that:

“5% of realisations” was calculated by reference to the value of realisations actually received plus the value of realisations in relation to assets on which work to realise them had been commenced by the Receivers, but where those assets were not realised because of some intervening event.

Such intervening event would, clearly, have to be something out of the control of the Receivers. Specifically, in this case, the intervening event was the settlement of the debt between the Claimants and VBFA which – as I have described (Footnote: ¹⁸ ) – resulted in both the Claimants and VBFA requesting the Receivers not to proceed with the sale of the Travelodge and in the sale being abandoned by virtue of the settlement and the consequent discharge of the Receivers. (Footnote: ¹⁹ )

Accordingly, by reason of the requests not to proceed with the sale and the settlement itself, (Footnote: ²⁰ ) the sale of the Travelodge never took place, and its value was never realised. However, as I have described,²² significant work was done in seeking to realise the Travelodge asset and it was the

The Travelodge is an asset of substantial value. The sale price that the Receivers had agreed with the intended purchaser was £7.9 million, and the Receivers therefore contended that the 5% cap was calculated as 5% of actual realisations (£8.9 million) plus assets (i.e., the Travelodge) not realised because of some intervening event (£7.9 million), resulting in a cap of c. £840,000 (being 5% of £16.8 million).

I am thus presented with three alternative contentions as to the meaning of the words “5% of realisations”:

The Claimants’ case. The phrase means 5% of the money actually received by the Receivers on the sale of assets forming part of the Receivership Interests.

The Receivers’ primary case. The phrase means 5% of the realisations necessary to discharge the Claimants’ debt to VBFA, as that debt stood at the commencement of the Receivership.

The Receivers’ secondary case. The phrase means:

5% of the money actually received by the Receivers on the sale of assets forming part of the Receivership Interests; plus

5% of the value of assets forming part of the Receivership Interests in relation to which the Receivers have done some work in order to realise that asset or assets, but where the realisation process has been interrupted by reason of some intervening event that is nothing to do with the Receivers.

It is important to stress that I do not regard any of these alternative constructions as involving the implication of a term. The fact is that the word “realisations” is susceptible of multiple meanings and needs to be given a definition. Mr Collings, QC sought to persuade me that the meaning of the word was plain. It meant, he said, “actual realisations”, and that is a phrase that all of us used as a convenient shorthand to describe the Claimants’ case during the course of the hearing. But this phrase is, in itself, only a shorthand. Thus:

“Realisations” has to be translated into a monetary value. In short, the word must be referring to the money received by the realisation of an asset. Otherwise, the 5% cap is impossible to calculate. There has got to be a sum of money by reference to which the amount of 5% can be computed.

It is obvious that there is a temporal element to the definition of realisations. The term could refer (i) to assets the proceeds of which have in fact been received or

In short, although I was referred to the law regarding the implication of terms, I do not need to consider the law in this regard. I am engaged in a process of construction, not implication.

I turn to this process:

It is trite law – as both parties accepted – that a receiver is entitled to recover his remuneration costs and expenses from the assets he or she has been appointed to receive – here, the Receivership Interests and the Sums Receivable. That is so, whether or not the receiver ought to have been appointed in the first place; and even if the order appointing the receiver has been discharged. (Footnote: ²¹ )

There is, however, an important distinction between a receiver’s remuneration costs and his expenses or disbursements. Part 69.7 of the Civil Procedure Rules 1998 ( CPR ) provides as follows:

so directs; and

specifies the basis on which the receiver is to be remunerated.

who is to be responsible for paying the receiver; and

the fund or property from which the receiver is to recover his remuneration.

the receiver may not recover any remuneration for his services without a determination by the court; and

the receiver or any party may apply at any time for such a determination to take place.

the time properly given by him and his staff to the receivership;

the complexity of the receivership;

any responsibility of an exceptional kind or degree which falls on the receiver in consequence of the receivership;

the effectiveness with which the receiver appears to be carrying out, or to have carried out, his duties; and

the value and nature of the subject matter of the receivership.

