Mainstream Forwarders Limited v Naglum 1 Ltd

[2012] NZHC 467

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-5872 [2012] NZHC 467

BETWEEN  MAINSTREAM FORWARDERS LIMITED

Plaintiff

ANDNAGLUM 1 LTD Defendant

Hearing:         14 March 2012

Appearances: C J Orton for plaintiff

J McLennan for defendant

(on papers) Judgment:   20 March 2012

JUDGMENT OF ASSOCIATE JUDGE DOOGUE [Costs judgment]

This judgment was delivered by me on

20.03.12 at  4 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:

Martelli McKegg Wells & Cormack, PO Box 5745 Auckland [email protected]

Holmden Horrock, P O Box 1108, Auckland - [email protected]

MAINSTREAM FORWARDERS LIMITED V NAGLUM 1 LTD HC AK CIV-2008-404-5872 [20 March 2012]

[1]      Mainstream Forwarders Limited applied to liquidate the defendant on the basis that it was unable to pay its debts.  This was initially opposed, but NAGLUM 1

Ltd has subsequently withdrawn its opposition to the application and both parties agree that costs be determined by the Court.

[2]      The plaintiff seeks indemnity costs of $35,351.75.  The defendant seeks costs and disbursements on a 2B basis (calculated to be $5,150) or alternatively for costs to lie where they fall.

[3]      Liquidation proceedings were filed on 8 September 2008.   A statement of defence  was  filed  a  week  later.    The  plaintiff  alleged  that  the  defendant  was presumed to be insolvent  because it had not complied with a statutory demand served on it on 16 July 2008 claiming $20,272.62.  The defendant in its statement of defence said that it was indebted in the sum of no more than $10,596.16.  It denied that it was insolvent.  An amended statement of claim was filed in November 2008. On the 16 September 2008 John Hansen J made an order that “on consideration that

$10,596.16 is paid into Court by 3 p.m today, there will be an order restraining

advertising”.

[4]      The sum of $10,596.16 was in fact paid in as directed.

[5]      Subsequently the plaintiff applied to set aside the interim order restraining advertising and sought that the sum of $10,596.16 be paid to it in partial satisfaction of its claimed debt.  Abbott AJ made an order setting aside the interim order for stay of advertising.   He noted that the interim order was granted partly because the defendant had indicated an intention to place itself into voluntary liquidation within a matter of days.  Secondly that there was a genuine dispute in respect of part of the money being sought by the plaintiff.  The Judge considered that both grounds have now fallen away.   It was now too late for the defendant company to put itself in voluntary solvent liquidation.   Secondly it had admitted that it owed the sum of

$10,596.16.    The  defendant  had  ceased  trading.    The  Judge  did  not  determine whether the defendant company was at that point solvent.  But he concluded that the interim order for stay made on 16 September 2008 should now be lifted and ordered

accordingly and directed that the sum of $10,596.16 be paid out to the plaintiff’s

solicitors to be held in their trust account.

[6]      The liquidation proceeding was set down for a defended half-day hearing on

23 April 2009.   On 21 April or thereabout the defendant agreed to withdraw its opposition to the application and agreed that liquidators could be appointed.  Costs were reserved.

[7]      A further order seeking restraining of advertising was made on 5 November

2008.   This order was apparently made on the basis that the defendant wished to avoid commercial damage to its name and because there were no other creditors. John Hansen J made a further order restraining advertising on 5 November 2008. However, on 23 April 2009 the defendant withdrew its opposition and the company was put into liquidation. The parties were granted leave to file memoranda on costs.

[8]      The plaintiff seeks costs on a solicitor/client basis because of a charging clause in the contract between the parties.  The dispute about costs I am afraid to say has got out of control.  The defendant for example has filed 17 pages of submissions together with an additional affidavit about costs and sundry decisions of the Court. To put it in its context though that submission was filed in reply to a 15 page submission  which  was  filed  by  counsel  for  the  plaintiff  but  which  itself  had numerous addenda to it.

[9]      There are two issues.  Who should have costs and at what level.

[10]     The defendant having withdrawn its opposition must be viewed as being an unsuccessful party in the proceeding where the order which the plaintiffs sought was indeed made.  The presumption is therefore that it must pay costs.  It is idle for the defendant to still be contending that it was solvent when it withdrew its opposition to an application based on that very fact and which resulted in a Court order being made placing the defendant in liquidation.

[11]     The plaintiff claims solicitor/client costs of some $35,000.  I accept that the plaintiff is entitled to some costs.  Even it were entitled to solicitor/client costs they

remain under the control of the Court.  Both parties have acted in ways which seem to me to inevitably have exacerbated their level of costs generated by what ought to have been a fairly straightforward liquidation proceeding.

[12]     In exercise of my discretion, I consider that costs on a 2B basis ought to be allowed the plaintiff and the Court so orders.  Further, disbursements as approved by

the Registrar are also allowed.

J.P. Doogue

Associate Judge