Commissioner of Inland Revenue v Compudigm International Ltd (in Rec and in Liq) HC Auckland CIV-2008-485-1000

[2010] NZHC 2425

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2008-485-1000

BETWEEN  THE COMMISSIONER OF INLAND REVENUE

Plaintiff

ANDCOMPUDIGM INTERNATIONAL LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION)

Defendant

Judgment:      7 December 2010 at 2.20 pm

JUDGMENT AS TO COSTS OF ASSOCIATE JUDGE D.I. GENDALL

This judgment is delivered by Associate Judge Gendall on 7 December 2010 at 2.20 pm under r 11.5 of the High Court Rules.

Solicitors:           Terry IP, Solicitors, PO Box 10 932, Wellington 6143

Chapman Tripp, Solicitors, PO Box 993, Wellington 6140

THE COMMISSIONER OF INLAND REVENUE V COMPUDIGM INTERNATIONAL LIMITED (IN RECEIVERSHIP AND IN LIQUIDATION) HC WN CIV-2008-485-1000  7 December 2010

Introduction

[1]      On 21 September 2010, I dismissed an application by Andrew John Cardno (“Mr Cardno”) for leave pursuant to s 248 of the Companies Act 1993 to continue proceedings he had filed in the District Court of Clark County in Nevada, United States of America against his former employer, Compudigm International Limited (“Compudigm”). The application was opposed by Bally Technologies Inc (“Bally”), a company which is a third party to the Nevada proceedings against Compudigm, but who was granted leave to intervene and be heard in opposition to the application.

[2]      In  my  21  September  2010  decision,  I  concluded  that  I  did  not  have jurisdiction to determine whether the Nevada proceedings should continue, because the statutory prohibition in this country to commence or continue proceedings against a company in liquidation is not applicable to foreign proceedings, and that there were no grounds for otherwise restraining Mr Cardno from pursuing the Nevada proceedings. Accordingly, I decided that the application was unnecessary and dismissed it on that basis.  In doing so, I concluded at [44] of my 21 September 2010 decision that:

“.... in terms of New Zealand law, no consent of this court is required for the Nevada proceedings to continue.”

[3]      It is helpful to refer at this point to the somewhat unusual genesis of Mr Cardno’s application, which was the result of concerns held by the Nevada Court as to whether the Nevada proceedings could only go ahead with an order of the High Court of New Zealand. Prompted, it seems, by a submission from Bally to that effect, the Nevada Court ordered that Mr Cardno’s proceedings would be dismissed unless a New Zealand Court order was obtained granting leave to continue the proceeding.

[4]      Mr Cardno now seeks costs against Bally on his application on a 2B basis on the grounds that: first, it was Bally’s intervention in the Nevada proceeding, and its argument that consent of the liquidator or leave of the New Zealand Court was required, that caused this unnecessary application to be made; secondly, Bally was not successful on any of the grounds set out in its notice of opposition; and thirdly, the Court did not take the approach which Bally sought that the Court would adopt,

namely refusal of leave to continue the Nevada proceedings, before reaching the jurisdictional issue.

[5]      Bally opposes Mr Cardno’s application for costs and, for its part, contends that it is entitled to costs both on its application to intervene in the proceeding and on the application for leave to continue proceedings.   This judgment deals with these costs issues.

Counsel’s Arguments and My Decision

[6]      Mr  Cardno  submits  that  this  is  an  unusual  case  where,  although  the application was dismissed, he was “as successful as possible” given the difficult circumstances he found himself in as a result of the Nevada Court requiring an order for which there was no jurisdiction for the New Zealand Court to make. He submits that  Bally  was  equally  unsuccessful,  because  it  was  in  Bally’s  interest  for  Mr Cardno’s application to be dismissed on the merits, without a determination of the question of jurisdiction.

[7]      In terms of the Court’s jurisdiction to make an award of costs against a non- party, Mr Cardno refers to s 99A of the Judicature Act 1908, which provides as follows:

99A Costs where intervener or counsel assisting Court appears

(1)  Where the Attorney-General or the Solicitor-General or any other person appears in any civil proceedings or in any proceedings on any appeal and argues any question of law or of fact arising in the proceedings, the Court may, subject to the provisions of any other Act, make such order as it thinks just—

(a)  As to the payment by any party to the proceedings of the costs incurred by the Attorney-General or the Solicitor-General in so doing; or

(b)  As to the payment by any party to the proceedings or out of public funds of the costs incurred by any other person in so doing; or

(c)  As to the payment by the Attorney-General or the Solicitor-General or that other person of any costs incurred by any of those parties by reason of his so doing.

(2)  Where the Court makes an order pursuant to subsection (1)(b) of this section, the Registrar of the Court shall forward a copy of the order to the [[chief executive of the Department for Courts]] who shall make the payment out of money appropriated by Parliament for the purpose.

[8]       Bally submits that s 99A is not applicable, as it relates to the payment of costs as between parties and non-parties. It submits that there is no rule that explicitly covers the present situation of costs payable between two non-parties, but that the costs rules have been considered adequate to encompass the interests of interveners such as Bally, referring to Diagnostic Medlab Ltd v Auckland District Health Board HC Auckland CIV-2006-404-4724, 13 June 2007 at [24]. It submits that costs should be awarded “as if both it and Mr Cardno were parties to this proceeding”. There seems to be no issue with this approach.

[9]      In relation to the application for leave to continue the proceedings, Bally submits that it succeeded in having the Court decline to grant the application, while Mr Cardno failed on all of the grounds set out in his notice of application; and that any “necessity” in bringing the application arose from the acceptance of Mr Cardno’s counsel in Nevada that leave of the New Zealand Court was in fact required, and not from the position taken by Bally in the Nevada proceeding. Bally relies here on a statement by counsel that “... under the issues of comity we do give deference to the New Zealand law in as much as they require us to get the consent of the liquidator before proceeding...”.

[10]     In my view, it is appropriate in the circumstances of this case that costs lie where they fall. While I do not wish to resolve the issue of who – ultimately – caused the application for leave to be brought, I consider it to be clear that neither Mr Cardno nor Bally was entirely successful or unsuccessful here. Both parties urged me to determine the application on the merits, which I declined to do. As such, this was an application that had neither a winner nor a loser, and an award of costs in favour of either party would not be a true reflection of the end result. In reaching this conclusion, I have also had some regard to Bally’s position in the Nevada proceedings, in that Bally chose to become actively involved in this matter and was at least instrumental in bringing this issue to the fore initially.

[11]     Having said that, however, it is true that Bally was wholly successful in its application  to  intervene  in  the  proceeding,  as  recorded  in  my  decision  dated  6

September 2010.   On that application, Bally seeks costs totalling $2,268.00. Notwithstanding this, in my view the appropriate outcome is for costs to lie where they fall also with regard to Bally’s application to intervene.  Both applications here were clearly interconnected and the application to intervene was only brought for the purposes of the application for leave.

Conclusion

[12]     For the reasons outlined above there is to be no order made as to costs on either of the applications before this Court.  Costs are to lie where they fall.

‘Associate Judge D.I. Gendall’