Seeking Leave and Legal Costs

Applying for Leave to Act as a Director notwithstanding your disqualification, whether that be by Order of Court or by way of a Disqualification Undertaking, will lead to a legal costs liability.

If such steps are commenced before the Secretary of State issues a Disqualification Claim, then the legal costs in those proceedings may be eliminated altogether.

However in most scenarios there will be legal costs that a Director has to pay, regardless as to the extent s/he instructs his/her own solicitors.

We address the likely costs liability in the most common scenarios below.

Costs Arising Pre-Issue

If a Director offers a Disqualification Undertaking before a Disqualification Claim is issued at Court, the Secretary of State will not normally seek their legal costs incurred in investigating matters, putting together the evidence and instructing solicitors to issue proceedings.

The Secretary of State will not even seek the legal costs incurred by using external solicitors, whose costs may be considerable where there are substantive representations provided by the Director and extensive negotiations by correspondence and in meetings has passed.

However, if a Director instructs their own solicitors to make such representations and advise on the risks the Disqualification Proceedings present, they will remain liable for their own solicitor’s legal costs – regardless as to whether the Secretary of State decides to issue the claim or not.

There is no ability to reclaim legal costs incurred prior to the issue of proceedings, where such threatened proceedings are dropped.

Costs Arising after Issue of Legal Proceedings

Where a Disqualification Undertaking is offered and accepted by the Secretary of State after issue of a Disqualification Claim, the legislation provides that the Director is treated (as regards the liability for legal costs) as having lost the claim.

The Director will have to pay the Secretary of State’s legal costs incurred to date (including time spent negotiating the Disqualification Undertaking).

In some cases, where the Disqualification Undertaking is offered very early or before service of the Disqualification Claim, the Secretary of State may be more conciliatory and offer to waive any entitlement to payment of their legal costs.

However, this offer is dependent on the circumstances of each case.

Protecting against Liability for Legal costs in Disqualification Proceedings

The Secretary of State when applying for a Disqualification order does not usually seek a specific Disqualification period – although the Court will rely on the legal representatives to provide guidance on the period sought.

In negotiations a Director may choose to offer a Disqualification Undertaking for a specific period, which may be unacceptable to the Secretary of State. 

If however, at trial or at any Carecraft determination the Court decides on a period equal to or below the period which the Director offered, then it is likely that the Director will not be required to pay the legal costs arising after s/he made that offer, and may even be able to set-off a claim for their own legal costs for that same period.

Legal costs of Application for Leave

Regardless as to whether an application for Leave to Act is made before or after proceedings are issued, the Director will always be liable for the Court fee, their own legal costs and the legal costs of the Secretary of State.

The extent of the legal costs payable to the Secretary of State will depend upon the complexity of these matters and the length of time taken to deal with the application through to its final hearing – if, for example, the Director only gains interim leave as s/he is unable to satisfy the Court’s public interest concerns, then the further hearings (and work done in the interim) will increase the amount of legal costs that the Secretary of State (or rather their instructed solicitors) will seek.

However, when compared to the costs liability likely to arise in the main Disqualification proceedings, the Secretary of State’s legal costs are usually not as high.

At Francis Wilks & Jones we regularly deal with Director Disqualification proceedings and applications for Leave to Act and can advise on your best option and the legal costs consequences when considering your individual circumstances.

Please call any member of our Director Services Team now on 0207 841 0390. Alternatively email us with your query at info@franciswilksandjones.co.uk and we will call you back at a time convenient for you.