New Appeal: When can a liquidator be penalised personally for the cost of proceedings for his removal?

In this determination, Revenue Commissioner v Fitzpatrick, the Supreme Court granted Fitzpatrick leave to appeal to clarify “the type of circumstances in which it will be appropriate for a Court to penalise a liquidator personally in costs”.

 

Background

In 2015, Revenue issued High Court proceedings seeking to have Fitzpatrick removed as liquidator of Ballyrider Ltd and an order for costs against Fitzpatrick personally. The High Court (Murphy J) granted the Revenue’s request on grounds that Fitzpatrick had not conducted the liquidation in “an efficient or cost effective manner” [69]. Generally, costs in proceedings against a liquidator, where he is acting as an agent of a company, will be paid out of the assets of the company. It is only in exceptional circumstances that costs may be awarded against a liquidator personally. In a separate judgment (here), Murphy J made an order for costs against Fitzpatrick:

3. In defending this application the respondent was solely protecting his own interests. It was his conduct of the liquidation which was in issue. It was his conduct of the liquidation which the Court found to be deficient. In such circumstances he can not be characterised as acting as an agent of the company such as would render the company liable to defray his costs.

Fitzpatrick appealed both the substantive issue and the costs order to the Court of Appeal. On costs, he argued that, as there was no finding of negligence, misconduct or lack of integrity against him, no exceptional circumstances existed to warrant an order for costs against him personally.

Finlay Geoghegan J (here) agreed generally with the position adopted by the High Court but reduced Fitzpatrick’s personal liability for costs to 50%.

Fitzpatrick applied to the Supreme Court for leave to appeal.

 

Supreme Court

Granting leave, the Court determined that Fitzpatrick had met the constitutional threshold for leave to appeal, as:

the position of liquidator in respect of corporate entities forms an important part of the public administration of company law. It follows that it is in itself important that liquidators have the greatest possible knowledge concerning any potential exposure to liability or costs which may affect them personally.

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