Kim v Diamond Hostel Limited - [2020] NZHC 1551

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WAIHARAKEKE ROHE

CIV-2019-406-32

[2020] NZHC 1551

UNDER the Companies Act 1993

IN THE MATTER

of the liquidation of DIAMOND HOSTEL LIMITED

BETWEEN

SUNGJA KIM

Plaintiff

AND

DIAMOND HOSTEL LIMITED

Defendant

Hearing: On the papers

Counsel:

B J Norling and A A Alipour for Plaintiff S Kang for Defendant

Judgment:

3 July 2020

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 3 July 2020 at 2.30pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 3 July 2020

KIM v DIAMOND HOSTEL LIMITED [2020] NZHC 1551 [3 July 2020]

[1] In this proceeding, the plaintiff sought the liquidation of the defendant company, following an arbitration award in favour of the plaintiff.

[2] The proceeding was initially (by agreement) put on hold, given there was an application by the defendant for leave to appeal the arbitral award. In addition, the defendant applied to strike out the proceeding on the basis that the proceeding was issued before the statutory demand, relied on in the winding-up application, had run its full 15 working days. There was also an application to restrain advertising. Counsel for the plaintiff responsibly agreed that there would be no advertising pending the hearing of the application for leave to appeal which was heard on 19 March 2020.

[3] I set down the application for stay and to restrain advertising for hearing on 7 April 2020.

[4] As it happens, the hearing set down on 7 April 2020 was lost due to the COVID-19 level four lockdown. A telephone conference was held on 5 May 2020 to address the outstanding interlocutory applications. However, counsel for the defendant advised the Court by memorandum that the application for leave to appeal the arbitral award had been dismissed. This meant the defendant now accepted it was liable to pay the debt and that the defendant wished to withdraw the interlocutory applications.

[5] While there was some delay, the defendant paid the amount claimed in the statutory demand, that being the amount ordered to be paid under the arbitral award. Interest on that sum has also been paid. The dispute on which I am now asked to rule concerns costs.

[6]The lease between the parties contains the following costs clause:

6.1Each party will pay their own costs of the negotiation and preparation of this lease and any deed recording a rent review or renewal. The Tenant shall pay the Landlord’s reasonable costs incurred in considering any request by the Tenant for the Landlord’s consent to any matter contemplated by this lease, and the Landlord’s legal costs

(as between lawyer and client) of and incidental to the enforcement of the Landlord’s rights remedies and powers under this lease.

[7] Counsel for the plaintiff relies on the above clause to seek indemnity costs in respect of the two interlocutory applications and the winding-up proceeding.

[8] Defendant’s counsel resists the applications on two grounds. In respect…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NZHC 1551
Decision Date: 3 July 2020

CaseChat Overview and Summary

The plaintiff, Sungja Kim, sought the liquidation of Diamond Hostel Limited, following an arbitration award in their favour. The matter reached the High Court of New Zealand, Blenheim Registry, where Associate Judge Lester delivered the judgment. The primary dispute was over the costs incurred by the plaintiff in the liquidation process and two interlocutory applications. The defendant argued that they were successful in the proceedings as the debt had been paid, thereby opposing the plaintiff's claim for costs. However, the Court found that the plaintiff had indeed been successful in both the substantive proceeding and the interlocutory applications.

The Court's reasoning was based on the principle that an interlocutory application may be "determined" either by a court decision or by other mechanisms, such as the withdrawal by leave. Here, the two interlocutory applications were withdrawn by leave, making them "determined" in the plaintiff's favour. Furthermore, the substantive proceeding served its purpose in obtaining payment of the debt, which means the defendant was not successful in the proceeding. Therefore, the plaintiff was entitled to costs. The costs claimed were not excessive, and the Court allowed the plaintiff's claim for indemnity costs in the amounts of $2,626.00 for the interlocutory applications, $10,657.00 for the winding-up liquidation proceeding, and $892.06 for disbursements.

The Court did not grant the plaintiff's request to keep the winding-up proceeding on foot as an incentive for the defendant to pay the costs award. The Court reasoned that the amount claimed in the statutory demand and in the statement of claim had been paid with interest, and the presumption of insolvency that arose from the non-payment of the statutory demand had been rebutted by the payment made. As such, the proceedings were at an end.

Orders