Madsen-Ries v Rapid Construction Limited - [2013] NZHC 1319

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-001044 [2013] NZHC 1319

BETWEEN VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN
Applicants

ANDRAPID CONSTRUCTION LIMITED Respondent

Hearing: by memoranda

Appearances: R P Coltman for applicants
B D Gustafson for respondent

Judgment: 5 June 2013

COSTS JUDGMENT OF ASSOCIATE JUDGE ABBOTT

This judgment was delivered by me on 5 June 2013 at 4.30pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:
Fortune Manning, Auckland
B Gustafson, Auckland

V J MADSEN-RIES AND H D LEVIN v RAPID CONSTRUCTION LIMITED [2013] NZHC 1319 [5 June
2013]

[1] The respondent, Rapid Construction Limited (Rapid), seeks an award of costs following determination of this application by the liquidators of Giant Engineering Limited (in liquidation) for an order for payment to them of the value of an insolvent transaction. Rapid contends that it was the successful party as the Court accepted that it had a statutory defence to the majority of the sum claimed by the liquidators. It also seeks an uplift on scale costs on the ground that the liquidators refused a Calderbank offer.

[2] The liquidators contend that no award of costs should be made, on the grounds that they obtained an order for payment even though it was less than they had sought. They say that it was not certain that the defence would succeed, and in light of uncertainty as to the scope of the statutory defence it was reasonable for them to reject the Calderbank offer.

[3] For the reasons I will now give briefly, I consider that costs should lie where they fall.

Background

[4] The liquidators gave notice to Rapid on 30 August 2011 that they considered a payment of $113,551.84 made to it by Giant to be an insolvent transaction. Rapid did not object to the notice, so the transaction was set aside automatically.[1] The liquidators issued this proceeding seeking an order under s 295 of the Companies Act
[1] Companies Act 1993, s 294(3).
1993 that Rapid pay them the amount of the transaction. Rapid opposed the application claiming that it was entitled to the statutory defence under s 296(3) of the Act in respect of the sum of $90,713.50.

[5] On 20 December 2012 I held that Rapid had a defence in respect of the sum of $90,713.50, and made an order that the liquidators were entitled to receive the balance of $22,838.34. Costs were reserved.

[6] The parties have been unable to resolve costs. The respondent says that the liquidators recovered less than it offered them in a Calderbank letter. It seeks costs

on a scale 2B basis of $5726, together with an uplift of 33% (said to be a further

$1858). The applicants say that both parties had some success and no order for costs should be made.

The parties’ contentions

[7] The respondent says that the only matter in issue in the hearing was its entitlement to the s 296(3) defence (in respect of a cheque for…

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: [2013] NZHC 1319
Decision Date: 5 June 2013

CaseChat Overview and Summary

The case of Madsen-Ries v Rapid Construction Limited involved a dispute between the liquidators of Giant Engineering Limited and Rapid Construction Limited. The liquidators sought an order for payment of an insolvent transaction, which Rapid opposed, asserting a statutory defence under the Companies Act 1993. The court accepted Rapid's defence in part, ordering Rapid to pay a reduced amount. Following this determination, Rapid sought an award of costs, contending it was the successful party as it successfully defended against the majority of the sum claimed. The liquidators opposed the award of costs, arguing that they were partially successful in obtaining an order for payment, and that their rejection of Rapid's Calderbank offer was reasonable given the evolving nature of the law regarding the statutory defence.

The court had to determine whether Rapid was entitled to an award of costs given its successful defence, and whether the liquidators' rejection of Rapid's Calderbank offer warranted an uplift in costs. Rapid argued that the liquidators' refusal to accept its offer of $35,000 contributed to unnecessary costs, while the liquidators contended that their decision to proceed with the application was reasonable, given their duty to explore all avenues of potential recovery for creditors. The court considered the liquidators' partial success in obtaining an order for payment, and Rapid's late argument on set-off in liquidation, which might have influenced the liquidators' stance. The court ultimately concluded that neither party could be said to be unequivocally successful, and that the liquidators' decision to test Rapid's defence was reasonable, given the uncertainties surrounding the statutory defence at the time.

After weighing all factors, the court decided that costs should lie where they fell, making no order as to costs. The court recognised that the liquidators were partially successful in obtaining an order for payment, and that Rapid's defence, although successful, did not warrant an uplift in costs due to the liquidators' reasonable decision to proceed with the application. This decision reflects the court's consideration of the respective successes and responsibilities of both parties in the litigation process.

Orders