Easternmanor Development Limited v Yeshe Development Limited

[2025] NZHC 1971

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2024-404-2342

[2025] NZHC 1971

BETWEEN

EASTERNMANOR DEVELOPMENT LIMITED

Plaintiff

AND

YESHE DEVELOPMENT LIMITED

Defendant

Hearing:

(On the papers)

Appearances:

R O Parmenter for Plaintiff

P J Wright and T M McGoldrick for Defendant

Judgment:

17 July 2025

JUDGMENT OF ASSOCIATE JUDGE LESTER

(Costs)

This judgment was delivered by me on 17 July 2025 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

………………………..

EASTERNMANOR DEVELOPMENT LTD v YESHE DEVELOPMENT LTD [2025] NZHC 1971 [17 July 2025]

[1]    On 5 June 2025, I made an order placing Yeshe Development Limited (Yeshe) into liquidation.1 Mr Parmenter, counsel for the plaintiff, Easternmanor  Development Limited (Easternmanor), sought a short time to file costs submissions which he has now filed.

[2]    Mr Parmenter seeks costs on a 2B basis against Yeshe. So much is unremarkable and not opposed by Mr Wright, counsel for Yeshe, albeit he takes issue with costs claimed by Mr Parmenter for a strike-out application that did not proceed. I agree with Mr Wright’s submission that given that application was either withdrawn or dismissed,2 that costs for that step are not appropriate.

[3]    Accordingly, there an award of costs against Yeshe in favour of Easternmanor on a 2B basis as per paragraph 7 of Mr Parmenter’s memorandum of 5 June 2025, save for the interlocutory application to strike-out.

[4]    Had that been the only issue, no doubt counsel would have resolved matters directly, but Mr Parmenter also seeks a costs award against a director of Yeshe,     Mr Miao. The reasons for that are as follows.

[5]    Easternmanor has a separate claim against the directors of Yeshe for allowing it to enter into transactions in breach of their duties under the Companies Act 1993 (the Act). Essentially, Easternmanor says the directors caused Yeshe to trade recklessly when it contracted with Easternmanor in respect of the agreements referred to in my judgment of 5 June 2025, and my earlier judgment of 24 August 2023.3

[6]    Mr Parmenter submits the defendant directors “took the point that the way the statement of claim proceeded, Yeshe needed to be put into liquidation”. This led to Easternmanor bringing its liquidation proceedings against Yeshe.

[7]    Easternmanor sought the liquidation of Yeshe, relying on a judgment obtained in the August 2023 hearing, for just over $400,000. Yeshe opposed the liquidation

1      Easternmanor Development Ltd v Yeshe Development Ltd [2025] NZHC 1455.

2      Easternmanor Development Ltd (8188656) v Yeshe Development Ltd (82517678) HC Auckland CIV-2024-404-2342, 6 December 2024.

3      Easternmanor Development Ltd v Yeshe Development Ltd [2023] NZHC 2317.

application, and in doing so, raised a defence that had not been  raised  in  the  August 2023 hearing. Mr Parmenter submits it is clear that Yeshe is insolvent, and he was critical of Yeshe opposing liquidation on a basis that could and should have been raised in the August 2023 hearing. Ultimately, I accepted Mr Parmenter’s submission that it was an abuse of process for Yeshe to seek to raise the new defence, and placed Yeshe into liquidation. Mr Parmenter submits the sole purpose of defending the liquidation application was to protect the directors and to avoid the risks they faced in the proceedings against them personally and as such, Mr Miao should personally face the costs consequences of his unsuccessful defence of the liquidation application.

[8]    It  is  common  ground  that  there  is  jurisdiction  to  award  costs  against    a non-party. Here, however, I am satisfied this is not one of those exceptional cases that warrant costs against a non-party.

Mr Miao

[9]    Firstly, this was not a proceeding commenced by Yeshe. If the directors had not taken steps to defend the application, and presumably fund the defence, Yeshe would have been  placed in liquidation at the first call of the application.  However,  I accept it is not untenable that Yeshe, as an entity, had an interest in avoiding liquidation. For example, there may be tax losses within the company that may explain it wanting to avoid liquidation. I appreciate there is no evidence of that, but the directors may have had their own reasons for keeping the company alive.

[10]   Secondly, there is an unusual aspect to this proceeding. I have briefly mentioned the summary judgment entered against Yeshe in August 2023. Counsel for Yeshe in that proceeding, has since passed away. That complicated the issue of whether defences Mr Miao says were raised with late counsel could and should have been raised in that proceeding, being the key issue Mr Wright, as new counsel for Yeshe in this proceeding, had to confront. While that issue ultimately went against Yeshe, in my view, that issue was not dealt with inappropriately and was the subject of some debate. I note I did not accept Mr Parmenter’s primary argument that this was

a case of res judicata, but dealt with the matter under the Henderson v Henderson

principle.4

[11]    In my view, there are not, in this case, exceptional circumstances that warrant a costs award against Mr Miao. That Mr Miao may have also benefitted if Yeshe had not been liquidated will be a factor common to all liquidations where a director is also a shareholder. I accept Mr Wright’s submission that in the case of directors of insolvent companies, something more is required than the mere fact that the director has brought the proceeding on the company’s behalf. That is because, as the Court of Appeal noted in Kidd v Equity Realty (1995) Ltd, in almost every case a director of   a company will be the guiding mind behind litigation pursued by the company.5 That is all the more so where the company is the defendant rather than the instigator of litigation.

[12]For the above reasons, the application for costs against Mr Miao is dismissed.

Associate Judge Lester

Solicitors:

Heritage Law, Auckland (for Plaintiff) Elite Legal, Auckland (for Defendant)

Copy to counsel:

R O Parmenter, Barrister, Auckland (for Plaintiff)

P J Wright and T M McGoldrick, Barristers, Auckland (for Defendant)

4      Henderson v Henderson [1843] 67 ER 313 (Ch).

5      Kidd v Equity Realty (1995) Ltd [2010] NZCA 452 at [15]—[20].