Andrew Settle v Sandstone Legal Limited & Ors (Costs Judgment)

1. This judgment sets out my reasons for the costs orders made on 18 June 2025 following an administration application heard on 7 and 21 February 2025. Background

2. On 31 January 2025, Mr Settle as sole director of Sandstone Legal Limited (‘the Company’) issued an application seeking an order that Marco Piacquardio and Alan Coleman of FTS Recovery be appointed as joint administrators of the Company.

3. The application first came before the Court on 7 February 2025. At that hearing Mr Settle’s proposed prepack in favour of his new company, Precision, was rejected. The consideration offered via the prepack was so low and the margins overall so tight that the prepack did not clear the threshold requirements of Paragraph 11(b) of Schedule B1 to the Insolvency Act 1986 (‘Schedule B1’) for even the third limb of the statutory objective (distribution to one or more secured/preferential creditors). As there remained appetite for an administration order among the creditors in attendance at the hearing however, and a desire to explore competing offers, the Court did not dismiss the administration application but instead adjourned it. As the financial position of the Company was precarious and the Company was at risk of an SRA intervention, the Court appointed alternative office-holders, Phillippa Smith and Jessica Thomas of Smith and Barnes Limited, as interim managers, pending the final hearing of the application, which was listed for 21 February 2025.

4. Following the hearing of 7 February, a number of higher offers were made for the business and further witness statements were filed. Competing estimated outcome statements were lodged, reflecting the higher offers received.

5. At the next hearing on 21 February 2025, having considered the evidence and the further submissions then made, I concluded that the insolvency threshold requirement of paragraph 11(a) of Schedule B1 was cleared and that in light of (inter alia) the higher offers by then received, an administration order was reasonably likely to achieve the purpose of the administration; in this case a better result for creditors as a whole than would be achieved if the Company were wound up or, failing that, realising property in order to make a distribution to one or more secured or preferential creditors. I was also satisfied that the Court should exercise its discretion in favour of granting an administration order.

6. There was some debate as to which office holders should be appointed as Administrators. Truehaven supported the Applicant’s initial nominees, Mr Piacquadio and Mr Coleman, of FTS Recovery Limited. The Applicant’s position by the time of the hearing on 21 February 2025 (which had evolved since his proposed pre-pack was rejected on 7 February 2025 and interim managers appointed) was that his preference remained for Mr Piacquadio and Mr Coleman to be appointed if an administration order was granted, but that he would abide by the decision of the Court.

7. Three other creditors of the Company, Seven Stars, Curzon and the petitioning creditor, Medical-Legal, supported the appointment of Phillippa Smith and Jessica Thomas.

8. For reasons given in an ex-tempore judgment on 21 February 2025 (since transcribed and reported at [2025] EWHC 742 (Ch) ), I concluded that Ms Smith and Ms Thomas should be appointed as Administrators. I also concluded that Mr Settle had knowingly included, in each of his first and second witness statements in support of his administration application, material, self-serving untruths likely to mislead the Court.

9. As the hour was late (Ms Smith and Ms Thomas were appointed at 5.18pm that day) costs were reserved to a later hearing, which took place on 18 June 2025.

10. At the hearing on 18 June 2025, I granted a declaration that the costs and expenses (including their own fees) incurred by the Administrators as interim managers were pre-administration expenses pursuant to r.3.52 of the Insolvency (England and Wales) Rules 2016 (‘IR 2016’) and went on to order as follows: ‘1. The Administrators’ costs of the Administration Application (including their costs incurred prior to their appointment as Administrators) be paid as an expense of the administration.

2. The Administrators have permission to apply (by application notice and supporting witness statement) should they wish to seek an order re-ordering the priority of expenses in the administration under Rule 3.51(3) of the Insolvency Rules 2016. Any such application shall be reserved to ICC Judge Barber.

3. The Petitioning Creditor’s costs of and occasioned by the Winding-Up Petition and the Administration Application (including the hearings on 5 February 2025, 7 February 2025, 21 February 2025 and 18 June 2025) be paid as an expense of the administration, to be the subject of detailed assessment if not agreed with the Administrators.

4. Mr Settle’s costs of the Administration Application payable as an expense of the administration shall be capped at the monetary equivalent of the issue fee paid to the court on issue of the Administration Application. Save for the issue fee paid on issue of the Administration Application, no other costs are allowed by the court in favour of Mr Settle, whether as an expense of the administration or otherwise.

