In a rare dressing-down for a government agency, the deputy chairman of the Labour Court, Caroline Jenkinson, said the authority's investigation of the senior managers' expenses claim was "unsatisfactory and resulted in erroneous conclusions" which it refused to alter.

The authority, which last week ordered the closure of the first Polish restaurant in Ireland, Kanal Polish club in Dublin, was also rebuked for refusing to refer the dispute to a Rights Commissioner or the Labour Relations Commission.

When the authority was forced to attend a Labour Court hearing it took the unusual step of hiring employment barrister Tom Mallon to argue its case.

A spokesman for the Association of Higher Civil and Public Servants (AHCPS) said it was quite appalling for a state agency to refuse to cooperate with the state's dispute-settling bodies and then hire a top barrister to argue against their their own staff.

An authority spokeswoman refused to comment, saying it was an "internal matter".

The AHCPS told the court that, while the chief executive of the authority, Dr John O'Brien, was entitled to investigate, neither manager was interviewed during the investigation or given any chance to respond to allegations.

The association said the managers became aware of the investigation only because of the "inadvertent mislaying of a fax".

The investigation was sparked after the two managers submitted expenses for an overnight stay at a seminar which the authority believed had been already been paid for by the seminar's hosts. But it transpired that they had reimbursed the organisation for the overnight.

The final report, while not imposing any disciplinary sanction, was critical of the two senior managers.

The AHCPS sought a "written, clear and unequivocal apology" and said the investigation "caused significant distress by calling into question their unblemished personal and professional characters".

But the authority said it is obliged to account for all public funds it spends and cannot remove from its files a document which must be available to the Comptroller and Auditor General.

Jenkinson said that while the responses and attitudes of the two managers during the investigation were "unduly combative", the two managers had not engaged in any wrongdoing.

While it could not order the authority to withdraw the report, the court recommended that its ruling be appended to it for the record.

The court added that it would be "inappropriate" to recommend that the two managers receive an apology and that this would be best left up to the parties involved.

The authority spokeswoman refused to say whether it had accepted the court's recommendation.