Brown v Nu Build Project Management Limited

[2018] NZHC 267

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2016-409-001090 [2018] NZHC 267

BETWEEN

MARK ANTHONY BROWN

Applicant

AND

NU BUILD PROJECT MANAGEMENT LIMITED

Respondent

Hearing:	On the papers
Counsel:	G K Riach and M K Crimp for the Applicant S T Cottrell for the Respondent
Judgment:	28 February 2018

JUDGMENT OF NATION J

[1]                  The proceedings began as an application by Mr Brown, as a shareholder, seeking an extensive range of business records of Nu Build Project Management Ltd (the respondent company) for the period from 27 November 2012 to November 2016. Mr Brown says the proceedings were necessary because the respondent company “refused to comply with the applicant’s statutory request in its entirety”. He says that, ultimately, the respondent company agreed to provide Mr Brown with all the information sought, to the extent that it existed, meaning that he was successful in the proceedings and costs should be awarded on that basis.

[2]                  The respondent company opposes the application for costs and seeks costs itself on the basis the proceedings were not necessary. It says that, before proceedings began, the respondent company had offered to provide information effectively on the

BROWN v NU BUILD PROJECT MANAGEMENT LTD [2018] NZHC 267 [28 February 2018]

basis ultimately agreed to by the parties and on a basis better than Mr Brown was ultimately able to achieve because the information would have been provided without Mr Brown having to pay for the material. In the alternative, the respondent company says costs should be left to lie where they fall.

[3]                  The proceedings were filed on 4 November 2016. Mr Brown filed an affidavit in support of his original application the same day. Mr Gallagher, the other director of the respondent company, filed an affidavit in response and Mr Brown an affidavit in reply.

[4]                  It is apparent from those affidavits that Mr Gallagher and Mr Brown set up the respondent company with a view to their profiting from management work that the respondent company would be able to do in connection with rebuild projects in Christchurch after the Canterbury earthquakes. At least some of that work was to be carried out by Mr Brown’s company, Nu Build Homes Ltd (Mr Brown’s company).

[5]                  The dispute over access to documents arose in the context of a dispute between Mr Brown and Mr Gallagher over the way in which the respondent company was being operated to the claimed detriment of Mr Brown and Mr Brown’s company, and disputes between Mr Brown’s company and the respondent company over various issues.

[6]                  However, the uncontradicted record shows that, in May 2016, the accountant for Mr Brown and his company asked the accountant for the respondent company to provide certain financial information, not as extensive as was sought in the eventual proceedings. The respondent company’s accountant responded by saying there were conflicting instructions from the company’s directors and, in these circumstances, they could not provide the information requested. Mr Gallagher called a shareholders meeting and, through emails, advised Mr Brown that he was not inclined to provide the information until after the meeting.

[7]                  On 17 June 2016, lawyers for Mr Brown formally wrote to the directors of the respondent company, attention Mr Gallagher, referring to the proposed shareholders meeting and Mr Gallagher’s proposal that the meeting discuss the potential winding

up of the business. Mr Brown’s lawyers formally requested the information ultimately the subject of the proceedings.

[8]                  In his response of 5 July 2016, Mr Gallagher said he was not prepared to release the information to Mr Brown because of the dispute between Mr Brown’s company and the respondent company.

[9]                  After proceedings had been issued, the respondent company filed a notice of opposition. It was consistent with the stance that Mr Gallagher had taken earlier. The respondent company said the orders sought should not be made because of the way it would prejudice the respondent company in its disputes with Mr Brown’s company and in its business generally.

[10]              With Mr Gallagher’s affidavit in support of the respondent company’s notice of opposition was a letter from the respondent company’s lawyers to Mr Brown’s lawyers in response to the proceedings. In that letter, the lawyers reiterated that the request for documents had been refused because it could potentially prejudice the respondent company’s commercial position in relation to its disputes with Mr Brown’s company. The lawyers indicated that Mr Gallagher was willing to meet with Mr Brown to identify and discuss Mr Brown’s concerns. They also suggested the meeting might identify “specific information” that would help to resolve whatever concerns Mr Brown might have about the way the respondent company was being operated.

