The High Court has ordered a debtor to pay the Collector General’s costs of presenting and pursuing a bankruptcy petition after the debtor paid the petition debt in full before the petition was heard.
Mr Justice Mark Sanfey struck out the petition against solicitor Cormac Lohan and ordered him to pay the costs of the petition and specified related applications. The court did not adjudicate Mr Lohan bankrupt or decide whether the petition was valid. It directed that the costs be adjudicated if the parties could not agree them.
The petition, presented by Joseph Howley, the Collector General of the Revenue Commissioners, sought recovery of €260,767.64. That sum comprised balances stated in a 2019 bankruptcy summons on two judgments obtained against Mr Lohan in 2016 and 2017. The debt was paid through a number of payments by July 2022.
Mr Lohan had challenged the petition papers and alleged that a Revenue audit leading to the judgments was initiated for an improper purpose. He also sought a stay to facilitate alternative dispute resolution and pursued discovery concerning the audit. Those assertions were disputed by the petitioner and were not determined as standalone factual findings in the costs hearing.
The judge said bankruptcy proceedings are civil proceedings and that the court’s costs discretion is governed by the Legal Services Regulation Act 2015 and court rules. He concluded that where a debtor discharges the petition debt before the hearing, the payment will usually be treated as the event costs follow, subject to the circumstances of the case. The debtor must provide evidence or submissions sufficient to displace that usual approach.
In this case, the judge found no basis to depart from the usual order. He said the audit allegation amounted to a collateral attack on judgments that had not been appealed, and could not be raised in the bankruptcy costs proceedings. He also considered the discovery motion inappropriate in the circumstances.
The court ordered Mr Lohan to pay the petitioner’s costs of the petition, his own motion seeking dismissal or a stay, the debtor’s discovery motion, and the petitioner’s motion to set aside a notice to cross-examine. The petition was struck out following payment; no bankruptcy adjudication was made.