Directors’ liability for legal costs

Posted on June 25th, 2018

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A cautionary tale for directors who might think they can hide behind a “corporate veil” and avoid personal exposure.  Parties to a complicated dispute settled the dispute and entered into consent orders.   Subsequently, an application was made against one plaintiff company to enforce the consent orders.  The company had failed to execute all necessary documents.  When the plaintiff company continued to fail to comply, the Supreme Court (Tasmania) made an order under section 169 Supreme Court Civil Procedure Act 1932 (Tas) empowering the Registrar of the Court to execute the documents instead.  The Defendant then sought a costs order for the cost of enforcing the orders. 

The director of the plaintiff company was not a party to the proceedings.   The Judge noted that he had power to make costs orders against non-parties but also noted that he should be cautious before doing so.  In particular, in accordance with case-law, it was usual to require a party to warn a non-party of an intention to seek costs orders against them.  Here, however, it was clear that the director had been a sole director at the time the consent orders were made and therefore had clearly authorised the consent orders to be signed.  In addition, it was unlikely any warning would have made a difference to the director’s conduct in failing to comply with the consent orders.  In those circumstances, the Judge made the order for indemnity costs against the director. See ACN 125 152 310 Pty Ltd v Joseph [2018] TASSC 26

Felicity Wardhaugh is a Special Counsel at Mullane & Lindsay, and practises extensively in Wills and Estate Planning, Commercial and other Litigation and Employment LawIf you require any assistance in these areas please contact Felicity Wardhaugh or contact our Newcastle office.

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