McInteer v Xacta Consulting Limited HC WN CIV 2007-485-718

[2008] NZHC 2450

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2007-485-718

BETWEEN  GRAEME RONALD MCINTEER Plaintiff

ANDXACTA CONSULTING LIMITED Defendant

Judgment:      31 July 2008 at 4.00 pm

JUDGMENT AS TO COSTS

OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by Associate Judge Gendall on 31 July 2008 at

4.00 p.m. pursuant to r 540(4) of the High Court Rules 1985.

Solicitors:           Gault Mitchell, Lawyers, PO Box 645, Wellington

Ford Sumner, Lawyers, PO Box 25 299, Wellington

GR MCINTEER V XACTA CONSULTING LIMITED HC WN CIV 2007-485-718  31 July 2008

[1]      This judgment relates to a claim for costs.  The situation giving rise to the claim concerns the defendant’s decision to withdraw its initial opposition to an application  by  the  plaintiff  for  leave  to  continue  this  proceeding  against  the defendant, given that the defendant was a company which had just been placed into liquidation.

[2]      The present proceedings were commenced with the filing of the plaintiff’s statement of claim on 11 April 2207.

[3]      Subsequently on 10 March 2008 the defendant company was placed into liquidation.  It had, at that time, changed its name to Uniteknic Consulting Limited.

[4]      On 29 April 2008 the plaintiff filed an Application for Leave to Continue this proceeding against the defendant company now in liquidation pursuant to s. 248(c)(i) Companies Act 1993.  This application was supported by an affidavit of the plaintiff sworn 29 April 2008.

[5]      On 15 May 2008 the defendant filed a Notice of Opposition to the plaintiff’s leave application.

[6]      The  background  to  the  filing  of  the  Notice  of  Opposition,  according  to counsel for the defendant, appears to be as follows:

a)       The  liquidator  of  the  defendant  company,  Terrence  Charles  Web Bastion (“Mr Bastion”) appointed on 10 March 2008, provided his first report in relation to the company’s affairs together with his proposals for conducting the liquidation on 16 March 2008.

b)On 11 April 2008 Mr Bastion received a letter from the plaintiff’s solicitors requesting that he consent to the granting of leave to the plaintiff to continue the current proceedings against the company.

c)       On 29 April 2008, Mr Bastion apparently responded to this letter. He advised that he did not give consent to the proceeding continuing at that time as he had not been provided with a copy of the pleadings and other documents.  He requested these be provided following which he said he would give the matter further consideration.

d)On 1 May 2008 Mr Bastion says he was served with the plaintiff’s leave application, and by letter dated 1 May 2008 Mr Bastion received a copy of the present proceedings.

e)        This matter was due for a first call on 20 May 2008.  On 13 May 2008

Mr Bastion apparently instructed counsel to act on his behalf as liquidator of the defendant company.  His instructions included filing of a Notice of Opposition in relation to the application and an appearance at the call on 20 May 2008.   Counsel indicates that Mr Bastion was also at that point seeking advice as to whether or not leave should be sought to file a statement of defence if the Court granted the plaintiff leave to continue the proceedings.

f)        That first call of this matter occurred on 20 May 2008 and a range of time tabling orders were made by Associate Judge Faire.

g)       Since 20 May 2008, Mr Bastion indicates that he received significant documentation from the directors of the defendant company and this necessitated him conducting further enquiries.

h)Although those enquiries were not fully complete on 1 July 2008, Mr Bastion says that as he was still not in a position to file any affidavits in support of his Notice of Opposition, he made the decision to seek leave to withdraw that opposition on the basis that there would be “no issue as to costs”.   Mr Bastion went on to say he would abide any order of the Court in relation to the plaintiff’s leave application.

i)Subsequently, on 7 July 2008 consent orders were made granting the plaintiff leave to continue this proceeding.

j)That consent order reserved costs.   At paragraph 3 the parties were directed to file memoranda as to costs and that issue was then to be determined by me on the papers.

k)The plaintiff seeks costs against the defendant here for what he says is the time cost and expense that he has been put to in bringing the leave application which should have otherwise been avoided.

l)On 15 July 2008, counsel for the defendant filed his memorandum in relation to costs.   On 22 July 2008, counsel for the plaintiff in turn filed his reply memorandum on the issue of costs.

m)Both those memoranda have been provided to me and as neither party has indicated it wishes to be heard on the matter I now give my decision with respect to the costs question.

[7]      From the memoranda filed by counsel for the plaintiff and counsel for the defendant it is clear there is a major disagreement between them over whether the actions taken here by Mr Bastion as liquidator are reasonable or not.  Counsel for the plaintiff does not accept that Mr Bastion has acted reasonably under all the circumstances.

