McKay v Registrar of Companies

[2024] NZHC 335

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-811

[2024] NZHC 335

UNDER

the Companies Act 1993, section 329(1)(a) and High Court Rules 19.2(c)

IN THE MATTER OF

an application for restoration of a company, VISUAL STATEMENT LIMITED

BETWEEN

MARK BRIAN McKAY

Applicant

AND

THE REGISTRAR OF COMPANIES

First Respondent

BATH STREET ENTERPRISES LIMITED

Second Respondent

Hearing:

On the papers

Appearances:

Edward J Grove for the Applicant

Neville Woods for the Second Respondent

Judgment:

28 February 2024

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 28 February 2024 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

………………………….

Registrar/Deputy Registrar

Solicitors:

Lateral Lawyers Ltd (Shane Rohde), Mt Eden, Auckland, for the Applicant RiceCraig (Neville Woods), Papakura, Auckland, for the Second Respondent Counsel:

Chris Patterson Barrister Ltd (C T Patterson/E J Grove), Auckland, for the Applicant

McKAY v THE REGISTRAR OF COMPANIES [2024] NZHC 335 [28 February 2024]

[1]    On 6 June 2023 the Court issued a minute ordering that Visual Statement Limited (VSL) be restored to the New Zealand Companies Office Register pursuant to s 329(1)(a)(ii) of the Companies Act 1993, conditional upon the company filing, within one month of being restored to the Register, its annual returns for the financial returns 2020 onwards.

[2]    The applicant, Mr Mark McKay, in his counsel’s memorandum of 2 June 2023, has sought scale costs on a 2B basis of $5,258.00 together with disbursements, being the filing fee of $500.00, totalling $5,758.00, against the second respondent, Bath Street Enterprises Limited (BSL). The Court has taken the view (at [15] of the minute) that BSL should make a contribution to the applicant’s costs and directed the parties to endeavour to agree costs or, failing agreement, each party to file a memorandum as to costs.

[3]    Counsel for BSL filed a memorandum dated 14 June 2023 and counsel the applicant has filed a memorandum in reply, dated 20 June 2023. The Court apologises for the delay in dealing with this matter but it has only just been referred to me.

Applicant’s position

[4]    Mr Grove for the applicant acknowledges that where a respondent has chosen to simply abide by the outcome of the restoration application under s 329 of the Companies Act, awarding costs should only be made in exceptional circumstances. However, he submits exceptional circumstances exist in the present instance being:

(a)BSL lodged an unmeritorious objection to VSL’s automatic restoration to the Register, pursuant to s 328, thereby precipitating the need for the applicant’s application to the Court;

(b)BSL, despite repeated requests, subsequently refused to confirm that it was the person who had objected to the restoration and refused to disclose the grounds to the objection;

(c)BSL subsequently refused to confirm whether it would or would not be opposing the application for restoration under s 329, at least not until after the applicant had already been put to the cost of having to prepare and file its application and supporting evidence to address all the grounds that BSL had raised in its objection.

[5]    Mr Grove submits that BSL’s deliberate and unnecessarily obstructive conduct necessitated the applicant proceeding on the basis that the application could have been opposed by BSL on the same grounds set out in the objection it lodged with the Registrar of Companies and consequently required the applicant to go to the additional costs of addressing those grounds in its application.

[6]    In respect of the objections and arguments raised in counsel for BSL’s memorandum, Mr Grove responds as follows:

(a)He rejects the argument that BSL was not a party to the proceeding and submits there was no basis in law for this contention as BSL was named as a party to the proceedings and was served with the proceedings.

(b)As to the argument the applicant was granted an indulgence by the Court in allowing the restoration of VSL and consequently should not be awarded any costs, he submits that while the applicant was granted an indulgence, the sole cause for the applicant having to seek that indulgence was BSL’s lodging of its objection with the Registrar of Companies.

(c)He rejects BSL’s assertion that there is an absolute bar to costs being awarded in respect of conduct prior to the commencement of the proceeding and instead any relief in relation to such conduct must be expressly sought as an award of damages, and accordingly the Court

has no power to award any costs against BSL. He submits BSL’s reliance on the Supreme Court’s judgment in Paper Reclaim Ltd v Aotearoa International Ltd1 as authority for this proposition is misplaced and that is not the effect of the Paper Reclaim decision. He submits that the authorities of Daniel v Cundall2 and Belgiorno-Nettis v Auckland Unitary Plan Independent Hearings Panel3 are clear authority that costs can be awarded to reflect costs which have had to be incurred as a result of a party’s pre-proceeding conduct. He points to a number of decisions decided since the Paper Reclaim decision and he submits the Court has consistently held that conduct prior to the commencement of proceedings is relevant to costs.

(d)As to the assertions by BSL that the grounds for objection it raised with the Registrar of Companies to the restoration of VSL were either admitted, true and correct, or yet to be determined, he submits BSL has already foregone its opportunity to advance, or justify those grounds for objection in these proceedings as it did not oppose the restoration application on the grounds set out in the objection.

In conclusion, Mr Grove seeks contribution from BSL of an award of two-thirds of scale 2B costs together with the applicant’s actual disbursements in relation to the application (including costs in respect of Mr Grove’s memorandum of 20 June 2023).