Paragraph 10 of the Receivership Order makes clear that the Fees are not going to be determined by the Court (although, to be clear, no-one was suggesting that the general supervisory jurisdiction of the court was thereby ousted) but in accordance with the December Letter.

The effect of this is that unless the Fees are recoverable under the contract between DRP and VBFA, there can be no recovery of these Fees. (Footnote: ²² ) That is because, under CPR 69.7(1), a receiver may “only charge for his services” where the basis for this is specified, and the only basis specified is the December Letter (referencing, of course, the November Letter).

As I have described, the December Letter was before me on 13 February 2019, and its effect explained to me by counsel.²⁵ It seems to me that that is an explanation that I must take into account when considering the meaning of the December (and November) Letters. That is because I have ordered that the Receivers’ reasonable fees be paid “in accordance with the terms set out in the

It may, of course, be that the effect of the December Letter was (I have no doubt innocently) misdescribed to me by Mr Isaacs, QC, and I do not go so far as to say that I can rely on an explanation provided in court to override the otherwise clear words of the agreement contained in the December (and November) Letters. But where, as here, there are several plausible constructions of the December Letter, it seems to me that the way in which the operation of the December Letter was explained to me is something that I can and should take into account as a material factor in construing the contract. Mr Isaacs’ explanation is a factor pointing in favour of the Receivers’ primary construction.

Although the Claimants’ construction has a superficial attraction to it, in that it appears simple and easy to apply, that attraction is superficial. This became clear when Mr Collings, QC was making submissions in relation to the Receivers’ alternative contention. Mr Collings, QC submitted that only “money in the bank” could count as realisations for the purposes of the contract and that even if the Receivers had exchanged contracts for sale of the Travelodge before the settlement, but had not completed that sale before the discharge of the Receivership, this could not amount to an “actual realisation”. This contention strikes me as manifestly wrong, drawing an entirely unjustifiable distinction between the conclusion of an agreement for sale and its performance. It seems to me that a construction of the agreement that causes the promised for realisation not to count as a realisation for the purposes of the Fee cap in the contract is an untenable one.

If the “promised for” proceeds of a realisation count for the purposes of the cap – as I consider they ought to, seeking to read the contract in a sensible and commercial fashion – then it follows that “actual realisations” – the Claimants’ contended for construction – no longer works, without some kind of refinement so as to include future or potential realisations. Once this is appreciated, the initial attraction of the Claimants’ construction falls away, and I do not consider it to be a plausible construction of the cap.

Once it is clear that “realisations” must mean more than “money in the bank”, the constructions advanced by the Receivers become much more attractive. It seems to me that the Receivers’ primary construction is to be preferred over the Receivers’ alternative construction. That is because:

Although possible to formulate the trigger for allowing a future realisation to count as a “realisation”, that trigger can (obviously) be framed in many different ways. It could be framed as including only future realisations that had been contractually agreed and were to be performed in the future (as per paragraphs 95(6) and (7) above; or it could be framed as including any attempt at realisation that has involved the Receivers in some work (which is the Receivers’ alternative contention). Of the two, I much prefer the Receivers’ alternative contention, because that provides some link between effort and reward (in the sense that the cap is higher, the more realisations the Receivers attempt), but it would be fair to say that neither trigger clearly and unequivocally commends itself over the other. (Footnote: ²³ )

On the other hand, the Receivers’ primary construction – where the cap is defined by reference to the realisations that the Receivers are obliged to undertake in performance of their duties, i.e., those realisations necessary to discharge the debt owing to VBFA at the time of the commencement of the Receivership – provides a clear and sensible limit to the Receivers’ fees. What, effectively, the contract is saying is that the Receivers should spend whatever time is necessary to perform their duty of realisation, but that they can only recover their time costs up to a sensible limit defined by the value of the assets that must be realised, namely 5%.

