The effective owner of a building company has won his appeal against an order directing him to pay some €735,000 costs of his firm’s dismissed action over works to a bar of publican Charlie Chawke.
The Court of Appeal ruled the High Court had no jurisdiction to make that order against William Loughnane when he was not a party to his company’s case and had no prior warning costs might be personally sought against him. Such an order would be “unfair”, it said.
While it was clear from the High Court findings that Mr Loughnane committed perjury and sought to mislead that court by providing fraudulent invoices, and is also to all intents and purposes the beneficial owner of the company, the fact remains he was not a party to the litigation, Mr Justice Gerard Hogan said.
The action by Mr Loughnane’s company, WL Construction Ltd (WLC), was dismissed in 2016 by the High Court, at the close of WLC’s 28 day evidence, as an abuse of process and due to being tainted by “fraud and dishonesty” of Mr Loughnane.
WLC had taken proceedings against Mr Chawke and Edward Joseph Bohan, as co-owners of the Lord Lucan pub in Lucan, Dublin. It claimed sums were outstanding for renovation and extension works to the pub, which were completed at the end of 2006. It was conceded on behalf of WLC during the hearing the value of its claim was €28,691. The High Court also heard payments of some €700,000 had been made to WLC for the works and the owners disputed any further monies were due.
In October 2016, Mr Justice Seamus Noonan granted the defence application to dismiss the case at the close of the WLC evidence after finding no prima facie case was made out and on the basis of “deliberate dishonesty” by Mr Loughnane. WLC had at one stage claimed up to €370,000 was owed to it but later conceded the value of its claim was no more than €28,691, he noted.
Liable for costs
The judge awarded costs to the defendants against WLC and later held that Mr Loughnane, as principal of WLC, was liable for the defendants’ costs. A stay applied to his decision to join Mr Loughnane as a co-defendant to the case and to make him liable for costs.
The costs ruling was believed to be the first of its kind in a case not involving a personal injuries claim and legal sources speculated it could have a “chilling” effect on litigation by companies as directors are normally considered protected against costs liability.
On Thursday, the Court of Appeal allowed Mr Loughnane’s appeal against the costs order.
Mr Justice Hogan, giving the court’s judgment, said the jurisdiction to make a costs order against a non party should remain an “exceptional” one.
The High Court did not have jurisdiction to award costs against a non-party witness after the conclusion of litigation when that person had not previously been put on notice costs might be sought personally against him, he found.
The judge also raised concerns related to the correctness of a 2011 High Court decision, Mooreview Developments v First Active plc, involving the first explicit recognition of a jurisdiction to make a costs order against a third party. However, that issue would have to be decided in a case where the matter was fully argued, he said.