5. Mr Settle shall personally, without recourse to the insolvent estate, pay Seven Stars’ costs of and occasioned by the Administration Application up to and including the hearing on 7 February 2025, such costs to be the subject of a detailed assessment if not agreed between Seven Stars and Mr Settle. The question of whether and if so in what sum Mr Settle should be ordered to make an interim payment on account of those costs shall be dealt with at the hearing at which Judgment is handed down.

6. Seven Stars’ costs of and occasioned by the Administration Application from 8 February 2025 onwards (together with any of Seven Star’s costs ordered by paragraph 5 of this order to be paid by Mr Settle which in the event are not paid by him) shall be treated as an expense of the administration, to be the subject of detailed assessment if not agreed with the Administrators.

7. Save as aforesaid the consequentials hearing is adjourned to the handing down of Judgment.

8. The time for seeking permission to appeal is extended until 21 days after the handing down of Judgment’.

11. I turn now to address the submissions made at the hearing of 18 June 2025 and my reasons for making the order set out above. The Applicant’s position

12. In broad summary, Mr Settle maintained that: (1) he had no objection to the costs of Seven Stars, the interim managers and the Petitioner being payable as an expense; (2) he was entitled to his costs of the application as an expense of the administration under rule 3.12(2) IR 2016, which provides: ‘If the court makes an administration order, the costs of the applicant, and of any other person whose costs are allowed by the court, are payable as an expense of the administration’ (3) rule 3.12(2), in contrast to rule 3.11(2) (which contains the proviso ‘unless the court orders otherwise’), did not give the court a discretion to order that the applicant’s costs are not payable as an expense; (4) even in the absence of rule 3.12(2), it would be appropriate for his costs to be paid as an expense as: (a) but for his application, the Company would have been wound up, to the detriment of its creditors; (b) it had been open to Seven Stars to make its own administration application, rather than ‘piggy-backing’ on his application, but no such application was made; (c) he had taken an appropriately neutral position at the second hearing, when the dispute as to which administrators should be appointed was thrashed out between two rival groups of creditors; (d) even if he had continued to advocate for his own nominees, that would not preclude his costs being payable as an expense, given that his nominees were backed by Truehaven, a major creditor of the Company, relying for this purpose on Med-Gourmet Restaurants Ltd v Ostuni Investments Ltd [2010] EWHC 2834 at para 30; (e) he should not be ordered to pay any other party’s costs personally, relying for this purpose (inter alia) on rule 3.4 IR 2016, which provides that, once filed, an administration application made by the directors is to be treated for all purposes as an application by the company; (5) in particular, he should not be ordered to pay Seven Stars’ costs, contending that (a) it was open to Seven Stars to make its own application, but it did not; (b) even if he had been amenable to Seven Stars’ nominees at the first hearing on 7 February, a second hearing would still have been required because so many of Seven Stars’ submissions on 7 February were made on instruction rather than being based on evidence; (c) the material inaccuracies in Mr Settle’s first and second witness statements were regrettable but had not increased Seven Stars’ legal costs. He had corrected the position in his third witness statement, prepared shortly before the hearing on 21 February 2025; (d) he had taken a neutral position at the hearing on 21 February 2025; (e) Seven Stars wanted the Company to go into administration with its own choice of administrators but that could not happen unless Seven Stars incurred costs evidencing (i) that it was appropriate for the Company to go into administration and (ii) that its own choice of nominees was preferable. There would always have had to have been two hearings because Seven Stars had not put in evidence all the matters that it intended to rely on by the time of the first hearing; (6) the costs of all parties should be paid as an expense of the administration. The Petitioner’s position

13. The Petitioner, Medical-Legal Appointments Limited, sought an order that its costs of and incidental to the winding up petition presented by it against the Company on 24 December 2024 (including the first hearing of the petition on 5 February 2025, which was adjourned to await the outcome of the administration application, and the hearings of 7 February, 21 February and 18 June in these proceedings) be payable as an expense of the administration.

14. In support of its position, the Petitioner relied upon the case of Irish Reel Productions Ltd v Capitol Films Ltd [2010] EWHC 180 (Ch) , which it maintained was authority for the proposition that where an administration order is made, the petitioner of a winding up petition can recover its costs. It also relied on rules 3.12(1)(e), 3.12(2) and 3.51(2)(c) IR 2016.