It might be asked why the contract refers to “realisations” rather than (as Mr Isaacs, QC did) the “outstanding judgment debt”. On consideration, the reason is clear: the assets the subject of the Receivership were hugely uncertain in terms of their value. Both Blackpool FC and the Travelodge represented, in different ways, very challenging realisations. The range of values attaching to Blackpool FC – as I know from the trial of the original section 994 dispute – was particularly wide. It was, I consider, quite possible for the realisation of the Receivership Interests to achieve less than the debt outstanding to VBFA. (Footnote: ²⁴ ) If so, it would be neither reasonable nor proportionate to set the cap at the level of the “outstanding judgment debt”. In short, if the debt was £20 million, but the realisable assets only worth £10 million, the cap should be £10 million, not £20 million. Thus, if – as was not the case here – the Receivership Interests were worth less than the outstanding judgment debt, that was a risk that was borne by the Receivers. Conversely, if (as did occur) the judgment debt was discharged in some other way, the cap on the Receivers’ remuneration would be unaffected.

For all these reasons, I conclude that the cap in relation to the Receivers’ fees was 5% of the realisations necessary to discharge the Claimants’ outstanding judgment debt to VBFA as at the date of the Receivership (13 February 2019). Since it would appear to be the case that the value of the Receivership Interests exceeds the outstanding judgment debt as it stood at 13 February 2019, the cap is (as Mr Isaac described it) at the level of c. £1.25 million.

If I am wrong, then I consider that the Receivers’ alternative case represents the proper construction of the contract, in which case the cap is – as I have described - c. £840,000.

As I have described in paragraph 34(3) above, the amounts outstanding as at 19 December 2019 – the date the Receivership was discharged – amounted to £690,161.95. These items include one item of Fees, and sixteen items of Disbursements. The element attributable to Fees was £360,137.40. (Footnote: ²⁵ )

The outstanding Fees:

Will need to be re-assessed on the basis of my conclusions as regards VAT: see Issue 1 considered in Section G above; and

Will obviously be subject to the cap that I have described. On my understanding of the figures, and in light of my findings as to how the cap operates (Issue 3 considered in Section I above), these Fees will all fall within the cap.

In principle, therefore, these items all ought to be recoverable by the Receivers. However, the Claimants contend that there should be no recovery of these sum even if the cap does not bite. The Claimants contend that the Receivers’ outstanding Fees and Disbursements should have been recovered out of realisations made during the Receivership, and that if the Receivers have failed to retain sufficient assets to meet these amounts, then they simply cannot be paid (other than pursuant to any indemnity from VBFA).

In effect, the Claimants say that there is a prescribed “order of priority” in the Receivership Order which compels this outcome. The words the Claimants rely upon in the order are those in paragraph 10, which provides that Fees and Disbursements are “to be retained by the Receivers and applied in satisfaction of the Costs prior to any distribution to the Petitioner” (emphasis added).

It is the Claimants’ contention that the effect of these words – in particular the ones I have emphasised – is that the Receivers are only entitled to their Costs (Footnote: ²⁶ ) if they retain these prior to any distributions to the Petitioner. This construction would require the Receivers to ensure that all Costs were paid out of realised assets, and to postpone any distribution until those expenses and disbursements have been discharged.

The construction of paragraph 10 of the Receivership Order does not quite incentivise the Receivers to get in all of the Receivership Interests, discharge outstanding Costs, and only then distribute. But it does mean that the Receivers must be be extremely cautious and conservative in making distributions, if the Receivers want to be confident

Thus, in the present case, to take a concrete example, the Receivers should have retained the realisations from the Football Assets so that they could discharge expenses incurred later in relation to the realisation of the Travelodge, which (in the event) never occurred.

In effect, the Claimants’ contention implies a later distribution to VBFA than would otherwise occur. It creates a powerful disincentive against early distribution.

The Receivers contended that this is not the correct construction of the Receivership Order, and I am satisfied that the construction contended for by the Claimants is not the correct one. I conclude that there is no “priority effect” of the sort contended for by the Claimants, and that the Receivers can recover their Costs (that is, the Fees and the Disbursements as described above) even if they have distributed the recoveries that they have made.

