Non-party costs order made against directors of an insolvent company: Re MPB Developments Limited
Re MPB Developments Limited [2025] EWHC 1291 (Ch)
It is often said that non-party costs orders are to be regarded as “exceptional” orders.
But this only means that a non-party costs order is not made “in the ordinary run of cases” and the only immutable principle is that the jurisdiction must be exercised justly: MPB Developments at [13].
In MPB Developments, the applicants successfully obtained a winding up order against the company on the (unusual) basis that the company was balance sheet insolvent: see [2025] EWHC 198 (Ch). They then sought a non-party costs order against the directors of the company that had caused it to defend the winding up petition, in circumstances where the company would not be able to pay the costs of the petition in addition to the petition debt of £57.2 million plus interest.
Where a non-party costs order is sought against a director or shareholder of an insolvent company, the relevant principles are set out in the guidance of the Court of Appeal in Goknur Gida Maddeleri Enerji Imalet Ithalat Ihracat Tiracet ve Sanayi AS v Aytacli [2021] 4 WLR 101 at [40] – [41]. The touchstone is whether the director causing the company to defend the petition was the “real party to the litigation”. That may be demonstrated by showing that:
- The director was seeking to benefit personally from the litigation; or
- There is some other reason why it would be just to make a non-party costs order, usually found in evidence of impropriety or bad faith on the part of the director in connection with the litigation.
In the MPB Developments case, Mrs Justice Joanna Smith found that:
- The directors were acting in their own interests rather than in the interests of the company by causing the company to defend the Petition, including by seeking to leverage a settlement agreement that was in their personal interests and by continuing to receive their directors’ salaries whilst the litigation was ongoing.
- The directors acted with impropriety, at least in the sense that they were pursuing a highly speculative defence of proceedings when they had no genuine belief in the solvency of the company.
The directors of the insolvent company were therefore found to be the “real parties” to the litigation and the Court made a non-party costs order.
The MPB Developments judgment demonstrates that the non-party costs jurisdiction will be exercised in appropriate cases. Parties litigating against insolvent companies should carefully consider if this provides a route to successful recovery of costs against those controlling the company. Consideration should be given to this possibility at an early stage of the proceedings as the non-party should ordinarily be warned of the likelihood of a non-party costs application at an early stage before the main trial.
Tim Matthewson was instructed by Kingsley Napley LLP to act for the successful applicants.
Supreme Court hands down judgment in Waller-Edwards v One Savings Bank
The Supreme Court handed down judgment today in Waller-Edwards v One Savings Bank plc, providing clarification about the circumstances in which a bank is “put on inquiry” that a mortgage has been procured by undue influence. Where a lender is put on inquiry, the lending and any associated mortgage may be set aside unless the bank can show that steps have been taken to ensure that the borrower is aware of the nature of the transaction and has received legal advice on it.
In the well-known cases of Barclays Bank v O’Brien [1994] 1 AC 180, CIBC Mortgages plc v Pitt [1994] AC 200 and Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773, the House of Lords considered cases in which it was alleged that a person had entered into a loan for the benefit of their spouse (or other person with whom they were not in a commercial relationship) as a consequence of undue influence or misrepresentation. They held that the lender would be put on inquiry where it appeared to the lender that the loan was not for the benefit of the person who was subject to the undue influence or misrepresentation, i.e. they were acting in substance as a surety or guarantor. On the other hand, where the loan appeared to the lender to be joint borrowing for the benefit of both spouses, the lender would not be put on inquiry.
Ms Waller-Edwards was found by the County Court judge to have entered into a £384,000 remortgage transaction with One Savings Bank plc as a consequence of the undue influence of her partner, Mr Bishop. The bank understood that the loan was to be used for the purchase of another property for the couple and to pay off an existing mortgage debt. As a condition of the lending, it required Mr Bishop’s car loan of £25,000 and credit card debts of £14,500 to be paid off. Consequently, from the perspective of the bank the lending was a hybrid transaction: it was partly for the joint purposes of Ms Waller-Edwards and Mr Bishop but about 10% of the lending was for Mr Bishop’s sole purpose. In fact, unknown to the bank, after paying off the first charge, Mr Bishop used the loan to make a payment to his ex-wife.
