Blanchett v RBI Ltd - [2014] NZHC 2450

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-443-000472 [2014] NZHC 2450

UNDER Section 292 of the Companies Act 1993

IN THE MATTER

of the liquidation of TSSN LIMITED FORMERLY KNOWN AS KLN LIMITED AND THE STEPPING STONES NURSERY LIMITED (IN LIQUIDATION)

BETWEEN

DAVID MURRAY BLANCHETT and GRANT DAVID MCQUOID Applicants

AND

RBI LIMITED Respondent

Hearing: (On the papers)

Judgment:

6 October 2014

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 6 October 2014 at 3.30 pm, pursuant to Rule 11.5 of the High
Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors: Shieff Angland, Auckland
Sean Kelly Lawyers, Auckland

Copy to: S Grant, Auckland

BLANCHETT & Anor v RBI LIMITED [2014] NZHC 2450 [6 October 2014]

Introduction

[1] RBI Limited (RBI) seeks indemnity or scale costs against Messrs Blanchett and McQuoid as liquidators of The Stepping Stones Nursery Limited (TSSN). Although the liquidators were successful in a claim against RBI, it claims an entitlement to costs as the judgment more or less mirrored RBI’s settlement offer of
$10,000 made prior to the commencement of the proceedings.

[2] In a judgment delivered on 9 July 2014 Associate Judge Abbott allowed the liquidators’ application, ordering RBI to repay $9,623.29 plus interest. He directed that there be no order as to costs, reasoning as follows:1

Neither party addressed me in the hearing in relation to costs. Both parties have succeeded to some extent. The liquidators established that TSSN was unable to pay its due debts, but only in respect of transactions in the second half of the specified period. RBI succeeded in establishing that there was a continuing business relationship, and I found against the liquidators on the application in New Zealand of the rule of peak indebtedness. On the other hand RBI did not succeed in establishing its entitlement to the s 296(3) exemption. Weighing all of these factors, I consider that there should be no order as to costs (so that each party is to bear their or its own costs).

[3] RBI sought the recall of the judgment as the Judge had not given the parties an opportunity to address the issue of a Calderbank offer. In the absence of Associate Judge Abbott, following his retirement, the file was referred to me. In a minute issued on 12 September 2014 I recalled the judgment to enable counsel to be heard further on the issue of costs. Further memoranda have now been exchanged. This is the final decision on costs.

General background

[4] The liquidators applied to set aside as insolvent transactions 20 payments made by TSSN to RBI totalling $543,472. Associate Judge Abbott allowed the application in relation to six of those 20 transactions, ordering repayment of
$9,623.29 plus interest.

[5] Prior to the issue of the proceedings on 6 August 2012 RBI made a without prejudice offer except as to costs of $10,000 in full and final settlement. That offer was in response to the liquidators’ earlier settlement offer of $186,324.05.

RBI’s argument

[6] RBI…

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 Blanchett v RBI Ltd

Details

AGLC: Blanchett v RBI Ltd [2014] NZHC 2450
Case: [2014] NZHC 2450
Decision Date: 6 October 2014

CaseChat Overview and Summary

The High Court of New Zealand was asked to decide whether RBI Limited should be granted indemnity costs against the liquidators of The Stepping Stones Nursery Limited, David Murray Blanchett and Grant David McQuoid, after the liquidators were successful in their claim. The liquidators had sought to set aside 20 payments made by The Stepping Stones Nursery Limited to RBI, totaling $543,472, as insolvent transactions. The Court of Appeal had previously ruled that six of these payments were indeed insolvent transactions and ordered the repayment of $9,623.29 plus interest. RBI, in turn, sought indemnity or scaled costs against the liquidators, arguing that the final judgment mirrored their settlement offer of $10,000, made prior to the proceedings.

The court considered the legal principles surrounding Calderbank offers and their impact on costs in litigation. The court examined the reasonableness of the liquidators' decision not to accept RBI's offer and the relevance of the uncertainty surrounding the application of the 'peak indebtedness' rule in New Zealand at the time. The court also took into account the liquidators' partial success in the proceedings, as they were only able to establish that The Stepping Stones Nursery Limited was unable to pay its debts in respect of transactions in the second half of the specified period.

In its judgment, the court determined that although the final judgment was close to RBI's offer, the liquidators acted reasonably and responsibly in pursuing the proceedings. The court found that there was a proper basis for the claim and that the liquidators were not unreasonable in rejecting RBI's offer. Consequently, the court ruled that costs should lie where they fell, meaning each party would bear its own costs.

Orders