Arjang v NF Global Limited

[2021] NZHC 903

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-778

[2021] NZHC 903

UNDER

the Companies Act 1993, section 241

IN THE MATTER OF

an application to put a company into liquidation

BETWEEN

MICHAEL MOSHE ARJANG

Plaintiff

AND

NF GLOBAL LIMITED

Defendant

Hearing:

23 April 2021

Appearances:

Shane Campbell and William Porter for the Plaintiff,

ABT Services Ltd, Imperium Trust Company (UK) Ltd, Flarmont LP and Luxcast Ltd (creditors in support)

William Potter (on his own behalf) for Meredith Connell No appearance for NF Global Ltd and Starboard Capital SA

Brian Henry for Mr Oberto (former director of NF Global Ltd) Harriet L Quinlan for Sky Management Ltd

George Bogiatto for LD Drago Met srl Luke Sizer for Eleonora Sport Ltd Jason A Zwi for Giuseppe Zandona

Judgment:

23 April 2021

ORAL JUDGMENT OF ASSOCIATEJUDGE R M BELL

Solicitors:

Wynn Williams (Shane D Campbell), Auckland, for the Plaintiff and four supporting creditors Meredith Connell (W Potter/W Fotherby) formerly for NF Global Ltd and Starboard Capital SA Anthony Harper (Harriet L Quinlan), Auckland, for Sky Capital Management Ltd

George Bogiatto, Auckland, for LD Drago Met srl

Buddle Findlay (Bridie McKinnon/Luke Sizer/S Bisley), Wellington, for Eleonora Sport Ltd (UK) Morrison Mallett (Jason Zwi), Auckland, for Giuseppe Zadona

Copy for:

William L Porter/Jeremy W A Johnson, Bankside Chambers, Auckland, for the Plaintiff Brian P Henry, Auckland, for Mr Oberto (former director of NF Global Ltd)

ARJANG v NF GLOBAL LTD [2021] NZHC 903 [23 April 2021]

[1]    After I gave my interim decision, I adjourned the matter to today to give the company and its shareholder the opportunity to pay the debts of the creditors who appeared at the defended hearing.1 No payment has been made. I have received a certificate from the plaintiff’s solicitors that the debt owed to Mr Arjang remains unpaid. Proof of advertising has been provided. There is no reason why a liquidation order ought not to be made now.

[2]    Accordingly, I make an order that NF Global Ltd is to be put into liquidation. The time of the order is 12.31 pm. I appoint John Howard Ross Fisk and Marcus James McMillan as liquidators. I approve their rates of remuneration on the normal terms. I record that they are permitted to act as liquidators under the Insolvency Practitioners Regulation Act 2019.

Meredith Connell

[3]    Meredith Connell applied for a declaration that they have ceased acting as solicitors on the record for NF Global and its shareholder, Starboard Capital SA. Mr Potter has kindly appeared this morning. I am grateful to him for his appearance. While Meredith Connell are no longer being paid, I requested their assistance to deal with “wash-up” matters. The declaration that Mr Potter has ceased acting for NF Global and Starboard Capital SA will take effect on the close of business on 27 April 2021. That is to allow the liquidation order to be sealed and served on an address for service for the defendant and its shareholder. That will also allow Meredith Connell to send the order on to Starboard Capital SA.

Media access

[4]    I invited submissions from counsel whether there is any reason why the media should not have access to the court file. There were no submissions why they should not. I make an order under the Senior Courts (Access to Court Documents) Rules

1      Arjang v NF Global Ltd [2021] NZHC 395.

2017 allowing the media representatives who attended court today access to all documents on the court file.

Costs

[5]    Schedule 7 cl 1(1)(c) of the Companies Act 1993 provides in the order of priorities for payments by liquidators:

The reasonable costs of a person applying to the court for an order that the company be put into liquidation including the reasonable costs incurred between lawyer and client in procuring the order.

Given that reasonable costs can be part of the distribution, Parliament obviously intended the Court to have the power to order costs to that extent. That is an independent power. It is unnecessary to rely on the costs rules in the High Court Rules 2016. Fankhauser v Strongline Buildings Ltd is authority for awarding full solicitor/client costs to a successful plaintiff on a liquidation application.2

[6]    Other creditors actively supported Mr Arjang in this proceeding: Sky Capital Management Ltd, LD Drago Met srl, and Eleonora Sport Ltd. The combined efforts of those creditors contributed to the success of Mr Arjang’s claim. For example, statutory demands served by other creditors helped establish the insolvency of the company. That none of these creditors had been paid pointed clearly to a liquidation order being required, given the clear insolvency. Accordingly, under sch 7 of the Companies Act 1993, I will award costs on a solicitor/client basis also to Sky Capital Management Ltd and to Eleonora Sport Ltd. Mr Bogiatto, for LD Drago Met srl, has sought scale costs only.

[7]    Mr Arjang’s actual costs up to today come to $92,732.51 (including disbursements). Invoices substantiating those charges have been provided. There is no charge for GST as Mr Arjang lives abroad.

[8]    Earlier in the proceeding NF Global applied to restrain advertising and to stay the proceeding. Powell J dismissed that application but did not fix costs.3 Memoranda

2      Fankhauser v Strongline Buildings Ltd [2014] NZHC 2629.

3      NF Global Ltd v Arjang [2020] NZHC 2455.

as to costs were filed last year but no costs were decided then. I indicated in a minute of 10 March 2021 that it would be more appropriate to deal with costs on the stay application once the matter had been finally decided. Mr Arjang’s lawyers have included their costs of the stay application in their charges.

