Frimley Estate Limited v K8 Limited

[2013] NZHC 1693

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2012-441-511 [2013] NZHC 1693

UNDER  the Companies Act 1993

BETWEEN  FRIMLEY ESTATE LIMITED Applicant

ANDK8 LIMITED Respondent

On Papers:               Memorandum 10 May 2013 from counsel for respondent

Memorandum 2 July 2013 from counsel for applicant

Judgment:                4 July 2013

JUDGMENT AS TO COSTS OF JUSTICE D.I. GENDALL

This judgment was delivered by me on 4 July 2013 at 3.30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ..................................................................

FRIMLEY ESTATE LIMITED v K8 LIMITED [2013] NZHC 1693 [NAPIER] [4 July 2013]

[1]      This decision relates to an application for costs by the respondent following the discontinuance by the applicant of an application to set-aside a statutory demand.

[2]      On  21  August  2012  the  applicant  filed  an  Application  to  Set-Aside  a Statutory Demand which had been issued against it.  That application was opposed by the respondent who filed a Notice of Opposition on 19 September 2012.

[3]      The opposed application was scheduled for hearing on 2 May 2013 which hearing was vacated when the Notice of Discontinuance referred to above was filed on 19 April 2013.

[4]      The respondent now seeks costs with respect to the discontinuance of this application on a category 2B basis which it says totals $5,174.00.  That application is opposed by the applicant which contends that costs here should simply lie where they fall.

[5]      Costs on discontinuance of a proceeding are dealt with at r 15.23 High Court

Rules which provides:

15.23     Costs

Unless the defendant otherwise agrees or the Court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[6]      The principles to be applied in considering an application for costs on a discontinuance are noted at McGechan on Procedure at HR15.23.01 as follows:

HR15.23.01      Principles

The following emerge from Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 and FM Custodians Ltd v Pati & Ors [2012] NZHC 1902 at [10]-[12]:

(a)      Although  the  r  15.23  presumption  is  designed  to  give  a  certain  and predictable outcome upon discontinuance, it may be displaced if the Court finds there are circumstances which make it just and equitable that it should not apply.

(b)      Although the Court is not limited in the factors it may take into account when considering whether the presumption is displaced, generally:

(i)     The Court will not consider the merits of the respective cases, unless they are so obvious that they should influence the costs outcome.

(ii)      The Court  will consider the  reasonableness of the  stance of both parties:  whether  it  was  reasonable  for  the  plaintiff  to  bring  and continue the proceeding, and for the defendant to oppose the proceeding up to the point of discontinuance.

(iii)     Conduct  prior  to  the  commencement  of  the  proceeding  may  be relevant (for example, if any conduct by a defendant precipitated the litigation), as may be the reason for discontinuing (for example, a change of circumstances rendering the proceeding unnecessary).

(c)  The Court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.

[7]      In the present case on its face the respondent is entitled to an award of costs here under the r 15.23 presumption given that the applicant discontinued its application to set-aside the statutory demand.

[8]      In opposition, however, the applicant contends first, that the respondent knew at the time it served the statutory demand that the applicant was a substantial land owner with substantial assets and less expensive modes of enforcement of the debt outstanding were available to it against a solvent company.

[9]      And secondly, in noting that  the original statutory demand arose from a Disputes  Tribunal  judgment  in  favour  of  the  respondent  of  a  relatively  modest amount against the applicant, the applicant says that on 21 August 2012 it filed a claim against the respondent in the North Shore Disputes Tribunal seeking damages of $31,043.00 which claim has not been disposed of.

[10]     Accordingly,  the  applicant  contends  the  respondent  has  simply  used  the statutory demand process here as a “club” to put undue pressure on it to pay the debt before the counterclaim against the respondent can be determined.   The applicant says  therefore that its  application to set-aside the statutory demand under these circumstances was a proportionate and justified response, pending the outcome of its counterclaim.

[11]     The applicant maintains that the use of the company liquidation process in this case was merely as a debt collection service and this is quite inappropriate – International Airline Training (NZ) Limited v Rohlig New Zealand Limited  HC, Auckland, CIV-2003-404-3564, 23 February 2004.  It concludes that the use of the

statutory demand procedure in the circumstances here must be seen as either an abuse of process or at the very least an unnecessary step which I repeat has again resulted in a justified response to set-aside the demand pending the outcome of the counterclaim.  It is on this basis that the applicant contends costs should simply lie where they fall.

[12]     On these aspects, I am satisfied here that this is a situation where the issue by the respondent of the statutory demand was appropriate and costs on the applicant’s discontinuance of the present application should be paid in accordance with r 15.23

High Court Rules.   The r 15.23 presumption has not been displaced here.   The statutory demand was issued with respect to a debt ordered to be paid following a decision of the Disputes Tribunal.  As I understand the position, there was no appeal or review of that decision of the Disputes Tribunal, and the appropriate step to be taken by the applicant in this case as I see it was simply to pay or secure the amount of this debt, and then to pursue its alleged counterclaim as a separate action.  It did not do this.

[13]     I find therefore that the applicant should pay costs to the respondent on its discontinued application.

[14]     Turning now to the issue of quantum of those costs, this is to be calculated on a category 2B scale basis and has been noted by counsel for the respondent in her Memorandum dated 10 May 2013 at $5,174.00.  This amount is calculated on the basis of 2 days for filing the Notice of Opposition and supporting affidavits under Item 38 at $3,980.00, 0.2 of a day for appearance at a Mentions Hearing or call-over at $398.00 under Item 12, and $796.00 under Item 11 for 0.4 of a day for filing a Memorandum for a case management conference.

[15]     In my view these charges are reasonable and appropriate here.

[16]     An order is made therefore that the applicant is to pay to the respondent costs on  its  discontinuance  of  the  application  to  set-aside  the  statutory demand  on  a category 2B basis totalling $5,174.00 together with disbursements if any as approved by the Registrar.

‘Justice D.I. Gendall’

Solicitors:         Gresson Grayson, Solicitors, Hastings