Adams v Sun - [2014] NZHC 1395

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
COMMERCIAL LIST

CIV 2013-404-4168 [2014] NZHC 1395

UNDER THE COMPANIES ACT 1993

IN THE MATTER OF

STARPLUS HOMES LTD (IN LIQUIDATION)

BETWEEN

SHAUN NEIL ADAMS AND JOHN ROBERT BUCHANAN (AS LIQUIDATORS OF STARPLUS HOMES LTD (IN LIQUIDATION)) Applicants

AND

DAVID WEI SUN First Respondent

MAGSONS HARDWARE LTD Second Respondent

HAMILTON HARDWARE RETAIL LTD Third Respondent

UNITED TIMBER MERCHANTS LTD Fourth Respondent

DALE KING BUILDING SUPPLIES LTD Fifth Respondent

RD 1 LTD

Sixth Respondent

Hearing: 13 June 2014 (by audio visual link)

Counsel:

No appearance by or on behalf of Applicants

N W Ingram QC for First Respondent

M D Arthur for Second Respondent
K A Lomas for Third and Sixth Respondents

P R Cogswell for Fourth Respondent

No appearance by or on behalf of Fifth Respondent

Judgment:

20 June 2014

JUDGMENT (NO. 4) OF HEATH J

This judgment was delivered by me on 20 June 2014 at 4.00pm pursuant to Rule 11.5 of the High
Court Rules
Registrar/Deputy Registrar

RE STARPLUS HOMES LTD (IN LIQUIDATION)) v SUN [2014] NZHC 1395 [20 June 2014]

Questions of costs

[1] I am required to determine the incidence of costs as among competing claimants to money that was paid into Court (the fund). The fund originated from the proceeds of sales conducted by a first mortgagee.1 The questions arise out of two judgments that I gave on 6 May 2014, on an application for directions made by the liquidators of Starplus Homes Ltd (in liquidation) (Starplus).

[2] In my judgments of 6 May 2014, I decided which claimants were entitled to participate in the fund2 and whether the liquidators of Starplus were entitled to indemnity costs out of it.3 Subsequently, the basis on which the successful claimants were to participate was agreed among the parties, and confirmed by provisional declarations (subject only to costs) recorded in a third judgment, delivered on 13
May 2014.4 The incidence of costs falls to be determined in light of those

decisions.5

Background

[3] Starplus was engaged in property development. Before it was put into liquidation on 22 April 2013, its primary lender, ASAP Finance Ltd (ASAP), held first mortgages over a large number of properties that it owned. They fell into default. ASAP conducted mortgagee sales of each to recover moneys owing to it. By the time the last two properties (731 and 741 Redoubt Road, Manukau) came to be sold, it was clear that a surplus would exist that could be applied towards other debts.

[4] ASAP applied to this Court6 for an order authorising the sales of the two Redoubt Road properties and requiring their proceeds, together with any other surplus money, to be paid into Court to await a judicial decision about distribution
among competing claimants. Brown J made an order to that effect. Following the

1      See para [3] below.
2      Re Starplus Homes Ltd (in liq) [2014] NZHC 912.
3      Re Starplus Homes Ltd (in liq) (No. 2) [2014] NZHC 913.
4

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Adams v Sun

Details

AGLC: Adams v Sun [2014] NZHC 1395
Case: [2014] NZHC 1395
Decision Date: 20 June 2014

CaseChat Overview and Summary

The case of Adams v Sun involved the liquidators of Starplus Homes Ltd, a property development company that had been put into liquidation. The primary lender, ASAP Finance Ltd, held first mortgages over a number of Starplus's properties. Upon default, ASAP conducted sales of these properties, leading to a surplus that was to be distributed among competing claimants. The court was required to determine the incidence of costs among these claimants and whether the liquidators were entitled to indemnity costs out of the fund.

The legal issues that the court needed to address included determining the validity of the respective security interests claimed by the competing claimants, the priority to be afforded to each creditor with a valid claim, and whether the equitable doctrine of marshalling applied. The court also had to decide on the basis for awarding costs among the competing claimants and which party should bear the burden of the liquidators' indemnity costs.

In its reasoning, the court found that Mr Sun had a valid registered second mortgage over the properties, while the other claimants held valid equitable security interests under agreements to mortgage. The court also determined that the doctrine of marshalling applied due to ASAP's choice of the order in which to sell the properties. Regarding costs, the court awarded one-third of the liquidators' costs to be paid out of the fund, with the remaining costs to be borne by the successful claimants. The court further decided that Mr Sun should bear the costs incurred by the successful building supply companies due to his adversarial approach and unmeritorious arguments. Additionally, the court ordered Mr Sun and United Timber to each bear 50% of the liquidators' indemnity costs.

The outcome of the case was that Mr Sun was required to pay costs to the successful building supply companies, while no costs were ordered as among the successful claimants and United Timber. Mr Sun and United Timber were also required to each bear 50% of the liquidators' indemnity costs. The court further clarified that if the quantum of costs and disbursements could not be agreed upon, they would be fixed by the Registrar.

Orders