Dalton v Mackley
[2021] NZHC 2999
•5 November 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-000760
[2021] NZHC 2999
UNDER the Companies Act 1993 IN THE MATTER
of the liquidation of Carbon Group Limited (in liquidation)
BETWEEN
SIMON DALTON and MATTHEW PETER KEMP
Applicants
AND
NEIL MACKLEY
Respondent
Hearing: On the papers Counsel:
K K Kommu for Applicants
B J Norling and C T Zhang for Respondent
Judgment:
5 November 2021
COSTS JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 5 November 2021 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
DALTON v MACKLEY Costs Judgment [2021] NZHC 2999 [5 November 2021]
Costs application
[1] The liquidators of Carbon Group Ltd (in liq) applied for directions under s 284(1)(a) of the Companies Act 1993. On 29 July 2021, Powell J directed that a hearing be held to determine as a preliminary issue whether the Court had jurisdiction under s 284(1)(a) to grant directions of the scope and nature sought by the liquidators.
[2] In an interim judgment of 7 September 2021, I held the orders sought by the liquidators were not orders the Court could properly make under s 284(1)(a) in the circumstances of this case.1
[3] In a further judgment of 8 October 2021, I made directions to regularise the proceeding and I called for submissions on costs in relation to the interim judgment.2 The directions I made included that upon receipt of memoranda I would decide the issue of costs on the papers unless I considered a hearing was required. I then received memoranda from counsel in relation to costs. Following receipt of the liquidators’ memorandum a further memorandum of reply submissions was filed for the respondent. There was no direction for the filing of reply submissions and no leave was sought to do so. In the result they were not substantially helpful.
The respondent seeks costs
[4] Counsel for the respondent submits the respondent should be awarded costs of the proceeding to date on a 2B basis with a 50 per cent uplift. The submissions proceed on the premise that the respondent was the successful party and therefore entitled to costs.
[5] The respondent’s claim for an uplift on scale costs relies on r 14.6 of the High Court Rules. The respondent submits the liquidators used the wrong procedure to commence the proceeding in an attempt to shortcut standard court procedures and this was not appropriate. This, it is submitted, put the respondent to significant unnecessary cost. It is said the respondent’s actual costs significantly exceed both scale costs and the increased costs that are sought, so that even the uplift on scale costs
1 Dalton v Mackley [2021] NZHC 2329.
2 Dalton v Mackley [2021] NZHC 2697
will not put the respondent back into the position he would have been had the proceeding been commenced on a proper basis.
[6] The respondent’s counsel advises that Calderbank offers have been exchanged which it is not appropriate to disclose while the substantive proceeding remains unresolved. It is submitted that in the event the Court is not minded to award increased costs, then scale 2B costs should be awarded but with leave reserved to the respondent to seek an uplift at the conclusion of the proceeding.
The liquidators’ position
[7] The liquidators argue the only costs that are in issue relate to the interim judgment and not the proceeding as a whole. They say there are no grounds for awarding increased costs because the position taken by the liquidators did not lack merit. The liquidators submit there are in fact grounds to reduce any costs entitlement of the respondent because the point taken by him that the Court did not have jurisdiction was raised at a very late stage.
[8] Despite that, the liquidators do not oppose the making of an order the respondent is entitled to costs in relation to the preliminary question on a 2B basis (subject to some objections to specific amounts claimed). However, they say the Calderbank offers are irrelevant for the purposes of determining those costs.
Discussion
[9] The general principles are not contested. I consider that all matters of costs are discretionary but the discretion must be exercised on a principled basis.3 The determination of costs, so far as possible, should be both predictable and expeditious.4 The party who has lost should pay the costs of the party that has won unless there are exceptional reasons to the contrary.5 Unless there are special reasons to the contrary, costs on an opposed interlocutory application should be fixed when the application is
