BPE Solicitors & Anor v Gabriel

Factual and Procedural Background

The Plaintiff lent £200,000 to Company A under a facility agreement arranged by the Defendant, the Plaintiff’s solicitors. The lower courts held the Defendant negligent but differed on damages: the trial judge awarded the full loss, whereas the Court of Appeal reduced the award to £2 on the basis that the loss fell outside the scope of the Defendant’s duty and, in the alternative, would in any event have been reduced by 75% for contributory negligence.

As to costs, the trial judge initially ordered the Defendant to pay the Plaintiff’s costs, but the Court of Appeal reversed that order and required the Plaintiff to pay the Defendant’s costs of the claim and the appeal, totalling £469,170.60. Shortly afterwards the Plaintiff petitioned for, and was adjudged, bankrupt. The Trustee was appointed on 25 March 2014, thereby becoming vested with the right to pursue the Plaintiff’s pending appeal to the Supreme Court. The Trustee has not yet decided whether to proceed because of uncertainty over personal exposure for the Defendant’s costs incurred below if the appeal fails.

The Trustee therefore applied to the Supreme Court for a ruling, in advance of any substantive hearing, on whether adoption of the appeal would expose him personally to the Defendant’s costs of the trial and Court of Appeal proceedings.

Legal Issues Presented

1. Does the Supreme Court possess jurisdiction to determine, prior to the substantive appeal, the extent of a trustee in bankruptcy’s personal liability for costs already ordered against the bankrupt?
2. If the Trustee adopts only the Supreme Court appeal, is he personally liable, by virtue of that adoption, for the Defendant’s costs incurred in the trial and in the Court of Appeal?

Arguments of the Parties

Trustee’s Arguments

• A trustee in bankruptcy who adopts an existing appeal becomes personally liable only for costs referable to that appeal, not for costs of earlier stages that concluded before bankruptcy.
• Making the Trustee liable for historical costs would unjustly elevate the Defendant’s claim over other unsecured creditors and would deter pursuit of a potentially valuable appeal that could increase the dividend to creditors.

Defendant’s Arguments

• Preliminary objection: the Supreme Court allegedly lacks jurisdiction to entertain a costs issue except when granting permission to appeal or upon final disposal of the appeal.
• Substantively, by adopting the appeal the Trustee should also assume personal responsibility for the whole action, including the Defendant’s costs ordered by the Court of Appeal.

Table of Precedents Cited

Court's Reasoning and Analysis

Jurisdiction. The Court rejected the Defendant’s jurisdictional objection, relying on section 40(5) of the Constitutional Reform Act 2005 and rule 46 of the Supreme Court Rules 2009. These provisions permit the Court to decide any question necessary for doing justice in an appeal, including costs questions, at any stage.

Victorian authority reviewed. The Court analysed Borneman v Wilson, finding its “all-or-nothing” rule rooted in obsolete procedural constraints—specifically, the historical inability to order costs against non-parties and to prove such liabilities in bankruptcy. Modern legislation and case law (notably Aiden Shipping and Nortel) now allow both, eliminating the rationale for automatically extending prior costs to the Trustee.

Discretion not compulsion. The Court concluded that, while courts retain a discretionary power to impose earlier costs on a trustee, there is no absolute legal rule requiring it. Any such order must depend on case-specific considerations rather than the mere fact of adoption of proceedings.

Distinct proceedings principle. Trial, Court of Appeal, and Supreme Court stages are discrete for costs purposes (Wright v Bennett). The Trustee wishes to adopt only the Supreme Court appeal; the trial and intermediate appeal are concluded, with existing costs orders already entered against the Plaintiff before bankruptcy. Those liabilities are provable debts in the bankruptcy and do not automatically transfer to the Trustee.

Risk allocation. Imposing personal liability for historic costs would wrongly prioritise the Defendant’s claim over other unsecured creditors by enabling the Trustee to seek an indemnity from the estate ahead of dividend distribution.

Accordingly, the Court declared that adoption of the appeal alone does not render the Trustee personally liable for the Defendant’s costs of the earlier proceedings.

Holding and Implications

HOLDING: The Court declared that the Trustee, if he adopts the pending Supreme Court appeal, will not be personally liable for the Defendant’s costs incurred up to and including the Court of Appeal’s order dated 22 November 2013 solely by reason of his office or such adoption.

Implications: The ruling clarifies that trustees in bankruptcy can pursue appellate remedies without automatic exposure to historic costs, thereby facilitating informed decision-making and potentially enhancing recoveries for creditors. The decision does not create a rigid rule; future courts may still exercise discretion depending on the facts, but the Victorian “all-or-nothing” approach is disapproved.