CP Asset Management Limited v Grant - [2012] NZHC 2228

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-2498 [2012] NZHC 2228

UNDER the Companies Act 1993

IN THE MATTER OF the liquidation of NZ PROPERTIES HOLDING LIMITED (IN LIQUIDATION)

BETWEEN CP ASSET MANAGEMENT LIMITED Applicant

ANDDAMIEN GRANT AND STEVEN KHOV Respondents

Hearing: On the papers

Counsel: R B Hucker for applicant
B J Norling for respondents

Judgment: 30 August 2012

JUDGMENT OF LANG J [on costs]

This judgment was delivered by me on 30 August 2012 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

CP ASSET MANAGEMENT LIMITED V DAMIEN GRANT AND STEVEN KHOV HC AK CIV-2012-404-
2498 [30 August 2012]

[1] This proceeding arises out of the liquidation of NZ Properties Holding Limited (In Liquidation) (“New Zealand Properties”). The respondents were appointed as liquidators of New Zealand Properties when this Court placed it in liquidation on 23 March 2012.

[2] In this proceeding CP Asset Management Limited sought orders reversing two decisions by the liquidators. The first of these was a decision by the liquidators to reject a proof of debt that CP Asset Management had lodged in the liquidation. The second was a decision by the liquidators not to hold a meeting of creditors.

[3] On 23 July 2012, CP Asset Management obtained leave to discontinue the proceeding. It did so because the liquidators had by that stage decided to call a creditors meeting. They had also provisionally accepted the proof of debt so as to enable CP Asset Management to vote at that meeting. As a consequence, there was no reason for CP Asset Management to continue with the proceeding.

[4] The parties have been unable to reach agreement regarding the issue of costs, and the Court is now required to determine that issue.

Background

[5] The events leading to this proceeding began on 5 April 2012, when the solicitors acting for CP Asset Management sent a letter to the liquidators in the following terms:

NEW ZEALAND PROPERTIES HOLDINGS LIMITED (IN LIQUIDATION)

1.We act for CPS Management Limited a creditor of the above company.

2. We enclose a proof of debt that has been completed by our client.

3. This letter requests that pursuant to the provisions of the Companies
Act that a meeting of creditors be convened by you.

4.The purpose for which our client seeks to convene a meeting of creditors is for a resolution to be passed that liquidators other than those appointed by the Court be appointed in place of those originally appointed liquidators and that under section 243(7) of the Companies Act 1993 that the current liquidators made application to the High Court for their replacement.

5. Please confirm the date of the meeting.

[6] The proof of debt enclosed with the application stated that NZ Properties was indebted to CP Asset Management in the sum of $81,997.68. The proof described that debt as being an “advance to NZ Properties Limited”. CP Asset Management did not, however, provide any supporting documentation when it…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] NZHC 2228
Decision Date: 30 August 2012

CaseChat Overview and Summary

CP Asset Management Limited, a creditor of the liquidated company NZ Properties Holding Limited, commenced proceedings against the liquidators, Damien Grant and Steven Khov, seeking to reverse two decisions made by the liquidators. The first decision was to reject a proof of debt lodged by CP Asset Management. The second was a decision not to call a creditors' meeting. CP Asset Management obtained leave to discontinue the proceeding as the liquidators had decided to call a creditors' meeting and provisionally accepted the proof of debt. The parties were unable to reach an agreement on costs, thus the Court was required to determine the issue of costs.

The primary issue before the court was whether CP Asset Management was entitled to an award of costs against the liquidators. CP Asset Management argued that it had effectively obtained the relief it sought and, as such, was the successful party in the proceeding. The liquidators contended that CP Asset Management issued the proceeding unnecessarily as they were entitled to reject the proof of debt due to the absence of adequate supporting documentation. The liquidators argued that they were not obliged to accept the proof of debt until CP Asset Management provided the necessary documentation.

The court held that CP Asset Management was the successful party in the proceeding, as it achieved its objectives of having the proof of debt accepted and a creditors' meeting called. However, the liquidators were entitled to require CP Asset Management to produce adequate supporting documentation in relation to its claim. The liquidators were justified in refusing to accept the proof of debt at the initial stage due to the absence of any supporting documentation. Nevertheless, the court found that it was open to the liquidators to defer acceptance of the proof of debt until CP Asset Management supplied adequate supporting documentation. The liquidators deprived CP Asset Management of this opportunity when they formally rejected the proof of debt.

The court rejected the liquidators' submission that CP Asset Management issued the proceeding unnecessarily. CP Asset Management was not to blame for the liquidators' decision to reject the proof of debt, and the liquidators ran the risk of an adverse award of costs as the unsuccessful party in the proceeding. CP Asset Management was entitled to an award of costs in its favour as the successful party; however, an award of increased or indemnity costs was not justified as CP Asset Management was partly to blame for the delay in providing the necessary documentation.

The court awarded costs in favour of CP Asset Management against the liquidators on a Category 2B basis, together with disbursements as fixed by the Registrar.

Orders