Sinclair v Glatt & Ors

1. The defendant Louis Glatt was formerly a practising solicitor. In January 2001 he was convicted of an offence of conspiracy to launder the proceeds of crime and sentenced to seven years imprisonment. On 15 February 2001 the applicant was appointed receiver of all his assets (with another who was subsequently discharged). In May 2002 a confiscation order was made against Mr Glatt in the sum of £3.2million. On 17 March 2006 the Court of Appeal Criminal Division quashed the confiscation; as a consequence of this decision the receivership was discharged on 25 April 2006.

2. The interveners are those beneficially entitled to the residue of Mr Glatt’s assets after deduction of the charges properly incurred in the course of the receivership, which, it has been established, includes post discharge expenses properly incurred in the capacity of receiver. There are applications before this court made by the former receiver and the interveners. For convenience in this judgment I will refer to the parties as the receiver and the beneficiaries.

3. Throughout its duration and subsequently, the receivership has been hotly disputed. There have been numerous decisions of judges of this court given in the last 14 years, and three judgments of the Court of Appeal Civil Division. A summary chronology of some of these disputes reveals the following:

4. In 2001 there were applications made by the receiver to commit Mr and Mrs Glatt for contempt of court for breach of a freezing order obtained before the receivership and a further application for sale of assets; there was a cross-application to dismiss the receivers. On 23 November 2001 Mr Justice Ouseley gave directions for the payment of receivership costs, provision of receivership accounts and for any objections to be raised by Mr Glatt.

5. Between August 2002 and November 2008, Mr Justice Munby, as he then was, conducted various hearings concerned with Mrs Glatt’s mental capacity, the validity of a deed of variation made in her favour and matrimonial claims made against Mr Glatt, various applications made by other interveners in these proceedings, applications for the release of funds from the receivership property, and from January 2003 an application made by Mr Glatt to discharge the receivership for a number of allegations related to the performance of the receiver’s functions (described by the receiver as the ‘root and branch attack’). This last matter was dismissed in a judgment dated 25 July 2003 ( [2003] EWHC 1732 (Admin) and an order made that is set out in full in Annex 1 to the present judgment. In summary, directions were given for the continuation of the receivership pending the determination of Mr Glatt’s appeal against the confiscation order; the receiver’s costs were payable in the receivership and to be paid to the extent of 85% subject to detailed assessment, but no such assessment was to be commenced without leave of the court. Amongst other things Munby J found that the receivers had complied with their obligations to submit accounts under the receivership order. An application for permission to appeal this order was refused.

6. In November 2008, Munby J declared that the receiver’s lien over the assets was effective despite the claims of the beneficiaries. This decision was upheld by the Court of Appeal on 13 March 2009 ( [2009] EWCA Civ 176 ).

7. In March 2009, the beneficiaries sought detailed assessment and in December 2009 the receiver applied for permission to enforce his lien over the assets to recover his remuneration costs and expenses. These applications were determined by Mr Justice Mitting on 14 December 2010 ( [2010] EWHC 3619 (Admin) ) whose order is set out at Annex 2. He directed payment out of the receivership assets, unless by 31 January 2011 an application was made for determination of those costs by a costs judge and the applicant applied to the Supreme Court Costs Office (SCCO) for directions. By paragraph 3 of that order he also determined that interest should run on unpaid amounts at the rate of 5%.

8. The beneficiaries appealed against the award of interest but the appeal was abandoned with costs to be paid by them on 30 September 2011.

9. Meanwhile, Mr Glatt was dissatisfied with the price obtained by the receiver on sale of one of his former properties 107 Station Road, Hendon. He sought permission to issue negligence proceedings against the receiver from Mr Justice Parker. The application was refused on 4 November 2010, but allowed in part by the Court of Appeal on 23 November 2011 ( [2011] EWCA Civ 1317 ). The Court of Appeal held there was an arguable claim that the receiver had been negligent in the marketing of the property despite obtaining a price independently assessed by reputable valuers. A further claim against the receiver that the estate agents had colluded with the purchaser to sell at an under value was dismissed, as it had first been canvassed after expiry of the relevant limitation period. In September 2012 this litigation was settled without admission of liability by acceptance by Mr Glatt of an offer of a lump sum of £132,000 plus costs, money representing both an unspecified capital sum and interest arising from the undervalue alleged. It is pertinent to note that the claim (and accordingly the settlement) was brought by Mr Glatt on behalf of himself and all those beneficially entitled (see particulars of claim paragraph 6A as amended 30.11.2011).

