FTG Securities Limited v Walker

[2019] NZHC 1817

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000675

[2019] NZHC 1817

BETWEEN

FTG SECURITIES LIMITED

Applicant

AND

ROBERT BRUCE WALKER AS LIQUIDATOR OF

TUAM VENTURES LIMITED (IN
LIQUIDATION AND IN RECEIVERSHIP)

Respondent

Hearing:	Determined on the papers
Counsel:	AJ Forbes QC, S L Austin and H M Weston for Applicant K C Francis and M Moon for Respondent
Judgment:	30 July 2019
Reissued:	30 July 2019

JUDGMENT OF GENDALL J

As to Costs

This judgment was delivered by me on 30 July 2119 at [Time] pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Under “the Slip Rule” there has been an obvious error in para [14], line 1, and the word “FTG” on this line 1 of para [14] is deleted and substituted therefore are the words “the liquidator”.

FTG SECURITIES LIMITED v WALKER [2019] NZHC 1817 [30 July 2019]

Introduction

[1]    In this proceeding the applicant FTG Securities Limited (FTG) applied to set aside a statutory demand issued against it by the respondent, Robert Bruce Walker, as liquidator of Tuam Ventures Limited (in liquidation and in receivership) (the liquidator).

[2]    That application filed originally on 7 September 2018 related to a debt owing by FTG pursuant to a costs order against it made in this Court for some $10,035 in favour of the liquidator. The application to set aside the statutory demand was opposed by the liquidator.

[3]    On 1 April 2019, FTG filed a Notice of Discontinuance with respect to this proceeding.

[4]    Then, on 3 May 2019, the liquidator filed a memorandum in this Court seeking an order for costs against FTG on this proceeding in terms of r 15.23 of the High Court Rules.

[5]    This was followed by a memorandum dated 17 May 2019 from counsel for FTG in response by which FTG opposed the liquidator’s costs application and itself sought an order for costs and disbursements on the proceeding against the liquidator.

[6]    I apologise to the parties and counsel for the delay in providing this judgment on the costs questions – their memoranda received respectively on 3 May 2019 and 17 May 2019 it seems had been misplaced in the Registry office of this Court and were only provided to me last week.

[7]    I have now had an opportunity to consider these submissions advanced in the respective memoranda and, based on this and all the other material in this proceeding before the Court, I now give my decision.

Background

[8]    In this proceeding, as I have noted, FTG sought orders setting aside a statutory demand issued by the liquidator under s 290 of the Companies Act 1993. The statutory demand arose out of a judgment debt for costs of $10,035 in favour of the liquidator contained in a sealed order of this Court made on 16 August 2018. It seems FTG did not seek or obtain a stay of the judgment which was the subject of that court order.

[9]    By agreement between the parties, it appears the judgment debt was paid to the liquidator’s solicitors to hold pending the outcome of an appeal by FTG against the substantive judgment. That  appeal  was  dismissed  by  the  Court  of  Appeal  on  20 February 2019.1

[10]   Then, as I have noted, FTG on 10 April 2019 filed a Notice of Discontinuance of the present proceeding. FTG, it seems, did not seek or obtain the liquidator’s agreement that, on the discontinuance, costs should lie where they fall.

[11]   Following receipt of the Notice of Discontinuance, the liquidator’s solicitors wrote to the solicitors for FTG seeking agreement on the liquidator’s entitlement to a payment of scale costs and disbursements here. That email letter was sent on 17 April 2019 and I understand no response has been received by the liquidator’s solicitors up to now.

Liquidator’s entitlement to costs

[12]Rule 15.23 of the High Court Rules 2016 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.

[13]   As McGechan on Procedure2 notes, by analogy r 15.23 has been applied to wider applications including originating applications such as the present application.

1      FTG Securities Ltd v Bank of New Zealand [2019] NZCA 16.

2      McGechan on Procedure (Thomson Brookers Loose Leaf Ed) at para HR 15.23.07

[14]   But, in any event, here r 15.23 applies as there can be no doubt that the liquidator was the successful party in these proceedings in opposing FTG’s application to set aside the statutory demand. It is true also that no stay of the judgment debt was sought or granted, FTG’s appeal to the Court of Appeal against the substantive judgment was dismissed and the amount sought in the statutory demand ultimately was paid to the solicitors acting for the liquidator.

[15]   Accordingly, the liquidator contends that the r 15.23 presumption that the liquidator here is entitled to its costs and disbursements must apply in this case. This obviates any requirement for him to demonstrate that FTG acted unreasonably in commencing and then discontinuing the present proceeding, a principle that is clear from the decision in Kroma Colour Prints Ltd v Tridonicatco NZ Ltd.3 The liquidator says therefore that he is entitled to his costs and disbursements on this proceeding which are calculated mainly on a category 2B scale together with disbursements which are outlined in a schedule to his memorandum. The total figure sought for costs and disbursements here is $7,595. This includes a further allowance for the liquidator’s costs on filing his memorandum as to costs. Scale costs are essentially calculated on a category 2B basis other than for two joint memoranda that are calculated on a 2A basis. This is appropriate here, and indeed, as I note later, quantum is not questioned by FTG.

