The Insolvency and Companies Court ordered a director to pay a creditor’s costs personally following a failed pre-pack administration application, holding that IR 2016 rule 3.4 does not prevent personal costs orders where the director knowingly misled the court.
Where an administration order is made, the court retains a discretion as to the quantum of the applicant’s costs payable as an expense of the administration, notwithstanding the terms of rule 3.12(2) of the Insolvency (England and Wales) Rules 2016. This discretion is derived from section 51 of the Senior Courts Act 1981, paragraph 13(1)(f) of Schedule B1 to the Insolvency Act 1986, and is engaged by the application of CPR r.44.2 via rule 12.41 of the Insolvency Rules 2016. [30-34, 36]
The general rule that costs follow the event applies to administration applications, and the court may treat a party who successfully opposes the applicant’s proposed course of action and secures the appointment of its preferred administrators as the successful party for the purposes of CPR r.44.2. [36, 38-39]
A personal costs order may be made against a director who made an administration application on behalf of a company, notwithstanding rule 3.4 of the Insolvency (England and Wales) Rules 2016, where the director is found to be the ‘real party’ conducting the litigation for his own personal benefit and in a manner involving misconduct. [54-55]
The costs of a winding-up petition, including the costs of hearings adjourned pending the determination of an administration application, may be ordered to be paid as an expense of the administration under rule 3.12(2) of the Insolvency (England and Wales) Rules 2016 where the court thinks it fit to do so. [25]
Costs incurred by an insolvency practitioner whilst acting as an interim manager may be treated as pre-administration expenses payable under rule 3.52 of the Insolvency (England and Wales) Rules 2016, provided a sufficiently direct and appropriate connection is demonstrated between the work carried out and the achievement of the ultimate administration. [26-27]
