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On appeal from: [2013] EWCA Civ 1513

The Supreme Court unanimously held that if Mr Hughes-Holland decides to pursue the appeal, he will not by virtue only of his office as appellant’s trustee in bankruptcy or of his adoption of the appeal be held personally liable for costs of the hearings before the trial judge and the Court of Appeal.

The appellant issued a claim in negligence against the respondents and was £200,000 in damages and his cost paid by the respondents. This was appealed and the damages were reduced to £2 and the appellant was ordered to pay the costs leading up to and including the Court of Appeal. The appellant was then made bankrupt and Mr Hughes-Holland was appointed his trustee in bankruptcy, but on the same day the appellant was granted permission to appeal the Court of Appeal’s ruling.

If a trustee in bankruptcy decides to adopt legal proceedings which were on foot at the time of the bankruptcy, the trustee personally becomes a party to those proceedings in place of the bankrupt. An order for costs may therefore be made against the trustee personally if the proceedings are unsuccessful. Mr Hughes-Holland therefore sought confirmation as to the costs position so that he can decide whether to pursue the appeal.

In delivering the judgment Lord Sumption stated that the Court of Appeal authority Borneman v Wilson (1884) 28 Ch D 53 suggests that a trustee in bankruptcy must either adopt proceedings in their entirety or not at all, even where there are discrete prior proceedings conducted by the bankrupt before his appointment. However, the reasons behind the judgment are no longer relevant as, at that time, the court were not able to award costs against a non-party, including the bankrupt where the trustee had been substituted for the bankrupt. The possibility of proving liability under a costs order against a company in liquidation was recognised by the Supreme Court in 2014. Sumption reasoned that it may be appropriate as a matter of discretion to order a trustee in bankruptcy to pay the other side’s costs of legal proceedings including those incurred before the trustee became a party, but there is no longer any absolute rule to that effect and this case does not concern that discretionary assessment. The appellant was responsible for the entire conduct of the trial and the appeal to the Court of Appeal, and the costs order which was made against him by the Court of Appeal is a provable debt in his bankruptcy. Sumption stated it would be contrary to principle for Mr Hughes-Holland to be held liable for costs in the proceedings below, as this would merely give the solicitors an unwarranted priority for their claim

 

For judgment, please download: [2015] UKSC 39
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII