High Court Rules on Costs in Brooke Homes Debt Enforcement Case

Citation: [2024] EWHC 357 (Ch)
Judgment on

Introduction

The case of Brooke Homes (Bicester) Limited v Portfolio Property Partners Limited & Ors is an illustrative example of legal principles applied during litigation over enforceability of debt and costs. This article analyzes the judgment and highlights the key legal principles employed by the High Court of Justice, Chancery Division. The focus is on how these principles are applied to decide which party was ultimately successful and thus entitled to the costs of the proceedings.

Key Facts

The case involves Brooke Homes (Bicester) Ltd (‘Brooke Homes’), a company formed for purchasing development land, which found itself in a legal dispute over the development of land in North-West Bicester and subsequent enforcement of a debt. Brooke Homes was the claimant in the ‘Main Action’ and had secured a judgment against the P3 parties (the first two defendants and fifth defendant), as well as having charging orders. However, it was also facing enforcement action from the Desiman parties (the third and fourth defendants) for costs owed.

The Desiman parties filed a winding-up petition against Brooke Homes based on its failure to pay the costs owed. Brooke Homes countered with the ‘Brooke Application’ seeking a stay of execution of costs orders and other relief. The core contention was the dissatisfaction with the enforceability process and intent to delay payment until Brooke Homes received payment from the sale of development land by the P3 parties in administration.

Several legal principles are pertinent in this case:

  1. Success in Litigation and Costs Orders:

    • The general rule in litigation is that the unsuccessful party will pay the successful party’s costs (CPR Pt. 44).
    • Success is measured by the reality of the outcome, rather than the technical position of the parties, requiring the exercise of common sense.
    • Even when litigation does not go to a final judgment, costs can be dealt with as if the issues had been settled, provided there is a proper basis for deciding costs as addressed in BCT Software Solutions Ltd v C Brewer & Sons Ltd.

  2. Conduct of the Parties and Costs Penalties:

    • Brooke Homes’ conduct was examined to assess whether the costs award should be impacted.
    • The approach to handling liquidation, and whether there is an abuse of process or an attempt to stifle litigation, is relevant to deciding on costs.

  3. Winding-up Petitions and Stays of Execution:

    • A winding-up petition is a conventional means of enforcing a debt (Mann v Goldstein).
    • The petitioner’s motives for initiating a winding-up petition are legally irrelevant.
    • The provision of security for a debt during the pendency of a petition can lead to a dismissal or stay of the petition.

  4. Indemnity Basis for Awarding Costs:

    • The court reserves indemnity costs for cases outside of the norm; this includes but is not limited to situations involving procedural impropriety or conduct resulting in unnecessary costs.

Outcomes

In determining the successful party, Deputy Judge Twigger K.C. considered whether the furtherance of the petition and stay application achieved any substantial outcome. Despite the Desiman parties’ argument that the undertakings they secured from Brooke Homes represented a form of secured payment, the judge held that in reality, the petition achieved nothing of substance, as the Desiman parties ultimately did not receive payment earlier than contemplated by the parties’ original agreement. Thus, Brooke Homes was deemed the successful party with respect to both the petition and stay applications.

However, a reduction in Brooke Homes’ cost entitlement was made to account for limited success on the part of the Desiman parties on several interim issues throughout the proceedings.

Conclusion

The judge’s application of legal principles in determining the incidence of costs is grounded in a holistic view of the outcomes and prudent judgment of the parties’ real positions post-litigation. It is a reminder that tactical litigation measures such as winding-up petitions, while legitimate, are not guaranteed to result in a costs award in the instigator’s favor if they do not meaningfully alter the substantive positions of the parties. The judgment showcases the delicate task judges face in weighing technical successes against the overall context of the case.