Directors can be liable for costs

A recent litigation case in which a company had issued a counterclaim citing professional negligence against their accountants who were suing for unpaid fees resulted in directors of the company being found personally liable for costs via a ' third party costs order', with the director who was deemed to have a controlling influence on events becoming liable for the accountants costs.

In this particular case, the counterclaim proceedings were shown to be opportunistic and dishonestly contrived which compounded the directors fate, however it does demonstrate that the Court can and will use its powers to make individual directors liable for costs when the blame is clear.

It is important for Company Directors to be clear of their position surrounding any litigation proceedings.

Factors relating to funding of litigation and the individuals who stand to lose or gain financially can and will be taken into account where appropriate in litigation involving limited companies.

Taking advice from your commercial lawyer in all significant matters involving personal funding into the company and any proposed litigation is the best way to avoid difficulties, but company directors are reminded that limited company status does not afford them blanket protection.

Sue Ross is a solicitor at Bell & Buxton Solicitors, specialising in Commercial Litigation and Employment Law.

For further information, contact Sue Ross at Bell & Buxton LLP, Telegraph House, High Street, Sheffield S1 2GA, Tel: 0114 2495969 or email [email protected]