10. The beneficiaries, supported by Mr Glatt, applied to the SCCO pursuant to the order of Mitting J at Annex 2. On 1 February 2011, Master Gordon-Saker, a costs judge of the SCCO, held a directions hearing for assessment of the costs and remuneration as directed. There were further hearings on 5 December 2011 and between 30 July and 3 August 2012. In the course of these hearings an issue arose as to whether the order for the receiver’s remuneration extended to work done after discharge of the receivership order. The matter was remitted to Mitting J who on 29 June 2012, confirmed that it did. An appeal by the beneficiaries against this decision was dismissed by the Court of Appeal with costs against them on 26 March 2013 ( [2013] EWCA Civ 241 ; [2013] 1 WLR 3602 ).

11. On 9 October 2013 a final costs certificate was issued by the SCCO costs judge in the sum of £1,159,562.53 for the legal costs and remuneration of the receiver. These included disbursements in various legal proceedings and some modest administrative disbursements incurred by the receiver in the discharge of his functions. It should be noted that the costs of this assessment of legal costs and remuneration were themselves assessed at £363,700; both sums were to be paid out of receivership assets. These assessments are final and accepted to be binding by all parties.

12. However, on 21 May 2014, the beneficiaries issued an application for an account to be taken by a Chancery Master of the receipts of receivership property. The receiver issued an application for payment out of all final sums owing relating to the receivership and the outstanding costs of the various appeals and hearings not included within the assessments £1,159,562 and £363,700.

13. There was a hearing before Mr Justice Mitting on 1 July 2014, of which I have been provided with the transcript. Instead of acceding to or dismissing the account application, he directed that there should be points of claim and a response thereto before the matter returned to him (if available) for hearing. Although there was no formal judgment the transcript reads as follows. In answer to a query from the judge as to precisely what the beneficiaries were seeking Mr Thompson QC (for the beneficiaries) said as follows (460): “ What I seek my lord, is an account of the gross receipts that the receiver has received, less any sums that he says he has taken off, that he says he is entitled to take off, so as to come to his receipt” After hearing from Mr Cullen QC (for the receiver), the judge said (522): “As far as ordering an account of gross and net receipts showing the sums deducted is concerned, on the information I have been shown, I am satisfied that, as to either all or virtually all of the receipts, gross and net, that might be in issue, that exercise has already been done and I do not see why the receiver should be made to do it again. If anybody is going to spend money on working it out it should be (the beneficiaries) and not the receiver….Given that there has been in effect full disclosure already, I do not think there is any need for an order for standard disclosure or anything of that kind. The witness statements will no doubt refer to the documents, and one would hope exhibit them…”

14. These directions have been complied with. The beneficiaries rely on a witness statement by Mr Glatt and the receiver on his twenty first statement in these protracted proceedings, both statements are dated 24 October 2014. The applications came before me for determination as Mr Justice Mitting was not available to hear them. The advocates for the parties remain the same as at the directions hearing. The Issues

15. The beneficiaries accept that the receiver is entitled to the orders that he seeks subject to the outcome of the objections they raised in the points of claim as refined by the time of the hearing. Those objections now number six in all; some of them are sufficiently precise to be determined by the court in this application but others are said to require the remedy of an account by a Chancery Master as insufficient information has been provided to demonstrate that all of the deductions made by the receiver from the gross receipts of the receivership were properly made. I now set out the substance of the six objections or claims of impropriety.

16. Objection One: relates to the proceedings taken in respect of the sale of 107 Station Road Hendon. The beneficiaries contend that it is not sufficient that there has been a settlement of the claim of sale at an undervalue including interest; it is necessary for a notional capital receipt from the sale to be added to the receipts part of the receivership balance sheet, and that sum increases the cash assets available to discharge receivership expenses and accordingly decreases the claim for 5% interest on unpaid bills that would otherwise arise.

17. Objection Two: relates to the most significant asset of Mr Glatt that was subject to the receivership a block of flats on Cromwell Road, West London, Cromwell Mansions. The block consists of twelve residential units and a porter’s lodge and common parts. Ten of the residential units are let on long leases and two are protected tenancies. The long leases all have covenants for the tenants to pay a proportionate share of the Annual Maintenance Cost. The protected tenants (at flats no 219 and 235) had no such obligations. Their share of the maintenance charges to the block of flats were therefore born by the freeholder. The receiver found that the block had not properly been maintained for a number of years. Amongst other things, the lift, the roof, and the porter’s flat needed repair work. The company (Gellair One) that was supposed to manage the block and to whom the tenants under the long leases were supposed to pay the maintenance payments had been dissolved a number of years previously. Mr Glatt had incorporated a new company (Gellair Two) of which he was sole director, but had not ensured that the leases were amended to require the tenants to pay the new service company their share of service charges. Further Gellair Two became inoperative whilst Mr Glatt was serving his sentence of imprisonment. He had, however, appointed managing agents, Dauntons Soar, to manage Cromwell Mansions. The receiver entered a new agreement to do the same things. However in June 2002 the tenants ousted Mr Glatt as director of Gellair Two, effectively treated that company as the vehicle for collection of service charges and appointed new managing agents Langley Taylor to act for them.