I have reached this conclusion for the following reasons:

It is important to begin with the general position. Generally speaking, receivers have a lien – for their remuneration and expenses and to secure their right of indemnity – over assets subject to the receivership order appointing them, whether or not these assets are in their hands. This lien survives the receivers’ discharge. (Footnote: ²⁷ )

The Court in Mellor v. Mellor rejected submissions that a receiver “should have taken the apple while it was in his grasp” (Footnote: ²⁸ ) and rejected the contentions that a receiver had no right to be paid out of assets over which he or she was appointed but which had never reached his or her hands nor to be paid his or her remuneration post-discharge, when the assets were out of his or her hands. The Court held that if that were the case, it would have the counterproductive effect of incentivising the receiver to commandeer assets for his/her own benefit as soon as he/she took office in case the appointment should be short-lived and to maintain a possessory lien over assets at the end of the receivership should he or she remain unpaid. (Footnote: ²⁹ ) That is precisely the concern that I have articulated in paragraphs 98 to 105 above.

Of course, it is no doubt possible to abrogate the lien, and preclude the Receivers from having or enforcing it. But it seems to me – whilst no doubt possible (something on which I say nothing more) – that the lien is something that is so fundamental to the operation of the Receivership that it would require clear language in the Receivership Order to abrogate or eliminate it. That is both because of the need to encourage practitioners to make themselves available for difficult assignments such as this; and to avoid the perverse incentives of commandeering assets that I have just referred to.

There is no such clear wording in this case. Indeed, the Discharge Order, in paragraph 2, states that “[t]he Receivers shall be a liberty to register a caution against the property Travelodge, Seasiders Way, Blackpool FY1 6JJ in respect of the lien securing the fees, liabilities, costs, expenses and disbursements of the

Furthermore, as I have indicated, the Claimants’ construction leads to perverse incentives in the operation of the Receivership. Assets are got in and recovered; but the Receivers are incentivised against distributing to the Petitioner for fear of being unable to pay the Costs – and not only their own time-costs, but also thirdparty creditors. If this was the intention of the Receivership Order, it would require singularly clear expression.

That brings me to the wording of the Receivership Order itself. I begin with paragraph 9 of the Receivership Order, which provides:

So, the Claimants’ construction of paragraph 10 runs in the face of the express wording of paragraph 9. For the Claimants’ construction to be right – and, as I say, I am satisfied that it is not – clear language would be required. The language is clear, but I consider that it points in diametrically the opposite direction. Paragraph 10 is not a (rather perverse) priority provision, but a facultative provision, making clear that the Receivers may – indeed, should – so far as consistent with their duties of getting in and distributing the Receivership Interests so as to repay the debt to VBFA owed by the Claimants, retain amounts due for fees, liabilities, costs, expenses and disbursements and apply the sum retained in satisfaction of those expenses “prior to any distribution” to the Petitioner.

Properly construed, paragraphs 9 and 10 mean that the Receivers should satisfy outstanding Costs from the realisations when these are received, and make payments of the net sum to the Petitioner as soon as reasonably practicable, with any further Costs incurred in the ongoing Receivership to be discharged out of future receipts from the Receivership Interests or Sums Received in the ongoing Receivership; or, in this case, where the Receivership is discharged, by enforcement of the lien over the Receivership Interests – here, specifically, the Travelodge.

In short, the Receivers have conducted themselves exactly in accordance with the Receivership Order, and I reject the contention that the outstanding Costs cannot be recovered. They can, and should be, and (given the delays and the accruing interest) this needs to happen in short order, at least so far as the third-party creditors are concerned.

I have particular regard to the third-party creditors, who clearly need to be paid promptly. I did not understand the Claimants to be advancing any other ground for not paying these creditors. Indeed, the fact that the Claimants’ “priority” argument meant that these creditors would be unpaid (absent payment from either the Receivers personally or VBFA, the Petitioner) is a further clear pointer that the Claimants’ construction of the Receivership Order is incorrect.