[9]    Earlier this week, Mr Arjang’s lawyers applied without notice for an order appointing interim liquidators. I dismissed that application.4 The fees claimed do not include the costs of that application.

[10]   Overall, I am satisfied with the costs claimed for solicitors and counsel, including the disbursements claimed. I bear in mind that Mr Arjang is an overseas creditor. It is normally more time-consuming and expensive to bring a liquidation application from off-shore. While I held that he was a creditor, his claim was not straightforward, given the defendant’s money-laundering allegations. His case did require fairly extensive evidence from overseas, not just from Italy but also from Israel, with the associated need to provide translations of documents. NF Global defended the claim vigorously. In the light of that, the fees claimed are reasonable, given the extensive case, a fully defended interlocutory application, and a defended substantive hearing for two days. I award costs as claimed, to be paid out of the assets of the company.

[11]   Mr Arjang also seeks costs against Starboard Capital SA, NF Global’s sole shareholder. It filed an appearance and thereby became a party to the proceeding. In becoming a party, it exposed itself to the risk of costs – a matter I referred to in my minute of 30 October 2020. It filed its appearance on 27 November 2020. In Menzies v Vaycay Trading Ltd, Associate Judge Sargisson awarded indemnity costs against the company, and also awarded scale costs against a shareholder, with the liability for costs against the shareholder to be joint and several with costs against the company.5

[12]   Mr Arjang seeks scale costs against Starboard Capital SA with a 50 per cent uplift under r 14.6 of the High Court Rules. As Starboard Capital SA came into the

4      Minute of 19 April 2021.

5      Menzies v Vaycay Trading Ltd [2020] NZHC 1413.

proceeding only part-way through the case, there is a question whether it should answer for costs in the proceeding before it entered an appearance. It was submitted for Mr Arjang that if a non-party were ordered to pay costs, they would pay costs from the outset of the proceeding, and if a non-party liable for costs can be ordered to pay costs from the outset of a proceeding, so can a shareholder who enters into the proceeding part-way through. Starboard Capital SA is the sole shareholder. The way that NF Global Ltd ran its business and the way that the litigation was conducted were clearly directed from London with the NF Global local office having limited autonomy. In light of those matters, it is reasonable for Starboard Capital SA as the shareholder opposing the liquidation to pay scale costs from the outset of the proceeding.

[13]   As to matters of exacerbation, Mr Arjang says that NF Global ran meritless arguments and there were elements of abuse in the way it ran its case. It ran arguments in the liquidation proceeding on which it had been unsuccessful before Powell J. There was little if any change in the evidence between the hearing in August 2020 and the hearing in February 2021. For example, it repeated its claim that Mr Arjang was subject to its standard terms and conditions, even though there was no evidence that Mr Arjang had agreed to NF Global’s terms and conditions. The money-laundering concerns were recycled in the hearing before me. There was a fruitless attempt to rely on s 37 of the anti-money laundering legislation, even though Powell J had rejected that. The reliance on the administration of Ipagoo was misconceived. The challenge to service of the statutory demand was without merit.

[14]   I regard many of these matters as showing no more than that the case was hard fought. There is, nevertheless, one aspect that does give me concern and does warrant some increase. Mr Arjang was attacked personally. During the hearing, it was suggested that he had been involved in illegal activity which could be punishable under the criminal laws of other states. The evidence did not justify that attack. Allegations of criminal activity made without a proper foundation are abusive and warrant an increase in costs. Accordingly, I increase the amount of the scale costs by 20 per cent rather than  the  full  50  per cent  claimed  by  Mr Arjang.   The scale  costs  come to

$37,881.50.  With the increase they come to $45,457.80.  The costs order against

Starboard Capital Management is joint and several with the order against NF Global, including as to the disbursements.

[15]   Sky Capital Management Ltd seeks actual and reasonable costs of $20,287.45. It seeks an order only against the assets of NF Global and does not seek an order against Starboard Capital SA. I make an order for those costs. I record that those costs are only for steps taken by Sky Capital Management Ltd in this proceeding. I am not dealing with costs in other proceedings, either the original statutory demand application6 (which was dealt with last year) or with the appeal to the Court of Appeal. Those are outside this proceeding.

[16]   Eleonora Sport Ltd claims solicitor/client costs of $34,286.00 including disbursements. While its costs are higher than those claimed by comparable creditors, Sky Capital Management Ltd and LD Drago Met srl, and it may not have taken as many steps in the proceeding, I accept that the amount of its claim was much higher and that intensive work was required from the time of initially receiving instructions, serving the statutory demand, through to appearing for hearing. While NF Global did not attack the evidence of Eleonora Sport Ltd, its solicitors will have prepared to meet any attack on its case. On that basis, I accept the costs claimed.

[17]LD Drago Met srl does not seek actual costs but claims scale costs at

$16,730.00. I approve those costs.

[18]   The other supporting creditors have entered appearances only for the hearing today. I award them scale costs under category 2 for their appearances today. They are the new creditors represented by Wynn Williams and Mr Giuseppe Zandona.

…………………………………….

Associate Judge R M Bell

6      NF Global Ltd v Sky Capital Management Ltd [2020] NZHC 2196.