The County Court held that the bank was not put on inquiry by the fact that an element of the loan was understood to be used to pay off debts in Mr Bishop’s sole name. This was upheld in the High Court and Court of Appeal. The Supreme Court, however, allowed Ms Waller-Edwards’ appeal. It held that a creditor is put on inquiry in any non-commercial hybrid transaction where, on the face of the transaction, there is more than a trivial element of borrowing which serves to discharge the debts of one of the borrowers and so might not be to the financial advantage of the other.
Joanne Wicks KC was instructed by David Prideaux of Solaris Law and appeared with Antonia Halker of Lamb Chambers for the bank.
Judgment handed down in Re Petrofac Ltd
On 20 May 2025, Mr Justice Marcus Smith handed down judgment in the matter of Re Petrofac Ltd [2025] EWHC 1250 (Ch), sanctioning a major restructuring plan under Part 26A of the Companies Act 2006. Daniel Petrides acted for the Retail Investor Advocate at both the sanction hearing and the convening hearing ([2025] EWHC 859 (Ch)).
Landlord required to repay hundreds of thousands of pounds of unlawfully charged insurance commissions to tenant
London Trocadero (2015) LLP v Picturehouse Cinemas Limited [2025] EWHC 1247 (Ch)
Criterion Group – the landlord of c. £4bn of property in central London – has been required by Mr Justice Richards to repay hundreds of thousands of pounds of overcharged insurance rent to one of its tenants, Picturehouse Cinemas.
Jonathan Seitler KC and Benjamin Faulkner acted for the successful tenant and were instructed by Julie Gattegno and Sally Tang at CMS.
Most commercial leases will provide for the landlord to insure the building, and then recharge the costs of insurance to its tenants as ‘insurance rent’, usually in accordance with their respective floor areas.
However, a practice has developed whereby landlords ask their insurers to pay the landlord’s brokers heavily inflated commissions, which the brokers then pass on to the landlords. The insurers commensurately increase the premium they charge the landlords, and the landlords pass to cost of that increased premium to their tenants. The result is that the insurers get the same net premium they always would, the brokers get the same remuneration they always would, but the tenants pay more for the same insurance, leaving the landlord to pocket the commission for nothing.
Criterion has engaged in this practice for years, sometimes earning commissions of 60%, and pocketing more than £1m a year, all at the expense of its tenants.
In this judgment Mr Justice Richards held that Criterion was not entitled to do so under the terms of the lease. He also held that Picturehouse was entitled to claim back insurance rent that was overpaid as a result in restitution.
This decision – although not breaking new legal ground – will be of real interest to commercial landlords and tenants, as it sheds light on a practice about which many tenants will be completely unaware. It paves the way for other tenants to enquire if their landlord has been earning commissions in such a way, and whether the terms of their lease do not permit such practices.
The Times have written an article, discussing the implications of this case, entitled ‘Landlords warned they may need to pay back insurance commission sums’, which you can read here.
Ben Faulkner has done a short video, going into it in more detail, which can be found here.
Court gives liquidators permission to bring US$216m claim against Pramod Mittal
Mitchell, Dowers, Plunkett & GSH Ltd v Pramod Mittal [2025] EWHC 934 (Ch)
The joint liquidators of Global Steel Holdings Limited (in liquidation) (“GSHL”) have been given retrospective permission pursuant to s.285(3) of the Insolvency Act to bring High Court proceedings against Pramod Mittal, who remains a bankrupt.
The application concerned claims totalling US$216 million against Mr Mittal, alleging fraudulent trading and breach of fiduciary duty, including the improper transfer of funds to family members after the imposition of a worldwide freezing order. The claims centre on the transfer of debts owed by a Nigerian subsidiary of GSHL to GSHL’s parent company and the subsequent payment of some US$180m to the parent company. A substantial proportion of these funds were then transferred, via Swiss accounts, to members of Mr Mittal’s family.
The joint liquidators argued that their claims were substantial and needed resolution in ongoing proceedings, rather than through the proof of debt process in bankruptcy. One aspect of this argument was the potential application of the rule in Cherry v Boutlbee as Mr Mittal’s trustee in bankruptcy has filed a substantial proof of debt in the liquidation. The Mr Mittal opposed, citing procedural delays, alleged prejudice to creditors, and his inability to fund a defence.
