Debut Homes Limited (in liquidation) v Cooper
[2022] NZHC 1302
•2 June 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-002280
[2022] NZHC 1302
BETWEEN DEBUT HOMES LIMITED (IN LIQUIDATION)
First PlaintiffHENRY DAVID LEVIN AND VIVIEN JUDITH MADSEN-RIES AS LIQUIDATORS OF DEBUT HOMES LIMITED (IN LIQUIDATION)
Second Plaintiffs
AND
LEONARD WAYNE COOPER
First Defendant
LEONARD WAYNE COOPER AND TRACEY COOPER AS TRUSTEES OF THE L & T COOPER FAMILY TRUST
Second Defendants
Hearing: 27 May 2022 Appearances:
P V Shackleton for the Plaintiffs
R B Hucker for the First and Second Defendants
Judgment:
2 June 2022
JUDGMENT OF HINTON J
(As to costs and interest)
This judgment was delivered by me on Thursday 2 June 2022 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:………………………
Solicitors:
Meredith Connell, Auckland Hucker & Associates, Auckland
DEBUT HOMES LIMITED (IN LIQUIDATION) v COOPER [2022] NZHC 1302 [2 June 2022]
Introduction
[1] In 2018, liquidators of the plaintiff company (Debut) sued its sole director, Mr Cooper, for breaches of the Companies Act 1993 (the Act). Mr Cooper and his wife were settlors, trustee, and principal beneficiaries of the second defendant, a family trust. The liquidators sought an order against the trust to discharge the trust’s security charge in respect of a loan made to Debut. I gave judgment on 15 March 2018 in favour of the plaintiffs against both defendants.
[2] The parties made written and oral submissions as to costs in 2018. By consent, the costs judgment was withheld pending the outcome of an appeal process. The substantive judgment was ultimately upheld by the Supreme Court after being overturned by the Court of Appeal. With the appeal process finally completed, the parties filed further memoranda to finalise the issue of costs in this Court and a further telephone hearing was convened on 27 May 2022.
[3] The plaintiffs seek costs against the first and second defendants on a joint and several basis. They modified the amount originally sought both in terms of costs and disbursements following the first memorandum filed by Mr Hucker, to recognise a number of relatively minor points that were conceded. The final amount claimed by way of costs is $62,941.75 as set out in a schedule attached to the plaintiffs’ memorandum dated 1 May 2018. Disbursements total $23,968.62, being primarily expert fees of Mr Killick, along with a small service fee.
[4]There is also an outstanding issue of interest to the date of judgment.
Costs against first defendant
Liability for costs
[5] Mr Hucker for the defendants properly accepts that the plaintiffs were the successful party as against the first defendants, subject to the points noted below. Also subject to the points noted below he accepts that the schedule of costs and disbursements is properly calculated.
Expert’s fees and disbursements
[6] Mr Hucker takes issue over the charging of travel time and air fares of Mr Killick. Mr Killick is an expert forensic accountant based in Christchurch. He had to travel to Auckland for two hearings. Normally the extra travel time and disbursements would not be allowable but in this case the extra costs are more than compensated for by Mr Killick’s hourly rate ($250 plus GST) being much lower than would apply to an equivalent expert in Auckland. Mr Shackleton for the plaintiffs also contended that there were no experts with the same specific expertise in Auckland but I do not need to consider that point. Overall, I consider Mr Killick’s fees and disbursements to be more than reasonable.
Second counsel
[7] The plaintiffs have sought $6,411.25 for second counsel. Mr Hucker says that the case did not involve overly complex matters of fact and law. He points out, in fairness, that the Court of Appeal did certify for second counsel in favour of the defendants on their successful appeal to that Court, but says that was not on the application of the defendants. It was a matter of the Court’s own volition.
[8] Given that this matter has occupied considerable Court time and had entirely conflicting outcomes, it would be difficult to find that it did not have the level of complexity that would justify second counsel. Consistent with that view I note that the defendants also had second counsel in the substantive hearings before me.
[9] In addition, my recollection of the hearing is that all counsel were actively involved, rather than junior counsel having a passive role. The case did involve quite a number of questions of law and also, even if not complex, very detailed questions of fact with analysis of accounting transactions, expenditure and so on.
