GRANT NICOLSON AND ISAAC LOWTHER STEVEN KHOV KIERAN JONES
[2024] NZHC 3724
•10 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-000678
CIV-2024-404-001090 [2024] NZHC 3724
BETWEEN GRANT NICOLSON
Plaintiff
AND
ISAAC LOWTHER
First Defendant
STEVEN KHOV
Second DefendantKIERAN JONES
Third Defendant
Hearing: On the papers Counsel:
Self-represented Plaintiff
K Puddle for the Defendants
Judgment:
10 December 2024
JUDGMENT OF GORDON J
[As to costs]
This judgment was delivered by me
on 10 December 2024 at 11 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: TWA Legal, Auckland Copy to: Plaintiff
NICOLSON v LOWTHER [2024] NZHC 3724 [10 December 2024]
[1] This is a contested costs application following a judgment I delivered on 5 November 2024 (judgment).1
[2] The plaintiff, Grant Nicolson, is the director and majority shareholder of Blue Bins Ltd (in liq) (Blue Bins). The second and third defendants, Steven Khov and Kieran Jones, were appointed as the liquidators of Blue Bins on a joint and several basis. The first defendant, Isaac Lowther, is an employee of an insolvency firm directed by Mr Khov and Mr Jones (Khov Jones Ltd).
[3] Mr Nicolson resolved to put Blue Bins into liquidation on 28 February 2024. Since then, he has filed a number of applications broadly opposing the liquidation of Blue Bins including making allegations against the defendants and counsel for the defendants. The defendants opposed the applications and sought an order for security for costs.
[4] I heard some of the applications on 10 October 2024 and on 5 November 2024 I delivered the judgment:
(a)granting the defendants’ application for security for costs;
(b)refusing Mr Nicolson’s application for consolidation of proceedings;
(c)refusing Mr Nicolson’s two applications for orders under the Contempt of Court Act 2019 (contempt applications);
(d)refusing Mr Nicolson’s application under s 250 of the Companies Act 1993 seeking orders for immediate termination of the liquidation of Blue Bins and the involvement of Khov Jones Ltd as liquidators and reinstatement of Blue Bins on the business directory (s 250 application); and
(e)reserving costs.
1 Nicolson v Lowther [2024] NZHC 3240 [judgment].
Costs claimed
[5] The parties have exchanged memoranda on costs. The defendants, as the successful party, seek an award of costs as follows:
(a)$8,962.50 on the security for costs application (calculated on a 2B scale basis) together with disbursements of $95.96;
(b)$14,160.75 on the s 250 application (calculated on a 2B scale basis increased by 50 per cent) together with disbursements of $95.96;
(c)$14,847.88 on the contempt of court interlocutory application (calculated on a 2B scale basis increased by 75 per cent) together with disbursements of $95.96; and
(d)$9,410.63 on the contempt of court originating application (calculated on a 2B scale basis increased by 75 per cent) together with disbursements of $95.96.
[6] The calculation of costs is set out in a schedule (which was included in the submissions of Mr Puddle on behalf of the defendants) annexed as Appendix A to this judgment.
[7] No costs are sought on the consolidation application as very little time was spent on that issue at the hearing. Counsel appearing on behalf of Mr Nicolson on 10 October 2024 properly acknowledged that there was no basis for a consolidation order.
[8] Mr Nicolson, who was represented at the hearing on 10 October 2024 but was otherwise self-represented (when the applications, affidavits and written submissions were filed), accepts his liability to pay costs but opposes the award of any costs above scale.
Scale costs
Legal principles
[9] The award of costs and disbursements is governed by part 14 of the High Court Rules 2016 (HCR). The Court has a broad discretion to award the costs of a proceeding.2 The first step in determining costs is by applying the appropriate category of proceeding and daily recovery rate (set under the HCR) to the time taken for each step required by the proceeding.3 The time taken must be objectively reasonable and does not necessarily reflect the time actually spent.4 An award of costs should not exceed the (actual) costs incurred by the party claiming costs.5
Security for costs application
[10] The defendants claim 2B scale costs for their successful security for costs application, with appropriate adjustments to avoid double counting. No increased costs are sought for steps taken on this application.
