The High Court has refused an application by nine respondents for their costs against the liquidator of Pierse Contracting (No. 2), after they successfully resisted a restriction application under section 150 of the Companies Act 1990.
In a judgment delivered on 12 February 2015, Mr Justice Cregan said the liquidator’s earlier application had been dismissed on 30 January. The court had found for the respondents on each of the five issues advanced in support of a restriction order. The costs judgment considered only whether the respondents should recover their legal costs from the liquidator; it did not revisit the underlying application.
The judge said there was no automatic rule that costs should follow the outcome in section 150 proceedings. The court had to exercise its discretion in light of the facts and the statutory scheme. That scheme requires a liquidator to bring a restriction application in specified circumstances, while giving directors the opportunity to put their case before the court.
The respondents argued, among other things, that they had won, that some directors had invested their own money in the company, and that they had provided an expert accountant’s report while the liquidator had filed no expert report in reply. They also raised concerns about access to the liquidator’s section 56 report and whether all relevant facts had been put to the Director of Corporate Enforcement. The judge said those matters did not justify a costs award on the circumstances before him. He was not persuaded by the specific criticism concerning one respondent’s treatment, having considered the correspondence.
The liquidator submitted that the application was brought in good faith, on reasoned grounds, and in fulfilment of his statutory role. He also argued that costs orders against liquidators could have a “chilling effect” on future applications. The judge accepted that concern, saying such orders could frustrate the statutory scheme and work against the public interest. He also noted submissions that the liquidation had no assets and that the application had been funded from the liquidator’s own resources; those considerations carried some weight but were not decisive.
The court concluded that the liquidator had acted fairly and reasonably, narrowed the issues and brought the case in good faith on grounds that appeared reasonable to him. The fact that he ultimately lost did not determine the costs question. The respondents’ application for their costs against the liquidator was refused.