Supporting Documents:
82-17 AFL.pdf82-17 Rsp Notce.docx

THE SUPREME COURT

BETWEEN

APPLICATION FOR LEAVE TO APPEAL TO WHICH ARTICLE 34.5.3° OF THE CONSTITUTION APPLIES

RESULT: The Court grants leave to the Applicant to appeal to this Court from the Court of Appeal

REASONS GIVEN:

1. Jurisdiction

This determination relates to an application by the respondent in the underlying proceeding (“Mr. Fitzpatrick”) for leave to appeal, under Art. 34.5.3 of the Constitution, from a judgment of the Court of Appeal (Finlay Geoghegan, Irvine and Hogan JJ) delivered on 7th April 2017. The order appealed against was also made on the 7th April 2017 and perfected on the 27th April 2017. As is clear from the terms of the Constitution and many determinations made by this Court since the enactment of the 33rd Amendment it is necessary, in order for this Court to grant leave, that it be established that the decision sought to be appealed either involves a matter of general public importance or that it is otherwise in the interest of justice necessary that there be an appeal to this Court.

The Court considers it desirable to point out that a determination of the Court on an application for leave, while it is final and conclusive so far as the parties are concerned, is a decision in relation to that application only. The issue is whether the questions raised, and the facts underpinning them, meet the constitutional criteria for leave. It will not, save in the rarest of circumstances, be appropriate to rely on a refusal of leave a having a precedential value in relation to the substantive issues in the context of a different case. Where leave is granted, any issue canvassed in the application will in due course be disposed of in the substantive decision of the Court.

2. The Proceedings

The applicant in the underlying proceedings (“the Revenue”) brought an application under the Companies Acts 1963 – 2012 in which it was sought that Mr. Fitzpatrick be removed as Liquidator of Ballyrider Limited. On the 21st July 2015 the High Court (Murphy J.) acceded to the Revenue’s application for reasons set out in the judgment of the Court delivered on that date (Revenue Commissioners v. Fitzpatrick (2015) IEHC 477).

Thereafter the Revenue sought that the costs of the proceedings be awarded against Mr. Fitzpatrick. Murphy J. delivered a separate judgment in that regard on the 27th October, 2015 (Revenue Commissioners v. Fitzpatrick (2015) IEHC 676). Murphy J. noted that the reason why she had made the order removing Mr. Fitzpatrick as Liquidator was that it had, in her view, been demonstrated that he had not conducted the liquidation in an efficient or cost effective manner. Murphy J. considered that, in defending the application for his removal, Mr. Fitzpatrick was solely protecting his own interests in circumstances where his conduct of the liquidation was in issue. In those circumstances Murphy J. came to the view that it was appropriate that the costs be awarded against Mr. Fitzpatrick personally.

Thereafter Mr. Fitzpatrick appealed both against the substantive decision made by Murphy J. and also, separately, against the order for costs to which reference has just been made. For reasons set out in a judgment delivered by Irvine J. on the 26th July 2016 (Revenue Commissioners v. Fitzpatrick (2016) IECA 228), the Court of Appeal dismissed the appeal against Mr. Fitzpatrick’s removal as Liquidator although the appeal was allowed in part insofar as it related to certain consequential orders.

However the Court of Appeal delivered a separate judgment in relation to Mr. Fitzpatrick’s appeal on the costs order made in the High Court (see Revenue Commissioners v. Fitzpatrick (2017) IECA 115.

3. The Order appealed against

The judgment of the Court of Appeal on the costs issue was delivered by Finlay Geoghegan J. on the 7th April 2017. It is as against that judgment that Mr. Fitzpatrick seeks leave to appeal to this Court. It was common case that there was no finding of negligence, misconduct, personal unfitness or lack of integrity as against Mr. Fitzpatrick. Mr. Fitzpatrick argued that the ordinary rule in respect of the costs of proceedings brought against a Liquidator where he is acting as agent of a company is that the costs should be directed to be paid out of the assets of the company. It was, however, acknowledged that there was authority for the proposition that, in exceptional circumstances, costs might be ordered against a Liquidator personally. However, in the light of the findings as to the absence of misconduct it was argued that such exceptional circumstances could not be said to exist in the circumstances of this case.

