The High Court has refused Danske Bank’s application to make a personal insolvency practitioner pay the bank’s costs of successfully setting aside an extension of a debtor’s protective certificate.
In a judgment delivered on 8 June 2016, Ms Justice Baker said a costs order against a practitioner was possible in principle, but should be made sparingly and only in exceptional circumstances. She concluded that ordering Tom Murray, the practitioner in this case, to pay the costs would not serve the interests of justice.
The costs application followed an earlier ruling setting aside an extension granted to James Nugent on 10 February 2016. The extension had been granted ex parte. In the earlier judgment, the court found, among other matters, that the debtor had failed to make full and frank disclosure. Mr Nugent was later adjudicated bankrupt, and costs had already been awarded against him in favour of Danske Bank. That order was not opposed.
The bank argued that the practitioner should also pay because practitioners occupy a central role in personal insolvency applications, prepare and present the paperwork, and have a duty of frankness to the court. It said that full disclosure would have prevented the extension from being granted.
Baker J treated Mr Murray as a non-party for the costs application: he had no personal interest in the outcome, and the orders under the insolvency legislation affected the debtor, not the practitioner. The court considered principles governing costs against non-parties, including whether they had a financial interest in or control over litigation and whether imposing costs would be fair.
The judge said the practitioner’s role carried a demanding obligation of frankness and trust. She found no reason in principle why costs could not be ordered against a practitioner in a suitable case, while emphasising that such jurisdiction should be used exceptionally.
In this case, the substantive ruling had clarified the role of practitioners in a relatively new statutory scheme, at a time when there was little superior-court guidance. Mr Murray had no personal benefit to gain from the application, and practitioners’ fees were modest, the judge said.
Baker J found that Mr Murray had not sufficiently examined the debtor’s investments and projected income and capital. His approach to the financial circumstances was cursory and did not adequately engage with assumptions in a two-year-old Ernst & Young report. However, she was not satisfied that he had been fully informed by the debtor about some relevant matters, and considered that the shortcomings arose from insufficient engagement rather than bad faith. She said primary blame lay with the debtor, whom she described as an experienced businessman.
The court therefore refused Danske Bank’s application for costs against the practitioner. The judgment did not disturb the earlier order setting aside the protective-certificate extension or the costs order already made against the debtor.