COSTS OF A CHARGING ORDER ASSESSED AT £5000 DUE TO 'EXCEPTIONAL' CIRCUMSTANCES.
I-DESIGN CONSTRUCTION LTD (1), MR PAUL ARCHER (2) MR JAMES HOOKER (3) & MRS CLARE ARCHER (4) -v- MR DAVID RENWICK (25th July 2023) Plymouth County Court (unreported)
In an ‘exceptional’ order, the Plymouth County Court sitting in Torquay & Newton Abbot allowed a Judgement Creditor to complete execution and issued a Final Charging Order over a ‘fraudulent’ bankrupt’s property. Equally rare, the court set-aside the fixed costs of £110 payable to the Judgement Creditor and increased these to £5000. This Case Report provides an introduction to the fixed costs regime and analyses the court's decision to have it set-aside.
THE LAW & FIXED COSTS
Should the court order for the payment of money and the judgement debtor defaults, then the judgement creditor may apply for a Charging Order over the judgement debtor's property. This is a form of security that essentially acts as a private mortgage insofar as it gives the judgement creditor the right to apply for a subsequent court order for sale, should the debt remain unsatisfied.
Regretfully, the civil courts do not automatically enforce their orders the onus for which rests solely on the shoulders of the judgement creditor. While the courts are duty bound to ‘assist’, they do not do so for free and in most circumstances, a successful judgement creditor will be forced to incur further legal costs just to secure money that the court has already ordered to be paid.
To help stem the flow of further financial loss, the law limits the amount of solicitor fees that can be recovered for enforcement. These extremely modest sums are set in stone under CPR Part 45, Table 5 and include:
ENFORCEMENT | FIXED RECOVERABLE COSTS |
Attachment of Earnings Order: | £8.50 |
Debtor's summons to court to account for their assets and finances: | £30 per hour for attendance |
Writ of Control (i.e. Bailiffs): | £51.75 |
Final Third Party Debt Order: <£150: | £51.75 |
Final Third Party Debt Order: >£150: | £98.50 + Reasonable Disbursements |
Final Charging Order: | £110 |
Order for Sale: | £42.50 + £2.75 for each additional person served. |
SETTING ASIDE FIXED COSTS
The Fixed Costs regime is said to be ‘fair’ in a typical scenario. This envisions uncontroversial applications and negotiations between creditor and debtor held in good faith. However:
The court has absolute discretion as to costs under CPR r.44.2.
Pursuant to CPR r.45.1(1) the Fixed Costs regime applies unless the court orders otherwise.
When deciding what order to make about costs, the court must pursuant to CPR r.44.2(4) take into account the factors listed under CPR r.44.4(3)(a). These include the conduct of the parties, efforts to resolve the dispute, the value of the claim, the importance of the order and the complexity of the matters in dispute.
In general, fixed costs apply save for 'exceptional circumstances' which is to say, cases that fall so far outside the normal course of affairs they could not have been envisioned when fixed costs were being introduced. An example of such a case can be seen in Blacknest Gate Ltd -v- Seymour Realty Ltd [2020] EWHC 3878 (TCC). Here, the judgement creditor had to serve the judgement debtor in accordance with the rules of the British Virgin Islands which led to additional costs being incurred. Not only that, but the judgement debtor chose to simply ignore the application which gave rise to a jurisdictional issues. It was therefore held to be unjust to limit the judgement creditor to fixed costs and having considered the the conduct, complexity, value and importance of the matter, the judgement debtor was ordered to pay their creditor's increased costs accordingly.
THE I-DESIGN CONSTRUCTION LTD LITIGATION
The I-Design Construction Ltd (IDC) litigation arose after the Judgement Creditor (a pensioner) was defrauded of his life savings and left in a collapsing house without working central heating and hot water in winter. The Claimants then returned to extort more money from their victims using criminal harassment and ‘terror tactics’. This necessitated police involvement and upon receiving a subsequent notice of a referral to Trading Standards, the Claimants issued proceedings on the dishonest basis of being fully insured but otherwise having the capital to satisfy a judgement.
In April 2022 IDC’s case was struck out for their directors breach of multiple of court orders. In July 2022 the Defendant's damages were assessed at £95’658 pursuant to a successful counterclaim. Once it was revealed the directors had been dishonest as to the state of IDCs finances and insurance, they were made joint and severally liable for the costs of the litigation pursuant to a forewarned Non-Party Costs Order. In September 2022 IDC was put into liquidation, in February 2023 the Judgement Creditor secured an Interim Charging over the 2nd Claimant’s Property and in March 23, Mr Archer received a formal criminal caution for harassment and malicious communications sent to his creditors. He then went into hiding from court enforcement officers (bailiffs) using a series of fake addresses.
The court listed a hearing for the Final Charging following an objection from the 4th Claimant (whom as usual, had refused to serve a copy). Thereafter, Mr Archer in a final attempt to frustrate enforcement applied to the Adjudicator's Office in order to make himself bankrupt. This was subsequently granted following an adjournment. However, the court in an exceptionally rare decision deemed it 'just' to exercise its powers under s.346(6) Insolvency Act 1986 and allowed the Judgement Creditor to complete execution. The question that remained, was should the fixed costs be set aside?