BSL’s position

[7]    Mr Woods, for BSL, submits that the applicant should not be entitled to any award of costs as:

(a)there is no legal basis upon which costs may be awarded; and

(b)no factual basis upon which costs should be awarded.

1      Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26; [2006] 3 NZLR 188.

2      Daniel v Cundall [2020] NZHC 2309 at [21] and [22].

3      Belgiorno-Nettis v Auckland Unitary Plan Independent Hearings Panel [2022] NZHC 3623.

[8]    As to there being no legal basis upon which costs may be awarded, Mr Woods submits:

(a)BSL had a statutory right to oppose an application for restoration of VSL under s 328 of the Act. The Registrar had a duty to consider the opposition and the power to reinstate a company rests with the Registrar of Companies. He submits that it is the Registrar who is the defendant in the proceedings and who exercises the power under s 328(4) in the event that it receives what it considers to be a bona fide objection to restoration. He submits BSL is entitled as of right to provide its grounds in opposition to the Registrar, and there is a public interest in safeguarding that process as of right.

(b)Costs are not presumed in favour of a successful plaintiff when that plaintiff is seeking an indulgence from the Court. He submits on this occasion the applicant’s own neglect resulted in the need to make the application and VSL was seeking an indulgence of the Court, including in the exercise of the Court’s discretion to grant the application.

(c)As to the authority of the Paper Reclaim decision, costs reflect how a party acted during the course of the litigation, not before it. Mr Woods submits in this case the originating application did not plead any misconduct against BSL with the Registrar and in the event that the Court seeks, on its own motion, to make an enquiry into the facts and the grounds contained and described in the notice of objection, VSL would be required to clearly articulate allegations of bad faith or impropriety or some other tortious cause of action. He submits that this Court is bound by the Supreme Court’s decision in Paper Reclaim, and may not consider costs in relation to any pre-proceeding conduct, namely the notice of objection to the Registrar.

(d)He submit BSL took no steps in the proceeding, and its conduct therefore in relation to the proceeding caused no cost to the applicant.

Accordingly, there is no lawful basis upon which the Court can order costs against BSL.

[9]    Mr Woods submits that there is a general rule that costs against non-parties are out of the ordinary and/or exceptional. He submits BSL is a non-party as it is not properly a party to the proceeding.

[10]   Mr Woods then seeks to distinguish the two authorities relied on by the applicant, Daniel v Cundall4 and Belgiorno-Nettis v Auckland Unitary Plan Independent Hearings Panel,5 submitting the facts of the cases means they are not relevant to the current situation.

[11]   Mr Woods submits there has been no factual basis for an award of costs against BSL and the six grounds for objection in the notice of objection filed by BSL are either admitted, true and correct, or are yet to be determined. Accordingly there is no factual basis upon which the applicant may assert the objection was made, either in bad faith, was not a genuine or bona fide or otherwise fits within the exceptions that would be required to justify an award of costs against a non-party.

[12]   Finally in conclusion, Mr Woods submits that BSL’s costs in making a submission as to costs should be ordered against VSL and seeks 2B scale costs of

$1,195.00.

Result

[13]   Having considered the respective submissions of Mr Grove and Mr Woods,    I am of the view that BSL should make a contribution to the applicant’s costs in respect of the application. The reasons for this are:

(a)The application under s 329 of the Companies Act was necessary due to the objection of BSL filed with the Registrar of Companies. While Mr Woods is correct in his submission that it was BSL’s statutory right

4      Above, n 2.

5      Above, n 3.

to file the objection, none of the grounds for the objection were pursued by BSL in opposing the applicant’s restoration application, which in my view, amounted to BSL abandoning its position prior to the hearing.

(b)While BSL ultimately did not oppose the application and agreed to abide by the decision of the Court, this decision was communicated to the applicant too late to avoid putting the applicant to the cost of preparing for a hearing on the basis that BSL would pursue all the objections it had raised in the notice of objection to the Registrar of Companies.

(c)It is arguable from the authorities cited, of Daniel v Cundall and Belgiorno-Nettis v Auckland Unitary Plan Independent Hearings Panel and other authorities cited at [13](h) of Mr Grove’s submissions, that the Court can take into account pre-proceeding conduct in fixing costs, where the conduct has directly resulted in increased costs to the applicant. In this instance, while BSL was entitled to lodge its objection, its refusal to confirm it was the objector and the grounds for the objection, and its late refusal to confirm whether the hearing would be opposed or not, justifies some award of costs to the applicant.

(d)The applicant has sought two-thirds of the 2B scale costs of the application and the memorandum as to costs together with actual disbursements. In my view, a fair result is the amount of two thirds of the applicant’s 2B costs on the application as sought by the applicant (but not costs on the memorandum, this being effectively “costs on costs”) together with disbursements.

Orders

[14]I make the following orders:

(a)BSL is to pay the applicant an amount equal to two thirds of the applicant’s 2B cost of $5,258.00 in respect of the application amounting

to $3,470.28 together with the disbursements of $500.00 (being the application filing fee) totalling $3,970,28.

(b)BSL’s application for 2B costs against VSL is dismissed.

…………………………….. Associate Judge Taylor