Core Infrastructure Limited v Kiwi Labour Recruitment Limited
[2019] NZHC 2772
•30 October 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-394
[2019] NZHC 2772
UNDER the Companies Act 1993 BETWEEN
CORE INFRASTRUCTURE LIMITED
Applicant
AND
KIWI LABOUR RECRUITMENT LIMITED
Respondent
Appearances: J Sumner and D Corry for applicant
A Knowsley and R Scoular-Sutton for respondent
Judgment:
30 October 2019
COSTS JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[On the papers]
[1] This is an application for an order pursuant to s 290 of the Companies Act 1993 setting aside a statutory demand served by the respondent, Kiwi Labour Recruitment Ltd, on the applicant, Core Infrastructure Ltd. It was listed for hearing before me on 3 October 2019. At the commencement of the hearing I was told by counsel that a payment had been made by Core Infrastructure to Kiwi Labour and that it was common ground that there was a dispute as to the balance of the alleged debt that needed to be resolved elsewhere. I was asked to approve the withdrawal by Core Infrastructure of its application, which I did.
[2] That left only the question of costs. Counsel have been unable to resolve these. Accordingly, I now have memoranda from Mr Sumner for Core Infrastructure and Mr Knowsley for Kiwi Labour addressing costs. Both parties are seeking a costs award.
CORE INFRASTRUCTURE LIMITED v KIWI LABOUR RECRUITMENT LIMITED [2019] NZHC 2772
[30 October 2019]
[3] The principles set out in pt 14 of the High Court Rules 2016 relating to costs are quite straightforward:
(a)Ultimately, costs are at the court’s discretion, though of course that discretion, like all others, must be exercised on a principled basis.1
(b)The general rule is that costs follow the event, that is to say that the successful party is entitled to a costs award.2
(c)As to quantum, the starting point is that costs are calculated by reference to the scales contained in the Rules, which are designed to ensure that the successful party recovers a reasonable proportion of its actual costs.3
(d)There is provision for the denial of costs to the successful party, the award of indemnity costs, increased and decreased costs, all to meet the exigencies of particulars situations.4 Awards departing from scale costs are comparatively rare. A party seeking an order for costs other than on a scale basis must establish the grounds for such an order.
[4] It is by no means obvious which of the two parties has the stronger claim to success in this proceeding.
[5] On the one hand, Mr Knowsley contends on behalf of Kiwi Labour that the net outcome is that Core Infrastructure has paid his client a substantial proportion (approximately 30 per cent) of the amount originally demanded in the statutory demand. On the other hand, Mr Sumner for Core Infrastructure is entitled to say that Kiwi Labour has accepted that a significant proportion of the amount demanded is the subject of a legitimate dispute. I mention this simply to reinforce that even the starting point for an analysis of costs — who can be said to be the successful party in this proceeding — is not obvious in this case.
1 High Court Rules 2016, r 14.1(1).
2 Rule 14.2(1)(a).
3 Rule 14.2(1)(c).
4 Rules 14.6 and 14.7.
[6]From counsel’s submissions the circumstances would seem to be as follows:
(a)Pursuant to an agreement dated 9 May 2018 Core Infrastructure engaged Kiwi Labour to provide personnel from time to time.
(b)For reasons that are not relevant for present purposes the commercial relationship between the parties broke down in or around May 2019.
(c)As at 16 May 2019, Kiwi Labour had rendered invoices to Core Infrastructure totalling $34,055.83. On the evidence it seems fair to conclude that there was no dispute as to $10,984.46 of that, but that Core Infrastructure has raised a dispute about the balance —
$23,071.37.
(d)On 10 July 2019, Kiwi Labour served its statutory demand. This was for the full amount of its claim plus interest and costs — totalling
$37,571.98.5
(e)Core Infrastructure wrote to Kiwi Labour on 18 July 2019 inviting it to withdraw its statutory demand. Amongst other things it was said in this letter that the statutory demand included disputed items and that the statutory demand process was not apt to resolve what was effectively a contractual dispute between the parties. Core Infrastructure then filed this application for an order setting aside the statutory demand on 23 July 2019.
(f)Kiwi Labour filed and served its notice of opposition on 6 August 2019.
(g)Core Infrastructure says that it then carried out a full analysis of Kiwi Labour’s invoices and concluded that of the amount claimed
5 There is a serious issue as to whether or not it is appropriate to include in a statutory demand a claim for costs which of course, at the time that the demand is served, has not been ordered and is not, on any view, payable. Associate Judge Bell referred to a developing practice of including a claim for such costs in statutory demands in his decision in CBC Construction (Auckland) Ltd v Auckland Concrete Company Ltd [2019] NZHC 1104 at [10], and deprecated this. However, that issue is not relevant to the resolution of the question of costs here.
$10,984.46 was not the subject of any dispute. It also concluded that it had a valid counterclaim that, although it was not in a position to quantify, would entitle it to set off in part or in whole the undisputed portion of Kiwi Labour’s claim.