15. The Petitioner further contended that: (1) it was owed a substantial undisputed debt by the Company and accordingly was entitled to present a winding up petition; (2) the presentation of the winding up petition was a ‘trigger’ for Mr Settle’s administration application and Seven Stars’ response to it; (3) the Petitioner’s attendance at the 5 February, 7 February, 21 February and 18 June 2025 hearings had been necessary because: a) all the hearings concerned the winding up petition, which was listed at the same time as the administration application. b) MLA was an interested party and was entitled to be heard on the administration application (and to support the appointment of Ms Smith and Ms Thomas as administrators). (4) the Petitioner had engaged constructively with these proceedings and had been reasonable in its approach to the proposed administration. It agreed at the 5 February hearing that the winding up petition had to be adjourned in light of Mr Settle’s administration application. Upon reviewing Seven Stars’ evidence ahead of the 7 February 2025, it responded pragmatically and “pinned its colours to the mast” in supporting Ms Smith and Ms Thomas’ appointment. It had maintained that position at the 21 February 2025 hearing.

16. The Petitioner opposed Mr Settle’s application for his costs. It did not oppose Seven Stars’ application for a personal costs order against Mr Settle. The Administrators’ position

17. By the time of the hearing of 18 June 2025, there had been a creditors’ decision procedure within the administration approving the interim managers’ costs as an expense. Out of caution, however, the Administrators also sought a declaration confirming the status of the costs incurred by them as interim managers as pre-administration expenses pursuant to rule 3.52 IR 2016 and a corresponding order to that effect.

18. The Administrators also sought an order altering the priority of those expenses, to put them on a par with the expenses falling within rule 3.51(2)(a), on the footing that otherwise they would sit quite low in the priority, at rule 3.51(2)(i). The power to alter priority was said to be by way of a residual discretion under rule 3.51(3), which applies where there is not going to be a surplus for fees. The Administrators contended that given the breadth of powers granted to them as interim managers and the intensive, highly effective work undertaken by them in that role in difficult circumstances, it would not be appropriate for their costs as interim managers to fall so low in the priority and that such costs should be afforded commensurate priority with post-appointment fees.

19. The Administrators opposed Mr Settle’s application for his costs. They did not oppose Seven Stars’ application for a personal costs order against Mr Settle. Seven Stars’ position

20. Seven Stars sought a personal costs order against Mr Settle for the entirety of its costs of the administration application on the indemnity basis.

21. Seven Stars relied upon rule 12.41 IR 2016, which expressly invokes CPR Parts 44 and 47. It argued that the general rule in CPR r.44.2(2)(a) that the unsuccessful party will be ordered to pay the costs of the successful party applied to the present case, as did CPR r.44.2(4), which required the Court to have regard to all the circumstances, including the conduct listed in CPR r.44.5(a)-(e).

22. Seven Stars maintained that for the purposes of CPR r.44.2, Mr Settle should be treated as the unsuccessful party and Seven Stars as the successful party. This was on the basis that Mr Settle’s application for a ‘pre-pack’ administration order at the 7 February 2025 hearing (which had been strenuously opposed by Seven Stars) had failed and that Seven Stars had succeeded at the hearing on 21 February 2025 in securing the appointment of its chosen nominees as Administrators.

23. Seven Stars also invited the court to take Mr Settle’s conduct into account, relying (in broad terms) upon three areas of conduct for these purposes: (1) Mr Settle’s knowing inclusion, in both his first and second witness statements in support of the administration application, of material, self-serving untruths likely to mislead the court; (2) Mr Settle’s earlier reliance, at a hearing on 24 November 2024 in proceedings numbered CR 2024 005152, on his witness statement dated 22 November 2024 in an application by the Company to restrain presentation of a winding up petition by a company known as Curzon Claims Limited t/a Clockwork Claims; a witness statement which Seven Stars contended had wrongly stated that the Company was both cashflow and balance sheet solvent and (as purported evidence of the Company’s cashflow solvency) relied upon an imminent VAT rebate of £687,633.97 said to be ‘due to be paid any day’, whilst failing to disclose that the Company had already agreed to pay the entire VAT rebate to Truehaven immediately upon receipt, which it then did; (3) Mr Settle’s failure to disclose relevant information to the Interim Managers and the solicitor manager.

