Investcorp Holdings Limited v Quinn

[2012] NZHC 613

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-6778 [2012] NZHC 613

BETWEEN  INVESTCORP HOLDINGS LIMITED Plaintiff

ANDCLIVE ANTHONY QUINN AND PAMELA ISABEL QUINN

First Defendant

ANDQUINN CHARTERED ACCOUNTANTS LIMITED

Second Defendant

Hearing:         2 April 2012

Counsel:         DR Bigio and KLJ Simcock for plaintiff

SP Bryers for first and second defendants

Judgment:      2 April 2012

(ORAL) JUDGMENT OF ASSOCIATE JUDGE FAIRE [on costs]

Solicitors:           LeeSalmonLong, PO Box 2026, Auckland 1140

McVeagh Fleming, PO Box 4099, Auckland 1140

INVESTCORP HOLDINGS LIMITED V QUINN HC AK CIV 2011-404-6778 [2 April 2012]

[1]      Mr BJ Thompson, a director of the plaintiff company brought an application pursuant to s 165 of the Companies Act 1993 to bring a derivative action against the defendants.

[2]      The first defendants are also directors of the plaintiff company.  The second defendant is an incorporated company which carries on business as chartered accountants.

[3]      The application was heard by Venning J on 21 September 2011.  In a reserved decision issued on 6 October 2011 leave to bring a derivative action was granted. The decision defined the scope of the proceedings, namely as to costs:

(a)      Whether the first defendants permitted Quinn Chartered Accountants Ltd to overcharge the plaintiff for services rendered to the plaintiff as a director;

(b)Whether the first defendants permitted the second defendant to overcharge the plaintiff for accounting and other professional services rendered to the plaintiff by the second defendant;

(c)      Whether the first defendants permitted the second defendant to pay less than market rental for premises occupied by the second defendant at 129 Kolmar Road, Papatoetoe; and

(d)Whether the first defendant’s authorised an excessive rate of interest on advances made to the plaintiff by a shareholder of the family trust and permitted those advances to be secured by a mortgage over two years.

[4]      His Honour ordered that a derivative action might be brought under the name of the plaintiff company and he ordered that costs on the derivative action be dealt

with as follows:[1]

I consider  the  just  result  is  an  order  that  the  company  pay  part  of  the reasonable costs of the proceeding.  I fix that part of the reasonable costs to be paid by the company at $50,000 (subject to the issue of leave discussed below).    I  direct  the  company  is  to  pay  the  first  $50,000  of  the  costs associated with the proceeding.  Any costs over and above that sum required to  bring  the  proceeding  to  conclusion  are  to  be  paid  by  Mr Thompson personally in the first instance.  I reserve leave for him to apply for any such costs paid by him, to also be ultimately paid by the company once the proceedings are determined on their merits, if that becomes necessary.

[1] Thompson v Quinn HC Auckland CIV-2010-404-8457, 6 October 2011 at [71].

[5]      In relation to the application to bring a derivative action his Honour ordered that  Mr Thompson  was  to  have  costs  on  the  application  based  on  Category  2, Band B.  The defendants filed an appeal against the judgment of Venning J and made application for a stay pending disposal of that application.

[6]      Directions were given for the disposal of the stay application which was scheduled to be heard before me today.  The defendants notified that they no longer wished to proceed with the application for stay and the appeal.   On that basis the application  is  withdrawn.     The  only  outstanding  issue  then  is  costs  on  the application.

[7]      The plaintiff seeks costs based on Category 2,  Band B which have been calculated at $2,444 in accordance with the High Court Rules.  Those costs include a conference which gave directions for the disposal of this application and, in my view, are properly included.

[8]      Rule 14.1 gives the Court a discretion to order costs in relation to a step taken in a proceeding.   The discretion is generally to be exercised in accordance with specific rules:  Glaister v Amalgamated Dairies Ltd.[2]   In Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd. The Court of Appeal said of the costs regime contained in this section that:[3]

[2] Glaister v Amalgamated Dairies Ltd [2004] 2 NZLR 606 at [19].

[3] Mansfield Drycleaners Ltd v Quinny’s Drycleaning (Dentice Drycleaning Upper Hutt) Ltd

(2002) 16 PRNZ 662 (CA) at 668.

there is a strong implication that a Court is to apply the regime in the absence of some reason to the contrary

The test to be applied is entirely an objective and not a subjective one.

[9]      Unless there are special reasons to the contrary rule 14.8 requires costs on an opposed interlocutory application to be fixed when the application is determined. That does not have specific application to this case because the case has not been determined on an opposed basis.   However, there is an analogy with the position which applies where a party discontinues a proceeding.  That position is covered by r 15.23.

[10]     Rule 15.23 of the High Court Rules provides:

Costs

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

[11]     The rule raises a presumption that a discontinuing party will be liable for costs: North Shore City Council v Local Government Commission[4], Kroma Colour Prints Ltd v Tridonicatco NZ Ltd.[5]      Generally, the court will not inquire into the merits of the case unless the answer is clear and obvious.

[4] North Shore City Council v Local Government Commission 9 PRNZ 182.

[5] Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973 at 975.

[12]     What is apparent to me in this case is that if an order for costs is not made, the effect is to impose a further burden on the plaintiff’s assets by the costs which it would normally receive, being the successful party.  When I apply the principles that I have referred  to  in  this  judgment,  I come to  the conclusion  that  the plaintiff company is  entitled  to  costs  based  on  Category 2,  Band B for an  interlocutory application, and that includes the conference in which directions for the disposal of this application were made.  On calculating those matters $2,444 should be paid.

[13]     I order that the defendants pay costs in that sum.

JA Faire

Associate Judge