COSTS

During an investigation into two companies controlled by B, who was a director, documents were requested under section 447 of the Companies Act 1985.

After...During an investigation into two companies controlled by B, who was a director, documents were requested under section 447 of the Companies Act 1985.

After seeing the books and documents B supplied, winding up petitions were presented, which B decided to defend until the last day of the trial.

The judge ordered the companies to be wound up, having found that no proper books of account had been kept, that the businesses of the companies were intertwined with B who treated the companies moneys as his own and that the savings scheme marketed through the companies lacked intrinsic merit.

After judgment the Secretary of State warned B for the first time that he intended to apply for a costs order against him.

The judge ordered B to pay the costs personally because he had defended to protect his own reputation and position without seriously considering the interests of the companies or their creditors.

B appealed against the costs order.Anthony Elleray QC (instructed by DP Hardy & Co, Liverpool) for B.

Robert Hildyard QC and Bridget Lucas (instructed by the Treasury Solicitor) for the Secretary of State.

Held, dismissing the appeal, that in considering a costs order against a director the crucial question was whether the relevant director held a bona fide belief that the company had an arguable defence and it was in the companys interests to advance the defence; that, if he did, to make a non-party pay the costs would constitute an unlawful inroad into the principle of limited liability; but that, on the facts, B had not considered the companies interests but his own and there was ample evidence to justify the costs order despite the absence of an early warning concerning costs.