Costs

Re Estate of Jimmy Savile; National Westminster Bank plc v Lucas and others: Court of Appeal, Civil Division: 16 December 2014

Administration of estates – Distribution – Retention of assets to meet future liabilities – Claimant bank being executor of estate of Jimmy Savile – Orders being made, among other things, approving bank’s entry into scheme designed to deal with claims for compensation from estate based on alleged assaults by Savile

Sir James Savile, better known as Jimmy Savile, died in October 2011. Under his will the residue of his estate was given to the Jimmy Savile Charitable Trust (the trust). National Westminster Bank (the bank) was named as the executor of the will. The bank began to receive letters from a number of potential claimants seeing compensation from the estate based on alleged assaults by Jimmy Savile.

The bank was aware that if the claims were numerous, significant in value and genuine then there was a serious possibility (even a probability) that, together with legal costs, they would, if successfully pursued to judgment, exhaust the assets and render the estate insolvent. Accordingly, the bank applied ex parte under Civil Procedure Rule part 64 for various forms of relief. In the application notice the bank also sought permission pursuant to CPR part 8.2A to issue a claim form without naming the defendants.

An order was made in the bank’s part 8 proceedings approving the bank’s entry into a scheme (the scheme) negotiated between solicitors and counsel acting for claimants (the PI claimants), for the bank, and for bodies alleged to be vicariously liable in respect of the claims, including the sixth defendant British Broadcasting Corporation and the seventh defendant secretary of state for health.

The purpose of the scheme was to provide a mechanism under which a PI claimant might submit his or her claim to the bank so that the bank, on a consideration of the supporting evidence, could decided whether to admit or reject the claim.

In addition to approving the bank’s entry into the scheme, the judge made other significant orders: (i) he ratified £392,511.46 worth of expenditure by the bank pursuant to section 284(1) of the Insolvency Act 1986, most of which consisted of bills for work carried out by the bank’s solicitors in connection with the PI claims; (ii) he dismissed the trust’s application for the removal of the bank as executor and for its replacement by PT as administrator of the estate; (iii) he ordered the trust to pay the bank, the PI claimants and the secretary of state their costs on an indemnity basis and to pay 80% of the bank’s costs and all of the costs of the PI claimant’s application for the approval of the scheme, again on the indemnity basis.

The adverse costs orders in respect of the bank’s application for approval of the scheme were made to reflect what the judge described as the unreasonable conduct of the trust (see [13] of the judgment). The trust appealed against the order sanctioning the bank’s entry into the scheme; the dismissal of the removal application; the section 284(1) order in respect of expenditure; and the orders for costs.

It submitted, among other things, that: (i) the approval application had been defective because, although the bank had asked the court to give directions as to whether it should proceed under the scheme, it had not provided any evidence that it had actually formed the view that the scheme was beneficial to the estate, nor had it provided the court with any material upon the basis of which the court could conclude that its decision to support the scheme was a proper one; (ii) the judge had erred in his assessment that the bank had not acted either unfairly or incompetently in relation to its handling of the PI claims; (iii) the bank should have sought directions from the court before incurring the expenditure it had incurred in negotiating the scheme; and (iv) the costs orders had been inconsistent with the usual practice in cases involving the court’s determination of a question arising in connection with the administration of an estate.

The court ruled: (1) In respect of the approval application, in the circumstances, the scheme had not been intrinsically flawed nor had it been one which no reasonable executor could have promoted. The trust’s challenge to the judge’s order approving the scheme would be rejected.

In respect of the removal application, the judge’s finding that the bank had acted and would continue to act fairly and with proper regard to the interests of the beneficiaries in its administration of the scheme was determinative of that aspect of the appeal, unless it could be demonstrated that those findings had not been open to the judge on the evidence. In the circumstances, the judge had considered all the evidence and had reached a conclusion which had been fully open to him.

The trust had not established any grounds upon which the court could properly interfere with the judge’s conclusions. In respect of the section 284(1) order, the only issue was whether the judge should have refused an ratification order on the basis that the expenditure should have been authorised in advance.

In the circumstances, the judge had been entitled to proceed on the basis that he had. The instant case was not one where the court ought to have refused to make a validation order out of regard for the interests of the unsecured PI claimants (see [76], [79], [85], [93], [98], [102], [104], [105] of the judgment).

The appeal against the judge’s order in respect of the approval application, the removal application and the section 284(1) order would be dismissed (see [126] of the judgment).

Vos, Re; Dick v Kendall Freeman [2006] BPIR 348 distinguished; Letterstedt v Broers [1881-5] All ER Rep 882 considered; Tamlin v Edgar (2012) Times, 23 February considered.

(2) The judge’s decision to order the trust to pay 80% of the costs of the approval application had been intended to reflect the additional costs generated by the trust’s opposition to the application. The judge’s order had been wrong in principle. In the circumstances, the matters relied upon by the judge had not, on analysis, justified a departure from what would be the usual order for costs on such an application.

In respect of the bank, the right order was that the bank should take the entirety of its costs of that application out of the estate. Further, the judge had been wrong to treat the application as inter parties litigation between the PI claimants and the trust and to order the trust to pay the former’s costs.

The attendance of the PI claimants at the hearing had assisted the judge in deciding whether to approve the scheme and they were entitled to their costs out of the estate. In respect of the removal application, it was a hostile application against the bank based on grounds which the judge had rightly rejected as having no real foundation. There were no grounds on which to interfere with the judge’s exercise of discretion in respect of the costs of the bank. The costs of the other parties were a different matter.

The costs of those third parties were only recoverable if the judge had been in some way justified in making costs orders against the trust in favour of non-parties to the application, which he had not (see [111], [112], [115]-[117], [120]-[123] of the judgment).

The costs of the trust and the PI claimants of the approval application would be paid out of the estate on the indemnity basis and the bank would take its costs out of the estate. The trust would pay the bank’s costs of the removal application on the indemnity basis. No order would be made in respect of the costs of the PI claimants and the secretary of state of that application (see [126] of the judgment).

Buckton, Re, Buckton v Buckton [1907] 2 Ch 406 considered; Grender v Dresden [2009] All ER (D) 183 (Mar) considered.

Decision of Sales J [2014] All ER (D) 92 (Mar) affirmed in part. Decision of Sales J [2014] EWHC 1683 (Ch) reversed in part.

Mark Cunningham QC (instructed by Osbourne Clarke) for the bank; Robert Ham QC and Teresa Rosen Peacocke (instructed by PWT Advice LLP) for the trust; Keith Rowley QC, Piers Feltham and Justin Levinson (instructed by Slater & Gordon (UK) LLP) for the third and fourth defendants; Neil Block QC (instructed by Capsticks LLP) for the BBC; Andrew Warnock QC (instructed by DAC Beachcroft LLP) for the secretary of state.