[11] Mr Nicolson does not oppose costs claimed for the security for costs application. However, he contends that because the defendants have not filed any evidence as to the actual costs incurred, the Court is not in a position to determine if the costs claimed by the defendants are appropriate.
[12] Mr Puddle’s reply is twofold. First, he says that it is not necessary for the defendants to file evidence of actual costs because scale costs are not determined by reference to actual costs. Second, he says that the award of costs sought by the defendants is less than the defendants’ actual costs incurred to date (and evidence of this could be provided if the Court required).
[13] I agree that it is not necessary for the defendants to file evidence of actual costs incurred. The appropriate daily recovery rate, on which scale costs are calculated, is
2 High Court Rules 2016, r 14.1.
3 Rule 14.2(1)(b)–(c).
4 Rule 14.2(1)(e).
5 Rule 14.2(1)(f).
set in the rules to be “two-thirds of the daily rate considered reasonable”; it is not fixed to actual costs.6 Further, the HCR at r 14.2(e) clearly provides:
what is an appropriate daily recovery rate and what is a reasonable time should not depend on … the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
[14] In these circumstances there is no reason to depart from the usual principle that costs follow the event. I will grant 2B scale costs to the defendants as sought on steps taken on the security for costs application.
Increased costs
Legal principles
[15] The Court may make an order increasing costs otherwise payable under r 14.6(3) of the HCR if, relevantly:
(b)the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—
…
(ii)taking or pursuing an unnecessary step or an argument that lacks merit; or
(iii)failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or
…
(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or
…
(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.
6 High Court Rules, rr 14.2(1)(d) and 14.4.
Are increased costs justified?
[16] The defendants seek increased costs uplifted from 2B scale costs on successfully opposing the s 250 application and the contempt applications. I will first discuss whether increased costs are justified on those applications, dealing with them both together, before considering the appropriate quantum of increase for each application.
[17] Mr Puddle submits that Mr Nicolson has failed to act reasonably both in filing and pursuing these proceedings and in doing so has vastly increased the costs of the defendants beyond what would normally be expected. Mr Puddle notes the following in relation to Mr Nicolson’s conduct:
(a)applications filed were wholly without merit and were not argued against the background of any legal principles;
(b)unnecessary and repetitive affidavits and memoranda were filed, the reading and consideration of which required the defendants to expend extra time and expense;
(c)not taking up the defendants’ invitations to resolve matters in a less antagonistic manner nor taking up suggestions to seek legal advice (except for during the hearing on 10 October 2024); and
(d)engaging in serious allegations and personal attacks against the defendants and counsel for the defendants without any factual foundation, including allegations of fraud, dishonesty, perjury, and breaches of professional conduct.
[18] Mr Nicolson does not deny his conduct during the proceeding but opposes any uplift to scale costs. He says that he was a lay litigant who made errors of judgment in ignorance of the Court’s processes, rules, and manner of presentation, and that this should be taken into account when considering the reasonableness of his conduct for the purpose of assessing costs.
[19] In response, Mr Puddle notes that Mr Nicolson was repeatedly advised to seek legal advice throughout the proceeding. By way of example, he sets out 10 instances between 8 April 2024 and 6 September 2024 when the defendants advised Mr Nicolson to take legal advice. Mr Nicolson did not do so. Instead, he continued to act for himself with input from Ms Dunstan, despite cautionary advice from both opposing counsel and the Court.7 When Mr Nicolson did eventually instruct counsel, it was on the eve of the 10 October 2024 hearing, by which point the defendants had already expended the necessary time and expense in preparing for the hearing.