[16]   And, so far as the disbursements claimed are concerned, they include travel to Christchurch for counsel at the first call of this matter on 24 September 2018. In all the circumstances here, I find this is satisfactory.

[17]   On its face, therefore, in terms of r 15.23 High Court Rules, the starting point must be that the liquidator is entitled to his costs on this matter following FTG’s discontinuance of this proceeding.

3      Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150.

FTG’s position

[18]   Notwithstanding this, as I note above, FTG not only opposes this present application but also itself seeks an order that the liquidator pay its costs and disbursements following its discontinuance.

[19]   This submission is advanced on the basis that r 15.23 provides that “unless the court otherwise orders” a plaintiff who discontinues a proceeding must pay costs to the defendant. Counsel for FTG submits this is an appropriate situation for the Court to so “otherwise order”.

[20]   Counsel for FTG advances this submission on the basis it is said that from email correspondence between the parties FTG was willing to pay the costs the subject of the liquidator’s statutory demand provided some security was supplied to it for repayment in the event that FTG’s pending appeal against the substantive judgment to the Court of Appeal was successful. FTG maintains that this offer was made bearing in mind that the respondent liquidator was said to be insolvent.

[21]   FTG notes that the correspondence discloses the liquidator refused to provide any such security for the period in question and this was the reason for FTG’s application to set aside the statutory demand. FTG suggests now that security for repayment, if its appeal had been successful, was standard practice in a case such as this if the other party was insolvent.

[22]   Given this, FTG contends that its application to set aside the statutory demand should in fact have been unnecessary. FTG says it could have been avoided had the liquidator agreed to supply a personal assurance as to repayment when first approached to do so. Under these circumstances FTG’s contention is that it is actually the party who has succeeded with respect to its application and costs should follow the event in the normal way.

[23]   Accordingly, FTG seeks its costs and disbursements again largely on a 2B basis, other than the cost of the two joint memoranda which have been calculated on a 2A basis. These costs and disbursements are set out in a schedule which is attached

to the 17 May 2019 memorandum filed and interestingly they total $7,230, a figure very close to the $7,595 claimed by the liquidator here.

Analysis and my decision

[24]   On all of this, I am of the view that this is a case where the standard presumption in r 15.23 of the High Court Rules that on a discontinuance, the party discontinuing must pay the costs of the successful opposing party, should apply. The costs order of this Court for $10,035 which was the subject of the statutory demand was an order made on 16 August 2018.

[25]   Given the history between these parties, and the obvious difficulty the liquidator would have in obtaining payment of these Court ordered costs from FTG, it was not unreasonable for the statutory demand to be issued by the liquidator. The Court ordered costs, which were unconditionally due then, were not at that point paid. Instead, the liquidator was required to file and pursue a formal Notice of Opposition to FTG’s  application  to  set  aside  the  statutory  demand  filed  in  this  Court  on  7 September 2019.

[26]   Notwithstanding FTG’s appeal to the Court of Appeal on the substantive proceeding, I am satisfied here that the $10,035 Court ordered costs should have been paid by FTG and been available to the liquidator, and not delayed some months until FTG’s discontinuance in this proceeding was filed on 11 April 2019. The costs were the subject of a Court order and no stay of that order or the Court’s judgment had been sought or obtained.

[27]   There is nothing before the Court to suggest too that Mr Walker as liquidator of Tuam Ventures Ltd is insolvent or is likely to be. A mere assertion to this effect in the memorandum from counsel for FTG is not sufficient in all the circumstances here.

[28]   I therefore reject the claim by FTG for payment of its costs and disbursements on its application to set aside the statutory demand, a statutory demand that I find was properly issued. It must follow also that FTG’s opposition to the liquidator’s claim for costs and disbursements on his successful opposition to FTG’s setting aside application also fails.

Result

[29]   In conclusion, the liquidator is entitled to an order for his costs and disbursements on this matter in terms of r 15.23 High Court Rules. No objection is taken to the liquidator’s calculation of his scale costs and disbursements.

[30]   An order is now made therefore that FTG is to pay to the liquidator his costs and disbursements totalling $7,595 on the liquidator’s successful opposition to FTG’s application to set aside the statutory demand.

...................................................

Gendall J

Solicitors:

Canterbury Legal

Meredith Connell, Auckland

Copy to:
Austin Forbes QC, Christchurch