ICB Retaining & Piling Limited v Innovate Civil and Construction Limited
[2023] NZHC 1840
•13 July 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-1719
[2023] NZHC 1840
BETWEEN ICB RETAINING & PILING LIMITED
Plaintiff
AND
INNOVATE CIVIL AND CONSTRUCTION
LIMITED (in liquidation) Defendant
Hearing: 9 June 2023 Appearances:
S M Singh for the Plaintiff
No appearance for the Defendant
Judgment:
13 July 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 13 July 2023 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Dentons Kensington Swan
ICB RETAINING & PILING LTD v INNOVATE CIVIL AND CONSTRUCTION LTD (in liquidation) [2023] NZHC 1840 [13 July 2023]
Introduction
[1] The plaintiff filed liquidation proceedings on 13 September 2022 against the defendant company, Innovate Civil and Construction Limited (in liquidation). After relatively complicated progress through the Courts, leave was granted to withdraw the application on 9 June 2023 as the defendant company had been liquidated on 17 May 2023 pursuant to liquidation proceedings brought by another creditor. The plaintiff sought leave to discontinue and for costs on the application.
[2] I granted leave to discontinue but reserved the question of costs to be determined on the papers. This was because counsel for the plaintiff filed a memorandum seeking costs on a 2B basis in the amount of $16,491.00 plus disbursements of $1,228.64, considerably more than the usual costs award for a liquidation proceeding. There was no appearance for the defendant company at the hearing and no costs memorandum has been filed on their behalf.
[3] I summarise the relevant costs principles below before setting out a timeline and considering the steps for which the plaintiff claims costs.
Relevant costs principles
[4] Rule 14.1 of the High Court Rules 2016 confirms that “all matters are at the discretion of the court if they relate to costs of a proceeding”. The discretion vested by r 14.1 is wide but must be exercised subject to the general principles in r 14.2. The first principle set out in r 14.2(1) is that the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds.
[5]The Court of Appeal has confirmed that:1
Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed.
[6]The remaining principles in r 14.2(1) are:
1 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [6]; and see Emmons Developments New Zealand Ltd v Mitsui Sumitomo Insurance Company Ltd [2020] NZHC 932 at [28]–[29].
(b)an award of costs should reflect the complexity and significance of the proceeding:
(c)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d)an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f)an award of costs should not exceed the costs incurred by the party claiming costs:
(g)so far as possible the determination of costs should be predictable and expeditious.
[7] Rules 14.3 to 14.5 provide for the categorisation of proceedings, the appropriate daily recovery rates and the determination of a reasonable time for each step for the purposes of r 14.2(1)(c) by reference to the time specified for each step in schedule 3. A determination of what is a reasonable time for each step must be made by reference to three bands, relevantly here band A “if a comparatively small amount of time is considered reasonable,”2 or band B “if a normal amount of time is considered reasonable”.3
[8] Rule 15.23 of the High Court Rules provides that unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding must pay costs to the defendant. The r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, although it may be displaced where it is just and equitable in the circumstances that the presumption not apply.4
[9] The principles applying to whether the r 15.23 presumption should be displaced are summarised in McGechan on Procedure:5
2 High Court Rules 2016, r 14.5(2)(a).
3 Rule 14.5(2)(b).
4 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR15.23.01].
5 At [HR15.23.01].
(c)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 up to the point of discontinuance: whether it was reasonable for the plaintiff to bring and continue the proceeding; and for the defendant to oppose the proceeding. The plaintiff will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful in the proceeding.
(iii)The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However, it must be clear that the plaintiff would have succeeded had the circumstances … not changed
…
(d)The court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.
[10] I set out a detailed timeline below because it assists with considering the steps for which costs have been claimed.
Timeline
[11] A statutory demand was first served by the plaintiff on the defendant company on 3 August 2022. No application to set aside that demand was filed. Liquidation proceedings were then filed on 13 September 2022 and served on the defendant company on 23 September 2022. The application to appoint liquidators was advertised in the New Zealand Gazette on 5 October 2022 and in the New Zealand Herald on 7 October 2022 with a statement of advertising filed with the Court on 9 November 2022.
[12] The matter was first called on 11 November 2022 but adjourned to 15 December 2022 to enable funds to be obtained for payments.
[13] Prior to the 15 December 2022 call, the defendant filed an application for leave to file a statement of defence out of time together with an affidavit in support. The plaintiff filed a short affidavit, dated 15 December 2022, in reply. Leave was granted to file the statement of defence after hearing from counsel and a statement of defence
was filed on that same day. Timetabling directions were also made leading up to a defended hearing on 17 April 2023.
[14] The plaintiff filed a statement of reply to the defendant’s statement of defence on 19 January 2023 together with a memorandum seeking amendments to the timetable orders. These were sought on the basis that counsel for the defendant had advised at the 15 December 2022 hearing that an amount of $480,000.00 was due to be paid to the defendant company by a third party by 20 February 2023. Counsel for the plaintiff submitted that it would be sensible to delay the dates by which evidence was required to be filed to after that date as if payment was made, further steps may not be necessary. Amendments to the timetable were therefore made on 27 January 2023.
[15] The solicitor on the record for the defendant withdrew with leave of the Court on 23 March 2023. On the same day, counsel for the plaintiff filed a memorandum seeking unless orders due to the defendant’s failure to comply with the amended timetable, as the defendant had failed to confirm whether it had received the
$480,000.00 payment referred to above or to file evidence as directed. Unless orders were made by Associate Judge Taylor on 31 March 2023.
