Madsen-Ries v Petera

[2015] NZHC 2418

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-000103 [2015] NZHC 2418

UNDER

the Companies Act 1993

IN THE MATTER

of Petranz Limited (in liquidation)

BETWEEN

VIVIEN JUDITH MADSEN-RIES AND DAVID STUART VANCE AS LIQUIDATORS OF PETRANZ LIMITED (IN LIQUIDATION)

FIRST PLAINTIFF

PETRANZ LIMITED (IN LIQUIDATION)

Second Plaintiff

AND

DARRELL WARREN KARANEIHANA PETERA

First Defendant

DIANA JOY PETERA Second Defendant

Hearing:	On the papers
Appearances:	N H Malarao for plaintiffs Defendants in person
Judgment:	5 October 2015

JUDGMENT OF LANG J

[as to recall of judgment and costs]

This judgment was delivered by me on 5 October 2015 at 2 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

MADSEN-RIES AND VANCE v PETERA [2015] NZHC 2418 [5 October 2015]

[1]      On 24 March 2015, I delivered a judgment in which I found in favour of the plaintiffs against the defendants on several causes of action.1    The plaintiffs now seek an order recalling my judgment in order to deal with a claim for interest that I omitted to deal with in the substantive judgment.  Mr Malarao for the plaintiffs also advises that the parties have been unable to reach agreement regarding costs, and asks that those be fixed by the Court.

[2]      The defendants have failed to provide any submissions in relation to both outstanding issues.  As a result, I am required to deal with those issues without their input.

The application for recall of judgment

[3]      Mr Malarao rightly points out that the plaintiffs’ amended statement of claim dated 20 June 2004 sought interest under each cause of action.  He also repeated the claim for interest in his closing submissions.  I inadvertently overlooked this issue in the substantive judgment.

[4]      There is no doubt that the Court has jurisdiction to recall a judgment where an  issue  such  as  interest  has  been  inadvertently  overlooked.2      Mr  Malarao  has referred me to several cases in which the courts have considered it appropriate to recall judgments where that has occurred.3

[5]      I consider it appropriate to make an order under s 87 of the Judicature Act

1908 as sought by the plaintiffs.  The judgment is recalled and amended to include interest at the prescribed rate on the sums in respect of which judgment has been entered against the defendants.  In each case interest is to be payable from the date upon which Petranz Ltd went into liquidation.

1      Madsen-Ries and Vance v Petera [2015] NZHC 538.

2      Matua Finance Ltd v Bank of New Zealand HC Auckland CP490/04, 4 August 1995.

3      Brake v Boote (1991) 4 PRNZ 86; Levin v Shot Blast Services (Auck) Ltd HC Auckland CIV-

2012-404-433, 22  July  2013,  and  Vodafone  New  Zealand  Ltd  v  M5  Investments  Ltd  HC Auckland CIV-2008-404-286, 14 October 2011.

Costs

[6]      The plaintiffs were the successful parties.  As a result, the defendants should be required to contribute to their costs.4     Ordinarily, costs in a case such as this would be calculated on a category 2B basis.  Costs calculated on that basis would amount to $48,058.50 as calculated in the schedule annexed to Mr Malarao’s memorandum dated 18 June 2015.

[7]      In addition, the plaintiffs seek costs under the District Court Rules 2009 for steps taken whilst the proceeding was within the jurisdiction of the District Court. Calculated on a category 2B basis these amount to $7,285.00.  As a result, an award of costs on a category 2B basis in respect of steps taken in both this Court and the District Court would total $55,343.50.

[8]      The plaintiffs seek increased costs, however, in respect of the steps taken in this Court.  They ask for an order that costs be increased by 50 per cent.  In doing so they rely on the well-known principles enunciated by the Court of Appeal in Bradbury v Westpac Banking Corporation,5 and Holdfast NZ Ltd v Selleys Pty Ltd.6

[9]      The plaintiffs base their claim for increased  costs on arguments that  the defendants contributed unnecessarily to the time or expense of the proceeding, that they failed to comply with directions of the Court, pursued unnecessary steps and/or arguments that lacked merit, failed to comply with an order for discovery and failed to admit facts, evidence, documents and legal arguments without just cause.

Failure to comply with directions of the Court

[10]      Mr Malarao submits that the defendants failed to comply with the following directions of the Court:

1.On 13 June 2014 Associate Judge Sargisson directed the defendants to file statements of their proposed evidence and an index of documents by 1 December 2014.  They did not serve their briefs of evidence until 18 February 2015, and did not provide any index of documents.

4      High Court Rules, r 14.2(a).

5      Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400;

6      Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 at [46]-[48].

2.The defendants failed to comply with a timetable direction requiring them to file and serve an amended statement of defence no later than

4 July 2014.  They served a deficient amended statement of defence on 4 August 2014 and a compliant statement of defence on 22 August

2014.

