Body Corporate 172108 v Manchester Securities Limited (in liquidation)

[2021] NZHC 1852

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-225

[2021] NZHC 1852

UNDER

the Companies Act 1993

BETWEEN

BODY CORPORATE 172108

Plaintiff

AND

MANCHESTER SECURITIES LIMITED

(in liquidation) Defendant

Hearing:	On the papers
Appearances:	J B Orpin-Dowell for plaintiff K Sullivan for defendant
Judgment:	29 July 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON [COSTS]

[1]    On the application of the plaintiff, Body Corporate 172108, in a judgment originally issued on 19 and then reissued on 28 February 2020, I made an order winding up the defendant, Manchester Securities Ltd.1 Following an unsuccessful appeal by Mr R J Cummins, formerly the sole shareholder and director of Manchester Securities, to the Court of Appeal,2 the Body Corporate applied for costs in  the  High  Court  proceedings.  Costs  were  sought  not  only  against  Manchester Securities but also against Mr Cummins who had taken an active part in the 10 December 2019 hearing of the substantive application (and the appeal that followed). In a judgment issued on 30 June 2021 I made a costs award in favour of

1      Body Corporate 172108 v Manchester Securities Ltd [2020] NZHC 198.

2      Cummins v Body Corporate 172108 [2021] NZCA 145.

BODY CORPORATE 172108 v MANCHESTER SECURITIES LIMITED (in liquidation) [2021] NZHC 1852 [29 July 2021]

the Body Corporate against Manchester Securities and Mr Cummins jointly.3 The concluding paragraph of my judgment read as follows:

[11]  I award the plaintiff costs against the defendant and Mr Cummins jointly. Those costs are to be calculated on a 2B basis. The costs, along with any relevant disbursements, may be fixed by the Registrar.

[2]    I had expected that counsel would engage cooperatively to resolve any issues that might arise in relation to the scope and quantum of costs, and present an agreed costs order to the Registrar for sealing. However, it is apparent that that did not happen, and the Court now has before it a further exchange of memoranda from counsel (four in total) in which they seek a determination of these matters.

[3]    The starting point is the scope of the Body Corporate’s costs claim. The  Body Corporate commenced this proceeding in late 2018 (there had been an earlier challenge to the statutory demand served by the Body Corporate that was the subject of an application to set aside in this Court and an appeal to the Court of Appeal). Manchester Securities applied for a stay. I dismissed that application in a judgment dated 14 December 2018.4 The Body Corporate sought costs and I awarded actual and reasonable costs  in its favour against Manchester Securities in a judgment dated    25 February 2019.5 Manchester Securities then applied for leave to appeal against my 14 December 2018 judgment refusing a stay. I granted such leave in a judgment dated

25   March   2019.6  Manchester   Securities   appealed   unsuccessfully   against   my

14 December  2018  judgment  to  the  Court  of  Appeal.7  After  all   that,  the   Body Corporate’s  substantive  application  for  an   order   winding   up   Manchester Securities came on for hearing and, as already said, I dealt with that in my 28 February 2020 judgment.8

[4]    The aspects of the litigation in this Court in respect of which costs have not already been dealt with are Manchester Securities’ successful application for leave to appeal against my 14 December 2018 judgment (“application for leave”) and the

3      Body Corporate 172108 v Manchester Securities Ltd (in liq) [2021] NZHC 1542.

4      Body Corporate 172108 v Manchester Securities Ltd [2018] NZHC 3307.

5      Body Corporate 172108 v Manchester Securities Ltd [2019] NZHC 253.

6      Body Corporate 172108 v Manchester Securities Ltd [2019] NZHC 569.

7      Manchester Securities Ltd v Body Corporate 172108 [2019] NZCA 408.

8      Body Corporate 172108 v Manchester Securities Ltd, above n 1.

Body Corporate’s successful application for an order winding Manchester Securities up (“the substantive application”). The Body Corporate seeks costs in relation to both of those applications.

[5]    In his memorandum of 8 July 2021 Mr Sullivan, who was not involved as counsel at the time of the application  for  leave,  but  who  appeared  for  Manchester Securities in the substantive application (though not for Mr Cummins who presented argument on his own behalf) and who now appears to be presenting argument in the interests of both Manchester Securities and Mr Cummins in relation to this costs application, raises a series of points against the Body Corporate’s costs claim.

[6]    Mr Sullivan submits that costs in relation to the application for leave “have not been awarded to the Body Corporate and cannot be claimed”.

[7]    Given the convoluted background to this matter, and that the primary focus of counsel’s initial exchange of memoranda concerning costs,  and my  judgment  of  30 June 2021, was the substantive hearing, that is an understandable submission. However, Mr Orpin-Dowell’s submissions on behalf of the Body Corporate at that stage certainly addressed costs in connection with both the application for leave and the substantive application. He included schedules of costs in relation to both (as well as a schedule of disbursements). Prima facie at least it appears to me that my judgment of 30 June 2021 must be treated as having applied to both applications.

