McMahon v Ah Sam
[2014] NZHC 659
•26 March 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-4735 [2014] NZHC 659
IN THE MATTER OF SEASTONE C ONSTRUCTION AND
CIVIL LIMITED (In Liquidation)
BETWEEN
KIRSTINA MARY McMAHON Applicant
AND
DEREK AH S AM First Respondent
PAUL VLASIC Second Respondent
Hearing: 26 March 2014 Appearances:
K M McMahon - Applicant in person
M L Broad with C P Piho for RespondentsJudgment:
26 March 2014
ORAL JUDGMENT OF ASSOCIATE JUDGE BELL
Solicitors:
Kensington Swan, Auckland, for Respondents
McMAHON v AH SAM and VLASIC [2014] NZHC 659 [26 March 2014]
[1] In February this year, Judge Abbott made an order putting Seastone Construction and Civil Ltd into liquidation on the application of Lorraine Edkins. Judge Abbott appointed Mr Ah Sam and Mr Vlasic liquidators.
[2] Ms McMahon is a director of the company. She has applied for an order removing Mr Ah Sam and Mr Vlasic as liquidators. The grounds she gives in her application are that Mr Ah Sam and Mr Vlasic have falsely signed their consent to act as liquidators and that there is a conflict of interest.
[3] In response, the liquidators say that they gave their consent to be appointed liquidators properly, and they deny that they are under any conflict of interest. They counter that Ms McMahon has failed to comply with her obligations under the Companies Act 1993.
Preliminary matters
[4] At the start of the hearing, Mr Broad objected to an affidavit that Ms McMahon had sworn and filed on 17 March 2014 as it was not served on the offices of the lawyers for the liquidators on that date. In fact, it was yesterday that Ms McMahon sent them a copy of that affidavit. I have still allowed the affidavit to be used in evidence. I accept the point that as the lawyers received the affidavit only yesterday, the liquidators had not had the opportunity to reply to it. I have taken that into account in the weight I have placed on it. In the end I am not sure that much turns on the matter.
[5] Ms McMahon filed the application with Seastone Construction and Civil Ltd named as the applicant. I am treating her as the applicant. There are reasons why she could not use the name of the company to seek orders to remove Mr Ah Sam and Mr Vlasic as liquidators.
[6] The first is that once a company goes into liquidation, the liquidators assume
custody and control of the company.1 They have the power to initiate or continue
proceedings in the name of the company.2
On the other hand, although directors
remain in office, they cease to have powers, functions and duties other than those which are required or permitted to be exercised under Part 16 of the Companies Act. The powers of directors under Part 16 of the Act do not extend to issuing
proceedings in the name of the company.
[7] The second is that – as I shall elaborate more fully – any application for liquidators to be removed may be brought by a director, but the company itself cannot bring such an application. There are specific provisions in the Companies Act for applications to remove liquidators. While the Companies Act lists classes of people who may bring applications – and that includes directors - the company itself is not given the power to apply to the court for the removal of a liquidator.3
Liquidators have control of the company. If they no longer wish to hold the office of
liquidator, they do not need to apply to the court – they can simply resign. In that event, the court will fill the vacancy under s 283 of the Companies Act.
[8] Accordingly, as Ms McMahon is not entitled to use the name of Seastone Construction and Civil Ltd as applicant, I am treating her as applying in person. Because she is a director of the company, under the relevant provisions of the Companies Act she is entitled in her own right to apply for removal of the
liquidators.
Companies Act p rovisions on removal of liquidators
[9] It is necessary to understand how these provisions apply to Ms McMahon’s application.
[10] But before I deal with the provisions of the current Companies Act, it is helpful to go back to the Companies Act 1955. Section 237(1) of that Act said:
1 Companies Act 1993 s 248(1)(a).
2 Companies Act, Sch 6, clause (a).
3 Companies Act, s 286(1).
A liquidator appointed by the Court may resign or, on cause shown, be removed by the Court.
