Installer Services (Hutt Valley) Limited (in liq) v Colson

[2019] NZHC 1084

Delivered at 9:30am on 20 May 2019 pursuant to rule 11.5

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2017-485-748

[2019] NZHC 1084

BETWEEN

INSTALLER SERVICES (HUTT VALLEY)

LIMITED (in liq) Plaintiff

AND

ANDREW LESLEY COLSON AND SUE JENNIFER COLSON

Defendant

On the papers

Counsel:

B Walker and S Stock for plaintiff

S Iorns and A Campbell for defendants

Judgment:

20 May 2019

JUDGMENT OF GRICE J

[Costs]

[1]    Installer Services (Hutt Valley) Ltd (Installer) was successful in its claim against Mr and Mrs Colson who were the directors of Installer before it went into liquidation.1

[2]The claims against the Colsons were set out in the judgment as follows:

[1]       …

(a)the company made distributions to Mr Colson, in his capacity as a shareholder, while failing to follow the required statutory processes when the company was insolvent. Repayment of the amount distributed is sought pursuant to s 56 of the Companies Act 1993 (the Act);

1      Installer Services (Hutt Valley) Ltd v Colson [2019] NZHC 210.

INSTALLER SERVICES (HUTT VALLEY) LIMITED (in liq) v COLSON [2019] NZHC 1084 [20 May 2019]

(b)Mr and Mrs Coulson breached their duty as directors to act with reasonable care and skill pursuant to s 137 of the Act; and

(c)Mr and Mrs Colson breached their duty as directors to act in good faith and in the best interests of the company pursuant to s 131 of the Act.

[3]    The proceeding raised complex issues.2 The records and documents that had been recovered by the liquidators from the company in liquidation were not in good order. This contributed to the complexities involved in the litigation.

[4]    I found that the directors had breached their duty of care. I also found that  Mr Colson had to pay reparation for amounts taken by him as a shareholder. The repayment was required due to the total failure of the directors to ensure the company followed the required procedures for shareholder distributions.

[5]    I found, on the basis of the distributions, that the directors had failed to exercise the reasonable care and skill that was required of them under the Companies Act 1993.

[6]    I assessed the total reparation for the breaches and the distribution at $19,943. Mr Colson was ordered to pay this as repayment of the shareholders’ distribution and both Mr and Mrs Colson (as directors) to repay the same amount (jointly and severally) as reparation for the breach of their directors’ duty of care.

[7]    I indicated in my judgment that I could see no reason why the successful plaintiff should not be entitled to costs as usual. I reserved leave for the parties to file submissions on costs if they could not agree on them and timetabled those submissions.

[8]    Installer sought costs. It provided a schedule based on an assessment of category 2B costs and disbursements. The schedule provided for totals of $28,544 for costs and $1,906.69 in disbursements. The Colsons do not contest the quantum of the costs claimed but do dispute liability for costs.

2      The issues included recovery of shareholder distribution; directors’ salaries; solvency; issue estoppel; good-will; directors’ duties; reparation calculation; causation; and culpability.

[9]    The Colsons say they should not have to pay costs as claimed by Installer in full. They say costs should lie where they fall or at least be reduced by 50–75 per cent. In support of that submission they point to the fact that Installer’s initial claim was in the vicinity of some $200,000, but it only succeeded to the amount of $19,943. The Colsons say this is equivalent to about 10 per cent of the claim.

[10]Installer says in response:

(a)It was successful, which was recognised in the judgment;

(b)The breach of directors’ duties was made out. This is a serious finding;

(c)There was no Calderbank bank offer made by the Colsons which would support a lowering of the costs award.

[11]   The usual rules in relation to awards of costs are set out in the High Court Rules 2016. The Rules insofar as they are relevant here are:

(a)Rule 14.1 — costs are at the discretion of the court;

(b)Rule 14.2(a) — the primary principle is that the unsuccessful party should pay costs or “costs follow the event”;

(c)Rule 14.2(g) — the costs aim to achieve predictability, consistency and expediency in the “determination” of costs.

[12]   While the general rule is costs follow the event, there are many reasons why the court may depart from awarding a successful party costs in terms of the relevant category.

[13]   In this case there are no reasons for departing from the general rule. There was no Calderbank offer made; the proceedings were complex. That the actual quantum awarded at the end of the day was much less than the claim belies the complexity of the claim and the issues raised.

[14]   I do not consider that the fact that the quantum awarded was less than claimed, in the circumstances of this case, justifies the departure from the general rule. Installer was required to prove its case, which involved some complex issues in making any recovery. It did so.

[15]   Accordingly, an order for costs in favour of Installer is made to be calculated on a 2B basis, in terms of the Schedule set out in Installer’s memorandum of 13 March 2019.

Grice J

Solicitors:

Taiaroa Legal, Christchurch for plaintiff Alan Campbell, Porirua for defendants