However, Finlay Geoghegan J. agreed with the general position adopted by Murphy J. in the High Court to the effect that a different approach was appropriate where the application giving rise to the potential order for costs involved the personal interests of the Liquidator rather than actions taken by the Liquidator on behalf of the company. The Court of Appeal therefore determined that it was open to it to award the costs of the proceedings against Mr. Fitzpatrick personally. However, having regard to a number of factors which are not relevant to the issues which arise on this application for leave to appeal, the Court of Appeal decided to reduce the award of costs against Mr. Fitzpatrick personally to 50% of the total costs with the balance of 50% of the costs to be paid out of the assets of the company.

It is as against that finding of the Court of Appeal which Mr. Fitzpatrick wishes to further appeal to this Court.

4. The Contentions of the Parties

The notice of application for leave to appeal together with the response is published along with this determination. It is not, in those circumstances, necessary to set out in full detail the contents of those documents. For the purposes of this determination it is sufficient to summarise the basis upon which the applicant suggests that the constitutional threshold for leave to appeal has been met.

In substance Mr. Fitzpatrick contends that there is an issue of general public importance as to whether it is appropriate to order costs of an application such as this against a Liquidator who is removed from office on grounds not involving negligence or wrongdoing but rather, as here, on the basis of not having conducted the liquidation in as efficient a manner as the Court considered appropriate.

The Revenue, in opposing the application for leave, suggest that the decision of the Court of Appeal represents the application of well established principles to the particular facts of this case. It is said that the decision of the Court of Appeal involves the principle that costs follow the event and the existence of a discretion of the Court, in an appropriate case, to award costs personally against a Liquidator both of which are said to be well established.

5. Discussion

As is clear from a range of determinations made by this Court since the 33rd Amendment to the Constitution came into force, the constitutional function of this Court is no longer that of an appeal court designed to correct alleged errors by the trial court. Where it is said that the High Court has simply been in error in some material respect the constitutional regime now in place confers jurisdiction to correct any such error as may be established on the Court of Appeal. Rather the text of the Constitution now in place makes clear that an appeal to this Court, whether directly from the High Court under Art. 34.5.4 or from the Court of Appeal under Art. 34.5.3, requires that it be established that the decision sought to be appealed against involves a matter of general public importance or that it otherwise is in the interest of justice necessary to allow an appeal to this Court. It will rarely be necessary in the interest of justice to permit an appeal to this Court simply because it is said that the lower court was in error. An appeal to the Court of Appeal provides the appropriate remedy for any error made by the High Court. Likewise a party which has had the opportunity to have the decision of the High Court reviewed by the Court of Appeal will have had the benefit of having been able to put its case both at trial and on appeal. Without more the interests of justice will not require a further review on appeal to this Court.

Against that background it is necessary to address the basis on which it is said that the constitutional threshold is met in this case.

In the great majority of circumstances questions concerning the award of costs will not meet the constitutional threshold. On some limited occasions this Court has given leave to bring a cross appeal in respect of costs but only then on the basis that the Court considered that the interests of justice required that a respondent be entitled to raise a question of costs in circumstances where there was going to be an appeal in any event.

It is true, as Revenue have pointed out, that the general principle that costs follow the event and the principle that the Court has a discretion to award costs against a liquidator are both well established. However, there can be issues of general public importance which concern the way in which broad general principles are properly to be applied in the circumstances of important categories of case where the same general circumstances may be likely to re-occur. It follows, therefore, that there may be exceptional circumstances where the application of well established broad principles concerning the award of costs in a particular case may nonetheless meet the constitutional threshold for the case may fall into a category where there is an important issue as to how generally the broad principles should be applied in that particular category of case.

In addition, in the context of these proceedings, it is relevant to note that 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. Excessive uncertainty as to such potential liabilities could impact on the willingness of suitable persons to take up the role of liquidator. It follows that it is important to bring as much clarity as possible to the type of circumstances in which it will be appropriate for a Court to penalise a liquidator personally in costs in respect of an application such as this. Whatever the result of this appeal liquidators generally will have greater certainty in knowing where they stand.

For those reasons the Court proposes to grant leave to appeal. The Court will permit Mr. Fitzpatrick to pursue the grounds of appeal set out in Section 6. of his notice of application for leave to appeal.

6. Conclusion

The Court, therefore, grants leave to appeal under Art. 34.5.3. The permitted grounds are as set out in the previous section of the Determination.