Anthony J. Fitzpatrick as Liquidator of Elvertex Ltd ((in Liquidation)) v John O'Sullivan and Geraldine Lyons
| Jurisdiction | Ireland |
| Judge | Mr Justice David Keane |
| Judgment Date | 12 March 2021 |
| Neutral Citation | [2021] IEHC 166 |
| Date | 12 March 2021 |
| Docket Number | [2019 No. 301 COS] |
| Court | High Court |
In the Matter of Elvertex Limited (In Liquidation)
And in the Matter of the Companies Act 2014
[2021] IEHC 166
[2019 No. 301 COS]
THE HIGH COURT
CHANCERY
Costs – Stay – Companies Act 2014 – Respondents seeking costs – Whether costs should follow the event
Facts: The High Court (Keane J), on 20 January 2021, gave an ex tempore judgment refusing the application of the applicant, Mr Fitzpatrick, for various reliefs against the respondents, Mr O’Sullivan and Ms Lyons, under ss. 596, 604 and 608 of the Companies Act 2014. Each of the respondents sought an order against Mr Fitzpatrick for the costs of that application. Mr Fitzpatrick stated his intention to appeal against the refusal of the application and submitted there should be no costs order against him (or, in the alternative, that a stay should be placed on that order pending a directions hearing in the Court of Appeal). Mr O’Sullivan and Ms Lyons each sought their costs of the application against Mr Fitzpatrick personally.
Held by Keane J that, having applied the principles governing an application for costs against a liquidator in the judgment of McKechnie J in Revenue Commissioners v Fitzpatrick in his capacity as liquidator of Ballyrider Ltd (in liquidation) (Unreported, Supreme Court, 31 July 2019) to the facts and circumstances of the case, these proceedings had been brought by Mr Fitzpatrick in his own name, so that the first principle is not engaged and, under the second, which is, the normal rule on costs applies. Keane J held that Mr O’Sullivan and Ms Lyons were each entitled to their costs of the application against Mr Fitzpatrick. Keane J could find nothing in the nature and circumstances of this case, or in the conduct of the parties, that would warrant the exercise of the discretion of the court under s. 169(1) of the Legal Services Regulation Act 2015 to depart from the fundamental rule. Applying the third principle, Keane J held that this is not a case in which public policy requires Mr Fitzpatrick, as liquidator of the company, to be protected against a personal costs order in litigation forced upon him in that capacity. Keane J held that as the first principle is not engaged, nor is the fourth. Applying the fifth principle, Keane J held that Mr Fitzpatrick had breached the duty of care that he owed to the company as its liquidator in bringing and, to a still greater degree, in maintaining the application. Keane J held that Mr Fitzpatrick’s actions in doing so amounted to negligence, disentitling him to have recourse to the assets of the company to discharge either his own costs or those awarded against him in favour of Mr O’Sullivan and Ms Lyons. Keane J did not propose to accede to Ms Lyons’ application for a direction, under O. 99, r. 7(3) of the RSC, that she produce an estimate of her costs; to be followed by an order, under O. 99, r. 7(2), measuring a sum in gross to be paid to her in lieu of her adjudicated costs. Keane J held that Ms Lyons’ submission that this would avoid the additional costs and further delay associated with an adjudication assumed that Ms Lyons’ costs could not, or would not, be agreed, and overlooked the additional cost and delay associated with a further adjudication in the court. Rather, Keane J would grant the more usual order that Mr Fitzpatrick pay the reasonable costs of Mr O’Sullivan and of Ms Lyons, to include all reserved costs, which costs are to be adjudicated upon in default of agreement.
Keane J held that he would make the following final orders: (1) an order refusing each of the reliefs sought in the originating notice of motion; (2) an order directing Mr Fitzpatrick to pay Mr O’Sullivan and Ms Lyons their reasonable costs of the proceedings, to include all reserved costs and the costs of submissions, which costs are to be adjudicated upon in default of agreement; (3) an order prohibiting Mr Fitzpatrick from having recourse to the assets of the company to discharge his own costs of the proceedings or those of Mr O’Sullivan and Ms Lyons for which he is liable; and (4) an order staying the execution of the orders for costs in favour of Mr O’Sullivan and Ms Lyons pending the first directions hearing before the Court of Appeal if an appeal is lodged within time.
Costs to the respondents.
Ronnie Hudson BL for the applicant, instructed by Herbert Kilcline, Solicitor.
Joe Jeffers BL for the first respondent, instructed by Dillon-Leetch & Comerford, Solicitors.
Emily Farrell SC, with Elizabeth Donovan BL, for the second respondent, instructed by Geraghty & Company, Solicitors.