3.Amended  timetable  directions  required  the  parties  to  exchange affidavits of documents no later than 5 September 2014.   The defendants   did   not   serve   their   affidavit   of   documents   until

11 September 2014.

[11]     I agree that these are demonstrated breaches of timetable directions made by the Court.  I do not consider, however, that they are sufficiently serious to warrant an uplift in costs as sought by the plaintiffs.   To the extent that the plaintiffs were required to seek the assistance of the Court to remedy the breaches, they will be able to recover costs on a category 2B basis in respect of memoranda and telephone conferences that became necessary as a result of these defaults.  No further sanction is required.

Pursuing unnecessary steps and advancing arguments that lacked merit

[12]     Mr Malorao raises two issues under this head.  First, he points out that the defendants denied in their statement of defence that the company was unable to pay its debts as they fell due.  He says this meant that the plaintiffs were required to go to considerable lengths to establish the point at which the company became insolvent. When Mrs Petera gave evidence, however, she accepted that the company had suffered cashflow difficulties from a relatively early stage, and that the directors had made a deliberate decision to pay trade creditors rather than tax so that the company could continue trading.

[13]     I do not consider that this issue warrants an increase in costs.  The date upon which the company became insolvent was always going to be an important factor in determining whether, and if so to what extent, the defendants may have breached their statutory duties as directors under the Companies Act 1993.  For that reason the plaintiffs needed to establish the likely date of insolvency regardless of the fact that the defendants had denied in their pleadings that the company was unable to pay its

debts as they fell due.  The very fact that the company became unable to meet its tax obligations  was  in  any  event  cogent  evidence  that  the  company  had  become insolvent at an early stage.

[14]     Next, Mr Malarao relies on the fact that the defendants pleaded in their statement of defence that they sought and relied on the advice of professional accountants and bookkeepers.   This meant that the plaintiffs were required to investigate this issue and present evidence and submissions to the contrary.  At trial, however, the defendants failed to adduce any evidence of the content of advice they had received from professionals such as accountants and bookkeepers.

[15]     Mr Malarao does not provide any detail of the efforts that the plaintiffs were required to go to in order to rebut this proposed defence.   The important point, however, is that the onus was on the defendants to prove that they relied for advice upon appropriately qualified professionals.  Mrs Petera’s brief of evidence dealt with this issue in very brief terms.  She did not go into any detail at all as to how she and her husband had relied for advice upon such persons.  She also concluded her brief by saying that the defendants proposed calling an accountant to give evidence on this point.  No such brief was ever served.  As a result, it must have been obvious to the plaintiffs that the defendants were unlikely to be able to establish a defence under s

300(2)(b) of the Companies Act 1993.

[16]     I do not consider the defendants should be required to pay increased costs under this head.

Failure to admit facts, evidence, documents and legal arguments

[17]     Mr Malarao relies again in this context on the defendants’ denial that the company became unable to pay its debts as they fell due when that fact was effectively acknowledged at trial.  I have already dealt with this issue.

[18]     Mr Malarao next relies on the fact that the defendants contested repayment of their current account, and argued that payments they had made from the company’s bank account related to legitimate business expenditure or wages and salaries.  This argument overlooks the fact that the defendants’ arguments on these points were

partly successful at trial.   I held that payments made on 10 December 2007, 5

December 2008 and 23 December 2008 related to business expenditure.7    I also declined the plaintiffs’ claim for recovery of wages or salaries to the extent that the company and defendants had declared such payments for taxation purposes.  Given that fact I do not consider it appropriate to require the defendants to pay increased costs under this head.

Failure to comply with order for discovery

[19]     The plaintiffs acknowledge that the defendants provided a sworn affidavit of documents.   Mr Malarao points out, however, that the affidavit did not list any documents and the defendants did not provide the plaintiffs with any documents prior to trial.   He submits that Mrs Petra then tried to introduce some new and previously undiscovered documents during the course of the trial.

[20]     I acknowledge that the defendants’ affidavit of documents did not list any documents.  Importantly, however, the brief of evidence that Mrs Petera served prior to the trial did not refer to any documents.  With one exception, the trial transcript does not show that she tried to produce previously undiscovered documents for the first time whilst giving evidence.  Her evidence at trial was generally to the effect that she had given all of the company’s records to the liquidators or to the person preparing the company’s tax returns.

[21]     My reading of the transcript reveals that Mrs Petera produced one document when she gave evidence.   This was a letter from one of the company’s creditors (Chevron Oil Company) confirming that it had been paid in full after the date upon which the company was placed in liquidation.  Mrs Petera had canvassed that issue the previous day during her cross-examination of Ms Madsen-Ries, and I did not take Mr Malarao to object to the production of the document.

[22]     I do not consider that an uplift in costs is warranted under this head.

7      Madsen-Ries and Vance v Petera, above n 1 at [23].

Orders

[23]     It follows that I am not prepared to require the defendants to pay increased costs  to  the  plaintiffs.    The  plaintiffs  are  entitled  to  costs  and  disbursements calculated on a Category 2B basis for steps taken in both the High Court and District

Court.

Lang J

Solicitors:

Meredith Connell, Auckland