Burke & Ors v Peabody Construction Ltd [2024] EWHC 392 (Ch)
- 23 February 2024
The case considered an appeal against a decision made by ICC Judge Prentis regarding the allocation of costs in a Company Voluntary Arrangement (‘CVA’) dispute.
The central issue of the appeal was whether the Joint Supervisors should be held jointly and severally liable for the costs of Peabody Construction Ltd from the trial onwards. The lower court had ordered the Joint Supervisors to be jointly and severally liable for these costs, a decision they appealed.
The Joint Supervisors argued that: they were named as parties only in their capacity as supervisors, not in their personal capacities; the general rule was for costs to be awarded against the unsuccessful party and that was the company and not the supervisors; they had a limited capacity in proceedings and there had been no criticism of their conduct; and the judge had erred in placing reliance on their failure to attend a consequentials hearing, and therefore they should not be personally liable for costs.
Peabody Construction Ltd countered with several points, including allegations of misconduct on the part of the Joint Supervisors indicating a lack of independence/neutrality.
The Decision
The appeal was allowed and the order against the Joint Supervisors was set aside. The court determined that the lower court had misdirected itself in concluding that the Joint Supervisors had abandoned their neutrality and adopted a hostile litigation stance. The judge emphasised that the joint representation and the tone of legal arguments did not necessarily indicate a departure from neutrality.
Furthermore, the judge highlighted that personal misconduct is generally required to justify a costs order against a nominee in such cases. The judge found no evidence of such misconduct by the Joint Supervisors.
The decision highlights the importance of demonstrating personal misconduct to justify a costs order against a nominee in CVA proceedings. The emphasis on neutrality and the need for clear evidence of wrongdoing provides guidance for future cases involving the allocation of costs in similar disputes.