Jackson v Grant
[2022] NZHC 3148
•29 November 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2460
[2022] NZHC 3148
UNDER The Receiverships Act 1993 IN THE MATTER
of the receivership of Ormiston Rise Limited (in receivership and in liquidation) and
Ormiston Rise Development Limited (in receivership and in liquidation)
BETWEEN
NEALE JACKSON and GRANT GRAHAM
as Receivers of Ormiston Rise Limited (in receivership and liquidation)
First Applicant
…/cont.
Hearing: On the papers Appearances:
D Friar and L McNeely for the first and second applicants
R Hollyman KC and A Peat for the first and second respondents D Chisholm KC, J Caird and S Hawksworth for the third and fourth respondents
Judgment:
29 November 2022
JUDGMENT OF GORDON J
[As to costs]
This judgment was delivered by me
on 29 November 2022 at 12 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Counsel: Solicitors:
R Hollyman KC, Auckland Bell Gully, Auckland
A Peat, Auckland Simpson Grierson, Auckland
D Chisholm KC, Auckland A Botterill, Waterstone Insolvency
JACKSON v GRANT [2022] NZHC 3148 [29 November 2022]
NEALE JACKSON and GRANT
GRAHAM as Receivers of Ormiston Rise Development Limited (in receivership and liquidation)
Second Applicant
AND DAMIEN GRANT as Liquidator of
Ormiston Rise Limited (in receivership and liquidation)
First Respondent
DAMIEN GRANT as Liquidator of Ormiston Rise Development Limited (in receivership and liquidation)
Second Respondent
ARENA ALCEON NZ CREDIT PARTNERS, LLC
Third Respondent
QUAESTOR ADVISORS, LLC
Fourth Respondent
[1] In my judgment of 24 August 20221 I made discovery orders in favour of the first and second respondents, Damien Grant, as liquidator of two companies (the liquidator)2 against the first and second applicants, Neale Jackson and Grant Graham, the receivers of those two companies (receivers) and the third and fourth respondents, respectively Arena Alceon NZ Credit Partners, LLC and Quaestor Advisors, LLC (together the lenders).
[2] The parties have not been able to agree costs. The liquidator says that as he is the overall successful party he is entitled to costs. He seeks costs on a 2B basis of
$8,604 against the lenders and $5,417 against the receivers.
[3] The lenders and receivers oppose the application and say costs should lie where they fall.
Submissions
[4] For the liquidator, Mr Hollyman KC first notes that discovery in originating applications is not available as of right. Both the lenders and the receivers in their notices of opposition opposed discovery being ordered in any form.
[5] Mr Hollyman acknowledges that the specific orders originally sought were refined by the liquidator at the hearing but he says even those orders in their refined form were opposed. He notes the discovery orders made were as follows:
As against the lenders
(a)All documents relating to the negotiation and meaning of the “Final Interest Payment” in the Facility Agreements;
(b)All documents relating to: the decisions taken to incur the Preservation Costs; and the reasons for and the necessity of incurring the Preservation Costs;
1 Jackson v Grant [2022] NZHC 2113.
2 I will refer to the liquidator in the singular as the same individual is the liquidator of both companies.
As against the receivers
(c)To the extent that the receivers have any such documents, the documents as referred to in (a) above; and
(d)The receivers’ development budgets; monthly certification reports from the engineer reviewing the civil works undertaken; and monthly reports from the quantity surveyor.
[6] Mr Hollyman notes that the amount involved in relation to the Final Interest Payment was around $20 million and Preservation Costs around $6.5 million.
[7] Mr Hollyman submits that overall the liquidator was successful and apart from the receivers’ offer to provide the specific documents in [5](d) above, discovery in any form was opposed.
[8] The lenders do not agree that the liquidator was the successful party. Rather, the lenders consider they were successful. In the notice of opposition the lenders opposed discovery sought on the basis that the categories of documents, as then proposed by the liquidator, were irrelevant to the substantive issue in the proceeding (namely the correct amount of the secured debt) and/or overly broad in scope.
