Grant v McCullagh - [2013] NZHC 2210

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-001620 [2013] NZHC 2210

BETWEEN
DAMIEN GRANT AND STEVEN KHOV as liquiators of Ellis Construction Limited (In Liquidation)

Applicants

AND

ANTHONY JOHN MCCULLAGH AND STEPHEN MARK LAWRENCE Respondents

Hearing: On the papers

Counsel:

B J Norling for applicants
D M Hughes/L M Van for respondents

Judgment:

28 August 2013

COSTS JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 28 August 2013 at 4.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
Waterstone Insolvency, Auckland
Kensington Swan, Auckland

GRANT AND KHOV v MCCULLAGH [2013] NZHC 2210 [28 August 2013]

[1] Damien Grant and Steven Khov are the liquidators of Ellis Construction Ltd (in liquidation) (ECL). They have applied for an order for costs against the former receivers of ECL (Anthony McCullagh and Stephen Lawrence) in respect of an application they brought for an order for the receivers to produce documents relating to ECL.

[2] The receivers initially resisted the liquidators’ requests (including requests made formally pursuant to notices under s 261 of the Companies Act 1993), contending that they were not obliged to produce the documents which were largely their own working papers.

[3] The liquidators filed their application. The receivers produced some documents but resisted production of others. They then formally opposed the application. However, after further discussions between the parties and provision of further documents by the receivers, the liquidators withdrew their application.

[4] The liquidators say that they have been the successful party, in that they obtained the documents that they were seeking. They seek an order for increased costs. The receivers say that the liquidators cannot be considered the successful party because the question of their obligation to provide the documents was not determined. They maintain their position that they had no obligation to do so, but produced further documents simply to achieve a pragmatic resolution.

[5] For the reasons I will now give, I have come to the conclusion that the receivers should pay the liquidators’ costs in relation to the application, but only on a scale 2B basis.

Background

[6] ECL was placed in receivership on 7 May 2009. The respondents, Grant McCullagh and Stephen Lawrence, were appointed receivers pursuant to a general security agreement. The following day, ECL was put into liquidation by order of this Court. Gilbert Chapman was appointed liquidator. On 11 July 2011, Mr Chapman

was replaced by the applicants (Damien Grant and Steven Khov), who remain liquidators.

[7] The receivership was discharged on 10 August 2011, shortly after the liquidators were appointed. The liquidators had some difficulty understanding the receivers’ statutory accounts, and verifying the receivers’ reports by reference to those accounts. They requested documents from the receivers that they considered belonged to ECL. The documents included copies of the receivers’ trust account statements for ECL.

[8] The receivers took the view that they had provided the liquidators with all of

ECL’s documents.

[9] The liquidators say that they sent the…

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.

Continue reading Grant v McCullagh

Details

AGLC: Grant v McCullagh [2013] NZHC 2210
Case: [2013] NZHC 2210
Decision Date: 28 August 2013

CaseChat Overview and Summary

In the case of Grant and Khov v McCullagh, the High Court of New Zealand was called upon to determine an application for costs brought by the liquidators of Ellis Construction Limited against the former receivers of the company. The liquidators, represented by their counsel, sought an order for costs against the receivers, who had resisted producing certain documents relating to the company. After protracted correspondence and negotiation, the liquidators withdrew their application, claiming they had achieved their objective of obtaining the documents they sought. The receivers, on the other hand, argued that the liquidators could not be considered the successful party as the question of their obligation to provide the documents was not determined. The court found that the liquidators were the successful party in the application, as they obtained the documents they were seeking, and thus, the receivers should pay the liquidators' costs in relation to the application. However, the court ruled that the costs should be awarded on a scale 2B basis, and not increased further.

The legal issues before the court were whether an award of costs should be made, the basis on which any award should be made, and whether any award should be increased for any reason. The court held that an award of costs should be made as the liquidators achieved their purpose, and the application was reasonably necessary. The court also held that the liquidators were entitled to costs despite being represented by in-house counsel, as they would have had to engage a law firm and/or counsel otherwise. The court determined that the appropriate starting point for the award was a scale 2B basis, given the significance of the issue and the experience of counsel required. The court ruled that the costs should not be increased further as the receivers' point was not clearly without merit, and their refusal to accept the liquidators' proposal on 3 November 2012 was reasonable. The court also found that the liquidators' actual costs were likely to be in excess of the costs awarded on a 2B basis, and thus, the principle in the High Court Rules was not offended.

Orders