18. The receiver had to deal with the problems of getting Cromwell Mansions back in to repair, addressing the problems of the status of the various companies and managing agents, arrange for the hand over of the managing agents to the tenants, and was responsible for the bills of Dauntons’ Soar under the various agreements made that included services rendered in respect of the protected tenancies for which the freeholder was liable. In addition to these problems, the receiver took proceedings for arrears of rent against various of the tenants; in the case of the protected tenants there were further problems connected with arrears in the calculation of housing benefit. The hours of work spent by the receiver in addressing these problems and the legal costs incurred in seeking advice and taking proceedings were the subject of the assessments made by the SCCO judge. The points of claim do not and could not take issue with the reasonableness of these sums but contend that most of this expenditure should have been recouped from the tenants under the terms of their long leases.

19. Objection Three: also relates to Cromwell Mansions. It is common ground that although the freehold title is in the name of Mr Glatt, the equitable interest was held in even shares between Mr Glatt and a company called Unitel that was a corporate vehicle of Mr Pasricha (both of whom were interveners in earlier stages of these proceedings). The receiver’s account identified that three payments had been made out to Unitel in the sums of £15,000, £16,827 and £20,000. The points of claim had disputed all three payments and claimed that the receipt of rent and/or damages from tenants should not have been discounted by these payments out. By the time of the hearing, the objection in respect of £20,000 was withdrawn as it had been pointed that such a payment had been directed by previous order of Munby J in 2002. As regards the other two payments the dispute was confined to the proposition that they should not have been paid out without further express order of the court, as the order of Munby J (Annex 1 Paragraph 4 substituting new paragraph 3 (3) (a)(vii) ) contemplated that further payments over would only be made on the sale of Cromwell Mansions but the block was never sold as envisaged in the order as the beneficiaries had raised funds to discharge the receiver’s costs without the sale being enforced.

20. Objection Four: concerned the receiver’s claim to interest on unpaid bills. There were two parts to the objection; first, it was contended that up until March 2013 there was a cash surplus in the receivership account and no interest payments should be paid at all as the receiver should have paid himself out of this surplus rather than await payment out of a sale of assets or other payment from the beneficiaries. Second, it was contended that cash should have been credited to the receiver’s account as soon as it was received by an agent of the receiver, whether his solicitors or his managing agents irrespective of when it was received. In this respect a significant gap between receipt of rents by Dauntons Soar and the payment over of these sums to the receiver was relied on. In both instances, therefore it was submitted that allowance of the interest on unpaid bills was inappropriate.

21. Objection Five: was an objection taken to a number of deductions made by the receiver from gross receipts for payments of bills connected with the receivership property. Thus in respect of the sale of Station Road Hendon, various queries are raised as to deduction for an inventory, removal of contents, storage of contents until March 2007 and other items. In respect of storage charges of £7,855 for items of significant sentimental value to Mrs Glatt, it was contended that they should not have been stored. Similar objections to storage charges were paid in respect of the contents of Mr Glatt’s former office at 15 Berkeley Street. Objection was also taken to £6403 for lift repairs at Cromwell Mansions although this claim was abandoned by the time of the hearing as it clearly related to the contribution of the protected tenants that was payable by the freeholders, and various other deductions from the accounts for payment to agents.

22. The objections taken were two fold. First, it was contended that these expenses should have been proved in the SCCO assessment of remuneration costs and disbursements as these items were ‘disbursements’ within the meaning of the order of Mr Justice Mitting (Annex 2 paragraph 2). The beneficiaries submit that if these items were not put forward and justified in those proceedings, the receiver was now shut out from claiming them. Second, if this submission failed, they should be deducted as improperly incurred.

23. Objection Six: reverts to the question of interest. Apart from any recalculation of interest that may be required in the event of any of the previous contentions finding favour, three distinct contentions were advanced at the hearing. First, the contention was repeated that interest should not be payable when there was any cash surplus; second, that interest should not be charged on disbursements that did not bear interest such as VAT remittances and counsel’s fees; third, that interest should not apply to claims for costs outside the 85% sum directed by Munby J and Munby J because these fees were not due until the final assessment made by the SCCO.

