Liquidators entitled to costs pre-dating a change of liquidator—Tackie v Morrison

Liquidators entitled to costs pre-dating a change of liquidator—Tackie v Morrison

Where there is a change of liquidator in the course of an office-holder’s claim, does the indemnity principle prevent the new liquidators from recovering costs of the claim relating to the period before their appointment? Cristín Toman of Enterprise Chambers, discusses the appeal of Tackie & Anor v Morrison.

Original news

Tackie & Anor v Morrison [2015] EWHC 3980 (Ch)

What was the background to the appeal, briefly?

This was an appeal from a decision made by the costs judge on a detailed assessment of costs in insolvency proceedings. Mr Morrison was the defendant to proceedings (the preference claim) brought under sections 238–240 of the Insolvency Act 1986 (IA 1986) by the liquidator of ATM Sales Limited.

After commencement of the preference claim, but before trial, the liquidator retired due to ill health and was no longer able to continue in office. New liquidators (the liquidators) were appointed in his place, and were substituted as claimants in the preference claim.

At trial the preference claim succeeded and a costs order was made against Mr Morrison in favour of the liquidators.

At detailed assessment Mr Morrison argued that the liquidators were not entitled to their costs in respect of the period before the change of liquidator. The costs judge rejected this argument, and assessed costs on the basis that the liquidators were entitled to costs pre-dating the change of liquidator and their substitution as claimants.

Mr Morrison appealed to the Chancery Division.

What were the legal issues the judge had to decide in this appeal?

The judge, His Honour Judge Hodge QC, had to decide where there was a change of liquidator in the course of an office-holder’s claim, whether the indemnity principle prevented the new liquidators recovering costs of the claim relating to the period before their appointment.

In his appellant’s notice, Mr Morrison had presented the appeal on the (wrong) basis that the change of office-holder had occurred after the costs order was made, and that the liquidators were attempting to enforce a costs order made before they were party to the proceedings. If these had been the true facts, there would have been a further legal issue as to whether a liquidator can enforce an order for costs made in favour of his or her predecess

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.