[20] As I noted in the judgment, Mr Nicolson’s apparent misunderstandings and misconceptions on the law around liquidation appears to have driven the filing of his meritless applications, at least in part.8 Mr Nicolson’s refusal to retain legal counsel for any meaningful amount of time directly contributed to the defendants’ increase in costs. In such circumstances I consider it unjust to allow Mr Nicolson to rely on his status as a lay litigant to the detriment of the defendants.
[21] While I have a degree of sympathy for Mr Nicolson, who says he was acting in what he believed at the time to be in the best interests of Blue Bins, those realisations have come too late. His conduct during the proceeding warrants an award of increased costs being made against him.
What is the appropriate quantum of increase?
[22] I turn to the assessment of the appropriate quantum of increase from scale costs.
[23] The defendants seek 50 per cent increased costs on the s 250 application and 75 per cent increased costs on the contempt applications.
[24] Mr Nicolson says that the uplifts sought by the defendants of between 50 per cent and 75 per cent are unnecessarily punitive, excessive, and unreasonable. He contends that he is suffering from disadvantages which should be recognised by the
7 Judgment at [13]–[16].
8 At [38].
Courts, including his status as a lay litigant, his old age, and the loss of his company causing personal and financial stress.
[25] With respect to Mr Nicolson, I do not consider the purported disadvantages he raises to be of particular relevance to the assessment of the appropriate quantum of increase. The purpose of an award of costs is for the unsuccessful party to compensate the successful party.9 As discussed above, Mr Nicolson’s unreasonable conduct required the defendants to incur unnecessary additional costs. As the unsuccessful party, Mr Nicolson is liable to pay increased costs to properly compensate the defendants. The question is therefore: what quantum of increase is appropriate to compensate the defendants for the unnecessary costs that they incurred?
Section 250 application
[26] The s 250 application involved Mr Nicolson seeking orders that the liquidation of Blue Bins and the involvement of Khov Jones Ltd as liquidators be terminated immediately, and that Blue Bins be reinstated on the business directory.10 As I found in the judgment, Mr Nicolson’s arguments and evidence in support of this application were doomed to fail. In particular:
(a)Mr Nicolson’s arguments and evidence did not engage with established legal principles the Court considers when deciding whether to exercise discretion to order a stay of a liquidation;11
(b)Mr Nicolson relied on evidence filed by Ms Dunstan which was put to one side because it did not comply with the HCR and Ms Dunstan did not have the necessary expertise to give accounting evidence;12
9 High Court Rules, r 14.2(1)(a).
10 Mr Nicolson also filed two other applications under s 250 seeking similar orders. Costs are only sought on the s 250 application determined in the judgment, that is, the application made on 17 April 2024.
11 Judgment at [118]–[120].
12 At [122]–[124].
(c)there was nothing in the evidence in relation to contempt applications or other evidence that would support the removal of Khov Jones Ltd;13 and
(d)some arguments were plainly misconceived in fact14 or in law.15
[27] Mr Nicolson’s conduct in filing and pursuing a meritless application contributed unnecessarily to the time and expense of the proceeding as the defendants were still required to oppose the application, file additional supporting affidavits, and prepare written and oral submissions. I consider this warrants a substantial uplift. In Holdfast NZ Limited v Selleys Pty Limited, the Court of Appeal observed:16
An increase of 50% on scale costs should therefore grant the costs-claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated under the bands or under [equivalent of r 14.6(3)(b) HCR].
[28] I am satisfied that it is appropriate for costs on the s 250 application to be increased by 50 per cent as sought.
Contempt applications
[29]In making the contempt applications, Mr Nicolson alleged that the liquidators:
(a)entered into an agreement for sale and purchase (SPA) with a third party for the sale of Blue Bins’ assets after orders were made which would have prevented such a sale; and
(b)not filing documents as directed by the Court.
[30]Both the above allegations required the liquidators to file affidavits in response.