[11]              As recorded in a minute of 6 December 2016, in response to the proceedings, the parties began discussing what documents would be made available by the respondent company but the proceedings were set down for hearing on 8 March 2017.

[12]              Through a memorandum of counsel dated 24 February 2017, the parties confirmed that the respondent company had, on 21 December 2016, confirmed it would provide Mr Brown with copies of all the information sought in his originating application, to the extent the documents existed, on the basis he paid for that information. With a view to reducing the costs of disclosure, there was to be an initial, somewhat limited, disclosure of all those documents to see if that was all Mr Brown needed.

[13]              The proceedings were further adjourned to allow for the provision and consideration of the material provided. Following analysis of the information, Mr Brown sought, and the respondent company agreed to provide, further limited documents.

[14]              Through a memorandum of 1 September 2017, counsel confirmed the respondent company had provided Mr Brown with copies of all remaining documents which he sought in the proceedings, to the extent that such documents had existed, with Mr Brown having met the cost of providing those documents. It was accordingly agreed that the only issue to be determined in the proceedings related to costs and they could be dealt with based on the memoranda to be filed for the parties.

[15]              With the outcome of the proceedings, as advised by counsel, Mr Brown has been successful. On that basis, the general principle, as set out in r 14.2 High Court Rules, is that he would be entitled to costs.

[16]              Given the initial response from the respondent company’s lawyers to the formal request from Mr Brown’s lawyers for the information which was the subject of the proceedings, and given the ultimate outcome, I consider the filing of proceedings was reasonably necessary and justified.

[17]              Having carefully considered the letter which the respondent company’s lawyers wrote on 23 November 2016, I do not consider that it was an offer to provide all the documents ultimately disclosed. The letter was primarily suggesting a meeting to discuss whatever general issues there were between Mr Brown and Mr Gallagher or other shareholders in the respondent company. There was a suggestion that Mr Brown could identify the more specific information he was seeking but, in relation to Mr Brown’s concerns, it was suggested the provision of more limited information might be “a possible outcome” of Mr Brown’s application. At the same time those tentative suggestions were being made, the lawyers confirmed that the respondent company was of the view that disclosure would prejudice its commercial position in relation to its disputes with Mr Brown’s company and that was why the request for disclosure had been refused.

[18]              Mr Brown submitted an award of costs on a 2B basis would be appropriate. I agree. I do not accept the proceedings were of such a nature that a comparatively small amount of time should be considered reasonable for each step that had to be taken in the proceedings. I reject the submission that time allocations under band A would be appropriate. I consider that, given the reasons why memoranda had to be filed seeking further adjournments of the proceedings, it would be reasonable to allow time for the filing of joint memoranda as sought.

[19]              Given the respondent company’s initial response to the formal request for documents, I do not consider the award of costs should be reduced on the basis the application, as originally framed, was unnecessarily wide.

[20]              It is not necessary or appropriate for the Court to analyse the actual time that might reasonably have been expended by counsel on each particular step in the proceedings for which costs are sought, where the ultimate quantum of the costs award is no more than a contribution of about two-thirds to the reasonable costs a party incurred in connection with the proceedings.

[21]              On a 2B basis, Mr Brown says he would be entitled to costs for the proceedings in the sum of $9,087. He also seeks disbursements of $540 for the original filing fee and $92 as a service fee, a total of $9,719. Ultimately, however, Mr Brown seeks an award of costs in the total sum of $7,500 plus those disbursements. I note that the disbursements sought do not include the cost which Mr Brown has already met in obtaining the documents ultimately provided.

[22]In all these circumstances, I order the respondent company to pay Mr Brown

$7,500 plus disbursements of $632.

Solicitors:

Harmans Lawyers, Christchurch GCA Lawyers, Christchurch.