24. The receiver’s response to each of these contentions may be summarised as follows:- i) Insofar as the objections complained of a failure to gather in assets this was not an issue that could be addressed in a claim for a common account. It would require either a discrete action for negligence/breach of duty in proceedings outside the receivership or a claim of wilful default in those proceedings. Neither course was now possible as either directly (in distinct proceedings) or by analogy if the court’s permission were sought to ventilate these claims against its receiver in the receivership proceedings, a limitation defence would arise, as the acts complained off had taken place well over six years before they were identified in the points of claim. ii) It was not the case that Mitting J’s order applied to deductions from gross receipts. The reference to disbursements in the Annex 2 order was understood by the parties in drawing up the order and the judge in making it to refer to the disbursements arising in the assessment of legal costs or the administrative disbursements in the receiver’s claim to remuneration. This was clear from the transcript of the proceedings in which the conditional order for assessment was made; the decision of the costs judge in the directions hearings of the issue assigned to him, the absence of any assessment by the costs judge of matters that could only be examined in an order for accounts, the absence of any reference back to Mitting J as to whether his order was intended to require the costs judge to assess the deductions from gross receipts, and indeed the very decision of July 2014 to direct some further hearing as to the need for an account of the receipt side of the balance sheet. iii) In any event each of the disputed disbursements were legitimate disbursements properly incurred in the receivership as is evidenced from the orders for payment out made by Munby J in the Annex 1 decision, and by implication the assessment of the costs judge as to the reasonable remuneration afforded to the receiver who was engaged amongst others in this activity. iv) The disputes as to the interest claimed were essentially a collateral attack on the order of Mitting J awarding interest, after a contested hearing on 14 December 2010, when such an order was opposed by leading counsel then appearing for Mr Glatt. Similar objections had been made and rejected in that hearing. Even if specific points had not been made about counsel’s fees and the liability to interest they could and should have been if it was contended that these items should have been excluded from the unpaid bills. In any event, in the exercise of discretion Mitting J had awarded interest at 5% and not the 8% sought, and the justice of the case had been met by a single rate for the overall unpaid bill and not a further break down of different or nil rates for different elements in this bill. v) The beneficiaries’ present submissions were in a number of respects internally inconsistent and inconsistent with their previous claims in this long running saga. Thus at one point in the hearing it was contended that the receiver had no business pursuing claims against the tenants for arrears of rent as he had no good title to sue, whilst elsewhere it was claimed that he had failed to pursue the tenants through a service charge company that was no longer in existence, or a substitute company that there was no contractual obligations under the long leases to pay. Equally, at some points in the past and in advancing the present claim it was contended that no costs should be paid out of the receivership property until final assessment or other order of the court was made, whereas it was also contended that the receiver should have paid himself without reference to any court order or assessment out of any cash surplus that may have come in from time to time. vi) The receiver’s statement and the numerous exhibits it produced corrected a number of factual inaccuracies express or implicit in the points of claim as to why things were done and to what extent others such as Unitel had had proportionate share of deductions debited from net receipts paid over.

25. In my judgment, these rival contentions raised two issues of legal principle that required determination, before the substance of the challenges was considered on their individual merits.

26. The first such issue was whether a contention that the receiver as trustee had failed to bring property into the receivership account could be advanced in an application for a general account, without also raising an allegation of wilful default, negligence or other breach of duty for which the receiver was liable to compensate the beneficiary. In posing this question I am conscious that Mitting J had not ordered an account of receivership receipts to be taken but merely directions for further exploration of the beneficiaries’ contentions after the issue had been fully pleaded.

27. The second issue was whether the Annex 2 order and the exercise undertaken by the costs judge acted to prevent whether by reason of res judicata , estoppel, abuse of process or otherwise, the receiver claiming disbursements from gross receipts that he should have proved in the costs proceedings. Issue 1: proceedings for a common account

28. Both parties to these proceedings accepted that the test in a claim for a common account was that stated in Capewell v Revenue and Customs [2007] UKHL 2 [2007] 1 WLR 386 at [21] per Lord Walker approving the dictum of Warrington J in Boehm v Goodall [1911] 1 Ch 155 at 161: “ The court cannot itself indemnify receivers, but it can, and will, do so out of the assets, so far as they extend, for expenses properly incurred”.

