The Supreme Court has dismissed Brian Cunningham’s appeal against an order making him personally liable for First Active’s costs in litigation brought by companies of which he was a director or shareholder.
In a judgment delivered on 27 July 2018, Mr Justice William M. McKechnie held that the High Court had jurisdiction to make a costs order against a person who was not originally a party to the proceedings. He said that power arose under both Order 15, Rule 13 of the Rules of the Superior Courts and section 53 of the Supreme Court of Judicature (Ireland) Act 1877.
The order under appeal was made by the High Court in 2011 after the companies’ claims against First Active and others failed. The Supreme Court recorded that the main action, which included allegations of fraud relating to the sale of Finglas Shopping Centre and financing of a development at Bailey Point, ended in a non-suit after the companies presented their evidence. Those allegations were not established in the proceedings.
First Active later sought an order holding Cunningham liable for costs awarded in its favour. The High Court inferred that he had funded and driven the litigation, in part because the companies were insolvent, he had not denied on affidavit that he was the funder, and he had not identified another source of funding. Cunningham continued to deny that he funded the proceedings. The Supreme Court found the High Court was entitled to draw its inference from the evidence and circumstances.
The Supreme Court said a non-party costs order does not make a director liable for the company’s debts or pierce the corporate veil. It is a discretionary order based on the non-party’s own role in the litigation. Relevant considerations include whether the company could meet a costs order, the non-party’s financial interest and role in the case, how the proceedings were conducted, and whether the non-party was given notice that such an order might be sought. Bad faith or impropriety is not a required precondition, and notice is an important factor rather than an absolute requirement.
The court concluded that the companies could not meet the costs, Cunningham and his wife stood to be the main beneficiaries if the claims succeeded, and the proceedings had been conducted in a way that added to costs. First Active had sent notice in February 2008, two months before trial. Taking all the circumstances into account, the Supreme Court found the High Court had acted within its discretion and that the order was just. It dismissed the appeal.