[31] A central plank of the first allegation was that the liquidators backdated the SPA to make it appear that the SPA was entered into before the orders preventing the
13 At [133].
14 At [134].
15 At [131].
16 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) at [47].
sale of assets were made. Despite sworn evidence of one of the liquidators as to the date of the SPA, on 9 October 2024, the day before the hearing, Ms Dunstan served subpoenas on the defendants and two others connected to the SPA, requiring them to attend and testify at the hearing in order that Mr Nicolson might test the validity of the SPA. Three witnesses served with a subpoena gave oral evidence at the hearing. I found that there was no substance in Mr Nicolson’s case that the SPA was backdated.17
[32]There was also no substance in the second allegation.18
[33] In addition, Mr Nicolson made a number of other allegations amounting to attacks against the defendants and counsel for the defendants, including allegations of fraud, dishonesty, and professional misconduct.19 He also took steps to prevent the liquidators from being able to respond to his applications or to have the evidence they had filed struck out.20
[34] The allegations made by Mr Nicolson as part of the contempt applications were serious. They were made without any factual foundation and the subpoenas were served at unreasonably short notice. The relief sought by Mr Nicolson, an example of which is recorded in the judgment,21 illustrates the inflammatory approach of Mr Nicolson to the proceeding. The nature of the allegations required careful consideration and response by the defendants, substantially increasing the time and expenses incurred in opposing the contempt applications.
[35] Mr Puddle submits that a 75 per cent increase is justified on the contempt applications. He says that although both the s 250 application and contempt applications were hopelessly misconceived and justify a significant quantum in increased costs, the serious nature of the allegations in the contempt applications should attract a larger increase in costs.
17 Judgment at [85]–[92].
18 At [106]–[109].
19 At [32].
20 At [77].
21 At [110].
[36] I have considered a number of cases where an increase of over 50 per cent on costs was justified,22 the most analogous of which I consider to be Attfield v NZLF Ltd.23 In Attfield, this Court awarded costs increased by approximately 80 per cent against the respondent. The basis for the increase was that the respondent’s claims were doomed to fail; the respondent filed irrelevant, repetitive and late proceedings leading to unnecessary costs; and there was “some other reason”24 namely that the respondent made meritless attacks on the integrity and reliability of the applicant’s evidence and witnesses, the cross-examination of whom only served to reinforce and confirm the invalidity of the respondent’s claims.
[37]I also have regard to Holdfast where the Court of Appeal went on to say:25
We are not to be taken as saying that an uplift of more than 50% can never be justified under [equivalent of r 14.6(3)(b) HCR], as there may be circumstances where the court considers a higher award to be justified.
[38] I consider that this is such a circumstance where a higher award is justified. For the above reasons, I will increase scale 2B costs on the contempt applications by 75 per cent.
Results and orders
[39] I order the plaintiff to pay costs of $47,765.60 to the defendants comprised as follows:
(a)$8,962.50 on the security for costs application (calculated on a 2B scale basis) together with disbursements of $95.96;
(b)$14,160.75 on the s 250 application (calculated on a 2B scale basis increased by 50 per cent) together with disbursements of $95.96;
22 Mueller v Hendren (2009) 19 PRNZ 432 (HC); Haukiwi Copenhagen Lot 4 Orchard Limited v Teiwimahue Pewhairangi Te Moana [2019] NZHC 1582; and Intech Inc v Anura Ltd [2022] NZHC 1876.
23 Attfield v NZLF Ltd [2016] NZHC 189.
24 Pursuant to r 14.6(3)(d) of the High Court Rules.25 Holdfast NZ Ltd v Selleys Pty Ltd, above n 16, at [48].
(c)$14,847.88 on the contempt of court interlocutory application (calculated on a 2B scale basis increased by 75 per cent) together with disbursements of $95.96; and
(d)$9,410.63 on the contempt of court originating application (calculated on a 2B scale basis increased by 75 per cent) together with disbursements of $95.96.
Gordon J
Appendix A
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