(Emphasis added)
[11] That wording “on cause shown” appeared not only in New Zealand’s Companies Act. It also appears in the equivalent legislation in Australia, in their Corporations Act4 and the phrase was also used in English companies legislation. The case law on the words “on cause shown” allowed the courts to remove liquidators if there was some unfitness in terms of personal character or because there was some connection with other parties, or as a result of circumstances which
the liquidator became mixed up in. The case law shows that in some cases the power was used more extensively, as when the court considered that a particular person should not continue as a liquidator and someone else could do the job more effectively.5
[12] It is possible to see the way in which that particular provision worked in a case that has been referred to in later cases under the 1993 Act, Re Ocean Shipping
Ltd, a decision of Fisher J.6
Although that decision does not expressly refer to s 237
of the Companies Act 1955, it is clear that Fisher J assumed that there was a wide- ranging power to remove liquidators, which he exercised. In that case, liquidators who had been appointed were not willing to carry on further investigations and wished to bring the liquidation to an end and have the company struck off. Fisher J made an order for the company to be restored to the register, revoked the liquidators’ final report and replaced the existing liquidators with new ones to carry on investigations in the interests of creditors. That seems to be an application of the
power under s 237 of the 1955 Act.
[13] The provisions under the 1993 Companies Act are different. I have already referred to s 283. That allows the court to appoint liquidators if there is a vacancy in the office. Vacancies may arise because of a resignation, because of death, or
because of disqualification under s 280 of the Act. I will not need to come back to
4 Corporations Act 2001 (Cth).
5 See Billie J Little (ed) Company and Securities Law (looseleaf ed, Brookers) at [CA286.03(1)].
6 Re Ocean Shipping Ltd HC Auckland M348/96, 16 July 1996.
s 283 as it does not arise in this case. The liquidators have not resigned, have not died, and the question of disqualification under s 280 is not in issue.
[14] Section 280 sets out the qualifications for liquidators. Section 280(1) lists classes of people who may not be appointed and act as liquidators of a company. Subsection (4) provides that a person must not be appointed liquidator unless he or she has first certified in writing that he or she is not disqualified under subs (1).
[15] Section 284 gives the court general powers to supervise a liquidation.
284 Court supervision of liquidation
(1) On the application of the liquidator, a liquidation committee, or, with the leave of the Court, a creditor, shareholder, other entitled person, or director of a company in liquidation, the Court may—
(a) Give directions in relation to any matter arising in connection with the liquidation:
(b) Confirm, reverse, or modify an act or decision of the liquidator:
(c) Order an audit of the accounts of the liquidation:
(d) Order the liquidator to produce the accounts and records of the liquidation for audit and to provide the auditor with such information concerning the conduct of the liquidation as the auditor requests:
(e) In respect of any period, review or fix the remuneration of the liquidator at a level which is reasonable in the circumstances:
(f) To the extent that an amount retained by the liquidator as remuneration is found by the Court to be unreasonable in the circumstances, order the liquidator to refund the amount:
(g) Declare whether or not the liquidator was validly appointed or validly assumed custody or control of property:
(h) Make an order concerning the retention or the disposition of the accounts and records of the liquidation or of the company.
(2) The powers given by subsection (1) of this section are in addition to any other powers a Court may exercise in its jurisdiction relating to liquidators under this Part of this Act, and may be exercised in relation to a matter occurring either before or after the commencement of the liquidation, or the removal of the company
from the New Zealand register, and whether or not the liquidator has ceased to act as liquidator when the application or the order is made.
(Emphasis added)
[16] The powers given under s 284 are in addition to other powers which the court can exercise relating to liquidators. The other power for this case is the power to remove liquidators under s 286.
[17] The provisions of s 284 that are of relevance here are subs (1)(a) and (g). Sub-clause (a) gives a general power to give directions in relation to any matter arising in connection with the liquidation. In cases that I am going to discuss, that provision has been referred to as giving a power to remove liquidators. Sub- clause (g) allows the court to declare whether a liquidator has been validly appointed or validly assumed custody or control of the property. Mr Broad submitted that that power could be used when questions might arise as to the validity of shareholders’ resolutions. Such an issue has come before me in litigation surrounding Dragon
Flyte Farms in Northland.7
[18] It may be that s 284(1)(g) is capable of wider application than Mr Broad has submitted. For present purposes, I assume that it does overlap with s 286. Applications under s 284(1) may be made by a liquidator or a liquidation committee, as of right, but other people require the leave of the court – that is, a creditor, or shareholder, other entitled person or a director. If Ms McMahon wants to rely on s 284 to make her application, she would need leave of the court.