[9] Mr Chisholm KC for the lenders notes that the orders made in the judgment were substantially different from discovery sought by the liquidator and reflected the lenders’ position that the categories were irrelevant and/or too broad. In particular Mr Chisholm submits:
(a)Category one was refined to documents relating to the meaning and negotiation of the Final Interest Payments. That reflected the lenders’ opposition that the original category one documents were overly broad;
(b)No discovery was ordered in relation to category two. To the extent that the refined category two related to Preservation Costs this was merged with category three; and
(c)Category three was also narrowed both at the hearing and then again in the judgment. In their opposition the lenders had accepted that this category was relevant to the matters in issue but had taken the position that the scope of discovery was disproportionate.
[10] In the alternative Mr Chisholm submits that even if the liquidator can be said to have been successful (denied) it would be appropriate for the Court to refuse an award of costs under rr 14.7(d) and/or 14.7(f)(ii) of the High Court Rules 2016 (the Rules). More particularly Mr Chisholm submits: the liquidator’s “success” was very limited reflecting the lenders’ position that the original scope of discovery sought was largely irrelevant and overly broad; a substantial portion of the hearing was spent refining the liquidator’s discovery categories which created increased costs to the lenders who had to respond to those arguments; and the liquidator did not attempt to engage with the receivers to agree discovery prior to filing the application.
[11] For the receivers Mr Friar submits the liquidator’s original application for discovery sought documents that had no relevance to this proceeding. For example the liquidator sought all documents relating to the “commercial deal behind the funding documents”, documents concerning an unrelated “dispute with Mr Webber”, and documents concerning the appointment of receivers.
[12] Like Mr Chisholm, Mr Friar also notes that the Court did not grant the discovery sought by the liquidator even after the significant narrowing by the liquidator at the hearing. In terms of category one documents (regarding the “Final Interest Payment” in the Facility Agreements) Mr Friar submits that the order was primarily directed to the lenders given that the receivers did not have any role in the negotiation of the Facility Agreements.
[13] In respect of categories two and three the Court ordered only that the receivers discover those documents that the receivers had themselves proposed to provide by way of discovery (order (d) at [5] above).
[14] For those reasons Mr Friar submits there was no basis on which the liquidator can claim he was the successful party.
[15] Mr Friar supports the receivers’ position opposing costs by referring to the liquidator’s conduct in bringing and pursuing the application. First, he says that the liquidator brought the application for discovery without first raising the issue of discovery with the parties or seeking to agree categories of discovery.
[16] In a memorandum of 15 February 2022 the liquidator raised the possibility that he would seek discovery but did not identify any documents sought. In response, the following day, the receivers asked the liquidator to identify the specific categories of documents sought. The liquidator did not do so but instead proceeded to file the discovery application. After the application had been served the receivers proposed a meeting with the liquidator to see if an agreement could be reached as to the scope of discovery. The liquidator did not take the receivers up on those offers.
[17] Mr Friar also takes issue with the submission on behalf of the liquidator in this application where it is said that the discovery sought was opposed in any form. Mr Friar points out that in fact the receivers said in their notice of opposition that category three sought potentially relevant documents but that it was overly broad, disproportionate and not tailored to the specific issues in dispute. Mr Friar submits the Court’s decision on category three shows that the receivers’ position was correct.
[18] In advance of the hearing the receivers made a proposal in relation to the provision of limited discovery under category three. The liquidator did not accept or otherwise engage with this proposal.
[19] Finally, Mr Friar notes that in the ordinary course of events, the receivers would seek costs as the predominantly successful party on the application. He says, however, given that there is currently expected to be a surplus for unsecured creditors, there would be little point in seeking costs from the liquidator on this application and then paying the surplus to the liquidator at the end of the receivership. For that reason the receivers adopt the position that costs should lie where they fall.
Legal principles
[20] The general principle is that the successful party on an application is entitled to costs,3 fixed at the time.4 A robust view of success should be taken without a fine unpicking of the issue:5
[12] The starting point, as the authorities ... indicate, is the presumption that “the party who fails with respect to a proceeding ... should pay costs to the party who succeeds”, a robust view of success should be taken, and the presumption should not be too readily displaced. In this respect, r 14.2(g) is particularly relevant. It provides that “as far as possible the determination of costs should be predictable and expeditious.” That objective would be undermined if too fine an approach was taken to determining costs awards.
