BSL Management Limited v Sparks HC Napier CIV 2007-441-425

[2007] NZHC 2081

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV 2007-441-425

UNDER  the Companies Act 1993

BETWEEN  BSL MANAGEMENT LIMITED Applicant

AND  FRASER BEVAN SPARKS Respondent

Hearing:         30 August 2007

Appearances: No appearance for Applicant

C D Hall for Respondent

Judgment:      31 August 2007

Reasons:        3 September 2007

REASONS FOR DECISION BY ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 3 September 2007 at

3:45 p.m. pursuant to r 540(4) of the High Court Rules 1985.

Solicitors:

Mr J McDowell, Solicitor, PO Box 636, Napier (Fax: [phone])

Ms C D Hall, Carlile Dowling, Solicitors, Private bag 6021, Napier (Fax: [phone])

BSL MANAGEMENT LIMITED V SPARKS HC NAP CIV 2007-441-425  31 August 2007

[1]      On 30 August 2007 the application by the applicant to set aside a statutory demand issued by the respondent came on for hearing before me.

[2]      Ms Hall appeared for the respondent.    There was no  appearance  for the applicant.

[3]      At the hearing on 30 August 2007 I gave a decision in the following terms;

a)        The application to set aside the statutory demand is dismissed.

b)       Costs of $2,867.25 on a solicitor/client indemnity basis are awarded to the respondent against the applicant’s company.

c)        Costs sought  by the  respondent  against  the  non-party Bevan John

Stephenson are reserved.  As to this, directions are now made:

i)        within 15 working days of today counsel for the applicant and the non-party Bevan John Stephenson, Mr McDowell,  is to have the opportunity to file and serve submissions as to this costs issues;

ii)       within 5 working days of that date counsel for the respondent is to have the opportunity to file a memorandum in response;

iii)      these  memoranda are then to  be referred to  me and I  will decide the issue of costs against  the non-party Bevan John Stephenson on the basis of the material before the Court.

d)Directions are also made that service of this Minute on Mr McDowell is to be deemed to be served on the applicant and the non-party Bevan John Stephenson.

[4]      I indicated in that decision of 30 August 2007 that my detailed reasons for the decision would follow.  I now set out those reasons.

[5]      At paragraph [10] of a 30 August 2007 memorandum from Ms Hall for the respondent filed for the hearing of this matter, she advised that the solicitor acting for the applicant company had confirmed two important matters.  The first was that the applicant had placed itself into voluntary liquidation on 27 August 2007.   The second was that the applicant did not wish to proceed with its present Application to Set Aside the Statutory Demand.

[6]      That said, and as no submissions were advanced in support of the Application to Set Aside the Statutory Demand, that Application was dismissed.

[7]      So  far  as  costs  were  concerned,  the  respondent  sought  indemnity  costs totalling $2,867.75 against both the applicant company and also against the non- party Bevan John Stephenson (“Mr Stephenson”).

[8]      Turning  first  to  consider  the  costs  application  against  the  applicant,  the starting point in any cost consideration must be the fundamental principle set out in r 47 (a) High Court Rules that;

(a) The  party  who  fails  with  respect  to  a  proceeding  or  an interlocutory application should pay costs to the party who succeeds.

[9]      There is no doubt here that the respondent is entitled to a costs order against the applicant with respect to the present application, an application which effectively did not proceed.

[10]     Here, the respondent however does not seek costs on a scale basis but rather it seeks costs on a solicitor client indemnity basis.  A tax invoice and account were provided to the Court by Ms Hall for the respondent in support of this claim for indemnity costs which total $2,867.25.  Rule 48C High Court Rules authorises the Court to order a party to pay indemnity costs in certain situations which are set out at r 48C(4).   Amongst  the grounds for this are situations where a party has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending a proceeding or a step in proceeding.

[11]     It is clear that a high threshold must be passed before an order for indemnity costs is to be made: Paper Reclaim Limited v Aotearoa International Limited [2006]

3 NZLR 188. And as Goddard J, stated in Hedley v Kiwi Co-operative Dairies Limited (2002) 16 PRNZ 694 at para 8, indemnity costs tend to be reserved for cases “Where truly exceptional circumstances exist”.

[12]     Clearly, however, the authorities also establish that actual indemnity costs awards can be made against parties who act selfishly, oppressively and unreasonably and  inexcusably  delay  matters:  Re  Chiswell  (HC  Ak,   13  September  1999, Nicholson J, M770-IM99).

[13]     Turning to the present case, it is clear that in the week before the hearing of this application to set aside the statutory demand, the applicant took steps to place itself into voluntary liquidation.  The respondent was unaware of this.  In preparing for the hearing of this matter today, the respondent incurred significant legal costs, which in effect, have been wasted because of the actions taken by the applicants.

[14]     Ms Hall for the respondent suggested that it is unknown or uncertain whether the applicant now in liquidation will have any assets sufficient to meet a costs award in any event.

[15]     What is clear to me is that the applicant here at the 11th  hour rather than proceed with the application to set aside the statutory demand has taken the critical step of placing itself into voluntary liquidation.  Further, there was no appearance on behalf of the applicant before me and it is difficult to escape the conclusion that it has acted in a frivolous and vexatious way in its continuation of this proceeding up to 30 August 2007 in the knowledge that it would be choosing to place itself into voluntary liquidation some three days before that date.

[16]     As I see it, this is an appropriate case where  indemnity costs should be ordered against the applicant company in terms of r 48C(4).

[17]     I confirm the order made on 30 August 2007 that costs of $2,867.25 on a solicitor/client basis are awarded to the respondent against the applicant company.

[18]     The last matter before me related to the respondent’s claim for indemnity costs against the non-party Mr Stephenson.   Mr Stephenson is a director of the applicant and according to the respondent has been responsible in large measure for the steps taken by the applicant here and its decision to place itself into voluntary liquidation.

[19]     Mr  Stephenson  is  a  non-party  to  this  proceeding.     As  McGechan  on

Procedure at para HR46 Intro 03 (3) notes:

A cost order against a non-party is exceptional.

McCechan on Procedure goes on to note, at para HR46 Intro 03(4):

There is a requirement to establish that the non-party “cause” that proceeded to be brought or continued.

[20]     That said, I was not prepared to make an order for payment of non-party costs against Mr Stephenson at the hearing of this matter on 30 August 2007 without providing an opportunity to the non-party and to the respondent to provide submissions to me on that issue.

[21]     Accordingly, the directions noted at paragraph [3]c) are above were made and these are confirmed.

[22]     My decision with respect to the costs application against the non-party Mr Stephenson  will  be  made  when  any  memoranda  filed  in  accordance  with  that direction are referred to me.

Associate Judge D I Gendall