24. Seven Stars contended that the facts of the present case were so exceptional, involving ‘the most egregious conduct on the part of Mr Settle’, that he should be ordered to pay Seven Stars’ costs personally. Discussion and conclusions

25. I shall deal first with the costs of the Petitioner. In my judgment the Petitioner’s costs of and occasioned by the administration application and by the winding up petition should be paid as an expense of the administration. In this regard the reasoning of Irish Reel Productions Ltd v Capitol Films Ltd [2010] EWHC 180 (Ch) , a case decided under the Insolvency Rules 1986 (‘IR 1986’), is in my judgment equally applicable to cases governed by IR 2016. In Irish Reel the court observed that the phrase “the costs … of any person whose costs are allowed by the court” in r.2.12(3) of IR 1986 (wording now reflected in r 3.12(2) IR 2016) comprehends not merely that person’s costs of appearing at the hearing of an administration application, but also that person’s costs of any winding up petition which was dismissed at the same time, where the court thinks fit to make such an order. In the present case the court does think fit to make such an order. I would add that no one appearing before me opposed such an order or suggested an alternative.

26. I turn next to the Administrators’ costs. As previously noted, there has already been a creditors’ decision procedure under r 3.52(3)(a) IR 2016 approving the interim manager costs as an expense. In light of the scant definition of pre-administration costs in the Rules, however, (see rule 3.1 IR 2016 and Johnson Machine and Tool Co Ltd [2010] EWHC 582 (Ch) at [10]), in my judgment the Administrators are right to seek certainty, by way of a declaration and corresponding order, regarding the status of the expenses (including fees) that they have incurred as interim managers.

27. I accept Mr Lafferty’s submission that, so long as a sufficiently direct and appropriate connection can be demonstrated between the work carried out by an insolvency practitioner pre-administration and the achievement of the ultimate administration itself, the same can properly be categorised as pre-administration expense and catered for under rule 3.52 IR 2016. In the present case, the work undertaken by the Administrators whilst acting as interim managers was all directed to the enablement of the administration that followed. The interim managers were highly effective in their work, in extremely challenging conditions. On the evidence before me I am satisfied that they should be granted the declaration sought, together with an order that their costs of the administration application (including their costs prior to their appointment as Administrators) be paid as an expense of the administration.

28. It would not be appropriate at this stage, however, to grant the additional relief sought by the Administrators – that of reorganising priority in respect of interim manager costs under rule 3.51(3) IR 2016. In my judgment any such application would have to be brought by way of fee paid application notice supported by witness statement on proper notice to other affected parties. Both the Petitioner and Seven Stars indicated at the hearing on 18 June that they would oppose any such application. I would add that the evidence in support of such an application would in any event need to demonstrate that the threshold requirements of rule 3.51(3) were satisfied in order for the discretion to arise. For these reasons I shall simply include in the order a liberty to apply on that aspect.

29. I turn next to the costs of Mr Settle and Seven Stars.

30. Ms Doran maintained that by virtue of rule 3.12(2) IR 2016 the court had no discretion on the issue of the Applicant’s costs. As will be recalled, rule 3.12(2) provides: ‘If the court makes an administration order, the costs of the applicant, and of any other person whose costs are allowed by the court, are payable as an expense of the administration’

31. Ms Doran contended that rule 3.12(2), in contrast to rule 3.11(2) (which contains the proviso ‘unless the court orders otherwise’), did not give the court a discretion to order that the applicant’s costs are not payable as an expense.

32. Ms Doran went on to concede, however, that the Court nonetheless retained a discretion as to the quantum of such costs. In Re Japanese Koi Co Ltd (unreported, 13 July 2016), for example, a case involving two competing administration applications in which the applicants could not agree on the identity of an office-holder, requiring the court to select one instead, Snowden J (as he then was) capped the applicants’ costs, on grounds of unreasonable behaviour.

33. In light of Ms Doran’s concession, any debate as to the true effect of rule 3.12(2) IR 2016 is on one analysis largely academic. As I have heard submissions on this provision, however, I shall rule on it.

34. Having considered all the parties’ submissions on this issue with some care, I reject Ms Doran’s submission that, when an administration order is made, the court has no discretion on the issue of the applicant’s costs by virtue of rule 3.12(2) IR 2016. In my judgment, that rule must be read subject to section 51 of the Senior Courts Act and paragraph 13(1)(f) of Schedule B1. Moreover, by operation of rule 12.41 IR 2016, CPR r.44.2 is plainly engaged. I am fortified in that conclusion by the approach adopted by Roth J in Ardawa v Uppall [2019] EWHC 1663 (Ch) at [33]-[34]. At [34] he said: ‘The fact that [under rules 10.148-10.149 IR 1986] the Trustee’s costs of legal proceedings are payable out of the estate determines the source from which the funds will come. It does not, in my judgment, remove the normal role of the court as regards the costs of legal proceedings conducted before it.’