[8]      This is strongly disputed by counsel for the defendant.  He contends that as liquidator, Mr Bastion was required to oppose the application initially in order to protect his position but in doing so, he advised the plaintiff throughout that once he had carried out further investigations he might give his consent to the application.  In doing so, counsel argue that Mr Bastion had acted entirely reasonably.  Further, the defendant’s position is that once Mr Bastion had obtained the necessary information, which was required from the directors of the company including the plaintiff, and took some little time, he was then in a position to make a decision which he did.  The decision  was  not  to  continue  with  his  opposition  and  he  advised  the  plaintiff’s

lawyers  of  this  well  in  advance  of  the  hearing  set  down  for  7  July  2008 (subsequently vacated).

[9]      And on the general issue of costs, counsel for the defendant submits that costs awards against liquidators personally are unusual and that liquidators should face an award of costs only in exceptional circumstances.

[10]     With respect I do not accept this last contention.  There is no general practice against awarding costs against liquidators and this is confirmed in The Commissioner of Inland Revenue v AK Oriental Limited  (in liquidation) (2007)  18PRNZ 436. What does appear clear and is emphasised in the AK Oriental Limited decision is that whether a liquidator may have acted responsibly is an important relevant factor in considering awards of costs, not only as to whether they should be made at all, but also in relation to quantum – Hart v Stiassny (1998) 12PRNZ 240 and The Commissioner of Inland Revenue v AK Oriental at page 439.

[11]     From r. 46 High Court Rules it is clear that the Court has a general discretion in determining applications for costs.   That discretion however must be exercised subject to the specific directions on costs to be found in later rules.

[12]     R. 47 sets out general principles, the first of which is that a party who fails should pay costs to the party who succeeds.

[13]     R. 476C gives further assistance where a plaintiff has discontinued.  In this situation there is a presumption that the discontinuing plaintiff is to pay costs to the defendant “unless the defendant otherwise agrees or the Court otherwise orders”. Whether a Court should order otherwise requires a consideration of the  general discretion together with the specific costs rules subject to the following principles noted in McGechan on Procedure at para. HR476C.02:

HR476C.02 - Principles

The  following  emerge  from  Oggi  Advertising  Ltd  v  McKenzie  (1998)  12

PRNZ 535 and North Shore CC v Local Government Commission (1995) 9

PRNZ 182:

(a)      Whether   the   plaintiff   acted   reasonably   in   commencing   the proceeding, and the defendant in defending it. Thus, where the defendant acted reasonably in taking a step negating the point of the proceeding, and the plaintiff then discontinued, costs are likely to lie where they fall as in Olive Francis Retirement Home Ltd v Director- General of Health 13/7/05, Simon France J, HC Auckland CIV-2005-

404-1367.

(b)      The Court will not speculate on the merits of a case it never heard; only in the exceptional case where the  merits are clear will they influence the Court’s costs decision upon a discontinuance.

[14]     In the present case, the defendant liquidator withdrew his opposition to the plaintiff’s leave application on 1 July 2008.  This is a little over 6 weeks after the liquidator had filed his Notice of Opposition to the leave application.  In the interim the liquidator, Mr Bastion, maintains he acted reasonably in all the circumstances in that  initially he  was  required  to  oppose  the  application  in  order  to  protect  the company’s position, secondly, that he advised the plaintiff throughout that once he had  the  opportunity to  carry out  further  investigations  he  might  consent  to  the application, thirdly that he did require additional information regarding the claim and this was to come from the directors and finally, having considered that information he immediately advised counsel for the plaintiff that his opposition was withdrawn. In addition, Mr Bastion says that, throughout he refrained from filing any affidavit in support of his opposition pending his consideration of all this further information.

[15]     I take the view here that it was not unreasonable for the defendant liquidator to have opposed the plaintiff’s application for leave at the outset.  Further, there is a reasonable argument in my view that Mr Bastion the liquidator acted reasonably and responsibly in taking the subsequent steps which he did to obtain the necessary information and advice before withdrawing his opposition to the application.  At all times his obligation was to take steps and make decisions which were in the best interests of the company and its creditors.  The critical question for Mr Bastion to answer throughout was whether a continuation of his opposition to the leave application would be in the best interests of the company liquidation and the company’s creditors generally.  In my view he acted reasonably here in taking the

steps he did, and he properly withdrew his opposition to the plaintiff’s leave application in a reasonably timely way.

[16]     For these reasons, in my view, the appropriate course here is for costs on the defendant’s withdrawn opposition to the plaintiff’s leave application to lie where they fall.

[17]     There is to be no order for costs made with regard to that matter.

‘Associate Judge D.I. Gendall’