THE JUDGEMENT CREDITOR'S CASE ON COSTS
The Judgement Creditor argued that the case fell outside the ‘norm’ and so it would be just for fixed costs to be set aside. The value of the Charging Order sought (£203’077.44) was substantial and its significance to the Judgement Creditor being an elderly private citizen whom had been defrauded was self-evident. Furthermore, the costs incurred had been greatly exacerbated by the 2nd & 4th Claimant’s:
Conduct:
Their conduct had necessitated a formal police caution. In response to invitations to put forward payment proposals rather than engage in good faith, Mr & Mrs Archer had instead attempted to blackmail their creditors through a series of online trolling and doxing attacks. Specifically:
Dishonest Reputational Attacks: Mr Archer had attempted to inflict further financial loss on his creditors by contacting their business associates and suppliers to falsely allege that it was in fact they whom were criminals having harmed women and children and forced people into suicide attempts. The judgements against the Claimants were all “lies” and their creditors had been the ones to receive formal police warnings. Thereafter,
Impersonating Employees: In support of these blackmail attempts the Claimants had created a series of false social media accounts to impersonate their creditors’ employees. They had targeted people online through these false accounts and promised to give ‘secret information’ to expose their creditors.
Hate Crimes: Those that did not acquiesce to their demands, were themselves threatened with reputational damage. This had included a terminally ill single mother and people they deemed ‘minorities’ who were subjected to hate crimes and grotesque messages involving a minor.
There had been violence in the court with security again needing to remove the Claimants after they had rounded on their elderly Judgement Creditor.
The Claimants had attempted to frustrate other means of enforcement. Specifically, the use of court bailiffs through a series of false addresses. This had required the further cost of an investigator whom tracked down Mr Archer.
There had been repeated interruptions in all hearings with Mr Archer making sexist comments towards the judge and counsel and Mrs Archer being abusive to the Judgement Creditor’s solicitor (whom frankly found such behaviour helpful in making the case). The Claimants had also seen fit to fill the public gallery with ‘friends’ whom had engaged in pantomime jeering during submissions, attempted to interrupt client meetings prior to the hearing and with the Claimants themselves, needed to be thrown out of court.
Complexity:
Mr Archer had procured his own bankruptcy in secret to frustrate his creditors' enforcement. This had required detailed consideration of the Tagore Principles and the exceptionally rare exercise of the courts discretion under s.346(6) IA 1986. And;
Mrs Archer whom had previously pretended not be resident in the property, had subsequently pleaded a beneficial interest based on a ‘contribution’, having 2 dependent children and living there for 9 years. Thereafter, she had changed her story again to plead an interest based of an agreement, having 3 dependent children, a disabled mum and living there for 20 years (whoops).
THE JUDGEMENT DEBTOR'S CASE ON COSTS
Surprisingly, the Claimants did not deny any of the aforementioned and agreed that the case fell into the ‘exceptional’ category but argued that costs should not be paid as:
The Court Bailiffs were attending at midnight and trying to kick down their doors causing the children to cry throughout the night (Court bailiffs wear body cameras and do not attend at midnight being subject to strict regulations. This was understood to have been a police officer re the above but it was doubtful that they tried to kick down the door).
A court Process Server had tried to kick down Mrs Archer’s mother's door, drag her out of the house and serve non-official papers. (Court Process Servers do not deal with ‘non-official papers.’ If they cannot make contact they will simply leave a calling note. Should the intended recipient fail to respond, then the papers are just left at the address. Even the most passionate court process servers, do not kick down doors to drag grannies out into the streets in order to serve their papers).
They were the true victims. This was pleaded on the basis that police kept attending the property together with court bailiffs and process servers amounting to harassment.
THE DECISION
While not making any specific findings as to the Claimants stories, the court upon noting that all parties agreed the case was ‘exceptional’ and the general rule that the successful party should be paid its costs, agreed to set-aside the fixed costs which were summarily increased from £110 - £5000 using a broad brush approach.
As is the norm, these costs were added to the total debt protected by the Charging Order which stood at £203’077.44 with interest accruing at the Judgement Rate of 8% i.e. £1’424.32 p/m.
COMMENT
Even in ‘exceptional’ cases the courts are under no obligation to set aside the Fixed Cost regime and where the basis of such an argument is the conduct of a party, it is vital that the applicant’s conduct be beyond reproach. Simply put, one must come to the court with ‘clean hands’.
In relation to value, while the authority relied upon was a High Court case and the amount sought by the Judgement Creditor substantial, the discretion is not limited to cases of >£100’000 or thereabout. Applicants should note Chapman v Tameside Hospital NHS Foundation Trust the County Court at Bolton (15 June 2016) where a District Judge rejected the suggestion that the factors listed in CPR Part 44 did not apply to fixed costs cases.
Needless to say and in all circumstances, should you be a judgement debtor whom owes a substantial amount pursuant to acts of fraud and criminal conduct; then attending court without your papers, throwing abuse at your creditors, getting thrown out of court (again) and then coming back to make derogatory comments to and before the judge; will prove a risky litigation strategy.
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