The November Letter provides:

This is very clear. Whilst – ordinarily – such costs would naturally be regarded as

The matter does not, however, end there. The December Letter provides (with emphasis added):

The change is not particularly clearly flagged in the December Letter, but I am satisfied that the objective wording of the December Letter must be given effect to. The unambiguous meaning of these words is that, whereas under the November Letter, DRP was bearing the costs of all agents out of its Fees, the regime so far as agents for the residential properties were concerned would change, with their fees being paid for out of realisations. In other words, so far as residential agents were concerned, the position described in the November Letter was being changed back to the position that would ordinarily pertain, namely with these costs being paid for out of realisations. On the face of it, no change was made to the concession regarding the payment out of Fees of the costs of the non-residential agents.

Mr Phillips, QC, sought to contend that the contractual intention was different. The reference to “realisations” was in fact intended to be a reference to “fees”. As a result, the true construction of the change wrought by the December Letter was to retain the position of residential agents being paid out of fees, but to alter the position so far as non-residential agents was concerned, so that the concession made in the November Letter was effectively narrowed so as to exclude non-residential agents.

I am quite prepared to accept that Mr Phillips, QC was accurately describing the thinking of DRP and the Receivers. But absent a claim for rectification (which again, has not been made, and which I am not encouraging), the contractual wording is unambiguous. I do not see how I can properly read “realisations” to mean “fees”, when the use of the word “realisations” makes perfect sense.

Accordingly, the Receivers cannot recover the costs of non-residential agents as Disbursements, although they can recover residential agents’ fees. As I have indicated to the parties, precisely what falls within and without the definition of “non-residential agents’ fees” is a matter that I will – if necessary – debate at a consequentials hearing, the parties having by then the benefit of this Judgment so as to enable them to finally resolve (and set out in an order) the issues between them. But I should make clear that I do not regard Hilco’s costs as falling within this class. Mr Cooper has explained that Hilco were instructed for a fixed sum of £100,000 plus VAT and expenses to conduct the marketing and sale of Blackpool FC’s business and assets. Mr Cooper summarises the work Hilco did (including creating sales and marketing materials, marketing the assets, and assisting with due diligence including by managing a due diligence room for the sale). I raised with Mr Collings, QC, in the course of submissions, whether he was contending that Hilco’s fees were “non-residential agents’ fees”, and he confirmed that this was not the Claimants’ contention. Accordingly, I did not hear much argument on the point, but it seems to me that Mr Collings, QC is right, given the nature of the services rendered by Hilco in the sale of a complex set of assets like the Football Assets.

So far, I have only been considering the questions of Fees and Disbursements incurred during the course of the Receivership. Here at issue are sums incurred either side of this period, either before the Receivership began or after it was discharged by the Discharge Order.

It will readily be appreciated that the recoverability of these items raises rather different considerations from the recoverability of Fees and Disbursements incurred during the course of Receivership. Although these costs arise on different temporal sides of the Receivership, what they have in common is that they were not incurred during the Receivership, and for that reason are considered together in this Section. Nevertheless, the analysis will begin with the pre-receivership costs.

There was some debate between the parties as to when, exactly, the Receivership commenced. The Claimants placed considerable weight on the mismatch between the making of the Receivership Order on 13 February 2019 and the sealing of that Order on

As has been described to me, the Receivers incurred legal fees (payable to SH and to counsel) prior to this date, and the question is whether these are recoverable. The starting point is (again) paragraph 10 of the Receivership Order, which provides that Costs (defined as per paragraph 12(4) above) are to be paid in accordance with the terms set out in the [December Letter]. The wording of paragraph 10 strongly suggest that Costs are future costs (“shall be entitled…to be paid…”), but it seems to me that if the December Letter (and, of course, the November Letter referenced in that letter) clearly provided for the recovery of pre-Receivership Costs, then those costs would be recoverable as “Costs”.

But neither the November Letter nor the December Letter in any way suggests that costs pre-dating the appointment of Mr Cooper and Mr Rubin as Receivers are recoverable pursuant to the terms of those letters. To the contrary, the November Letter states:

It seems to me, therefore, that there is nothing in either the Receivership Order or the December Letter (read so as to embrace the November Letter) to provide any basis for the recover of pre-Receivership costs (or fees – but these are not claimed).