3 High Court Rules 2016, r 14.1(1).
4 Rule 14.2(1)(g).
5 Rule 14.2(1)(a) and Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 2 NZLR 523 at [19].
determined and become payable when they are fixed.6 Generally, costs awards should reflect the complexity and significance of the proceeding and be assessed by applying the appropriate daily rate to the time considered reasonable for each step required in relation to the proceeding.7
[10] I accept the respondent was successful upon the hearing of the preliminary question and prima facie he is entitled to costs in relation to that matter. I do not accept the respondent’s position that he should be awarded costs of the whole proceeding to date. The proceeding has not been determined and it is not the case that costs incurred by the respondent in filing his notice of opposition and supporting affidavits and in relation to case management conferences has necessarily been wasted. I also do not consider my decision to regularise the proceeding was an indulgence (as the respondent submits) but an approach consistent with the requirements of the High Court Rules and an incident of proper case management. It is my expectation that the evidence that has been filed by both parties will ultimately be utilised at trial and result in costs savings. Costs on steps taken in the proceeding to date that do not relate to the determination of the preliminary question will be assessed at the conclusion of the trial in the usual manner. If the respondent is ultimately successful, then it is to be expected he would be awarded costs for all steps in the proceeding. Further, if he is unsuccessful, he would be entitled to seek a reduction in any costs award made in favour of the liquidators to the extent that costs incurred as a result of the liquidators’ adoption of the incorrect procedure were in fact wasted.
[11] I also do not accept the respondent’s position that there is a basis to award increased costs because the liquidators attempted to shortcut the standard court procedures. While ultimately my conclusion was that the s 284 procedure had not been correctly utilised, the liquidators’ approach was supported by authority. I had understood Mr Norling to accept at the hearing that there were authorities supporting both sides of the argument.
[12] Relevant to this, and contrary to the respondent’s position, I do consider it relevant that the respondent did not raise the question of jurisdiction until immediately
6 Rule 14.8(1).
7 Rule 14.2(b) and (c).
prior to what would otherwise have been the hearing of the substantive application. The case had been set down for hearing on 2 August 2021 but it was only on 27 July 2021 that the respondent’s counsel raised for the first time the issue of jurisdiction. If the respondent’s counsel considered the liquidators’ approach was obviously misguided, it could be expected that the issue would have been raised much sooner and dealt with prior to the respondent incurring costs of filing substantive evidence.
[13] I am not therefore minded to award the respondent increased costs. In those circumstances, the respondent argues that costs should be awarded on a 2B basis but that I should reserve leave for him to apply for an uplift upon the conclusion of the proceeding when the Calderbank offers can be disclosed. Although the liquidators oppose that approach, I consider it has merit. Whether the respondent might, as a result of the exchange of Calderbank offers, be entitled to an uplift on scale costs, cannot yet be determined. There is authority for the Court making an interim award of costs but reserving to a party the right to apply for a “top-up” when that party’s entitlement to indemnity costs could only be determined after the substantive hearing.8 I see no reason why a similar approach should not be applied here.
[14] Finally, there are objections taken by the liquidators to specific amounts sought by the respondent in its schedule of costs. While the liquidators take issue with the time actually taken to complete certain steps, I consider this overlooks ancillary attendances that relate to them. So, for instance, while a time allocation of .4 of a day may seem excessive in respect to the preparation of a short memorandum, there may have been a considerable amount of time spent in research, taking instructions and negotiation between counsel that has been required. Furthermore, as noted, the determination of costs is to be both predictable and expeditious. It is contrary to those expectations that the Court be asked to tinker with what appear, on their face, to be reasonable claims.
8 OOO DV Ryboprodukt v UAB Garant [2008] 3 NZLR 326 (CA) and Topa Partners Ltd v JWL International Group Ltd [2020] NZHC 576.
Result
[15] The respondent is awarded costs calculated on a 2B basis in relation to the determination of the preliminary issue by my judgment of 8 October 2021 in the sum of $8,723.50 as per the attached schedule.
[16] Leave is reserved to the respondent to apply for “top-up” costs following determination of the proceeding on the basis of any Calderbank offers that have, to date, been exchanged between the parties.
O G Paulsen Associate Judge
Solicitors:
Glaister Ennor, Auckland, [email protected] / [email protected] Norling Law Limited, Auckland, [email protected] / [email protected]
Schedule
Item
Description
Daily rate
Days
Cost
39/12
Case management (29 July 2021)
$2,390
0.2
$478
11
Filing joint memorandum (29 July 2021)
$2,390
0.4
$956
40
Preparation of written submissions
$2,390
1.5
$3,585
42
Appearance at hearing for sole or principal counsel (2 August 2021)
$2,390
0.5
$1,195
11
Filing memorandum (28 September 2021)
$2,390
0.4
$956
42
Appearance at hearing for sole or principal counsel (8 October 2021)
$2,390
0.25
$597.50
11
Filing memorandum as to costs
$2,390
0.4
$956
Total costs
$8,723.50
0
4
0