[16] The defendant company did not comply with the unless orders and so the defendant’s defence was struck out on 11 April 2023.
[17] As an application to liquidate a company must be dealt with in open court, a minute was issued confirming that the hearing on 17 April 2023 would proceed. At that hearing, the director of the defendant company advised the Court that a part payment of $100,000 would be made before the end of the week. The application was therefore adjourned to 21 April 2023.
[18] At the commencement of the hearing on 21 April 2023, counsel for the plaintiff, Mr McMillan, advised that $100,000 in cleared funds had been paid into his trust account. Associate Judge Lester accepted there was potential for the matter to be resolved by the end of May 2023 and adjourned the matter to Friday, 9 June 2023.
[19] As set out in the introduction however, on 17 May 2023 liquidators were appointed to the defendant company on the application of another creditor. The plaintiff’s cost memorandum does not record whether the plaintiff was aware of the other liquidation proceedings.
Should the r 15.23 presumption apply?
[20] I consider that it is just and equitable in the circumstances for the presumption in r 15.23 of the High Court Rules not to apply. Relying on the principles in McGechan on Procedure set out above as to when the presumption will be displaced, the merits of the case here are so obvious they should influence the costs outcome. The plaintiff only discontinued because the relief it was seeking had already been achieved through the liquidation orders made on the application of another creditor. It is not clear whether the plaintiff was on notice of the other proceeding but even if it was, there would have been no certainty that liquidation would have been ordered in those proceedings first. I have no difficulty in finding that the presumption should be displaced.
What is the appropriate costs award?
[21] The plaintiff sets out a table of the costs claimed in its memorandum, including the relevant steps. Costs are claimed on a 2B basis which appears appropriate and is the usual basis upon which costs are awarded in liquidation proceedings.
[22] The table includes a claim of 0.8 of a day for the statement of reply. There is no allowance for the filing of a statement of reply in the steps in schedule 3 relating specifically to liquidation proceedings. The plaintiff has therefore relied on the allowance for statements of reply in ordinary proceedings by analogy. The time allocation in general civil proceedings for the commencement of a proceeding is three days. By contrast, the equivalent time allocation for liquidation proceedings, “filing statement of claim and other documents” (step 49), is 0.6 of a day. Allowing 0.8 of a day for filing a statement of reply does not appear consistent with this. I therefore reduce the time allocated for the statement of reply to 0.2 of a day to be proportionate.
[23] The plaintiff has claimed 1.5 days for the preparation of written submissions for the hearing. This is by analogy with the time allocation for submissions for an interlocutory application on a 2B basis (step 24). I consider this is appropriate even through the hearing was proceeding on an undefended basis because the defendant company’s defence had been struck out. The way in which the proceedings had progressed would have confirmed to counsel that a comprehensive approach needed to be taken, given the various steps that had been taken on behalf of the defendant company.
[24] The only other step for which the costs claimed require further consideration is the claim for preparation of a bundle for the hearing. A bundle assists the smooth running of the hearing and there are no disbursements claimed for photocopying in the preparation of the bundles. In the circumstances, I consider it is appropriate to award costs but on a 2A basis for this step (0.4 of a day).
[25] The remaining steps can all be justified as steps required by the timeline as outlined above and have been claimed by analogy with other steps in schedule 3 as allowed for by r 14.5 of the High Court Rules and at a relatively conservative rate.
[26]I therefore award costs as follows:
Step in the proceeding Allocated
days
Cost (x $2390)
48
Issuing statutory demand
0.2
$478
49
Filing statement of claim and other documents
0.6
$1,434
50
Appearance at mention hearing (11 November 2022)
0.4
$956
36
Other steps in proceeding not specifically mentioned – statement of reply (adjusted)
0.2
$478
36
Other steps in proceeding not specifically mentioned – affidavit
responding to matters raised by defendant company in support of application for leave to file a late statement of defence
0.2
$478
50
Appearance at mention hearing (15 December 2022)
0.4
$956
36
Other steps in proceeding not specifically mentioned – memorandum of counsel seeking amendment of timetable orders
0.4
$956
36
Other steps in proceeding not specifically mentioned – affidavit evidence of plaintiff for substantive hearing
0.2
$478
36
Other steps in proceeding not specifically mentioned – memorandum of counsel seeking an unless order
0.4
$956
36
Other steps in proceeding not specifically mentioned – preparation of written submissions
1.5
$3,585
36
Other steps in proceeding not specifically mentioned – preparation of bundles
0.4
$956
50
Appearance at substantive hearing (17 April 2023)
0.4
$956
50
Appearance at mention hearing (21 April 2023)
0.4
$956
50
Appearance at mention hearing (9 June 2023)
0.4
$956
Total costs
$14,579.00
Disbursements (excluding GST) Filing fee – application to put a company into liquidation
$469.57
Process server fee - service of statutory demand
$200
Process server fee – service of liquidation application
$140
Advertising fee – Gazette
$111.82
Advertising fee – New Zealand Herald
$307.25
Total disbursements
$1,228.64
Result
[27] Costs are awarded to the plaintiff in the amount of $14,579.00 plus disbursements of $1,228.64.
Associate Judge Sussock
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