Wallace (Official Liquidator of Custom House Capital Ltd) v Cassidy

• Jurisdiction: Ireland
• Judge: Mr Justice David Keane
• Judgment Date: 29 June 2017
• Neutral Citation: [2017] IEHC 428
• Docket Number: [2011 No. 219 MCA]
• Court: High Court
• Date: 29 June 2017

IN THE MATTER OF CUSTOM HOUSE CAPITAL LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF AN APPLICATION PURSUANT TO REGULATION 166 OF THE EUROPEAN COMMUNITIES (MARKETS IN FINANCIAL INSTRUMENTS) REGULATIONS 2007 ON THE APPLICATION OF THE CENTRAL BANK OF IRELAND

AND IN THE MATTER OF THE COMPANIES ACTS 1963-2012

AND THE MATTER OF SECTIONS 150 AND 160(2) OF THE COMPANIES ACT 1990 AND SECTION 56 OF THE COMPANY LAW ENFORCEMENT ACT 2001

BETWEEN

KIERAN WALLACE

(OFFICIAL LIQUIDATOR OF CUSTOM HOUSE CAPITAL LIMITED)

APPLICANT

AND

HARRY CASSIDY, JOHN WHYTE

and

JOHN MULHOLLAND

RESPONDENTS

[2017] IEHC 428

[2011 No. 219 MCA]

THE HIGH COURT

Company – Taxation – Official Liquidator – Companies Act, 2014 – Cost of application – 160(9B) of the Companies Act 1990 – O.99 r.1 of the Rules of the Superior Court – ss.12 &14 of the Civil Liability Act 1961 – Professional fees – Legal fees.

Facts: The applicant pursuant to s. 160(9B) of the Companies Act 1990 sought for the costs and expenses incurred in investigation and collection of evidence for the disqualification application. The applicant contended that the applicant had to engage in the services of people with appropriate skill while investigating the conduct of the respondent and pursuant to O99 r1 of the Rules of the Superior Court is entitled to an order as to costs. The third named respondent alleged being dragged into the court due to the fraudulent activities of the first name respondent. The third named respondent further submitted that the third named respondent had always co-operated with the liquidator and therefore the costs should be decided on individual basis as respondents were not jointly liable.

Mr. Justice David Keane held that the respondent were jointly and severally liable and ordered the payment of costs incurred by the applicant. The Court held that there had been enough evident to suggest fraudulent conduct on the part of third named respondent and that the third named respondent also benefitted from the wrongful payment received by the first named respondent. The Court held that by virtue of common law and principles of civil liability under ss. 12 &14 of the Civil Liability Act 1961 all the respondents had been found to be concurrent wrongdoers and thus would be jointly and severally liable.

JUDGMENT of Mr Justice David Keane delivered on the 29th June 2017

Introduction

1 The applicant is the official liquidator of Custom House Capital Limited. Each of the respondents was a director of that company. By Order made on 2 December 2016, pursuant to the terms of s. 842 of the Companies Act 2014 ("the 2014 Act"), each of the respondents was disqualified from, amongst other things, being appointed or acting as a director, or being involved, directly or indirectly, in the promotion, formation or management of any company. The disqualification periods imposed were 14 years, 10 years and 12 years, respectively. The judgment underpinning that Order, delivered on the same date, can be found under the neutral citation [2016] IEHC 689.

2 The applicant now moves, pursuant to s. 160(9B) of the Companies Act 1990, as inserted by s. 42(f) of the Company Law Enforcement Act 2001 and substituted by s. 11(2) of the Investment Funds, Companies and Miscellaneous Provisions Act 2006 or, in the alternative, pursuant to s. 846 of the 2014 Act, for his costs of that application, and for the whole of his costs and expenses incurred: (i) in investigating the matters that were the subject of the application; and (ii) in collecting evidence in respect of those matters. Those costs are sought against the respondents on a joint and several basis.

The law

3 Section 160(9B) provides, in material part:

"The court, on the hearing of an application for a disqualification order under subsection (2), may order that the persons disqualified ... shall bear-

(a) the costs of the application, and

(b) in the case of an application by...a liquidator...(in this paragraph referred to as the "applicant"), in addition to the costs referred to in paragraph (a), the whole (or such portion of them as the court specifies) of the costs and expenses incurred by the applicant-

(i) in investigating the matters the subject of the application, and

(ii) in so far as they do not fall within paragraph (a), in collecting evidence in respect of those matters,

including so much of the remuneration and expenses of the applicant as are attributable to such investigation and collection."

4 That provision has now been repealed and replaced by s. 846 of the 2014 Act, which is cast in substantially identical terms.

The application

5 The application is grounded on an affidavit of the applicant, sworn on 15 March 2017. That affidavit exhibits a fee report, dated 14 March 2017, in which the applicant sets out a summary and outline of the fees due to him for the work that he and his staff carried out in connection with: (i) the investigation of the matters that were the subject of the application; and (ii) the collection of evidence for the purposes of the application. The affidavit also exhibits a detailed bill of costs in respect of the legal fees incurred in the preparation and prosecution of the disqualification application, together with the opinion of a firm of legal costs accountants concerning that portion of the solicitor's professional fee and of Counsel's fees, submitted on a solicitor and own client basis, as would likely tax on a party and party basis.

i. the investigation

6 The applicant avers to the large volume of work that he and his staff carried out in investigating the conduct of the respondents as directors of the company. He avers also to having calculated the fees charged for that work in accordance with the reduced rates approved by this Court in Re Missford Ltd t/a Residence Members Club [2010] 3 IR 759 (at 767) and Re ESG Reinsurance Ireland Ltd (in administration) [2011] 1 ILRM 197 (at 204). The applicant further avers that, to the best of his ability, he delegated the work involved wherever possible to other members of his staff with the appropriate skills to deal with it. That was done in order to ensure that the necessary work was carried out in a cost efficient manner.

7 The fees for that work come to €86,075.50, plus VAT of €19,797.37, amounting to €105,872.87 in total.

8 Having considered the evidence before me, I am satisfied that the said fees are reasonable, not only by reference to the hours worked at the rates claimed, but also by reference to the nature and complexity of the work carried out and its value to the company in liquidation.

ii. the collection of evidence

9 The applicant avers that he and his staff also carried out significant additional work in collecting evidence. Once again, he avers that the work was delegated in the interests of cost efficiency wherever possible and the associated fees have been calculated on the basis of rates approved in earlier decisions of this Court.

10 The fees for that work are €57,386, plus VAT of €13,198.78, totalling €70,584.78. Having considered the evidence, I am satisfied by reference to the same criteria that those fees also are reasonable.

iii. legal costs

11 In the draft bill of costs exhibited to the grounding affidavit of the applicant, his solicitors have marked a professional fee of €42,750. They have received fee notes from Counsel amounting to €20,650. Both sums are exclusive of VAT. There has been outlay on postage of an additional €750. Hence, the applicant seeks an order for his legal costs on a solicitor and client basis in the sum of €64,150.

12 The opinion expressed on behalf of the firm of legal costs accountants retained by the applicant is that the solicitors' professional fee would tax on a party and party basis at between €20,000 and €25,000, plus VAT and that Counsel's fees would tax on the same basis at €11,500. Thus, the applicant acknowledges that the legal costs he might expect to be awarded on a party and party basis (including outlay) amount to €37,250.

The arguments

13 The applicant's submission starts from the proposition that he is entitled to an order for his legal costs of the disqualification application against each of the respondents jointly and severally on the basis of the usual rule,...