Isac (NZ) Limited v Managh

[2014] NZHC 2898

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV 2011-441-396 [2014] NZHC 2898

IN THE MATTER OF	the Companies Act 1993
IN THE MATTER OF	the liquidation of GAMBLING HELPLINE LIMITED (in liquidation)
BETWEEN	ISAC (NZ) LIMITED Applicant
AND	JOHN MANAGH Respondent

On the papers
Judgment:	20 November 2014

JUDGMENT OF MALLON J (Costs)

[1]      I refer  to  my judgment  delivered  on  5  December 2013.1     The  applicant applied  under s  284  of the Companies Act  1993  for an  order setting  aside  the liquidator’s decision to reject the applicant’s proof of debt and a direction that the debt as claimed for the sum of $178,802 be paid.  I held that the grounds on which the liquidator rejected the claim were wrong.  I directed that the liquidator reconsider the proof of debt.  I made associated directions as to how that reconsideration was to occur.

[2]      I also directed that brief memoranda could be filed within three months of the date of that judgment if the parties were not able to resolve costs as part of the liquidation.  I have since received reasonably substantial memoranda (two from each party) on various dates outside that time frame.  That was because the parties were

considering whether the issue of costs might be resolved as part of the resolution of

1 Isac New Zealand Ltd v Managh [2013] NZHC 3242.

ISAC (NZ) LIMITED v MANAGH [2014] NZHC 2898 [20 November 2014]

the substantive claim.    That  was  not  achieved  by the time the last  of the four memoranda had been filed.

[3]      The applicant seeks indemnity costs in the sum of $101,525.86 (inclusive of

GST) or alternatively increased costs.  It contends:

(a)       it was the successful party (it succeeded in having the liquidator’s

decision set aside);

(b)the liquidator pursued  every conceivable,  but  meritless,  ground in opposition;

(c)      the liquidator’s without prejudice settlement offer of $50,000 is not relevant because it has not been shown to be better than that achieved by the judgment;

(d)      an order should be made under cl 16(a) or (b) of the Companies Act

1993 Liquidation Regulations 1994 (which relate to the manner and source of the payment).

[4]      The respondent contends that:

(a)      the  applicant  failed  in  its  claim  for  payment  of  $178,802,  its application  was  misconceived,  and  the  applicant  ought  to  have brought its claim in the ordinary way with the leave of the Court;

(b)the  liquidator’s  without  prejudice  offer  was  fair  given  that  the applicant did not provide information to the liquidator to enable him to assess the applicant’s loss, and it remains to be seen whether the applicant will establish any loss and, if it does, whether any loss will exceed the liquidator’s offer;

(c)      costs should await the outcome of the assessment of the applicant’s loss and that assessment is yet to occur because relevant discovery has not been provided;

(d)if costs are to be ordered now the usual High Court Rules should apply, there is no basis for indemnity or increased costs, the legal costs  incurred  by the applicant  are unreasonable and  considerably exceed   the   liquidator’s   legal   costs   which   totalled   $55,209.36 (inclusive of GST), and there is no basis for a costs order above category 2B costs.

[5]      I consider that the applicant was the successful party, albeit only partially so. I agree with the applicant that the judgment obtained was akin to a judgment as to liability with quantum to be separately established.  Applying the High Court Rules the appropriate category is 2B.  While the liquidator raised meritless defences, that is somewhat balanced out by the applicant erroneously bringing its claim on the basis of ss 303 and 309 of the Companies Act 1993.

[6]      I do not accept that any basis for claiming costs above 2B for any step has been made out under the High Court Rules.   Nor do I accept the liquidator’s objections to items 20, 22, 32 and 33.  The items at 20, 22 and 32 were steps taken by the applicant regardless of the liquidator’s views as to who should have taken those steps, whether they were done properly and whether they were necessary.  The item at 33 reflects the unusual course the application took which ultimately led to the applicant’s (partial) success.  I accept the liquidator’s point that there is some double counting in respect of items 31 and 37 and that a total of four days for these two items is sufficient.  I therefore order category 2B costs as claimed by the applicant but with that slight adjustment in relation to items 31 and 37.

[7]      At this stage I consider it is not appropriate to make any order under the Companies Act 1993 Liquidation Regulations 1994.  Loss is yet to be established. Moreover the liquidator accepts that reasonable costs should be payable from the assets of the company and that in the ordinary course a shareholder stands behind unsecured creditors.  The costs order I have made relates only to setting aside the liquidator’s decision.  It will therefore be open to the applicant to claim further costs in the liquidation if it establishes its claim.

Mallon J