(h)On 15 August 2019, Core Infrastructure’s solicitors then wrote a “without prejudice save as to costs” letter to Kiwi Labour’s solicitors offering to pay the undisputed component of the latter’s debt —
$10,984.46 — within seven days, notwithstanding its alleged counterclaim and right of set off, if Kiwi Labour were prepared to withdraw its statutory demand on the basis that there would be no issue as to costs. Core Infrastructure says that it could not have taken that step any earlier than it did because it was only on receipt of certain information from Kiwi Labour including information incorporated in Kiwi Labour’s logbook records, which contained necessary information to complete its analysis.
(i)On 21 August 2019 Kiwi Labour’s solicitors responded to Core Infrastructure’s solicitors rejecting the offer contained in the latter’s Calderbank letter and stating that Kiwi Labour would only withdraw its statutory demand on payment of $43,201.28. This sum exceeded the amount of the statutory demand and included certain invoices that Kiwi Labour had already accepted were the subject of a dispute.
(j)Its Calderbank offer having been rejected, Core Infrastructure prepared detailed affidavit evidence and its solicitors and counsel prepared a synopsis of the submissions to be advanced on its behalf in support of this application.
(k)Kiwi Labour’s solicitors and counsel responded in due course.
(l)On the morning of the hearing, Core Infrastructure paid Kiwi Labour the undisputed component of its claim — $10,984.46.
(m)Plainly, Kiwi Labour, through its solicitors and counsel, accepted that the balance of its claim (whether the difference between the sum paid and that claimed in the statutory demand, or some higher figure) was disputed because, as I have already indicated, when the matter was called at 10.00 am counsel informed me that it was agreed that the application could be withdrawn by consent and whatever the precise scope of the residual dispute between the parties would be dealt with elsewhere — presumably by the commencement of proceedings by Kiwi Labour in the District Court.
[7] Against that background, Kiwi Labour contends that it is entitled to scale costs. Core Infrastructure, for its part, also claims costs. Indeed, it contends that it is entitled to increased costs.
[8]In my minute recording what transpired on 3 October 2019, I said:
[2] The only remaining issues concerns costs. Effectively, both parties are seeking a costs award. I have signalled to counsel that my impression is that criticisms might legitimately be levelled in both directions and that it may well be that this is a case in which costs ought to be left to lie where they have fallen. However, that is no more than an impression, and I have no firm view, not yet having had the benefit of counsel’s submissions.
[9] I now have the benefit of such submissions. Nothing contained in them suggests to me that my impression was wrong.
[10] As already said, it is not at all easy to say which of the two parties has been successful in this litigation, so as to be able to claim a prima facie entitlement to a costs award. For his part, Mr Knowsley for Kiwi Labour points out that Core Infrastructure paid the undisputed component of the claimed debt and in his submissions repeatedly describes that as Kiwi Labour having “won”. Mr Sumner’s rejoinder for Core Infrastructure is that Kiwi Labour’s total claim was always disputed in part (even putting aside any issues as to the appropriateness or otherwise of claiming costs in the statutory demand) and as soon as Core Infrastructure was able to carry out a full reconciliation it offered to pay the undisputed component on terms that were roundly rejected. He adds that, in the end, Core Infrastructure elected to pay that undisputed component in any event and that forced Kiwi Labour to agree to the
withdrawal of the application and the reference of the disputed component of the debt to litigation. He characterises that as a successful outcome from Core Infrastructure’s perspective.
[11] At a more detailed level it seems to me to be possible to level criticisms at both parties, as I said in my minute.
[12] Insofar as Core Infrastructure is concerned, it was plainly in a position to identify an undisputed component of the debt as early as 15 August 2019, that being the date of its Calderbank letter, and yet it elected not to make that payment until the morning of the hearing. Had it done so earlier both parties would have saved substantial costs.
[13] Turning to Kiwi Labour’s position, on receipt of Core Infrastructure’s Calderbank letter, it is not obvious to me why they did not accept the terms of the same, under which they would be paid the undisputed component of the debt and left to pursue the balance, in respect of which they now accept there is a genuine dispute.
[14] Frankly, the position seems to be that these two parties had, from about 16 May 2019 when their commercial relationship collapsed, become antagonistic towards each other to the point where both of them were being motivated by antagonism rather than a rational approach to the resolution of this matter. It was only immediately prior to the hearing and the need to face up to explaining their position, no doubt with the benefit of advice from their solicitors and counsel, that they arrived at the only obvious solution to this matter.
[15] For those reasons, the firm view I take is that costs in this matter — which no doubt are substantially more than they needed to be — should be left to lie where they have fallen.
[16]I decline to make any order as to costs.
Associate Judge Johnston
Solicitors:
Ford Sumner, Wellington for applicant
Rainey Collins, Wellington for respondent
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