Condor International Limited v Steelhaus 2014 Limited

[2019] NZHC 875

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1603

[2019] NZHC 875

UNDER

Section 290 of the Companies Act 1993

IN THE MATTER

of an application to set aside a statutory demand

BETWEEN

CONDOR INTERNATIONAL LIMITED

Applicant

AND

STEELHAUS 2014 LIMITED

Respondent

Hearing:

On the papers

Counsel:

I J Thain and I E Scorgie for the Applicant

K W Kemp and H L Quinlan for the Respondent

Judgment:

17 April 2019

COSTS JUDGMENT OF ASSOCIATE JUDGE SMITH

This judgment was delivered by me on 17 April 2019 at 3.30pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors / Counsel:

DLA Piper, Auckland Anthony Harper, Auckland

CONDOR INTERNATIONAL LTD v STEELHAUS 2014 LTD [2019] NZHC 875 [17 April 2019]

[1]    On 1 March 2019 I gave judgment (the principal judgment) dismissing the applicant's application to set aside a statutory demand issued by the respondent.1 I directed that if counsel could not agree on costs memoranda could be filed.

[2]The respondent has since filed a memorandum seeking actual costs, totalling

$24,220.82, on an indemnity basis.2

[3]    The  applicant  went  into  liquidation  on  7 March  2019.  Mr Thain  and   Mr Scorgie filed a memorandum dated 4 April 2019 referring to that fact, and attaching a liquidator's report indicating that it was likely that there would be no funds available to unsecured creditors in the liquidation. Counsel advised that, to avoid incurring further costs to the detriment of creditors, the applicant would abide by the Court's decision on costs.

[4]    While s 248(1)(c) of the Companies Act 1993 (the Act) prevents the continuation of legal proceedings when a company is in liquidation, that section does not preclude the Court from making an order for costs on a pre-liquidation judgment.3

The respondent's costs claim

[5]    Counsel for the respondent produced a schedule showing the amounts billed to the respondent by its solicitors. The total was the $24,220.82 claimed, and it was comprised in invoices dated 31 July 2018, 31 August 2018, and 30 October 2018. The first bill was for $3,443.28, the second for $13,417.33, and the third for $10,707.79. The GST component of those figures has been excluded from the amount claimed, and a filing fee of $110.00 on the notice of opposition has been added.

[6]    By way of comparison, costs on a 2B basis under the High Court Rules 2016 would be $10,704.

1      Condor International Ltd v Steelhaus 2014 Ltd [2019] NZHC 296.

2      High Court Rules 2016, r 14.6(4).

3      Brookers Company and Securities Law at CA248.03, referring to Orakei Group (2007) Ltd v Doherty [2008] ERNZ 505 (EC) at [34]-[36].

Relevant background

[7]    On 2 July 2018 the parties received an adjudication determination, under which the applicant was required to pay $79,781.94 plus interest of $6,671.46 plus ongoing interest at the rate of $34.21 per day. In addition, the applicant was ordered to pay adjudicator's fees of $18,600. When the applicant did not pay those amounts the respondent served its statutory demand on 11 July 2018. By then, the amount claimed including ongoing interest was $105,327.08.

Respondent's costs submissions

[8]    The respondent relies on r 14.6(4) of the High Court Rules. That subrule materially provides:

14.6     Increased costs and indemnity costs

…

(4)The court may order a party to pay indemnity costs if—

(a)the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing, continuing, or defending a proceeding or a step in a proceeding; or

…

(f)some other reason exists which justifies the court making an order for indemnity costs despite the principle that the determination of costs should be predictable and expeditious.

[9]    In Bradbury v Westpac Banking Corp,4 the Court of Appeal identified a number of circumstances in which indemnity costs have been ordered by the Courts. One such circumstance is commencing or continuing a proceeding in wilful disregard of known facts or clearly established law. Another is making allegations which ought never to have been made, or unduly prolonging a case by groundless contentions.

[10]   The respondent submits that the applicant acted improperly and unnecessarily in commencing and continuing the setting aside application (r 14.6(4)(a)). It says that following the adjudicator's determination, the applicant's obligation to pay the respondent was clear.

4      Bradbury v Westpac Banking Corp [2009] 3 NZLR 400; (2009) 19 PRNZ 385 (CA), at [29].

[11]   Prior to the hearing, the solicitors for the respondent wrote to the applicant's solicitors setting out the basis on which they considered that the amount demanded was not open to dispute, and inviting the applicant to withdraw the application to set aside the demand. The applicant did not take up that invitation.

[12]   The respondent relies on the terms of the principal judgment, in which I held that the applicant had not made out any grounds for a judicial review of the adjudicator's determination, and that other matters raised by the applicant were not reasonably arguable.

[13]   The respondent also referred to s 59 of the Construction Contracts Act 2002. That section materially provides:

59 Consequences of not complying with adjudicator’s determination under section 48(1)(a)

(1)The consequences specified in subsection (2) apply if a party to the adjudication fails, before the close of the relevant date, to pay the whole or part of the amount determined by an adjudicator.

(2)The consequences are that the party who is owed the amount (party

A)  may do all or any of the following:

(a)recover from the party who is liable to make the payment (party B), as a debt due to party A, in any court,—

(i)the unpaid portion of the amount; and

(ii)the actual and reasonable costs of recovery awarded against party B by that court:

…

(5)       In this section, relevant date means—

(a)the date that occurs 2 working days after the date on which a copy of the relevant determination is given to the parties to the adjudication under section 46(3); or

(b)if the adjudicator determines a later date under section 48(3)(a)(ii), that later date.

[14]   I think the respondent in a case like this would normally be entitled to reasonable costs actually incurred in a Court proceeding arising from an attempt to recover the amount of the adjudicator's determination (s 59(2)(a)(ii) of the Construction Contracts Act), but the respondent can only be entitled to reasonably

incurred costs, and I have not been provided with details of the time actually spent by the respondent's solicitors, or the hourly rates charged. Also, it is not clear whether some of the attendances billed to the respondent on 31 July 2018 may have related to the period before the Court proceeding was commenced.

[15]   In the absence of more detailed information I do not consider that I can award full solicitor/client costs as charged. However, I consider that the Construction Contracts Act context, which contemplates that the successful party in an adjudication proceeding should not be out of pocket by reasons of it being obliged to pursue recovery of the amount owing in a Court proceeding, together with the applicant's opposition based on an intended judicial review proceeding which was long delayed and apparently never filed, do provide a basis for a costs uplift under r 14.6(3)(d). In my view an uplift of approximately 50 per cent on scale 2B costs is appropriate. Allowing for the filing fee of $110.00 on the notice of opposition, costs on a 2B basis plus disbursements would be $10,814. With a 50 per cent uplift on that figure, costs payable to the respondent on the application would be $16,250, including disbursements. I make an order accordingly.

Associate Judge Smith