35. I would add that in my judgment Mr Settle cannot sensibly be treated as the ‘applicant’ for the purposes of rule 3.12(2) IR 2016 at any material time after the hearing of 7 February 2025 in any event, given the stance which he adopted in the administration application following that hearing.

36. Applying CPR r.44.2, the usual starting point, when the court, as in this case, considers it appropriate to make a costs order, is the general rule that costs follow the event, but the court may make a different order, having regard to all the circumstances of the case, including but not limited to the factors set out in CPR r.44.2(4)-(7).

37. I accept that there is no general principle that established dishonesty displaces the usual starting point of costs following the event: Bank of Tokyo-Mitsubishi Ufi Ltd v Baskn Gida Sanayi Ve Pazzarlama [2009] EWHC 1696 (Ch) and Hutchinson v Neale [2012] EWCA Civ 345 . In Hutchinson at [28], Pitchford LJ said that what is required is an evaluation of the nature and degree of the misconduct of the successful party, its relevance to and effect upon the issues arising at trial, and its tendency to create an unwarranted increase in the costs of the action to either or both of the parties.

38. In the present case, however, Mr Settle cannot in my judgment be treated as the successful party in any event. To adopt the language of paragraph 13(1)(a) of Schedule B1, with emphasis added, the court did not ‘make the administration order sought ’ on his administration application; Mr Settle’s application for a pre-pack administration, in favour of his own company and his own nominees, was roundly rejected by the court on 7 February 2025. Thereafter, the court exercised its powers under rule 13(1)(d) and (f), first appointing interim managers on 7 February and then, at the hearing on 21 February at which Mr Settle remained neutral and simply abided the event, appointing different administrators to those initially proposed by Mr Settle.

39. In my judgment Mr Doyle is correct in submitting that for the purposes of CPR r.44.2, Seven Stars was in substance the successful party. It successfully opposed Mr Settle’s application for a pre-pack administration and the appointment of Mr Settle’s favoured nominees at the hearing on 7 February and thereafter at the hearing on 21 February successfully sought the appointment of its chosen nominees as administrators.

40. Both Ms Doran and Mr Doyle agreed that in considering what costs orders to make, the court should also take into account all the circumstances of the case, including but not limited to those set out in CPR r.44.2 itself. They differed, however, on the issue of which circumstances the court could legitimately take into account on the facts of this case. Mr Doyle invited the court to take into account matters falling within the categories (1) (2) and (3) of paragraph [23] above. Ms Doran accepted that the court could take into account category (1), but maintained that it would not be appropriate for the court to take into account categories (2) or (3).

41. For the purposes of this costs judgment, I have concluded that I should not take into account the category (2) factors relied upon by Mr Doyle. The evidence in question was filed in separate proceedings which are not before me. Deputy ICC Judge Kyriakides gave further directions with a view to interrogating the accuracy of Mr Settle’s third witness statement and its impact on the outcome of the proceedings, but in the event the proceedings were concluded by consent.

42. For the purposes of determining the costs orders to be made in respect of Mr Settle and Seven Stars, I shall also leave out of account the category (3) factors relied upon by Mr Doyle. Whilst, notwithstanding his protestations to the contrary, it is plain from the evidence overall that Mr Settle did fail fully to cooperate with the Interim Managers and the Solicitor Manager during their two weeks in office, I am not persuaded that such conduct is of relevance to the orders to be made in respect of Mr Settle’s and Seven Stars’ costs of the administration application itself.

43. It was common ground, however, that it was open to the court to consider the category (1) factors relied upon by Seven Stars. These related to Mr Settle’s knowing inclusion, in both his first and second witness statements in support of the administration application, of material, self-serving untruths likely to mislead the court.

44. For ease of reference I reproduce below my conclusions on this issue, as set out in paragraphs [20] – [35] of my judgment of 21 February 2025 (reported at [2025] EWHC 742 (Ch) ): ‘20. Regrettably, Mr Settle, who is a solicitor, has been less than truthful with the Court in the context of this application. Mr Settle’s first witness statement dated 31 January 2025 in support of the administration application contained material and self-serving inaccuracies. The entire premise of Mr Settle’s first witness statement of 31 January was that the Company was a going concern but was effectively reaching the end of its trading life, requiring an immediate prepack administration in favour of Mr Settle’s new company, Precision.

21. In fact, that premise was false, as confirmed by Ms Smith, in her fourth witness statement, following her appointment as interim manager.