[19] Section 285 provides a definition of “failure to comply” under s 286.
285 Meaning of “failure to comply”
(1) In section 286 of this Act unless the context otherwise requires, failure to comply means a failure of a liquidator to comply with a relevant duty arising—
(a) Under this or any other Act or rule of law or Rules of Court;
or
(b) Under any order or direction of a Court other than an order to comply made under that section;—
7 Finnigan v Butcher [2012] NZHC 810 and Finnigan v Butcher (No.2) [2012] NZHC 2463.
and comply, compliance, and failed to comply have corresponding meanings.
(2) In subsection (1), relevant duty includes the duty of a person in his or her capacity as administrator or deed administrator of a company.
[20] Section 286 provides:
286 Orders to enforce liquidator's duties
(1) An application for an order under this section may be made by— (a) A liquidator:
(b) A person seeking appointment as a liquidator: (c) A liquidation committee:
(d) A creditor, shareholder, other entitled person, or a director of the company in liquidation:
(e) A receiver appointed in relation to property of the company in liquidation:
(f) If the liquidator is a chartered accountant, the President of the New Zealand Institute of Chartered Accountants:
(g) If the liquidator is a barrister and solicitor or a solicitor, the
President of the New Zealand Law Society:
(h) An Official Assignee.
(2) No application may be made to a Court by a person other than a liquidator in relation to a failure to comply unless notice of the failure to comply has been served on the liquidator not less than 5 working days before the date of the application and, as at the date of the application, there is a continuing failure to comply.
(3) If the Court is satisfied that there is, or has been, a failure to comply, the Court may—
(a) Relieve the liquidator of the duty to comply wholly or in part; or
(b) Without prejudice to any other remedy which may be available in relation to a breach of duty by the liquidator, order the liquidator to comply to the extent specified in the order.
(4) A Court may, in relation to a person who fails to comply with an order made under subsection (3) of this section, or is or becomes disqualified under section 280 of this Act to become or remain a liquidator,—
(a) Remove the liquidator from office; or
(b) Order that the person may be appointed and act, or may continue to act, as liquidator, notwithstanding the provisions of section 280 of this Act.
(5) If the Court is satisfied that a person is unfit to act as a liquidator by reason of persistent failures to comply or the seriousness of a failure to comply,—
(a) the Court must make a prohibition order; and
(b) the period of the order is a matter for the discretion of the Court but the Court may make a prohibition period for an indefinite period.
(6) A person to whom a prohibition order applies must not—
(a) Act as a liquidator in a current or other liquidation; or
(b) Act as a receiver in a current or other receivership. (7) Evidence that, on 2 or more occasions … ,—
(a) A Court has made an order to comply under this section in respect of the same person; or
(b) An application for an order to comply under this section has been made in respect of the same person and that in each case the person has complied after the making of the application and before the hearing,—
is, in the absence of special reasons to the contrary, evidence of persistent failures to comply for the purposes of this section.
(8) In making an order under this section a Court may, if it thinks fit,— (a) Make an order extending the time for compliance; or
(b) Impose a term or condition; or
(c) Make an ancillary order.
(9) A copy of every order made under subsection (5) of this section must, within 10 working days of the order being made, be delivered by the applicant to the Official Assignee for New Zealand who must keep it on a file indexed by reference to the name of the liquidator concerned.
[21] Subsection (1) lists the classes of people who may apply for orders under that section. It is relevant that the classes of people who may apply under s 286 are more extensive than the people who may apply under s 284(1). Specifically receivers, the President of the New Zealand Institute of Chartered Accountants, the President of the
New Zealand Law Society and the Official Assignee may apply for orders under s 286 even though they have no standing under s 284.