29. The question here arises is what is meant by ‘properly incurred’. As for the issue of receiver’s remuneration, there is a line of authority extending, in modern times, from the judgment of Ferris J in MGN v Maxwell [1998] 1 BCLC 638 onwards and now reflected in the terms of CPR 69 (7)(4) about the criteria to be applied for determining whether a claim is reasonable and proportionate. Those criteria were deployed by the costs judge in assessing the recoverable remuneration of the receiver. Despite Mr Thompson’s invitation to apply them to deductions from gross receipts, I am not persuaded that this is appropriate. I have no difficulty in concluding that deductions from receipts that are unrelated to receivership purposes are capable of challenge; the same applies to deductions that are self-evidently unnecessary or charged at an extravagant rate having regard to the circumstances at the time they were commissioned. These can be the subject of challenge and in this sense would be examples of impropriety in the receiver’s conduct. The question of how and when such a challenge can be brought is one of importance, however. Here the court is asked to adjudicate on the proportionality of expenses actually incurred, it seems in good faith, in the course of a receivership some twelve to fourteen years after they were incurred.

30. Mr Thompson expressly disclaimed the proposition that he was advancing a claim of wilful default or other actionable breach of duty. Doubtless he recognised that the limitation arguments raised in the points of defence would be a complete answer to any such claim, however ventilated, if first articulated in 2014. Rather he contended that the lack of propriety here relied on was conduct short of wilful default but had nevertheless led to a failure to garner in cash or deductions from gross receipts that the court considered inappropriate. He was unable or unwilling to further assist on any criteria for assessment as that would be putting a gloss on ‘properly incurred’.

31. Both sides relied as an accurate statement of the law on the relevant passages in Snell’s Equity (33 rd Edition) that state as follows:- ’20-13 The accounting procedure serves the informative purpose of allowing the beneficiaries to know the status of the fund and what transformations it has undergone. The accounting may identify specific assets in respect of which the beneficiaries may be entitled to proprietary relief. The procedure also has a substantive purpose. It is through the accounting procedure, and in accordance with the principles that govern it, that any personal liability a custodial fiduciary may have arising out of maladministration is ascertained and determined. For instance, where the fiduciary no longer has an asset which they should have, the accounting serves to convert the obligation to make it over into a personal obligation to pay an equivalent sum as “an equitable debt or liability in the nature of debt”. Even where a full and formal accounting is not necessary, the same principles apply. Third parties who receive misdirected trust assets with sufficient knowledge of their wrongful provenance are accountable in the same sense. (a) Proceedings for general accounts. What follows concerns proceedings for accounts in common form, which is to say accounts of the property and fiduciary has actually received in their accountable capacity and of what has become of it. Accounts on the footing of wilful default are discussed separately further below. (emphasis supplied) …. 20-017 (3) Taking the account. The accounting party first submits their verified accounts and supporting documents, and the beneficiary may then raise any specific objections they may have. Objections to an account presented to the court as complete are either by way of surcharge or falsification. The beneficiary surcharges the account when they contend that the accounting party should have charged themselves on the incoming side of the account with more than they had admitted. The beneficiary falsifies the account when they challenge an item of discharge entered into the outgoings side of the account. ….. 20-019 (5) An accountable party must charge themselves with any property they have actually received in their official capacity, whether personally or through an agent, as well as its fruits and exchange- product as the fund is invested and reinvested. The criterion of receipt is control, the question being whether the accounting party became able to apply the asset for authorised as well as unauthorised purposes. 20-021 Misapplications. An accounting party will not be entitled to a discharge for dispositions of property not authorised by their mandate. Unauthorised outlays are liable to be struck from the account and the account will be taken on the basis that the asset or money had remained. An accounting party may, for example, be liable on this basis if they consume, discard or destroy the property; if they gives it to a person not entitled; if they misappropriate the property to their own purposes, or to some other improper purpose; if they makes an unauthorised investment; or if an executor pays debts in the wrong order to the detriment of a creditor. The breach does not need to be pleaded, but can simply be raised as an objection to the account, and the resulting personal liability is not a species of damages. The accounting party is simply required to make good their account with money taken from their own pocket, although the beneficiary may instead choose if they wish to ratify the unauthorised transaction and claim whatever proceeds thee may be. Usually the misapplied assets are accounted for at values ruling on the date when the account is taken. …. (b) Accounts on the footing of wilful default … 20-025 Accounting on the footing of wilful default. An accounting on the footing of wilful default covers the same ground as a common accounting but in addition the trustee’s account may be surcharged with items, so it is said, that they would have received but for their wilful default. ….. 20-27 Surcharge for wilful default . Where a custodial fiduciary is found to have caused the fund to suffer a loss through their wilful default, their account will be surcharged in the amount of the loss, and the fiduciary will be required to make the loss good. The loss is accounted for on the incoming side of the account as if the fiduciary had received more. This is only a technique used to bring the loss into the schema of the account, and it is an error to infer from the fact that the loss is accounted for as if it had been a receipt that the surcharge represents a receipt that never materialised. It is a double error to infer that the only breaches that can be addressed in this type of proceeding are breaches the result in the custodial fiduciary not receiving an asset that hey would have received if they had done their duty. The governing concept is compensation for loss caused by the breach of duty, although this has not always been appreciated.’ (emphasis supplied)