[10]Overall, I am satisfied that certification for second counsel is appropriate.
Post-hearing attendances on the s 138 defence
[11] Mr Hucker seeks to exclude from the costs schedule attendances after the March 2017 hearing with regard to his client’s s 138 defence because he says it arose
out of an issue not put to his client at the hearing. He says costs should lie where they fall in that regard. I disagree. The s 138 defence was raised by the first defendant late in the piece which is the primary reason why further teleconferences had to be held. Furthermore, the first defendant failed on his s 138 defence.
Notice to admit facts
[12] Mr Hucker seeks a 15 per cent costs deduction on the basis that the plaintiffs declined to admit facts with regard to construction costs. He says this led to extra cost and time in the hearing. However, the notice was served too late. It was served less than four weeks before the trial and after the defendants’ briefs had been served. It was not reasonable that the plaintiffs be put in a position at that time of analysing the detail set out in the notice to admit. The plaintiffs did not have to hand all relevant materials. Furthermore, some of the facts set out in the notice to admit were subsequently varied by Mr Cooper himself.
[13]No deduction is to be made on this account.
Mixed success
[14] The first defendant seeks a reduction of 15 per cent of the overall costs award on the basis of the findings made in his favour with regard to the properties at 2 and 7 Karika Place. The transactions regarding these properties were not brought into account in terms of either liability or recoverability. In addition, I made deductions from the compensation claimed by the liquidators on account of unpaid time of Mr Cooper and other matters, none of which were accepted as being deductible by the plaintiffs.
[15] I agree with Mr Hucker that the plaintiffs were not wholly successful as against the first defendant. The ultimate award was about half of the amount they claimed.
[16] However, there can be no question but that the plaintiffs were substantially successful, and had to run all of the arguments that they did in order to obtain judgment. Furthermore their arguments were reasonably run. The points on which
they failed did not occupy significant time but more relevantly the first defendant did not win on them in entirety either.
Conclusion
[17] No deductions are to be made to the costs and disbursements claimed by the plaintiffs against the first defendant. They are payable in full.
Costs against second defendants
Liability for costs
[18] The second defendants argue that they were in fact the successful party. The plaintiffs’ claim against them was advanced on different bases and succeeded only on one, being an application under s 299 of the Act, and then only partially.
[19] I do not think it can sensibly be argued that the plaintiffs were not the successful party against the second defendants. Each of their arguments was directed to the same end which was to set aside the second defendants’ security, and that argument was successful. Prima facie, therefore, costs should be awarded in favour of the plaintiffs.
Claims for reduced costs
[20] As an alternative argument the second defendants say that costs should either lie where they fall or be significantly reduced for a number of reasons.
[21] Mr Hucker’s first argument is the same as set out above, that is as to only partial success. Second, he says the s 299 argument was secondary to the main arguments in the hearing which related to the breach of directors’ duties. Third, Mr Hucker relies on “without prejudice” communications made by the second defendants to the plaintiffs. Fourth, he notes that the second defendants were joined late to the proceeding. An amended statement of claim was filed joining the second defendants on 12 August 2016 by which stage the costs allowances in the plaintiffs’ schedule had already reached a total of over $18,000. Finally, Mr Hucker notes that the second defendants, even if unsuccessful, did not commit any breaches and in fact, as the
Supreme Court confirmed, the second defendants ultimately bore part of the loss from the first defendant’s actions.1 This is not a case where the second defendants as trustees and the first defendant are synonymous, as the second defendants separated some years ago.
[22] Mr Hucker also refers again to the post-hearing memoranda and hearing relating to the s 138 defence which he says should not be visited on the second defendants to whom that defence did not relate. Similarly, he says the expert’s disbursements should be solely the cost of the first defendant.
[23] Mr Shackelton disagrees with all of these arguments. He says most of the points raised are simply part of the mix or wider matrix. He relies heavily on the Supreme Court’s observation in awarding costs against both the first and second defendants jointly and severally that the cases of the defendants were “inextricably intertwined”.2
Discussion and conclusion
[24] I do not agree that the second defendants’ without prejudice communications are relevant. They were made too late and the second defendants did not achieve a better position than outlined in the correspondence. I note Mr Hucker did not strongly press this point.