Nor can the Receivers rely on any general proposition of law. As I have noted, (Footnote: ³⁰ ) a receiver is entitled to recover his remuneration costs and expenses from the assets he or she has been appointed to receive – here, the Receivership Interests and the Sums Receivable. That is so, whether or not the receiver ought to have been appointed in the first place; and even if the order appointing the receiver has been discharged. Whilst that general proposition extends to costs incurred after the discharge of a receivership, (Footnote: ³¹ )

In my judgment, the Receivers can identify no basis for the recovery of their preReceivership costs, and these cannot be recovered.

I should be clear that I am not referring to Fees or Disbursements incurred during the course of the Receivership but unpaid at the discharge of the Receivership. These, as I have described, are recoverable for the reasons I have given.

What I am here concerned with are the costs – both in terms of Post-Discharge Fees and Disbursements – that have been incurred since the Receivership was discharged by the Discharge Order. These sums are, on any view, very substantial, amounting to some £550,000. (Footnote: ³² )

It was the Receivers’ primary contention that their Post-Discharge Fees and Disbursements were not Costs within paragraph 10 of the Order nor covered by the December (and November) Letters. Rather, it was contended that these costs were recoverable as costs relating to the administration of the Receivership under the principle articulated in Glatt v. Sinclair. (Footnote: ³³ ) Accordingly, these costs were not “Costs” as defined in the Receivership Order, and were not “Fees” or “Disbursements” as I have defined them.

The Claimants disputed this, and contended that these costs were “Costs” as defined in the Receivership Order, and therefore were “Fees” or “Disbursements” as I have defined them. In making those point, the Claimants placed particular reliance on the fact that, under CPR 67.7, the Receivers’ could only recover their fees if the Court so directs, specifying the basis for such remuneration.³⁷ Thus, according to the Claimants, the Receivers could either recover their Post-Discharge Costs as Costs under paragraph 10 of the Receivership Order or not at all.

This dispute matters – or may matter, depending on the significance of my conclusions on Issue 3 – because on the Claimants’ case the cap on Fees applies, whereas on the Receivers’ case it does not. As to this:

It seems to me that the Receivership Order and the December (and November) Letters are most naturally construed as applying only to Costs as they arise during the course of the Receivership. That is because it would be unreasonable to subject Post-Receivership Costs to a cap that was intended to ensure a limit on the

Accordingly, although the point is not clear-cut, the better view is that the Receivers’ Post-Discharge Fees and Disbursements are recoverable independently of the Receivership Order and the November and December

I do not consider that there is anything to the point made by the Claimants regarding CPR 67.7. One of the points of the Declaration Application was to obtain certainty in relation to the recoverability of Post-Discharge Fees and Disbursements. In short, by the Declaration Application, I am being invited to make an order regarding the Receivers’ Post-Discharge Fees and Disbursements, and (for the reasons I have given) I am prepared to do so.

That leaves the question of the basis on which the Receivers are to be remunerated. It seems to me – and the Receivers did not contend otherwise – that the basis for the calculation and the recovery of the Receivers’ Post-Discharge

Neither the Claimants’ submissions, whether written or oral, nor the evidence adduced by the Claimants stooped to particularity in terms of a detailed analysis of the Receivers Costs, using that term to embrace all of the costs items considered in the course of this Judgment.

What was said, in essence, was that the costs were “too high” and therefore warranted a closer consideration, ideally by a Costs Judge. The closest the Claimants came to any specificity was in a report on legal expenses, produced for the Claimants, by a Mr Christopher McClure of The John M Hayes Partnership Limited, a firm of costs lawyers and law costs draftsmen.

In his report, Mr McClure provides his opinion on the reasonableness of the legal expenses incurred by the Receivers, in particular in relation to SH, although his report is by no means limited to SH’s costs. His conclusion was that:

My opinion is the most appropriate forum for the parties to make their submissions on costs, and for the Court to make a determination on those issues, would be the costs assessment process outlined at CPR Part 47. There are principally two reasons for this.