32. In my judgment these extracts (particularly the passages highlighted) indicate that there is a distinction between a common account, where the focus is on assets that have entered the possession of the receiver and have either not been accounted for at all, or accurately or have been removed for some reason, and an account on the basis of wilful default, where examination can be given to assets that should have been received into the possession of the receiver but for wilful default. It is because there was a duty to have gathered in the asset in question, that the establishment of wilful default enables the beneficiary to surcharge the receiver to the extent of the default. It is a high test that has to be expressly pleaded in the relevant proceedings and limitation issues may prevent the allegation being raised either in the receivership or other proceedings.

33. The present proceedings provided a good example of how wilful default or breach of duty may arise in receivership proceedings. The old authority of In re Maidstone Palace of Varieties [1908] 2 Ch 288 establishes that in the event of a grievance against a court appointed receiver, the aggrieved must apply to the court who appointed the receiver. The court may conclude no wrong has been done, permit the allegation of a wrong to be pursued before another court or require the allegation to be determined in the course of receivership proceedings. Here Mr Glatt contended that the sale of 107 Station Road was for an undervalue. He obtained the permission of the Court of Appeal to bring such proceedings outside the receivership proceedings and the court limited such permission to allegations that were raised within the relevant limitation period.

34. However, no such application was ever made in respect of an allegation of a breach of duty to charge the tenants of the long leases through the medium of the service charge obligations under the lease some or all of the costs of the receiver incurred in respect of the maintenance of the state of repair or the property or the recovery of rents from defaulting tenants. The same observation can be made of the deductions made from cash received in respect of payment out to Unitel, the managing agents or property storage firms. In each case the receiver’s regular abstract of accounts revealing the payments were served on Mr Glatt or the beneficiaries. If it was considered that the failure to gather in more than entered the account was improper or a breach of duty, such a matter could have been raised with the court, but was not done so until the points of claim were issued in 2014.

35. I accept that where money has come into the possession of the receiver and has either not been credited in the account properly, or the account reveals its subsequent removal, Snell at 20-21 indicates that there is no need for separate proceedings to establish the error or the breach of duty. In such a circumstance although damages are not payable, if the account reveals an unlawful payment out the trustee is required to make good the deficit: see for example the citation of Ahmed Anguilla v Estate and Trust Agencies [1938] AC 624 per Lord Romer at 637. In the present case none of the disputed payments out can be said to be unlawful in any event. Indeed in his judgment in July 2003 Munby J expressly declared at [95] “ there is no basis for any suggestion (if such be made) that the receivers have been guilty of negligence or serious default ”.

36. However, what the beneficiaries are now seeking by their claim that the accounts are deficient because assets that could have been gathered in have not been, is in substance to make a claim for damages without making any allegation of a breach of duty that could have progressed either as a wilful default account within the receivership or an independent action outside it. In my judgment in these circumstances, the claim for a common account is not an appropriate or sufficient way of advancing the claim. Having expressly abandoned any claim of wilful default or breach of duty, the beneficiaries implicitly abandon any claim in their points of claim that the receiver failed to gather in the assets. Issue 2: res judicata with respect to disbursements

37. I can state my conclusions on this issue more succinctly. I accept the submissions of the receiver on this issue summarised at [24] (ii) above and reject those of the beneficiaries at [22].

38. I have been taken through the proceedings leading to Mitting J’s order with some care by Mr Cullen. I am satisfied that what led to the December 2010 order being made was a challenge to the receiver’s claim for remuneration and legal costs and disbursements associated with either head. When the matter first came before Master Gordon-Saker in the first directions hearing, an attempt was made by the beneficiaries to broaden the inquiry into the deduction from gross receipts; the Master crisply explained that the SCCO does not deal with accounts and he would not know how to undertake one and that if an account was wanted the beneficiaries would have to go elsewhere and seek an order for an account in the Chancery Division (transcript p7; Bundle C3 /27/253). This invitation was not pursued by separate application or reference back to Mitting J until the 2014 application was made that I am now determining.

39. Equally, the directions given by Mitting J on 1 July 2014 in response to that application would have been in significant part otiose if he had concluded that deductions from gross receipts had already been determined by the costs master or should have been. At paragraphs 368 to 379, in the exchange with Mr Cullen, he indicated that if what he had been informed about the costs judge’s task was right, the answer to the extreme position ( res judicata or estoppel) was obvious and went on to identify the issue as ‘the non-legal expenses incurred by the receiver in managing the assets in the receivership not assessed by the costs judge’. If he had thought that he had already ordered these to be assessed and they had been rejected for want of proof it is inconceivable that he would have issued the directions that he did.

