Company owner held personally liable for firm’s failed action costs

The effective owner of a building company has been found liable for some €735,000 costs of his firm's dismissed action over works to a bar of publican Charlie Chawke.

The action by William Loughnane's company W. L. Construction Ltd was previously dismissed by the High Court, at the close of WL's 28 day evidence, as an abuse of process and due to being tainted by "fraud and dishonesty" of Mr Loughnane.

W.L. at one stage claimed up to €370,000 was owed to it for works to the pub but later conceded the value of its claim was no more than €28,691.

Mr Justice Seamus Noonan’s decision on Friday to hold Mr Loughnane, as principal of W.L., liable for the costs, is believed to be the first of its kind in a case not involving a personal injuries claim and may have significant implications.

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According to legal sources, the decision could have a “chilling” effect on litigation by companies as directors are normally considered protected against costs liability as a result of the “corporate veil”.

A stay of 21 days applies on the judge’s decision to join Mr Loughnane as a co-defendant to the case and to make him liable for the costs.

The ruling follows Mr Justice Noonan's judgment last October dismissing W.L.'s proceedings against Mr Chawke and Edward Joseph Bohan, as co-owners of the Lord Lucan pub in Lucan.

The judge granted the defendants application to dismiss the case at the close of the WL evidence after finding no prima facie case was made out and on the basis of “deliberate dishonesty” by Mr Loughnane. He awarded costs to the defendants against WL.

Mark Sanfey SC, for the defendants, later applied to join Mr Loughnane as co-defendant for the purpose of making him liable for the defendants’ costs. Mr Loughnane opposed the application.

Solicitor Neal Boland, for the defendants, said the costs they had incurred arose as a direct result of "litigation misconduct" of WL which, he said, was solely and entirely orchestrated by Mr Loughnane. Mr Boland also said there was no prospect of recovering costs against WL.

The judge said, while accounts showed WL’s historic debt has been significantly reduced and it may now be solvent or become so in the near future, that was of “marginal materiality” to what he had to decide.

The court has clear jurisdiction to make orders holding a party liable for costs of proceedings in circumstances “of such bad faith” as in this case, he said.

The entire case was permeated by Mr Loughnane’s dishonesty and he was ultimately responsible for directing and overseeing a claim that “ultimately transpired to be fraudulent and a manifest abuse of process”.

He rejected various arguments on behalf of Mr Loughnane, including the W.L. case was legitimate and it was reasonable to bring it and Mr Loughane relied on a quantity surveyor and should not be laden with all the blame.

Whatever about shortcomings in the surveyor’s evidence which the court had identified, there was no basis for suggesting the surveyor was blameworthy to an extent that could relieve Mr Loughnane of any responsibility, he said.

There was also no basis for suggesting the defendants should have put Mr Loughnane on notice of a possible costs application against him.

“Nobody other than Mr Loughnane was responsible for bringing this claim and nobody other than Mr Loughnane is responsible for the result,” he ruled.

The W.L. case was brought over sums alleged to be outstanding for renovation and extension works to the pub, which were completed at the end of 2006.

It was conceded on behalf of W.L during the 28 day hearing the value of its claim was €28,691. The court heard payments of some €700,000 had been made to WL for the works and the owners disputed any further monies were due. Both sides also disputed the nature of the contract documents involved.