Island Grace Fiji Limited (in receivership and in liquidation) v Satori Holdings Limited (in liquidation)
[2024] NZHC 3942
•20 December 2024
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2022-419-145
[2024] NZHC 3942
BETWEEN ISLAND GRACE FIJI LIMITED (IN RECEIVERSHIP AND IN
LIQUIDATION)
PlaintiffAND
SATORI HOLDINGS LIMITED (in
liquidation) Defendant
Hearing: On the papers Appearances:
A Olney and S Barker for Plaintiff and interested parties
SWR Potter, JRF Cochrane and MGP Martin for Defendant and Liquidators
RB Hucker and MW Swan for the Applicant, Andrew Hugh GriffithsJudgment:
20 December 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 20 December 2024 at 11 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Lane Neave, Auckland
Buddle Findlay, Auckland Molloy Hucker, Auckland
ISLAND GRACE FIJI Limited (in rec and liq) v SATORI HOLDINGS LTD (in liq) [2024] NZHC 3942 [20
December 2024]
Introduction
[1] On 17 November 2023, Andrew Griffiths, a director and an asserted creditor of the defendant company Satori Holdings Ltd (in liq), applied for leave to bring an application under s 284 of the Companies Act 1993 (Leave Application). On 23 October 2024, he filed a memorandum seeking to discontinue. In a minute dated 25 October 2024, I ordered the discontinuance and directed the parties to confer in an attempt to reach agreement on costs. Unfortunately, agreement was not reached, and costs memoranda have now been filed.
[2] Costs are claimed on a 2B basis with the liquidators of the defendant company, Satori Holdings Ltd (in liq), claiming $9,321 and the interested parties, Sequitur Hotels Pty Ltd and Sequitur Capital Pty Ltd, claiming $7,409.
[3] Pursuant to r 15.23 of the High Court Rules 2016 there is a presumption that where a party discontinues, that party is to pay costs.
[4] Mr Griffiths does not take issue with the quantification of costs on a 2B basis. Similarly, Mr Griffiths accepts that it was appropriate for the liquidators and interested parties to be represented separately.
[5] However, counsel for Mr Griffiths submits that this case falls within the exception to r 15.23, being a case that has been discontinued following a change of circumstances rendering the application unnecessary. Counsel explains that this is as a result of the determination of a separate application by the liquidators for directions by Tahana J on 16 September 2024.1 Mr Griffiths submits as a result no order for costs ought to be made.
[6] The sole issue therefore is whether the presumption in r 15.23 ought to be displaced.
1 McDonald and Ruscoe as liquidators of Satori Holdings Limited (in liq) v Island Grace (Fiji) Ltd (in rec and in liq) [2024] NZHC 2675 [Tahana J judgment].
Relevant costs principles
[7] As set out above, on a discontinuance, the applicant bears the onus of displacing the presumption in r 15.23 of the High Court Rules that the applicant must pay the respondent’s costs. Rule 15.23 provides:
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.
[8]The principles applying to the application of r 15.23 are summarised in
McGechan on Procedure as follows:2
(a)The r 15.23 presumption obviates any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.
(b)Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the court finds there are circumstances which make it just and equitable that it should not apply.
(c)Although the court is not limited in factors it may take into account when considering whether the presumption is displaced, generally:
(i)The court will not consider the merits of 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 (in this case new legislation) not changed - The Star Trust v Hamilton City Council [2016] NZHC 821 at [10].
(d)The court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.
2 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR15.23.01]; citing Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973, FM Custodians Ltd v Pati [2012] NZHC 1902 at [10]–[12] and Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782, [2015] NZCCLR 19 at [20]–[24].
Should the r 15.23 presumption be displaced in this case?
Submissions
[9] Counsel for Mr Griffiths explains that Mr Griffiths’ application was to seek leave to set aside the liquidators’ decision excluding him from being a creditor and so preventing him from funding any action that may assist in the recovery of assets. If the Leave Application was successful, and assuming Mr Griffiths was then successful in setting aside the decision that he was not a creditor, it would have enabled him to fund the recovery of the Vunabaka assets and therefore maintain the same priority as the interested parties for the purpose of sch 7 of the Companies Act.
[10] However, following the allocation of a priority fixture, Tahana J made orders that:3
(a)the Vunabaka assets were to be sold;
(b)the interested parties were the creditors who protected, preserved the value of, or recovered the Vunabaka assets for the purposes of sch 7, cl(1)(e) of the Companies Act; and
(c)as funders, the interested parties were entitled to priority in the proceeds.
