Henderson v Westpac Banking Corporation Limited & ors HC Auckland CIV-2010-404-1212

[2011] NZHC 533

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-1212

UNDER  The Insolvency Act 2006

BETWEEN  DAVID STEWART HENDERSON Applicant

ANDWESTPAC BANKING CORPORATION LIMITED & ORS

Respondents

Hearing:         20 & 21 September 2010 and 17 & 18 February 2011 (costs on papers)

Appearances: Mr D Grove for Applicant

Mr D M Hughes for Bankwest and Downer Construction (on papers) Mr Malarao for Commissioner of Inland Revenue

Judgment:      2 June 2011 at 4:00 PM

JUDGMENT OF ASSOCIATE JUDGE DOOGUE [on Costs]

This judgment was delivered by me on

02.06.11 at 4 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Chancery Street Chambers, P O Box 130, Auckland – [email protected]

Kensington Swan, Private Bag 92101, Auckland –  [email protected]

Meredith Connell, P O Box 2213, Auckland - [email protected]

HENDERSON V WESTPAC BANKING CORPORATION LIMITED & ORS HC AK CIV-2010-404-1212 2

June 2011

[1]      On 9 March 2011, I gave judgment dismissing the application for approval of a proposal under s 333 of the Insolvency Act 2006 (the Act).  It is not necessary to refer to that judgment in detail.  The essential reason why I dismissed the application was that creditors who were owed substantial debts had not been given notice of the proposal or creditors’ meeting.

[2]      The parties who had been served with the application and who opposed it now seek costs orders.  Those parties are Bank of Western Australia Ltd, Downer Construction (New Zealand) Ltd and the Commissioner of Inland Revenue.

[3]      The parties seek orders for costs against the provisional trustee under the proposal that was filed in Court, Mr DJ Ross.  One of the difficulties is that Mr Ross was not the applicant.  The applicant is Mr D S Henderson himself.  Section 333 of the Act says that “… the trustee must, as soon as practicable, … apply to the court for approval of the proposal …”.   No provision is made in the High Court Rules prescribing who is to make the application for approval of the proposal.   But the provisions of the statute are to the effect that the trustees should make the application rather than the insolvent.

[4]       There is no doubt jurisdiction in the appropriate circumstances for the Court to make an order for costs against a non-party:  Carborundum Abrasives Ltd v Bank of New Zealand (No 2).[1]     But the type of circumstance which Tompkins J in Carborundum stated would justify the making of such an order are not present here.

[1] Carborundum Abrasives Ltd v Bank of New Zealand (No 2 )[1992] 3 NZLR 757, 764.

[5]      Because Mr Henderson has failed in the proceedings which he brought for approval of the proposal, the presumption is that he should meet the costs of the other parties:  Rule 14.2(a).  I see no reason why the normal approach should not be applied in this case.

[6]      The next issue concerns whether the costs order should be augmented by an uplift from the standard rates or by making an order for actual and reasonable costs

to be paid by Mr Henderson.  In this regard, counsel for the various claimants made reference to the fact that the application was not correctly served on the parties.  The fact that a party gets some aspect of the proceedings wrong, does not justify the making of the type of augmented costs order which the respondents seek.  After all, an unsuccessful party to any litigation may have fallen short in any number of possible ways ranging from procedural errors to a failure on the substantive issue. But it is only in exceptional cases that augmented costs orders will be made.  The non-compliance of the rules  by Mr Henderson  in  serving the Bank  of Western Australia, for example, came down to quite narrow technical issues about service.  I do not consider that failure to properly understand and apply the rules in this regard should justify an order for augmented costs.  While regrettable, it is understandable why it happened.

[7]      It  seems  clear  that  Mr  Henderson  is  insolvent.     It  might  be  more understandable why a person in his position might make a procedural error than it would be, for example, for well-funded parties such as the respondents who have manifestly had access to good quality legal advice to steer them through the proceedings.    My  impression  from  the  evidence  about  service  of  the  Bank  of Western Australia, to take an example, was that Mr Henderson may have struck out on his own in undertaking that step rather than leaving it to his lawyers or seeking detailed guidance from them.

[8]      For these reasons I consider that the justice of the case requires that Mr

Henderson should be ordered to pay costs on a 2B basis.

J.P. Doogue

Associate Judge