22. After the hearing of 7 February, at which the pre-pack was rejected by the Court and interim managers appointed, Mr Settle told the interim managers and Mr Gregory (the solicitor manager) that all employees of the Company had in fact been made redundant between 3 January and 31 January 2025. By paragraph 10 of his third witness statement of 19 February, Mr Settle has since confirmed in evidence that all staff were made redundant with an effective date of 31 January 2025. This was the date of his first witness statement. He has also confirmed by his evidence that prior to the first hearing of his administration application, he had exercised the break clause in the lease or leases relating to the Company’s office premises, triggering a termination date of 31 January 2025. Again, this was the date of his first witness statement.

23. Against that backdrop, I turn to consider a number of the specific matters stated in Mr Settle’s first and second witness statements in support of a prepack administration.

24. By paragraph 19 of his witness statement of 31 January, Mr Settle states that: “If an administration order was not made, this would prevent the ability to conclude a going concern sale of the Company’s business and assets, meaning that the Company would have to cease trading.” The obvious implication here is that the Company was continuing to trade as at the date of the statement.

25. Other paragraphs in Mr Settle’s witness statement of 31 January are also premised on the Company still being a trading entity. Paragraph 4 refers to the Company carrying on business in the present tense. Paragraph 6 refers to the Company continuing to trade. Paragraph 20 postulates what would happen if the Company were to cease trading.

26. The second witness statement of Mr Settle, dated 6 February 2025 (the day before the first hearing of the application on Friday 7 February 2025), continues the fiction. At paragraph 13(d) of his second witness statement, Mr Settle states, “I have had to introduce personal monies to fund payroll, to ensure that the Company’s employees continue to work and progress client cases. But I cannot afford to do so past Friday” (i.e., past the date of the hearing of Friday 7 February).

27. In my judgment, on the evidence as a whole, it is clear that Mr Settle knew at the time of signing each of his first and his second witness statements that each such witness statement contained material, self-serving untruths likely to mislead the Court.

28. The fundamentally false premise on which the Applicant’s prepack administration application was (knowingly) based in turn infected the qualifying report of Mr Alistair Bacon, dated 29 January 2025, which was used in evidence in support of a prepack.

29. At clause 4.5 of the qualifying report, for example, Mr Bacon spoke of the consequences of winding-up the Company as being the immediate closure of its business and termination of all contracts of employment for its workforce. Again, at clause 5.4(b), Mr Bacon spoke of the benefits of continued trading, one such benefit being the safeguarding of the jobs of 31 employees. 30.The same fundamentally false premise also infected the estimated outcome statement prepared by one of the Applicant’s proposed Administrators, Mr Piacquadio. The estimated outcome statement, which was exhibited to Mr Piacquadio’s witness statement, was prepared on the footing of an absence of preferential employee claims in a prepack administration. 31.The same falsity also infected the skeleton argument prepared by Ms Doran, Mr Settle’s barrister, for the hearing of 7 February. Whilst neither Ms Doran nor her instructing solicitors were aware of the falsity at the time, the false premise materially impacted on Ms Doran’s written and oral presentation of the application at the hearing on 7 February. Paragraph 17 of Ms Doran’s skeleton argument provided, by way of example, that the estimated outcome statement prepared by Mr Piacquadio showed that a better result would be achieved for the Company’s creditors if it went into administration, as compared to liquidation. This was said to be due “to the value of the Company’s assets being lost if it ceases to trade and the absence of preferential employee claims in a prepack administration”.

32. Whilst Mr Settle admitted in his third witness statement (dated 19 February) that he had made staff redundant with an effective date of 31 January 2025, and that he had exercised break clauses regarding the Company’s office premises with a termination date of 31 January 2025, he did not by that statement offer an apology or any explanation for the deeply troubling material inaccuracies in his first and second witness statements.

33. On behalf of Seven Stars, Mr Doyle KC contended that no explanation was possible in the circumstances, as it was readily apparent that these were conscious, dishonest falsities, of a self-serving nature, made by a solicitor in two witness statements which each bore a statement of truth.

34. At the outset of today’s hearing, Ms Doran sought valiantly, on behalf of Mr Settle, to ameliorate his position, stating that Mr Settle had instructed her to apologise and to explain that he had been extremely stressed when he wrote his first and second witness statements; and also to proffer an assurance that whilst workers were made redundant, there would have been workers available to continue the work of the Company, had funding been made available.