Deputy ICCJ Shaffer granted retrospective permission for the proceedings, finding:
- The claims were genuine and not clearly unsustainable.
- The proceedings were best resolved within existing litigation, not via the proof procedure.
- No unfair prejudice to other creditors would result, as the claims needed to be quantified and determined, particularly if Cherry v Boultbee was of application.
- The delay in seeking permission was justified and caused no prejudice.
- Mr Mittal’s claimed impecuniosity was not sufficient reason to refuse permission, given evidence of available resources.
Graeme Halkerston, instructed by Charles Russell Speechlys, appeared for the joint liquidators.
Judgment handed down in Titanium Capital Investments Limited v Jonathan Hughes [2025] EWHC 682 (Ch)
Judgment was handed down by Mr Justice Richards on 20 March 2025, following a 3 week trial, in a case arising from a two partner partnership founded in the teeth of the pandemic to sell Covid tests for profit. A dispute arose because one partner dissolved the partnership and, days later, founded an (ostensibly) new business also selling Covid tests. One partner claimed that the partner who started the “new business” should account for profits including an extremely lucrative contract to sell Covid tests to the Danish government.
The partner who dissolved the partnership claimed this “new” business was nothing to do with the former partnership at all and also claimed that his partner had made a secret profit behind his back during the period of the partnership.
The partners advanced claims against each other for breach of fiduciary duty and an account of profits and unlawful means conspiracy.
The judgment dealt with issues of liability.
There will be a second trial to determine quantum.
The Claimants were represented by Alan Gourgey KC, leading Edward Crossley, instructed by Greenwoods Legal LLP. The Defendants were represented by Lexa Hilliard KC, leading Kate Rogers, instructed by Gardner Leader LLP.
Court of Appeal clarifies law relating to “half-secret” commissions in the energy supply market
On 21 March 2025 the Court of Appeal handed down judgment in Expert Tooling And Automation Ltd v Engie Power Ltd [2025] EWCA Civ 292, an important decision concerning so-called “half-secret” commissions in the energy supply market. Unusually, the Court of Appeal granted permission on appeal to the Supreme Court on the grounds on which the appellant did not succeed.
Thomas Grant KC led Professor Paul Davies of Essex Court Chambers and Ryan Turner of Maitland Chambers, who were instructed by Boris Cetnik of BC Legal on behalf of the appellant.
Upper Tribunal decision on home loan inheritance tax double trust scheme
The Upper Tribunal (Tax and Chancery Chamber) has given judgment in the appeal of Elborne v HMRC [2025] UKUT 59 (TCC), in which the Elborne estate and trustees of the Elborne settlements were appealing against the earlier decision of the First-tier Tribunal (Tax Chamber) [2023] UKFTT 626 (TC). The case concerns whether or not a home loan inheritance tax double trust scheme designed to remove the value of a freehold interest in real property from an individual’s inheritance tax estate whilst at the same time enabling the individual in question to continue to live in the property rent-free achieves its intended effect. At first instance, the First-tier Tribunal had held that on the proper construction of the applicable legislation, including section 103 of the Finance Act 1986, which deals with the treatment of certain debts, the scheme failed to achieve its intended effect, in line with the First-tier Tribunal’s earlier decision in Pride v HMRC [2023] UKFTT 00316 (TC). The Upper Tribunal has overturned the First-tier Tribunal’s decision holding the scheme to be effective. The case is of wide importance given the use of home loan inheritance tax schemes in relation to real property over several years up and down the country.
Jonathan Davey KC acts for the respondents along with Barbara Belgrano of Pump Court Tax Chambers. Charles Bradley of Pump Court Tax Chambers acts for the appellants.
Supreme Court of Gibraltar hands down judgment in Kijani Ratio (in liquidation) v Fagan and ors
Daniel Lewis acted for the Liquidators (Edgar Lavarello and Simon Conway of PwC), together with Nick Cruz and Kayleigh-Anne Revagliatte of Ellul & Cruz, securing judgment at trial for £62 million (judgment or settlement having already been obtained against the other Respondents). The claim was brought against the former directors of a Gibraltar collective investment scheme, for misapplying funds under their control to their own benefit, including the purchase of two yachts. The Respondent’s attempts to adjourn the trial were unsuccessful following which he did not participate further. This is the first judgment at trial in Gibraltar on claims under section 259 of the Insolvency Act 2011 (fraudulent trading) and section 260 (insolvent trading, equivalent to wrongful trading).