[25] I am also not persuaded that there is much in the point that the second defendants were joined late. All of the steps that were taken prior to their joinder were nonetheless necessary on the part of the plaintiffs for the purposes of the proceeding. It could in fact be said that the second defendants were fortunate that they did not have to incur legal fees in respect of those steps prior to their joinder.
[26] Otherwise I consider there is something in all of the points raised by Mr Hucker for the second defendants. For all those reasons I have decided to award costs and disbursements on a joint and several basis against the second defendants at 50 per cent
1 Madsen-Ries (as liquidators of Debut Homes Ltd (in liq)) v Cooper [2020] NZSC 100, [2021] 1 NZLR 43 at [75], n 85 and [141].
2 Madsen-Ries (as liquidators of Debut Homes Ltd (in liq)) v Cooper [2021] NZSC 104 at [4].
of the amounts sought. In doing so, I do not overlook the Supreme Court’s observation already quoted above, but consider it applies more particularly on appeal.
Interest
[27] The plaintiffs sought interest under the Judicature Act 1908 from the date of liquidation to the date of judgment. This was addressed in their closing submissions and pleaded in the amended statement of claim dated 12 August 2016.
[28]The point was overlooked in my judgment.
[29] As a consequence the plaintiffs have filed an application for recall and I accept both that the judgment should be recalled and that as a reasonably routine matter in cases of this nature the courts have awarded interest from the date of liquidation.3
[30] Mr Hucker says that compensation under s 301 of the Act is effectively a damages award, as compared to, for example, a situation where a liquidator is claiming interest on an overdrawn current account. He says on that basis interest should run only from the date of judgment.
[31] Mr Hucker’s proposition does not answer the point. Under s 87(1) of the Judicature Act, interest may be awarded on “debt or damages” from the date the cause of action arose down to judgment. Compensation under s 301 of the Act falls within the category of damages.4 The cause of action in this case arose on the date of liquidation.
[32] Mr Hucker also refers to delay in commencing the proceedings but it is generally accepted that the principle in terms of interest is to place the party in the
3 See Bay Kiwifruit Contractors Limited v Ladher [2015] NZHC 63; Sojourner v Robb [2006] 3 NZLR 808 (HC); Robb v Sojourner [2008] 1 NZLR 751 (where the award of interest was not disturbed on appeal); Walker v Allen (HC Nelson, CP 13/00, France J, 18 March 2004); Syntax Holdings (Auckland) Limited v Bishop [2013] NZHC 2171; Superior Blocklayers Limited (in liq) v Simpson [2016] NZHC 2601; Goatlands v Borrell HC Hamilton CIV-2005-419- 1643, 14 March 2007; Richard Geewiz Gee Consultants Ltd (in liq) v Gee [2014] NZHC 1483; Willburn Furniture & Restorations Ltd (in liq) v Gledhill [2016] NZHC 331; Sparta13 Contractors Ltd (in liq) v Moeke [2015] NZHC 1222; and CGES Ltd (in liq and rec) v Kelly [2016] NZHC 1465.
4 Goatlands v Borrell HC Hamilton CIV-2005-419- 1643, 14 March 2007 at [21].
position they would have been in had the breaches not occurred, such that the date of issuing proceedings is not generally material. I do not consider it material here.
[33] I note also that there is a discretion under the Judicature Act to order interest at a lesser rate and to fix different commencement dates. I considered applying a lesser rate bearing in mind the lower rates that have likely been applicable since the introduction of the Interest on Money Claims Act 2016. However, bearing in mind also that the applicable rate is a flat rate of five per cent per annum (rather than compounding), and the relevant interest period dates back now to 2014 – 2018, I have decided to leave the rate at five per cent and the commencement date at the date of liquidation.
Result
[34] The plaintiffs’ costs and disbursements are fixed at $62,941.75 and $23,968.62 respectively.
[35] Fifty percent of the plaintiffs’ costs and disbursements are to be borne by the first and second defendants on a joint and several basis.
[36] The remaining fifty per cent of the plaintiffs’ costs and disbursements are to be borne by the first defendant.
[37] The plaintiffs are entitled to interest at a rate of five per cent per annum running from the date of liquidation on 7 March 2014 to the date of judgment, being 15 March 2018. My substantive judgment is recalled for that purpose.
Hinton J
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