35. In my judgment, this is too little, too late. It is deeply troubling that Mr Settle, an officer of the court, should knowingly include self-serving material falsities in his first and second witness statements. It is also deeply troubling that, having filed a further witness statement as recently as 19 February (2 days prior to this hearing), Mr Settle studiously avoided offering any explanation or apology in that statement. I find the unevidenced apology and explanation which he has since proffered through Counsel entirely unpersuasive and unsatisfactory. I do not accept stress as an explanation. The purported ‘urgency’ of the administration application was engineered from start to finish by Mr Settle himself, as applicant and sole director of the Company. As sole director of the Company, Mr Settle knew full well by (at the very latest) November 2024 that the Company was insolvent. On the evidence as a whole, I consider it legitimate to conclude that he left making the administration application to the very last minute with a view to forcing through a prepack in favour of his own newly incorporated company. In those circumstances, his (unevidenced) claims to have been stressed at the time of making his first and second witness statement in support of the application are entirely unpersuasive’.

45. On behalf of Mr Settle, Ms Doran submitted that whilst the material inaccuracies in Mr Settle’s first and second witness statements were regrettable, they should not lead inexorably to orders that he personally bear his own costs without reference to the estate and that he personally pay any part of Seven Stars’ costs. In this regard she relied (inter alia) upon the case of Med-Gourmet Restaurants Ltd v Ostuni Investments Ltd [2013] BCC 47 , a case involving (inter alia) competing nominees and misleading information by a director, in which the court ultimately ordered that both sides costs be payable as an expense of the administration.

46. In Med-Gourmet, however, there appears to have been little or no debate on costs. The court’s conclusions on costs were set out in one sentence, without any reference to competing submissions. In the present case the court heard submissions on costs from multiple parties. Moreover, as rightly observed by Mr Doyle, judicial rulings on costs are highly fact-specific. Ultimately, when determining costs, the court must in each case consider with some care the facts set out in the evidence before it and the submissions made.

47. Ms Doran also contended that, but for Mr Settle’s administration application, the Company would have been wound up, to the detriment of its creditors.

48. To the qualified extent outlined below, I do take into account that, but for the issue by Mr Settle of an administration application, the Company was at risk of being wound up. The winding up petition was presented in December 2024. The administration application was issued on 31 January 2025. The next hearing of the winding up petition was listed for 5 February 2025. As a result of the issue of the administration application, at the hearing on 5 February 2025 the winding up petition was adjourned to 7 February 2025, to be heard together with the administration application.

49. The court’s acknowledgement of Mr Settle’s role in achieving that short reprieve for the Company is in my judgment adequately reflected in my order that the issue fee paid by Mr Settle on the issue of the administration application shall be payable as an expense of the administration. In light of my conclusions regarding Mr Settle’s conduct and its impact, however, as reproduced at [44] above, in my judgment it would be wholly inappropriate for this court, in the exercise of its discretion, to allow Mr Settle a penny more than the issue fee as an expense of the administration. The fact that the Company was not ultimately wound up at or following the hearing on 7 February was not down to Mr Settle, whose self-serving pre-pack administration was roundly rejected, but rather to the hard work of Seven Stars, supported by the Petitioner, the interim managers and the solicitor manager appointed. But for their hard work in challenging circumstances, the administration application would have been dismissed and the Company wound up.

50. Ms Doran also argued that it was open to Seven Stars to make its own application for an administration order. The fact that it did not do so, however, and that Mr Settle did, is already properly reflected in the court’s order that the issue fee paid by Mr Settle on the issue of the administration application shall be payable as an expense of the administration.

51. Ms Doran went on to argue that the material inaccuracies in Mr Settle’s first and second witness statements did not cause an increase in Seven Stars’ legal costs. She also argued that there would always have to have been two hearings because Seven Stars had not put in evidence all the matters that it intended to rely upon by the time of the first hearing.

52. I reject the suggestion that Mr Settle’s knowingly false evidence did not cause an increase in Seven Stars’ legal costs. That evidence tainted and distorted the whole of the first hearing, which ran late into the evening. I would add that the extent to which the material inaccuracies in question increased Seven Stars’ costs overall is only one of a number of factors for the court to take into account when exercising its discretion on costs. It is also legitimate in appropriate circumstances, for example, for the court to flag its disapproval of a litigant’s conduct, in the run-up to and during the proceedings, when ordering costs.

