The Court of Appeal has granted former solicitors for RHS Energy Limited a charge over a costs order made in the company’s favour, rejecting an attempt to rely on a later set-off agreement between liquidators. The court did not decide the charge’s priority or how it should be enforced.
The judgment, delivered by Ms Justice Baker on 16 May 2019, concerned an application by Larkin Tynan Nohilly under section 3 of the Legal Practitioners (Ireland) Act 1876. The firm had acted for RHS Energy in High Court proceedings and was on record when the Court of Appeal refused a stay and made a costs order against ES Energy Saving Systems Limited on 22 February 2017.
Both companies were in liquidation. The liquidator of ES Energy Saving Systems opposed the application, saying the costs order had been extinguished by a compromise reached with RHS Energy’s liquidator on 22 May 2017. Under that agreement, RHS Energy would discontinue its proceedings and pay €10,000 plus VAT and outlay; the costs order was to be set off against other costs.
The court said the rules allowed a set-off in some circumstances but did not make it automatic. Whether to allow one was a matter of discretion. It found that the solicitors’ entitlement to seek a charge arose when the costs order was made, before the liquidators agreed to the set-off. The later agreement could not displace that existing entitlement without the firm’s consent or a court order.
The judgment also noted that the firm had not been notified of the compromise under section 629(1) of the Companies Act 2014. The court said notice would have allowed the firm to seek directions about the compromise’s effect. It did not find that failure to notify automatically invalidated the agreement; it considered the effect of the agreement in deciding the application.
The Court of Appeal declared Larkin Tynan Nohilly entitled to a charge over the 22 February 2017 costs order. It refused the application for a set-off under Order 99, rule 4 of the Rules of the Superior Courts. The court expressly left questions of priority and enforcement for another application.