The High Court has refused to allow the liquidator of Doonbeg Investment Holding Company Limited to recover his legal costs for a creditor-claim application from the company’s assets.
In a judgment delivered on 19 October 2023, Ms Justice Butler ruled that the costs were not properly incurred in the winding up. She declined the liquidator’s proposed order that they be treated as costs in the liquidation. The ruling concerned the liquidator’s own legal costs; it did not make a costs order against him personally.
The application had been brought under section 631 of the Companies Act 2014 for directions on whether a claim by Alfred Giuliano, trustee in bankruptcy of Kiawah Doonbeg LLC, should be admitted to proof. In an earlier judgment, the court had directed that it should be admitted. The issue in this judgment was who would bear the liquidator’s costs of that litigation.
The liquidator argued that his costs should be paid from the company’s property, which would place them among the liquidation costs payable ahead of creditor claims. Giuliano opposed that order, but did not seek costs from the liquidator personally.
The court said the company had €1,528,090 available for creditors at the start of the liquidation, with provisionally admitted claims indicating a return of about 7% to each creditor before liquidation costs. The court said the liquidator’s legal costs could be expected to reach five figures and further reduce the distribution, with Giuliano, the largest creditor, bearing the greatest loss in real terms.
Justice Butler said there had been no dispute before the liquidator about admitting the claim, and no creditor opposed it in court. She criticised the decision to ask the court to make a determination that fell within the liquidator’s functions, particularly when the application generated significant legal costs. She also raised concerns that only about half of the other creditors had initially been notified and that the liquidator maintained a neutral position, leaving Giuliano’s evidence-based case unopposed.
The judge said the liquidator had not acted dishonestly or in bad faith, and there was no finding of misconduct or misfeasance. However, she considered it a borderline case under principles discussed in an earlier Supreme Court decision. On balance, she found sufficient grounds to deny the liquidator access to company funds for his own legal costs and refused the proposed order.