Ezipaint Limited (in liquidation) v Peters Holdings Trustee Limited

[2018] NZHC 165

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2017-419-000040 [2018] NZHC 165

BETWEEN

EZIPAINT LIMITED (IN LIQUIDATION)

First Plaintiff

MALCOLM GRANT HOLLIS AND WENDY ANN SOMERVILLE (AS LIQUIDATORS OF EZIPAINT LIMITED) Second Plaintiff

AND

PETERS HOLDINGS TRUSTEE LIMITED Defendant

Hearing:	(On the papers)
Counsel:	P Cornege for Plaintiffs C F J Reid for Defendant
Judgment:	16 February 2018

COSTS JUDGMENT OF VENNING J

This judgment was delivered by me on 16 February 2018 at 11.30am, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Beattie Rickman Legal, Hamilton

Gibson Sheat, Wellington

Counsel:            P Cornegé, Hamilton

EZIPAINT LIMITED (IN LIQUIDATION) v PETERS HOLDINGS TRUSTEE LIMITED [2018] NZHC 165 [16 February 2018]

[1]      In  a judgment  delivered  on  14  December 2017 Associate Judge Doogue dismissed the plaintiffs’ application to place the defendant company into liquidation.1

The Judge reserved the issue of costs to be dealt with by way of an exchange of memoranda.

[2]      Associate Judge Doogue has retired as an Associate Judge of this Court. High

Court Rule 14.9 applies. Counsels’ memoranda has been referred to me as Duty Judge.

[3]      The successful defendant seeks costs on a 2B basis calculated in the sum of

$14,642 including disbursements. The plaintiffs oppose the imposition of an order of costs.  The plaintiffs submit that it was reasonable for them to have filed and pursued the application for liquidation.  They seek an award of costs in their favour on a 2B basis plus disbursements, or at the very least, submit costs should lie where they fall.

[4]      While the principles in HCR 14.2(1)(a) and (g) confirm that a party who fails should pay costs to the party who succeeds and so far as possible the determination of costs should be predictable, HCR 14.1 confirms that all matters in relation to costs are at the discretion of the Court.  HCR 14.2 is subject to this overriding discretion.

[5]      It is necessary to briefly refer to the background to put the costs issue in context.  The first plaintiff was placed into liquidation in 2015.  Its sole director Mr Peters, is also the sole director of the defendant, which is the corporate trustee of a trust known as the Christopher Peter Family Trust (CPFT).  The defendant trustee is the majority shareholder in the first plaintiff.

[6]      On reviewing the accounts following liquidation the liquidators discovered the accounts showed the defendant owed a current account debt to the first plaintiff of

$61,037. The liquidators issued a statutory demand for that sum. The defendant took no steps to set the demand aside.

[7]      However, following the issuing of the liquidation proceedings, the defendant opposed liquidation and argued that the debt was disputed.

[8]      The Judge applied the Court of Appeal decision of Yan v Mainzeal Property Construction Ltd (in rec and in liq).2   While the plaintiffs were entitled to rely on the presumption of insolvency and the onus fell upon the debtor to establish there was a genuine and substantial dispute as to its liability to pay, it was open for the defendant to do that.

[9]      The Judge noted that Mr Peters had arranged for the defendant to review the accounts and on the basis of that review accepted that arguably there was a genuine and substantial dispute as to whether there was a debt owing from the defendant to the plaintiff.

[10]     The Judge considered that ultimately the defendant had raised sufficient on the material before the Court to suggest there may be a genuine dispute which would have to be determined in other than the Companies Court.  However, the Judge only came to that view because of the steps the defendant took in opposition to the liquidation proceedings.  Further, the defendant’s position was that the accounts had been drawn up in error.  But this was at a time when the company was under the control of Mr Peters.

[11]     In fact during the course of the judgment the Judge observed that when Mr Peters and his accountant had contrived to move property from the trustee defendant to the first plaintiff their actions meant the defendant as trustee acted in breach of its obligations to conform to the trust deed. The defendant’s analysis would have required the plaintiff to have returned property to which it was not entitled, again at a time when it was under the control of Mr Peters.

[12]     Ultimately the Judge felt unable to come to a clear conclusion on the issues because of the nature of liquidation proceedings and  it was for that reason the application was dismissed.

[13]     In those circumstances and given the defendant’s failure to challenge the statutory demand I am satisfied this is a case where the costs should lie where they

fall.  Order accordingly.

Venning J