The High Court made no order as to costs in an application by two directors of Doherty Advertising Limited, which was in official liquidation. Mr Justice Sean O’Leary delivered the judgment on 14 July 2006.
The costs application followed an earlier decision on a restriction application under section 150 of the Companies Act 1990. In that decision, the court found that the second to fifth named respondents had acted responsibly and honestly and should not be restricted. The judgment does not identify which of the third and fourth respondents brought the costs application.
The court considered whether directors who had satisfied the court that they should not be restricted were entitled to costs as successful parties. It followed earlier decisions that the court retained discretion over costs under Order 99, Rule 1 of the Rules of the Superior Courts. It rejected the argument that section 150(4B) required costs to be awarded to a director who discharged the burden of proof.
Mr Justice O’Leary said a liquidator’s section 150 application was made to obtain the court’s determination as part of the liquidator’s legal duty. In that context, the court considered that the application itself could be treated as the relevant “event”, rather than viewing the hearing as a conventional contest with a winner and loser. It concluded that costs should not normally be awarded to a director who avoided a restriction order.
The court also considered whether circumstances in this case justified departing from that normal approach. It criticised the inclusion of an allegation concerning the Dublin Daily matter against the third respondent and the liquidator’s imprecise formulation of the issues the directors had to meet. However, it said the absence of cash-flow projections from November 2002 to mid-2003 was a real failure by the directors, and that the lack of formal board meetings was a legitimate issue for the restriction hearing.
The court also said that, given the behaviour of the first and second respondents, it was extremely unlikely the liquidator would have been relieved by the Director of Corporate Enforcement of the obligation to apply in respect of each director, even if the liquidator had acted perfectly. In all the circumstances, the court made no order as to costs.