[8]    However, having said that, in my view it would be an injustice for costs to be awarded jointly against Manchester Securities and Mr Cummins in relation to application for leave, because it was not until well after that point in the litigation that Mr Cummins began actively to participate and thereby put himself in the position of a party and exposed himself to a costs risk. As I recorded in my 30 June 2021 judgment, he only did so in the course of the substantive application.9

[9]    In those circumstances, it seems to me that substantial justice will be done if any costs award in relation to the application for leave is against Manchester Securities

9      Body Corporate 172108 v Manchester Securities Ltd (in liq, above n 3, at [1]–[2].

only and the company and Mr Cummins are jointly liable for any award in relation to the substantive application.

[10]   Mr Sullivan contends that as Manchester Securities was successful in obtaining leave to appeal, it might claim costs in relation to the application for leave, notwithstanding that the appeal to the Court of Appeal was unsuccessful, though he goes on to suggest that the proper course is for costs in relation to the application for leave to be left to lie where they have fallen.

[11]   I do not accept that submission. Ultimately, the Body Corporate was successful on the issue and the starting point is that as the successful party it should have its costs at each stage. In this regard, it is helpful, in determining which party is the successful party, to have regard to what the Court of Appeal said in awarding the Body Corporate indemnity costs:10

… While leave to appeal was granted, the appeal was, as we have said, the exemplar of a collateral challenge to final decisions of this Court and an abuse of process.

(footnote omitted)

[12]   The view I have reached is that the Body Corporate is entitled to a costs award against Manchester Securities in relation to the application for leave.

[13]   That brings me to the substantive application in relation to which Mr Sullivan accepts that costs have already been awarded to the Body Corporate against Manchester Securities and Mr Cummings jointly.

[14]   Mr Sullivan questions two components of the Body Corporate’s claim, namely the claim for costs in respect of second counsel and the disbursements incurred in engaging expert witnesses.

[15]   Insofar as the claim for second counsel is concerned, Mr Sullivan says that as yet second counsel has not been certified for.

10     Manchester Securities Ltd v Body Corporate 172108, above n 7, at [39].

[16]In Tao v Strata Title Administration Ltd Thomas J said:11

[52]  The approach to determining whether costs of second counsel should be granted is always objective, and "is focused on the nature of the proceeding, not the actual counsel involved and how he or she or they choose to conduct the litigation".12 It was emphasised both in Nomoi Holdings Ltd and in subsequent cases, that there will usually need to be some unusual feature to the litigation to warrant allowances for second counsel.13 However, in Wholesale Distributors Ltd v Songle Ltd, it was noted that the applicant did not need to show that the case was beyond the capabilities of the principal counsel, so long as it was sufficiently complex to justify certification for second counsel.14

[17]   Whilst on its face this may appear to have been a straightforward proceeding for an order winding up a  company,  it  has  an  unusually  complex  background. Mr Allan, who is the Body Corporate’s solicitor, and who appeared as second counsel at the hearing, has been involved in this matter throughout, and the view I take is that it was entirely appropriate for the Body Corporate to have Mr Allan in attendance. I certify for and approve the costs and disbursements claimed in relation to Mr Allan’s involvement.

[18]   Turning to the expert fees, I can see no basis upon which the Body Corporate could be criticised for seeking to support its case in this extremely hard-fought litigation by obtaining independent expert evidence on important points. I do not follow Mr Sullivan’s contention that because the evidence was in affidavit form, and the experts did not give viva voce evidence, that that makes any difference to the recoverability of disbursements properly incurred by the Body Corporate in relation to those experts.

[19]Ultimately, the question is one of proof and reasonableness.15

[20]   I am satisfied that the evidence establishes that the Body Corporate incurred costs of $3,024.60 in engaging Mr Gray to give evidence as to progress of the works

11     Tao v Strata Title Administration Ltd [2016] NZHC 1821.

12     Nomoi Holdings Ltdv Elders Pastoral Holdings Ltd (2001) 15 PRNZ 155 (HC) at [26].

13     Nomoi Holdings Ltdv Elders Pastoral Holdings Ltd, above n 12, at [19] and YXCBA Developments Ltd v Auckland Council [2015] NZHC 2224 at [16].

14     Wholesale Distributors Ltd v Songle Supermarket Ltd [2015] NZHC 809 at [8].

15     See generally Air New Zealand Ltd v Commerce Commission [2007] NZCA 27, [2007] 2 NZLR 494, (2007) 18 PRNZ 406.

and $9,500.00 in engaging Mr Vance to express an expert view as to the financial position of the company. I see no basis (evidential or legal) for concluding that those costs were unreasonable. I allow them.

[21]For those reasons:

(a)The plaintiff body corporate will have its costs in respect of the application for leave. This costs award is against the defendant company only. Costs are awarded on a 2B basis in the sum of

$7,050.43. There are no disbursements.

(b)The plaintiff body corporate will have its costs and disbursements in respect of the substantive application for an order winding up the defendant. This costs  award  is  made  against  the  defendant  and  Mr R J Cummins jointly. Costs and disbursements are awarded on a 2B basis in the sum of $15,184.35. I allow disbursements in the sum of $17,634.10.

Associate Judge Johnston

Solicitors:

Grove Darlow & Partners, Auckland for plaintiff Core Legal Ltd, Masterton for defendant