Firstly, it would provide the [Receivers] with an opportunity to justify the reasonableness of the legal expenses claimed through the means of a detailed bill of costs. This would necessitate the provision of thorough descriptions of all work undertaken by [SH] and Teacher Stern (Footnote: ³⁴ ) in order to support the time claimed. In turn, the Claimants would then be in a position to make an informed judgment as to the reasonableness or otherwise of the costs claimed and, where appropriate, question any aspect of the expenses claimed by way of points of dispute. In response, the [Receivers] would be at liberty to serve formal replies to the Claimants’ points of dispute if so advised.

And secondly, in the event that costs cannot be agreed between the parties then the matter would be placed before a Costs Judgewho, in possession of the [Receivers’] file of papers (which, according to this process, are filed with the Court in readiness for the assessment hearing) and with the assistance of oral representations from the parties, would then conduct a line-by-line assessment of the reasonableness – CPR 44.4(3) refers – of all items in dispute inter partes by reference to the bill of costs, points of dispute and formal replies thereto.

The intended outcome of this process is to ensure that the Claimants’ liability for costs extends only to a sum that is reasonable – no more, no less – as required by the [Receivership Order], whether by agreement between the parties or upon assessment by a Costs Judge.”

I am in no doubt that there should be no detailed assessment of the Receivers’ Costs (whether legal costs or otherwise, and whether during or after the Receivership), but that the Costs and Disbursements as identified by the Receivers should be recovered by them, in full (subject to the very limited concessions made during the course of this process), pursuant to the lien that they have over the Receivership Interests. (Footnote: ³⁵ ) I have reached this conclusion for the following reasons:

The process that Mr McClure describes is – if not explicitly, then at least implicitly – the process by which the costs of a successful party in litigation before the Courts (i.e., the party with a costs order in his or her favour) are assessed if they cannot be agreed. On a number of occasions, I mentioned to Mr Collings, QC that if this was “ordinary” litigation between Party A and Party B, there could be no question but that I would send the costs off for detailed assessment. The point I was making to Mr Collings, QC was that the present was a very different case, where the Receivers were entitled to have their costs out of a specific fund (the Receivership Interests), unless I was not satisfied that those costs were properly incurred – the burden, I accept, being on the Receivers – in which case I would either disallow those particular costs or – in a less clear cut case – put in place some further mechanism for a “line-by-line” analysis of the Receiver’s Fees and Disbursements (whether during the Receivership or PostDischarge).

My point was that this is a completely different case from the one envisaged by

So, my starting point for the recoverability of fees and disbursements, to include litigation costs, is very different from that contended for by the Claimants. Mr Collings, QC sought to contend that this was not the general position by reference to Millett J’s decision in Re MC Bacon: (Footnote: ³⁷ ) but this is a case where the Judge found that the costs sought to be recovered from the estate were not expenses “properly incurred in the winding up” and that the litigation commenced by the liquidators was to this extent at their own risk. The liquidators were, quite simply, not permitted to be paid out of assets the subject of a floating charge. That is not this case.

Of course, I accept that the Receivers cannot simply put forward a figure for their costs, even if it looks reasonable, and require that it be paid. Their costs must be justified, and (as fiduciaries) they will be held to a high standard when making that justification. It is here that I must draw – in response to the general allegations of excess and unreasonableness made by the Claimants – on the findings that I have made in Section F above. The Receivers have produced a vast amount of material in support of the Fees and Disbursements that they claim. That material begins with the very detailed Reports (together with voluminous exhibits and annexes) which the Receivers submitted to the Court during the course of the receivership. Beyond this, I have the multiple statements of Mr Cooper, one of the Receivers, and the detailed narrative bills of the various lawyers involved.