53. The arguments addressed at [51] and [52] above must also be considered in context. From the evidence before me it is plain that Mr Settle was far from transparent in his dealings with Seven Stars from November 2024 onwards. The evidence demonstrates that numerous requests for financial information regarding the Company went unanswered, whilst Mr Settle, without disclosing the same to Seven Stars and other creditors at the time, put arrangements in place to set up Precision and to line up a short, covert, purported marketing process, aided inter alios by the same insolvency practitioners whom Mr Settle had used for a pre-pack the year before. His first two witness statements were peppered with knowing, self-serving, material untruths designed to achieve a hasty pre-pack. Only a few business days’ notice was given to Seven Stars of the first hearing of the administration application. That Seven Stars was not fully prepared with its evidence in response by the time of the first hearing on 7 February 2025 must be considered against that backdrop. Had Mr Settle engaged constructively and transparently with the Company’s creditors and put in place a proper marketing process for the Company’s business following presentation of the winding up petition in December 2024, in my judgment the administration application could easily have been dealt with in one hearing. The Company was plainly insolvent and there was unanimous appetite for an administration. Ultimately, the administration application took two hearings rather than one as a result of Mr Settle’s own conduct, in seeking to engineer an outcome for his own personal benefit rather than acting in the interests of the Company and its creditors as a whole.

54. Ms Doran also submitted that rule 3.4 IR 2016 (which provides that once filed an administration application made by the directors is to be treated for all purposes as an application by the company) prevents this court from making a personal costs order against Mr Settle. I reject that submission. In my judgment, rule 3.4 must be read subject to section 51 of the Senior Courts Act and paragraph 13(1)(f) of Schedule B1. Even if Mr Settle is treated as a ‘non-party’ on the issue of costs by virtue of rule 3.4, in my judgment it is just to make a ‘non-party’ personal costs order against him in respect of Seven Star’s costs up to and including the hearing of 7 February 2025. On the evidence before me Mr Settle was plainly the ‘real party’ over that period, seeking to benefit personally from his proposed pre-pack administration and conducting the litigation on self-serving evidence which he knew to be materially false, without proper regard for the interests of the Company or the creditors as a whole. I shall dispense with the formal ‘joinder’ of Mr Settle in his personal capacity on the issue of costs for the purposes of CPR r.46.2, on the basis that any such joinder would be an utterly artificial exercise serving no good purpose; Mr Settle is already named in the application notice as a party in the proceedings, has participated fully in the same, was given fair notice of Seven Stars’ intent to seek a personal costs order against him and has had a full opportunity, represented by counsel, to address the court on all aspects of the proceedings, including costs. He was even invited by the court at the costs hearing in June to confirm whether or not he wished to file any further evidence on the issue of costs and, having been allowed time to consider the point with his legal team, confirmed through counsel that he did not.

55. For all these reasons, rule 3.4 IR 2016 does not, in my judgment, preclude the court from making a personal costs order against Mr Settle in respect of Seven Stars’ costs of and occasioned by the administration application up to and including the hearing of 7 February 2025.

56. On the evidence which I have read, the submissions which I have considered and the conclusions which I have reached regarding Mr Settle’s conduct, it is in my judgment appropriate, in the exceptional circumstances of this case, for this court in the exercise of its discretion to order Mr Settle personally to pay, without recourse to the insolvent estate, Seven Stars’ costs of and occasioned by the administration application for the period up to and including the hearing of 7 February 2025, such costs to be the subject of detailed assessment if not agreed between Seven Stars and Mr Settle.

57. Seven Stars’ costs of and occasioned by the administration application in respect of the period from and including 8 February 2025 onwards shall be payable as an expense of the administration, such costs to be the subject of detailed assessment if not agreed with the Administrators.

58. In declining a personal costs order against Mr Settle in favour of Seven Stars with regard to the period 8 February 2025 onwards, I take into account the circumstances as a whole, including the position of neutrality adopted by Mr Settle in the proceedings following the hearing of 7 February 2025 and his third witness statement of 19 February 2025 which, whilst not apologising for or adequately explaining the same, at least corrected the earlier untruths in his first two witness statement.

59. I also take into account the fact that Seven Stars wanted the Company to go into administration with its own choice of administrators and that it could not achieve these objectives without evidencing that the threshold requirements of Schedule B1 were met and that its own choice of nominees was preferable. Seven Stars would therefore have incurred such costs in achieving its own legitimate objectives even absent any misconduct on Mr Settle’s part. In my judgment the appropriate order in respect of Seven Stars’ costs for the period 8 February 2025 onwards is that they be treated as an expense of the administration.

60. I shall hear submissions on any consequentials on the handing down of this judgment. ICC Judge Barber