[11] Counsel for Mr Griffiths submits that the effect of Tahana J’s judgment was to render the Leave Application unnecessary and without any commercial purpose. Given this change in circumstances, Mr Griffiths submits that no costs order should be made against him for taking the responsible step of discontinuing the Leave Application.
[12] In their joint memorandum in response, the liquidators and interested parties submit there is no good reason to depart from the usual presumption that costs should follow the event of discontinuance. They submit that Mr Griffiths is essentially taking the position that the risk of wasted costs in the event that a change of circumstances
3 Tahana J judgment, above n 1, at [61] and [77].
overtook the Leave Application should be borne by the respondents and not by him. The liquidators and interested parties, however, say there is no good reason why Mr Griffiths should not bear the risk that changed circumstances overtook his application.
[13] The liquidators and interested parties do not accept that the delivery of Tahana J’s judgment is a change in circumstances which should justify displacement of the usual presumption. In two of the cases cited in Mr Griffiths’ memorandum, North Shore City Council v Local Government Commission4and The Star Trust v Hamilton City Council,5 the change of circumstances relied on was the passing of subsequent legislation which rendered the claims in those proceedings moot and led to discontinuances being filed.
[14] Counsel point to the fact that despite this, in both cases the Court determined that the change in circumstances was a neutral factor at best and awarded costs to the defendants in any event. In The Star Trust v Hamilton City Council, the Court noted the applicant in that case:6
… raised serious issues in respect of the decision making of the respondent. The respondent actively contested those allegations. Not insubstantial cost was properly incurred by the respondent in response to a claim that the applicant has not pursued.
[15] The liquidators and interested parties therefore say that even accepting that there was a change in circumstances, considering the seriousness of the allegations made by Mr Griffiths, they were right to oppose the application and are, accordingly, entitled to costs when those allegations are no longer pursued.
[16] The liquidators and interested parties further submit that Mr Griffiths made his application in circumstances where the Vunabaka assets were the only remaining New Zealand assets of value and the liquidators could have been anticipated to sell those assets, which they did. In short, they submit, if Tahana J’s judgment and the sale of the Vunabaka assets were a change of circumstances, they were a change that was both foreseeable and likely at the time that Mr Griffiths made the Leave Application.
4 North Shore City Council v Local Government Commission [1995] 9 PRNZ 182 (HC).
5 The Star Trust v Hamilton City Council, above at n 3.
6 At [10].
[17] The liquidators and interested parties further submit that the Leave Application was filed in November 2023 and most of the costs incurred by the liquidators, including the cost of preparing a substantial affidavit in support of their opposition to the application, were incurred by the time of Tahana J’s judgment on 16 September 2024.
[18] Moreover, they say in the six-week period between the issuing of Tahana J’s judgment on 16 September 2024 and Mr Griffiths discontinuing his application on 23 October 2024, the liquidators and interested parties incurred further costs drafting written submissions and preparing for the hearing of the application scheduled for 6 November 2024, though those costs are not being sought here.
[19] Finally, the liquidators and interested parties contend that the Leave Application would not have been successful in any event.
Analysis
[20] Previous authority has made it clear that the Court will not consider the merits of the respective cases unless they are so obvious that they should influence the costs outcome. In the circumstances of this case I do not consider that it is necessary to rely on the likely success or otherwise of Mr Griffiths’ application.
[21] In my view, it is clear that the just and equitable result is that the presumption in r 15.23 ought not to be displaced because, as between the parties, the appropriate party to bear the costs of the application is Mr Griffiths, rather than the liquidators and interested parties.
[22] Mr Griffiths brought his application in circumstances where the Vunabaka assets were the only remaining New Zealand assets of value and it ought to have been reasonably foreseeable that the liquidators would seek to sell those assets, which they did.
[23] I accept the liquidators and interested parties’ submission that this was a change that was both foreseeable and likely at the time that Mr Griffiths made his application
and is not in the nature of a change in circumstances which ought to displace the presumption.
[24] I therefore make an order for costs on a 2B basis as sought by the liquidators and the interested parties.
Result
[25] The applicant, Andrew Hugh Griffiths, is to pay costs to the liquidators of the defendant in the amount of $9,231, and to the interested parties, Sequitur Hotels Pty Ltd and Sequitur Capital Pty Ltd, of $7,409.
Associate Judge Sussock
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