40. In my judgment, all the evidence to which I have been directed including but not confined to the parts cited above, points to the proper interpretation of the December 2010 order and the functions of the costs judge thereafter as supporting the submissions of the receiver. None of it points the other way, despite the remarks of the solicitor for the beneficiary in the costs hearing that if the receiver wants the costs of his disbursements he had better prove them. The fact that Master Gordon-Saker said he would only assess disbursements that had been proved demonstrates nothing; the issue is what disbursements he was assessing. The determination of the six objections

41. In the light of my conclusion on these two issues I can now determine each of the objections made in the points of claim that were pursued at the hearing: Objection One 107 Station Road

42. This is in substance a claim that the receiver should have introduced a sum of £85,000 into the receivership accounts, that the beneficiaries assess was the capital element of the offer of settlement in the proceedings for negligent under value. In so far as it is a claim for failing to bring money into the accounts but not pursued as an instance of wilful default in the receivership proceedings, it controverts the ruling on Issue 1 above and is accordingly dismissed.

43. I recognised that separate proceedings for negligence were pursued for this action, and the pleadings indicate that they were pursued on behalf of the beneficiaries, but it is clear that the overall settlement offer included a substantial sum by way of interest on the claimed undervalued capital receipt. The beneficiaries have already been compensated for this element, and further compensation in the form of reduced interest in the receivership accounts is neither necessary nor just. I observe that in the transcript of the hearing of 1 July 2014 (at 249 and 388) Mitting J indicated that if the receiver demonstrated that the settlement included interest that would be an end of the matter. In my judgment he has and it is. Objection 2 no charges made to the tenants of the long leases

44. This again is in substance an allegation that the receiver failed to bring money into the receivership accounts by failing to defray legitimate deductions from those with contractual obligations under the long leases.

45. It is sufficient to dismiss this claim that my decision on Issue One requires the beneficiaries to allege that the failure to take this step was a wilful default which allegation they have been unwilling to make and could not have made having regard to limitation principles.

46. Further, even a cursory examination of the evidence indicates that there was no ready mechanism for defraying repairs through the service charge agreements in the leases because of the state of affairs inherited from Mr Glatt where the service company that there was a contractual duty to pay was no longer in existence and objection was taken to other potential vehicles. These expenses had been incurred at the time of Munby J’s ‘root and branch’ judgment and yet no allegation of neglect was made therein and the receiver’s conduct as a whole was endorsed.

47. Equally, it is an extravagant proposition that even if there was a contractual vehicle for defraying some of the expenses incurred by the receiver standing in the shoes of the freeholder in remedying the defective state of the premises, that such an obligation could have included the remuneration of the receiver in sorting out a chaotic state of affairs, the legal costs of suing other tenants for arrears of rent, and other obligations of the freeholder towards protected tenants. For a combination of reasons there is nothing in this complaint. Objection 3 payments to Unitel

48. It was uncertain by the end of the hearing whether the beneficiaries still pursued this objection. If they did I reject it.

49. In addition to the application of Issue 1 to this objection, there is the point that it is clear that Unitel was a beneficial owner of the freehold interest and was entitled to the receipts due after deductions for net payments out to managing agents and the like. In July 2003 it was contemplated that Cromwell Mansions would be sold and further payments would be made to those beneficially entitled on sale. It was the beneficiaries who resisted this course as they wished to retain this asset after the receivership expenses have been paid. In those circumstances once interim accounts had been rendered, there was an obligation to pay those who were owed money. A failure to do so would only have incurred interest owed to Unitel. It is equally clear that payments made were subject to appropriate deductions apportioning the costs of the recovery between those beneficially entitled to the freehold. Objection Four: Credit Interest:

50. The broad principle that interest should not be awarded because the receiver could have remunerated himself from the receivership assets was clearly propounded by Mr Jones QC then appearing for Mr Glatt at the December 2010 hearing before Mitting J (transcript pp 33 to 39). This objection was not accepted in the part of the judgment dealing with interest (paragraphs 11 to 16) although the rate of interest claimed by the receiver was reduced from 8% to 5%. A detailed order for an award of interest was then made (Annex 2 paragraph 3).

51. In my judgment, there is no reason for this court to revisit the issue, as there has been a prior judicial determination. Mr Thompson contends that Mr Jones’s submissions were concerned with the existence of assets of the receivership generally rather than the availability of specific cash assets. The transcript does not suggest that a distinction was being made. Even if it can now, this was a submission that could have been advanced at the time when the order was made but was not.

