Lu Trustee Limited v Parkland Infrastruct Limited (In liquidation)

[2023] NZHC 3848

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-1550

[2023] NZHC 3848

UNDER

the Companies Act 1993

BETWEEN

LU TRUSTEE LIMITED and HO NO.2 TRUSTEES LIMITED

Plaintiffs

AND

PARKLANE INFRASTRUCT LIMITED (IN LIQUIDATION)

Defendant

Hearing:	On the papers
Appearances:	G Chan for the Plaintiffs
Judgment:	21 December 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 21 December 2023 at 11.30 am pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors: Tompkins Wake, Auckland

LU TRUSTEE LTD v PARKLANE INFRASTRUCT LTD (IN LIQ) [2023] NZHC 3848 [21 December 2023]

Introduction

[1]                 The plaintiffs have applied for costs in respect of these liquidation proceedings. When the matter was called before me in the liquidation list on 29 September 2023, I made orders granting leave for the plaintiffs to discontinue as the defendant company had been put into  liquidation  by  shareholders’  resolution  (following  service  on 15 August 2023 but prior to the first call).

[2]                 The parties have not been able to agree costs. The plaintiffs’ position is that they are entitled to costs on a 2B basis plus disbursements.

[3]                 I set out the procedural history below before considering the relevant costs principles and applying those to the circumstances of this case.

Procedural history

[4]                 Following separate caveat proceedings, the defendant was ordered to pay indemnity costs and disbursements totalling $245,906.60 to the plaintiffs.1

[5]                 On 5 July 2023, the plaintiffs served a statutory demand on the defendant for the amount of the costs award. The defendant failed to make payment or otherwise comply with the statutory demand.

[6]                 On 15 August 2023, the plaintiffs served these liquidation proceedings on the defendant. As noted above, the defendant was put into liquidation on 28 August 2023 by special resolution of the shareholders pursuant to s 241(2)(a) and within the time prescribed by s 241AA of the Companies Act 1993.

[7]                 As the defendant was already in liquidation, the plaintiffs’ liquidation proceedings could not proceed and so the plaintiff sought leave to discontinue when the matter was called on 29 September 2023.

1      Parklane Infrastruct Ltd v Lu Trustee Ltd [2023] NZHC 1309 at [56].

Relevant cost principles

[8]                 The principles applying to the determination of costs are set out in pt 14 of the High Court Rules 2016.

[9]                 Under r 14.1 all matters relating to costs are at the discretion of the Court. The discretion is not unfettered, with r 14.2 setting out the general principles that apply including:

(a)the party who fails in respect of a proceeding or an application should pay costs to the party who succeeds;

(b)an award of costs should reflect the complexity and significance of the proceeding; and

(c)costs are assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step.

[10]              Rule 15.23 separately provides that where a proceeding is discontinued there is a presumption that costs are payable to the defendant.

[11]              The principles applying to the application of r 15.23 are summarised by the authors of McGechan on Procedure: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:

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].

(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 … not changed …

(d)The court’s general discretion in r 14.1 as to costs can also override the general principles relating to discontinuance.

[12]              As set out above, the presumption can be displaced if it is just and equitable for a different costs award to be made.

[13]              The plaintiffs submit that the Court has previously awarded costs to creditors who cannot proceed with their liquidation applications under r 31.1 of the High Court Rules after the debtor’s shareholders resolve to liquidate it pursuant to s 241(2)(a) of the Companies Act.3 The rationale is that the company’s liquidation effectively vindicates the creditors for commencing liquidation proceedings.4

[14]              The plaintiffs submit that they should be regarded as ultimately successful in these proceedings despite discontinuing. The proceedings were appropriately commenced following the defendant’s failure to pay its debt and the plaintiffs’ objective has been achieved.5

[15]              I agree that the plaintiffs have effectively succeeded in these proceedings and that the presumption in r 15.23 ought to be displaced. I therefore now consider the amount of the costs award.

3      Commissioner of Inland Revenue v Pop-Up Globe Foundation Ltd [2021] NZHC 515 at [3] and [8].

4 At [7].

5      Cameron v Westland District Council HC Christchurch CIV-2009-418-026, 22 October 2009 at [33]

Categorisation and disbursements

[16]              The plaintiffs submit that costs ought to be awarded on a 2B basis as the proceedings are of average complexity and require the attendance of counsel of average skill and experience.

[17]              Scale 2B costs are sought for items 48, 49, 11, 12 and 29 of sch  3 of the  High Court Rules for a total of 1.6 days at the daily rate of $2,390.00 equalling

$3,824.00. I note that the final item, item 29, is sought prospectively, being 0.2 of a day for sealing this costs order. Each of the items appears appropriately claimed.

[18]              Disbursements are sought for service of the statutory demand and the liquidation proceedings, the filing fee for these proceedings, the costs of advertisements and for sealing the costs order. In total these amount to $1,581.55. Again these amounts are appropriate.

Result

[19]The defendant is to pay costs to the plaintiff on a 2B basis in the amount of

$3,824 in costs plus disbursements of $1,581.55 for a total of $5,405.55.

Associate Judge Sussock