Capital Produce Limited v Brooklyn Bar and Bistro Limited

[2018] NZHC 2917

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2018-485-332 [2018] NZHC 2917

BETWEEN

CAPITAL PRODUCE LIMITED

Plaintiff

AND

BROOKLYN BAR AND BISTRO LIMITED

Defendant

Counsel:

Andrew Swan for plaintiff

Matthew Freeman for defendant

Hearing:

9 November 2018

COSTJUDGMENT OF ASSOCIATE JUDGE JOHNSTON [On the papers]

[1]      In my substantive judgment in this matter dated 23 October 2018, I concluded that  Brooklyn  Bar  and  Bistro  had  established  grounds  for  a  permanent  stay  of Capital Produce’s winding up proceeding.   I reserved costs in the expectation that counsel would be able to sort these out. Regrettably, that has not happened, and I must now deal with them.

[2]      For Brooklyn Bar and Bistro, Mr Freeman contends that a costs award should be made in favour of that company against the debt collection agency that acted for Capital Produce Ltd, Law Debt Collection. He submits that whilst costs orders against non-parties are rare, this is a case which fits within the circumstances identified in Dymocks Franchise Systems v Todd1  because Law Debt Collection had a financial interest in the outcome of the litigation (its charges were included in the statutory demand) and had effective control of the proceeding.

1      Dymocks Franchise Systems v Todd (No. 2) (2005) 17 PRNZ 115 (PC).

CAPITAL PRODUCE LIMITED v BROOKLYN BAR AND BISTRO LIMITED [2018] NZHC 2917 [9 November 2018]

[3]      There is some force in this.   In my judgment, I concluded that there was evidence to suggest that the Court’s processes had been abused, and there is no real doubt that Capital Produce put the collection of this alleged debt in the hands of Law Debt Collection so that they had control over the process.  Indeed, one of the curiosities of the case is that the affidavit evidence as to the accuracy of Capital Produce’s statement of claim was made not by a director or officer of that company but by a director or officer of Law Debt Collection.

[4]      Those things said, the Court’s jurisdiction to make an order against a non-party is certainly one that must be exercised sparingly.  There are, as the cases indicate, potential natural justice issues in making costs awards against non-parties without giving them an opportunity to be heard. Moreover, my own sense is that such awards are more appropriately used where they are necessary for remedial purposes – for example where the party against whom the award would otherwise be made may be unable to pay it.  There is no suggestion in this case that Capital Produce is not in a position to pay a costs award. To the extent that a costs award may be said to have its genesis in the way in which this proceeding was conducted, Capital Produce may well look to Law Debt Collection.  But that is primarily a matter between those parties.

[5]      For Capital Produce, Mr Swan submits that the appropriate course would be to reserve costs pending the outcome of the underlying dispute.   In making this submission he points to a number of factors most critically that Brooklyn Bar and Bistro ignored the statutory demand which resulted in the prima facie presumption of insolvency and the ability on Capital Produce’s part to commence winding up proceedings.

[6]      The essential point is that there is a sense in which Brooklyn Bar and Bistro, by putting its head in the sand when it received the statutory demand, was the author of its own misfortune.

[7]      There is something in this too.

[8]      However, the Rules proceed on a presumption that costs in interlocutory proceedings will be dealt with when they are disposed of, and even if it can be said –

as I think it can – that Brooklyn Bar and Bistro must assume a degree of responsibility for what has occurred – there were any number of opportunities before and after this proceeding was commenced for Capital Produce to withdraw its winding up proceedings which in my view it should have done when it became apparent that there were real issues associated with calculating the amount due. Over and above that, the manner in which the proceeding was prosecuted by Law Debt Collection was at very least questionable.

[9]      In my judgement, the proper course is to award Brooklyn Bar and Bistro scale costs  against  Capital  Produce,  and  leave  any  secondary  issues  as  between Capital Produce and Law Debt Collection for resolution between them.

[10]     I make an order awarding Brooklyn Bar and Bistro costs and disbursements totalling $8,808.50.

Associate Judge Johnston

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt for defendant