[21] The Court of Appeal, quoting the Supreme Court, has reaffirmed that “the ‘loser, and only the loser, pays’, unless there are exceptional reasons”.6
[22] Success is assessed by considering the application as a whole and whether overall relief was allowed or refused. The Court of Appeal has stated:7
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.
[23] A judge should not be required to “unpick” steps and issues in detail and “success on more limited terms is still success”.8
[24] In addition to those principles, the Court has a discretion to refuse or reduce costs otherwise payable under the Rules if:
(a)Although the party claiming costs has succeeded overall, that party has failed in relation to a cause of action or issue which significantly increased the costs of the party opposing costs;9 or
3 High Court Rules 2016, r 14.2(1)(a).
4 High Court Rules, r 14.8(1).
5 Zhao v He [2020] NZHC 1048 at [12] (footnote omitted).
6 Weaver v Auckland Council [2017] NZCA 330 at [20], quoting Shirley v Wairarapa District Health Board [2006] NZSC 63 at [19].
7 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [6].
8 Weaver v Auckland Council, above n 6, at [24] and [26].
9 Rule 14.7(d).
(b)The party claiming costs has contributed unnecessarily to the time or expense of the proceeding or step in it by taking or pursuing an unnecessary step or an argument that lacks merit.10
[25] The Court has exercised that discretion where the successful party has had limited success and/or where most of the hearing time was engaged on the unsuccessful party’s unsuccessful arguments.11 In Weaver v Auckland Council the Court of Appeal recognised that a reduction in costs would be appropriate because although the appellants succeeded, “the time and resources necessary for the respondent to meet ultimately unsuccessful arguments significantly increased its costs”.12
Discussion
[26] I will consider the claim against the lenders first, then the claim against the receivers.
[27] I do not accept Mr Chisholm’s submission that the lenders were the successful parties. Although the categories of documents sought by the liquidator were refined significantly at the hearing and even though the Court order reduced those categories further, the liquidator nevertheless still had some success.
[28] However, I accept that there is a basis for reducing costs under rr 14.7(d) and 14.7(f)(ii).
[29] First, it is clear that some categories of documents initially sought were entirely irrelevant to the issue in the originating application, for example documents relating to the commercial deal behind the funding documents and documents concerning an unrelated dispute with a Mr Webber. Even though the liquidator did not pursue these categories of documents at the hearing, the lenders were required to prepare affidavit
10 Rule 14.7(f)(ii).
11 Weaver v Auckland Council, above n 6, at [15]; Body Corporate 199883 v Auckland Council [2017] NZHC 2455 at [18]; Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [5].
12 Weaver v Auckland Council, above n 6, at [26].
evidence and submissions for the hearing in response. Further, as Mr Chisholm points out, the liquidator did not succeed on all the reduced categories of documents.
[30] The items claimed in the schedule to the liquidator’s submissions are appropriate, including a reply memorandum following a memorandum by the lenders after my judgment issued seeking clarification and also a costs memorandum. I will award costs on a 2B basis. But for the reasons set out above, I reduce the costs claimed by 50 per cent.
[31]I do not propose to order costs against the receivers.
[32] As regards the first order against the receivers set out in [5](c) above, the evidence of the receivers was that they did not have any documents relating to the negotiation and meaning of the “Final Interest Payment” in the Facility Agreements.13 The primary order for discovery of those documents was directed at the lenders. As is apparent, from the way in which the order against the receivers was framed, it was made out of an abundance of caution.
[33] After service of the discovery application the liquidator did not take up the receivers’ offer to meet to discuss the scope of discovery. In the end, the second discovery order against the receivers was made in terms as proposed by the receivers.
Result
[34] I award costs of $4,302 (being 50 per cent of the claimed costs of $8,604) in favour of the liquidator against the lenders.
[35] I refuse the claim for costs against the receivers. Those costs are to lie where they fall.
Gordon J
13 Jackson v Grant, above n 1, at [41].
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