RULING of Mr Justice David Keane delivered on the 12th March 2021
On 20 January 2021, I gave an ex tempore judgment refusing Mr Fitzpatrick's application for various reliefs against Mr O'Sullivan and Ms Lyons under ss. 596, 604 and 608 of the Companies Act 2014. To avoid confusion between the first respondent John O'Sullivan and his son, Roger O'Sullivan, I will refer to them for the remainder of this ruling as, respectively, Mr O'Sullivan Senior (‘Snr’) and Mr O'Sullivan Junior (‘Jnr’).
Each of the respondents now seeks an order against Mr Fitzpatrick for the costs of that application.
Mr Fitzpatrick states his intention to appeal against the refusal of the application and submits there should be no costs order against him (or, in the alternative, that a stay should be placed on that order pending a directions hearing in the Court of Appeal). Mr O'Sullivan Snr and Ms Lyons each seek their costs of the application against Mr Fitzpatrick personally.
To assist in the conduct of Mr Fitzpatrick's intended appeal and to give context to the costs ruling that follows, I will first describe the background to, and procedural history of, the application; next, briefly summarise the issues raised and evidence adduced in it; and then recapitulate – and, perhaps, expand upon – the ex tempore judgment that I gave.
Mr Fitzpatrick was appointed liquidator of Elvertex Limited (‘the company’) on 19 February 2019. The company operated a business known as the Galleon Restaurant in premises at 210 Upper Salthill Road in the city of Galway (‘the restaurant premises’).
Mr O'Sullivan Snr and his wife, Nives O'Sullivan (‘Mr and Mrs O'Sullivan’), purchased the restaurant premises in 1987. A restaurant named the Galleon Grill had been in operation there since the mid-nineteen sixties. In January of that year, the couple acquired a shelf company named Elverta Limited (‘Elverta’) to operate the restaurant business, which they renamed the Galleon Restaurant. Mr O'Sullivan Jnr was an employee of Elverta. In 2010, Mr O'Sullivan Snr, who was then in his late-sixties and was suffering from health problems, decided to retire and to liquidate Elverta, which was wound up between August of that year and February 2013, when it was dissolved. From then on, Mr and Mrs O'Sullivan's principal source of income was the rent they received as owners and landlords of the restaurant premises. Mr O'Sullivan Snr is now 78 years old.
On 20 July 2011, Mr O'Sullivan Jnr incorporated the company. Mr and Mrs O'Sullivan agreed to lease the restaurant premises to the company, which commenced trading there on 1 September 2011.
On 24 April 2012, Mr and Mrs O'Sullivan, as landlords, and the company, as tenant, executed a formal lease of the restaurant premises (‘the lease’) for a term of 4 years and 9 months backdated to run from 1 September 2011. By a deed of variation made on 6 September 2017, the duration of the lease was extended to run instead for a period of 10 years from 1 September 2011. The deed of variation confirmed the terms of the lease in all other respects.
Under clause 3.1 of the lease, the company, as tenant, covenanted to pay the rent monthly in advance and to pay the service charge (effectively, the cost of insuring the premises) on demand. Under clause 3.11.1, the company was entitled to assign the lease with the landlord's consent in writing, which consent could not be unreasonably withheld. On the other hand, under clause 5.1, the landlords had a right to re-enter the premises and, by doing so, to terminate the lease in certain specified circumstances, including: (1) if any rent or other sum due under the lease was unpaid for 21 days after becoming due (whether formally demanded or not); or (2) if the company, as tenant, went into liquidation.
On 16 January 2019, Mr and Mrs O'Sullivan wrote to the company through their solicitors, asserting that it was in arrears of three months' rent and two years' service charges and demanding possession of the premises. The company ceased trading on 27 January. Mr O'Sullivan Jnr surrendered the keys on 1 February and Mr and Mrs O'Sullivan re-entered the premises that day, thereby terminating the lease.
Geraldine Lyons began working in the restaurant as an employee of Elverta in 1996 and continued working there as an employee of the company after it took over the operation of the restaurant in 2011. From 2012, Ms Lyons was a senior supervisor and, from April 2017, she was acting general manager, prior to the closure of the restaurant on 28 January 2019. On that date, with the assistance of the restaurant's head chef, Ms Lyons compiled an inventory of the fixtures and fittings in the restaurant premises (‘the Lyons inventory’).
Shortly after the restaurant closed, Ms Lyons approached Mr O'Sullivan Snr to express an interest in leasing the restaurant premises. Mr and Mrs O'Sullivan were anxious to continue receiving a rental income and to protect the goodwill in the restaurant premises from any loss that extended closure might cause. On 4 February, Ms Lyons signed an agreement to act as caretaker of the restaurant premises for Mr and Mrs O'Sullivan...
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