Ordering costs in a moratorium?

Overview

In this case, the court considered a request for costs where an application to cancel a mental health crisis moratorium was never heard. The moratorium came to an end after the debtor stopped receiving mental health crisis treatment. The court determined that unless the court is satisfied that it has a proper basis of agreed or determined facts upon which to decide whether the case is one in which it should give effect to the general rule or should make a different order, it must accept that it is not in a position to make an order about costs at all. That was the case here, where the court had not ruled on the substantive merits of the matter. In addition, the court emphasised that the protracted litigation between the parties meant that they had received the benefit of more than their fair share of the limited judicial and court resources available. Ultimately, the Court was not inclined to allow this kind of further, satellite litigation unless absolutely necessary.

Background

This was the latest in “sprawling litigation” between the Brakes and certain of their creditors (the Guy parties) following the breakdown of the employment relationship between them in November 2018. The Guy parties have been successful in most of this litigation and significant costs orders have been made in their favour.

The Guy parties sought to enforce these orders, but in August 2022, Nihal Mohammed Brake entered into a mental health crisis moratorium, which meant that no further enforcement action could be taken against her assets in respect of the unsatisfied orders. Her husband also entered into a moratorium which wasn’t addressed in this judgment. The other respondents, Rethink Mental Illness t/a Mental Health and Money Advice (England) and Dorset Healthcare University NHS Foundation Trust, were Mrs Brake’s debt adviser and mental health crisis treatment provider, respectively.

In October 2022, the Guy parties applied to cancel the moratorium. The progress of the application was delayed for various reasons, such that no substantive hearing on the merits occurred before the moratorium came to an end in July 2023, one month after Mrs Brake stopped receiving mental health crisis treatment. This obviated the need for a hearing to decide whether to cancel the moratorium, but the court requested that the parties provide submissions on outstanding issues - namely costs and whether the NHS Foundation Trust had been properly served.

The Guy parties submitted that, assuming that the respondents had been properly served, the Guy parties should obtain their costs from the respondents, on the basis that Mrs Brake had never met the criteria for the moratorium in the first place.

Mrs Brake argued that the service issue should be decided before any question of costs was dealt with. Mental Health and Money Advice’s primary position was that there should be no order as to costs since the substantive basis for the application was superseded by the moratorium's coming to an end. NHS Foundation Trust submitted that it was not a party to the application because it had not been properly served and therefore could not be ordered to pay costs.

The Court’s Decision

The first question was whether, as submitted by Mental Health and Money Advice, the court should simply make no order as to costs. In that case there would be no need to consider whether NHS Foundation Trust was properly served or whether disclosure should be ordered on the factual issues put forward by the Guy parties in order to support their claim for costs against the respondents. It was only if that was not the appropriate response on these facts that the court would need to go on to consider those matters.

Based on the relevant authorities, HHJ Paul Matthews (sitting as a High Court Judge) considered that the issue was whether, having decided that there was no longer any point in dealing with the substantive application, he was in a position to make an order as to costs. Unless the court is satisfied that it has a proper basis of agreed or determined facts upon which to decide whether the case is one in which it should give effect to the general rule or should make a different order, it must accept that it is not in a position to make an order about costs at all.

Judge Matthews did not think he was in such a position. He had no basis on which to say who (if anyone) was the successful party. Indeed, without a resolution of the service issue, the court would have no power to order costs against NHS Foundation Trust.

In addition, the Judge Matthews emphasised the already protracted nature of the litigation - noting the parties had already had more than their fair share of the court’s time - as a reason not to order costs. He stated:

“The sprawling litigation between the applicants and the Brakes has been going on now for five years, in several different sets of proceedings and in different fora, all fought with great intensity and at great expense. I have conducted and decided four full-scale trials and one quantum trial between the parties, of which two decisions went to the Court of Appeal (and that in the quantum trial may yet do so). I have also dealt with two Insolvency Act applications between them, the decisions in both of which went to the Court of Appeal, and one of them then on to the Supreme Court. I do not know how many decisions I have made in this litigation as a whole, but more than 40 of them have been published on BAILII under neutral citation numbers. In addition, there have been full scale employment tribunal proceedings.

In my judgment, the parties have had more than their fair share of the limited judicial and court resources available. I am not inclined to allow this kind of further, satellite litigation unless it is really necessary.”

On this basis, he refused to order costs.

Judge: HHJ Paul Matthews

Counsel: Bláthnaid Breslin of Littleton Chambers (instructed by Kennedys Law) for Mental Health and Money Advice

Stewarts Law for the Guy parties

DAC Beachcroft for NHS Foundation Trust