Costs awards to personal representatives are not assets of the estate: Bryan Court Freehold Ltd v BC Penthouse Ltd (Central London County Court – HHJ Johns QC, 15.07.2021)

16.07.2021

On 15.07.2021, HHJ Johns QC gave an oral judgment in Bryan Court Freehold Ltd v BC Penthouse Ltd. This was an application under r 72.10 CPR for a fund in court standing to the credit of a member of the Kuwaiti royal family, Sheikha Hind Salem Homoud Al-Jaber Al-Sabah (Sheikha Hind), to be paid out to her judgment creditor, Mr Asad Meerza.

The fund represented costs awards obtained by Sheikha Hind in Chancery Division proceedings in which she eventually acted in her personal capacity, as assignee of causes of action from the liquidators of two companies, and as then-administratrix of the estate of her father, Sheikh Salem Homoud Al-Sabah (the former head of the Kuwait Emiri Guard). Sheikha Hind had paid the costs in the first instance through loans from Mr Meerza.

The case centred around two rival claims on the fund. The first was brought by Sheikha Hind’s sister, Sheikha Sheikha Homoud Al-Jaber Al-Sabah. Sheikha Sheikha argued that the funds in court were assets of the English estate of the Sheikh (of which Sheikha Sheikha had by then become administratrix). The second was brought by Mr Tareq Al Baho, who claimed that the fund should be paid to him on the basis that he was also a judgment creditor of Sheikha Hind and that his judgment pre‑dated that of Mr Meerza.

HHJ Johns QC granted Mr Meerza’s application and dismissed the rival arguments. Dismissing Sheikha Sheikha’s position, HHJ Johns QC held that costs awards obtained by a personal representative are beneficially owned by the personal representative and are not estate assets. In reaching this decision, he followed the decision of the Court of Exchequer in Smedley v Philpot (1837) 3 M&W 573. It was therefore unnecessary to resolve in what capacity Sheikha Hind had obtained the costs awards. He went on to hold that allegations by Sheikha Sheikha that Sheikha Hind had misappropriated estate assets did not affect this position – while orders under r 72.10 CPR are discretionary, it would be wrong for the money to simply remain in court at the suit of a party who had not established an interest in the fund and was not a judgment creditor.

Dismissing Mr Al Baho’s application, HHJ Johns QC held that Mr Meerza’s application took precedence for two reasons. First, Mr Al Baho’s application was very late and was made after Mr Meerza had incurred the costs of resisting Sheikah Sheikha’s claim. Secondly, there was a close connection between Mr Meerza’s judgment debt and the fund in court. The fact that Mr Al Baho’s judgment debt pre-dated Mr Meerza’s did not justify precedence – it meant that the judgment creditor had not shown due diligence in enforcement.

HHJ Johns QC dismissed applications by both Sheikha Sheikha and Mr Al Baho for permission to appeal. It remains to be seen if they will seek to seek permission to appeal from a High Court Judge.

Francis Ng represented Mr Meerza, the successful applicant.

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