I am satisfied that – although high – the Receivers’ costs are justified, and that there is no call for further, line-by-line assessment. In paragraph 20 of his report, Mr McClure stated that “[w]hilst the ledgers supplied in relation to work undertaken to [SH] go further in their descriptions than do those of Messrs Teacher Stern, in many instances they still do not go far enough. The following examples serve to illustrate the inadequacy of some of the descriptions provided when held against the time spent/costs claimed…”. Mr McClure then provided five examples, numbered (a) to (e). Mr Phillips, QC took me through two of these examples, and I am satisfied (i) that if one goes beyond the bare descriptions into the other documentation already provided by the Receivers, far more detail emerges, and (ii) that in the light of such detail, the costs claimed are justified. Mr Phillips, QC cannot be accused of cherry-picking: he expressed a willingness to go through each and every instance cited by Mr McClure, but I considered that this was unnecessary. The fact is that the Claimants have raised no serious case regarding the Receivers’ Fees or Disbursements. Although, as I have said, the burden rests on the Receivers, where the Receivers’ claims are properly documented and on the face of that documentation justified as reasonable and proportionate, it is incumbent upon the Claimants to explain why this is not so, and raise at least a prima facie case for further investigation. This the Claimants have not done.

In Brook v. Reed, (Footnote: ³⁸ ) David Richards J (sitting in the Court of Appeal) described the guiding principles that ought to inform the Court when considering the remuneration of appointees like receivers. The list contains some obvious matters, which I have already considered, namely that it is for the receiver to provide full particulars of his or her claim, and to justify that claim, the burden being on the receiver and doubts being resolved against him or her. That is the approach I have followed, although I have also paid regard to the third factor – the professional integrity of the receiver. I confirm that I have had regard to the other matters set out by David Richards J in this paragraph. As I have stated, I consider the Receivers’ costs to be fair and reasonable in light of the complexity of the Receivership and the issues that the Receivers have had to deal with. In terms of proportionality, the value at issue is undoubtedly high, and I expected – but have seen – documentation of a high order of specificity and proper detail. If a further exercise – other than the line-by-line analysis contended for by the Claimants – had suggested itself (and none was put forward) I would have considered it on its merits. But my view is that I would take a lot of persuading to require the Receivers to engage in significant further work in justifying their costs, given the work that has already been done in this regard. To be clear, I do not consider such further work to be proportionate.

I have set out my conclusions on the issues before me, and do not repeat those conclusions here. As I have described, the issues before me and which I have determined were more in relation to the true meaning basis of the Receivers’ remuneration and cost recovery under the Receivership Order, the Discharge Order and the November and December Letters. There may be minor points of controversy that remain to be resolved, and I indicated during the hearing that I was alive to the possibility of this.

I am going to invite the Receivers to put together a draft order dealing with all matters arising out of the Declaration Application, the Claim and the account for further remuneration, and to submit that draft to the Claimants for their agreement and/or comment. Whilst I would very much hope that substantial agreement can be reached in light of this Judgment, I will list the matter for further hearing in the next three weeks, so that any outstanding matters, not capable of agreement, can be resolved then.

Finally, for the sake of completeness, there are two secondary points advanced by the Receivers, which are academic in light of my conclusions, but on which I should say a few words. The Receivers contended that I could reach the same outcomes in their favour either by varying the Receivership Order under the liberty to apply contained in paragraph 16 or else correcting the Receivership Order under the “slip” rule. Neither of these points arises, given the conclusions I have stated, but I should briefly say that I would have been disinclined to take either course.

It is extremely difficult to see how any of the matters on which I heard argument could be determined by reference to the “slip” rule. I simply do not see how that jurisdiction could have been exercised.

So far as variation of the order is concerned, I accept that (under CPR 3.1(7)) I have a broad jurisdiction and/or a broad discretion, but the circumstances in which that discretion can be exercised has clearly been laid out in a series of cases, beginning with Tibbles v. SIG plc, [2012] EWCA Civ 518, and further elucidated in Optis v. Apple, [2021] EWHC 131 Pat); Allsop v. Banner Jones, [2021] EWCA Civ 7; and Neurim Pharmaceuticals (1991) Ltd v. Generics UK Ltd, [2021] EWHC 530 (Pat).

In this case, I would have been most disinclined to vary the Receivership Order under CPR 3.1(7). There is no change of circumstance to point to, and (although perhaps not a final order in the absolutely strict sense) the Receivership Order is much more “entrenched” than an “ordinary” interlocutory order. I can see no basis for varying the Receivership Order under CPR 3.1(7).