52. Part of the argument concerned the dates when interest was deemed to have been received by the receiver. It is accepted that in principle, receipts by an agent of the receiver should be effective to discount interest accruing on such sums. The accounting details indicate that interest was calculated on this basis when sums were received by the receivers’ solicitors pending transfer. The position was different with respect to receipts of rent by the managing agents. Under the terms of their retainer they had a lien over such receipts for unpaid bills. Until the complex set of cross-transactions were worked out the lien was exercised, and rental receipts retained. I do not consider that the receiver’s claim for interest on rent held by the agent and not in the receivership account was improper. If the receiver had persuaded the agent to hand over the rent on an undertaking as to future payment of fees, those fees would have been greater by reference to interest. There is no double accounting here. Objection Five: receivership expenses

53. The draconian objection to these outgoings has been determined in Issue 2 above and rejected.

54. On their individual merits I am entirely satisfied by the evidence of the receiver that these were proper payments made in the circumstances in which he found himself. On sale or surrender of the premises he needed to give vacant possession. The personal property of Mr Glatt and his wife that was left behind was said in some instance to be of important sentimental value; other material appeared to be the stock of his business. It is easy to imagine the response of the beneficiaries if this material had been removed and dumped as waste. The duration of the storage was a result of failures to collect the material earlier despite invitation to do so.

55. The other items identified in the points of claim are all related to the receivership and are readily explained. I am satisfied that the agents fees were properly incurred in conducting the business of the receivership. There was no inflated basis of remuneration. Indeed, the agents were the same as those chosen by Mr Glatt, even though the billing arrangements differed having regard to the complex backlog of issues to unravel.

56. I am satisfied that there is nothing unlawful about these deductions. Indeed when pressed for an evidence based challenge to specific items, Mr Thompson seemed to revert to the position that not enough detail was given in the accounts or the abstract of accounts, the billing spread sheets, the evidence of the receiver or elsewhere to make an assessment as to their propriety and that is why an account in the Chancery Division is needed. I cannot accept that. The purpose of the July 2014 directions was for the beneficiaries to make pleaded and evidentially supported objections to the disbursements in questions if they had any grounds to do so. Mr Glatt has had access to the managing agents’ files and similar data for some years. If there was the material for a cogent objection it could have been made. It has not been despite the fact that by reason of the history of these proceedings an extended opportunity has been afforded to do so. This head of claim is also rejected. Objection Six

57. I am satisfied that none of the specific objections to the claim for interest are made out. Paragraph 3 of the order of Mitting J is clear and in my judgment does not: i) Limit interest to 85% of the costs identified by Munby J in 2003 or Mitting J in 2010. This order was made pending assessment, and construing the two orders together there is nothing to indicate either that interest cannot run on sums found on assessment to be due or that it can only run from the date of final assessment. ii) Exclude counsel’s fees from the order for interest, even in the absence of any obligation to pay counsel interest on fee notes. iii) Make an award subject to the receiver proving that there were no cash assets in his hands that he could have paid himself out of.

58. There was a contested hearing before the order was made and objections to interest in general or interest on specific sums could have been made there and then. It cannot be contended that the sums are improper when they have been made the subject of a judicial order. I further note that in reducing the interest rate to 5%, Mitting J was intending to adopt a proportionate overall response to the request when a different consequence might have arisen if there had been an item by item analysis. Conclusions

59. For all these reasons the beneficiaries’ objections fail. In the circumstances the receiver’s application succeeds. On receipt of this judgment I trust the parties will be able to agree the orders to give it effect. The parties have already agreed that the costs of this hearing and other outstanding costs orders will have to be assessed if not agreed.

60. Standing back and looking at all that has occurred in this former receivership from 2001 onwards, I cannot but express a profound sense of disquiet at how this litigation has proceeded and the costs accrued in doing so. Whilst I can well understand why the beneficiaries are anxious to ensure that the costs of the receivership be kept to the minimum necessary to achieve the tasks in hand, it seems to me that in substance those concerns were properly addressed back in 2003 by Munby J’s order set out in Annex 1; the unfocused ‘scatter gun’ contentions of the defendant Mr Glatt were then soundly rejected.

61. The best way to keep costs down is to cooperate in the receivership and not frustrate it with inappropriate challenges, prolonging the proceedings, incurring costs in respect of arguments about costs, and undermining the over riding objective of economy, efficiency and proportionality. The prolonged and persistent challenges made have strutted and fretted many an hour on the extended stage of these proceedings, but in the end, though full of sound and fury, they have signified nothing. I can only hope that with this judgment, minds can meet to avoid further expense including the substantial costs of detailed assessment, and that the residual assets are not further unnecessarily depleted in favour of the legal professions.