A law firm that began High Court proceedings for a dissolved company must pay the opposing company’s costs, after the court found the solicitors had acted for a client that no longer existed.
Jabaar Limited had asked the court to set aside an arbitrator’s interim award directing it to pay Townlink Construction Limited €441,654.84, as well as Townlink’s costs of the arbitration. The award followed a building contract dispute.
Jabaar was dissolved on 20 August 2010 after failing to file annual returns. Its solicitors issued and served the proceedings on 7 October. Townlink’s solicitors discovered the dissolution the next day and raised the issue with Jabaar’s solicitors.
Jabaar later withdrew its application. Townlink then sought its legal costs from Jabaar’s solicitors, arguing that the firm should be personally liable because it had brought proceedings for a dissolved company. Townlink had also sought to strike out Jabaar’s claim or, alternatively, obtain security for costs. The court said Jabaar’s withdrawal made that motion unnecessary.
The solicitors said they had not known of the dissolution when the proceedings began. In an affidavit, solicitor Cathal O’Sullivan said that after learning of it, he contacted John O’Connor, who was registered as a Jabaar director. O’Connor initially said he would instruct the company’s accountants to seek its restoration. He later decided not to pursue restoration at that time and instructed the firm to withdraw the proceedings.
Miss Justice Laffoy found that by starting the case, the solicitors had warranted they had authority from an existing legal entity. Jabaar had been dissolved almost three months earlier. Although the judge accepted the solicitors were unaware of the dissolution when they issued the proceedings, she was sceptical of the assertion that O’Connor did not know about the strike-off.
The judge also found that Townlink’s solicitors had notified Jabaar’s solicitors of the dissolution before most, if not all, of Townlink’s defence costs were incurred. She said the firm could have sought a stay while Jabaar pursued restoration or withdrawn the case sooner, avoiding those costs.
The court rejected Townlink’s alternative reliance on Order 99, rule 7 of the Rules of the Superior Courts. It said that rule did not apply because Jabaar did not exist and no costs order could be made against it for the solicitors to repay to their client.
The High Court ordered Jabaar’s solicitors to pay Townlink’s costs of the proceedings, to be taxed and ascertained on a party-and-party basis. It did not order payment of the arbitration award in this costs decision.