Court of Appeal hands down judgment in Wang v Darby
The Court of Appeal has handed down judgment in a decision which likely brings an end to this long running and significant litigation, in which Daniel Scott has acted for Mr Wang from the outset.
Background
In August 2021, Mr Wang obtained a without notice freezing order against Mr Darby which contained standard provisions relating to asset disclosure. Shortly thereafter, proceedings were commenced alleging that Mr Darby had breached the terms of cryptocurrency swap agreements made between the parties concerning Bitcoin and Tezos.
Mr Darby failed to disclose his ownership of 100 Bitcoin, which had a value of approximately $US 4m at the time the freezing order was made and is now valued at almost $US 10m. Mr Wang’s solicitors put Mr Darby on notice that they intended to commence proceedings for contempt of court if he did not purge his contempt and disclose his ownership of the 100 Bitcoin.
In the meantime, Mr Darby failed to pay an interim costs order and his Defence to the claim was struck out. Mr Darby’s solicitors came off the record. In January 2023, judgment was entered for Mr Wang and damages and interest of approximately $US 2m were assessed in his favour.
Following judgment, Mr Wang commenced contempt proceedings in respect of the failure to disclose the existence of the 100 Bitcoin. Mr Darby failed to engage with the contempt proceedings. The Court decided to proceed in his absence and found him in contempt of court in his absence on 10 June 2024 ([2024] EWHC 1394 (Comm)).
The Court adjourned the sanction hearing until 24 July 2024, in order to give Mr Darby time to reflect on the judgment, consider taking legal advice and seeking representation, and prepare evidence in mitigation.
Mr Darby attended the sanction hearing and indicated that he had been unable to secure legal representation. The Court proceeded to commit Mr Darby to 18 months immediate imprisonment. The Judge said that 6 months was the punitive aspect of the sentence and 12 months represented the part that might be set aside if the contempt was purged.
The Appeal
Whilst in prison, Mr Darby secured publicly funded legal representation. He appealed against his sentence and successfully applied for bail pending the appeal. He had served 146 days in prison (in excess of 4 months), a sentence equivalent to 292 days.
Very shortly before the appeal was due to be heard, Mr Darby admitted his contempt and apologised to Mr Wang and the Court. In light of this, the only real question that was live by the time of the hearing was whether the Court could (and should) reduce his sentence to take account of the purging of his contempt. In a judgment handed down on 4 February 2025, the Court of Appeal reduced Mr Darby’s sentence to time served, namely 292 days.
The decision is a helpful illustration of the wide-ranging powers available to the Court of Appeal under section 13 of the Administration of Justice Act 1960. Indeed, the appeal was essentially decided on the basis of fresh evidence. It is well known that in cases which do not concern committal of a person to imprisonment, it can be extremely difficult to obtain permission to adduce fresh evidence on appeal.
Lord Justice Dingemans’ obiter comments in the decision are also enlightening. Whilst it was unnecessary to decide whether the Court below should have granted a further adjournment to Mr Darby at the sanction hearing so that he could obtain legal representation, Dingemans LJ stated at [21] that there are many reasons to grant a person in Mr Darby’s position a short adjournment where they belatedly comply with the court process at the sanction stage of contempt proceedings. In particular:
“This ensures fairness to that person, in circumstances where many contemnors only come to their senses at the 11th hour and 59th minute, see generally Haringey London Borough Council v Brown [2015] EWCA Civ 483; [2017] 1 WLR 542 at paragraphs 41 to 44. In many cases this will also be to the advantage of the side seeking the order for committal. This is because the contemnor’s legal representatives are likely to have more success in persuading the contemnor to purge his contempt and comply with court orders. That will also assist the court in ensuring that there is compliance (albeit on a belated basis) with its orders.”
Daniel Scott was instructed by Rob Green of Curzon Green Solicitors and acted for Mr Wang as sole counsel in the Court of Appeal.