Elitzur v Ecolibrium Biologicals Limited - [2020] NZHC 2241

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2752

[2020] NZHC 2241

UNDER THE Companies Act 1993

IN THE MATTER OF

the liquidation of ECOLIBRIUM BIOLOGICALS LIMITED

BETWEEN

G ELITZUR

Plaintiff

AND

ECOLIBRIUM BIOLOGICALS LIMITED

Defendant

Hearing: On the papers

Appearances:

LC Sizer & C Ottow for the Plaintiff D Hayes for the Defendant

Judgment:

31 August 2020

RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH (COSTS)

This judgment was delivered by me on 31 August 2020 at 4pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:
Buddle Finlay, Auckland
New Zealand Commercial Law Corp Ltd, Hamilton

Elitzur v Ecolibrium Biologicals Ltd (costs) [2020] NZHC 2241 [31 August 2020]

[1] On 4 August 2020 I gave a reserved judgment following a defended hearing on an application by the plaintiff (Mr Elitzur) for an order liquidating the defendant (Ecolibrium).1 As the liquidation proceeding had not been advertised, no liquidation order could be made, but I made findings that Ecolibrium had failed in its pleaded defences, and that the liquidation proceeding should go ahead on the basis that Ecolibrium is liable for the full amount pleaded in Mr Elitzur’s statement of claim. I adjourned the liquidation claim to the list on 30 September 2020 to allow time for advertising.

[2] I found that Mr Elitzur was entitled to costs, but there is an issue as to whether he is entitled to full indemnity costs or merely scale costs under the High Court Rules 2016. I invited memoranda from counsel on the quantum of the costs order which should be made, and I have since received and considered memoranda from both counsel.

[3]I now give judgment on Mr Elitzur’s claim for indemnity costs.

Background

[4] The nature of Mr Elitzur’s claim is fully set out in my judgment of 4 August 2020, and there is no need to repeat it here. It is enough to note that Mr Elitzur is an Israeli citizen who entered into a contract with Ecolibrium (the Agreement), under which he would provide certain consultancy services to Ecolibrium in exchange for payment at the rate of US$6,000 per month. Ecolibrium is a start-up company in the biological pesticides field, and it was experiencing cashflow difficulties during the period Mr Elitzur was engaged to provide the consultancy services. In the event, it paid nothing to Mr Elitzur, and he eventually issued a statutory demand under the Companies Act 1993. The liquidation proceeding was commenced when Ecolibirum failed to comply with the statutory demand.

1 Elitzur v Ecolibrium Biologicals Ltd [2020] NZHC 1929.

Mr Elitzur’s costs claim

[5]Mr Eltizur seeks solicitor/client costs of $30,683 and disbursements of

$1,767.96, under an “indemnification” clause in the Agreement.

[6]The indemnification clause (“Clause 8”) reads:

8. Indemnification
Notwithstanding any other term of this Agreement [Ecolibrium] shall indemnify, defend and hold harmless [Mr Eltizur], heirs and assigns (the “Indemnitees”), against any claim, liability, cost, damage, deficiency, loss, expense or obligation of any kind…

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: [2020] NZHC 2241
Decision Date: 31 August 2020

CaseChat Overview and Summary

Elitzur, an Israeli citizen, sought to recover consultancy fees from Ecolibrium Biologicals Limited, a New Zealand start-up company. When Ecolibrium failed to comply with a statutory demand, Elitzur issued a liquidation proceeding. The court found Ecolibrium liable for the full amount pleaded but could not make a liquidation order due to the lack of advertisement. The key issue was whether Elitzur was entitled to indemnity costs under an indemnification clause in their agreement. The clause stated that Ecolibrium would indemnify Elitzur against claims arising out of the agreement. Elitzur argued this clause entitled him to indemnity costs for the liquidation proceeding, while Ecolibrium contended the clause applied only to third-party claims, not disputes between the parties. The court ruled that the clause was intended to cover third-party claims against Elitzur, not disputes between the parties. It found the clause did not apply to the present situation, and Elitzur was not entitled to indemnity costs under the clause. Instead, the court awarded Elitzur scale costs, deducting a portion for Ecolibrium’s success on the costs argument, and ordered Ecolibrium to pay $12,244.96 in total costs and disbursements to Elitzur. The court also dismissed Ecolibrium’s application for orders restraining publication and advertising of the liquidation proceeding.

Orders