[22] Section 286 gives the court express power to remove a liquidator. One way is for any persons entitled to seek an order to comply under s 286(3). But before the court can make such an order, the applicant must first give at least five days’ notice to the liquidators under s 286(2). The notice must identify a failure to comply, being a failure under s 285. It must require the liquidator to comply and state that if the liquidator continues to fail to comply, an application may be made under s 286(3).
[23] Under s 286(3), the court has the discretion whether to relieve the liquidator of the duty to comply, either wholly or in part or to make an order requiring the liquidator to comply. The court’s order specifies the extent to which the liquidator is required to comply. That gives the liquidator a detailed requirement as to what he or she should do.
[24] Section 286(4) gives the court the removal power. The removal power may be used either because the liquidator has failed to comply with an order under s 286(3) or because the liquidator is or has become disqualified under s 280 of the Act. Even when those grounds are established, the court has a discretion how to exercise those powers.
[25] There is a question whether s 286 is a stand-alone provision for removal of liquidators by the court, or whether s 284 may also be used as giving a more wide- ranging general power of removal. While s 284 is intended to generally supplement other powers of the court to supervise the liquidation of a company, I do not accept that in the light of the legislative history it can be regarded as giving a general, wide- ranging power to remove liquidators. In my view, ss 285 and 286 prescribe specific and narrow grounds for removal of a liquidator. In light of that, it would not be correct to exercise a more wide-ranging power to remove a liquidator under s 284.
[26] There is case law going both ways on the point. The approach which I have
set out above is one Mallon J followed in Official Assignee v Norris.8
In that case
8 Official Assignee v Norris [2012] NZCCLR 10 (HC).
the Official Assignee had applied for the removal of a liquidator. Mallon J found that the Official Assignee did not have standing under s 284. She also held that the Official Assignee (who did have standing under s 286) had not given Mr Norris the appropriate form of notice under s 286(2). In other words, Mallon J treated s 286 as the route by which liquidators should be removed.
[27] Decisions going the other way are Katavich v Meltzer, West v Grant, and
Black v Selwyn Developments Ltd.9 These three decisions all draw support from the
decision of Fisher J in Ocean Shipping Ltd.10
With great respect to the Judges who
heard those cases, they do not appear to have had the detailed provisions of s 286 drawn to their attention; they do not appear to have received submissions that the Companies Act 1993 has specific, narrow provisions; and that the powers which Fisher J could exercise under the Companies Act 1955 are not available under the Companies Act 1993. In short, I treat s 286 as a stand-alone code for removal of liquidators by the court. I do not accept that the carefully prescribed procedures
under that section can be outflanked by applying under s 284.
[28] In my view, the proper way to consider Ms McMahon’s application is to deal
with it under s 286 alone.
[29] At the end of this decision I will also consider the alternative argument, in case it is thought that s 284 has wider scope than I have allowed it here. That is, I will consider whether I would have granted leave to Ms McMahon in any event.
No basis for application under s 286
[30] Once it is accepted that s 286 of the Companies Act is the decisive provision, this case becomes straightforward. I asked Ms McMahon whether she contended that the liquidators were disqualified under s 280 of the Companies Act. She accepted that they did not come within any of the disqualifying classes under s 280. Therefore, her application cannot be considered under s 286(4)(a) of the Companies
Act as relying on s 280.
9 Katavich v Meltzer [2011] NZCCLR 8 (HC), West v Grant [2013] NZHC 3043, Black v Selwyn
Developments Ltd (In Liq) HC Auckland CIV-2007-404-4525, 20 August 2007.
10 Ocean Shipping Ltd, above n 6.
[31] The alternative route for the liquidators to be removed is for the procedures under s 286(2) and (3) to be followed. Ms McMahon did not give the liquidators a notice that complied with s 286(2) of the Companies Act. In Official Assignee v Norris, Mallon J addressed the requirements:
[42] What is required is a notice that meets the purpose of s 286(2). The purpose of the notice is to enable the liquidators (if they are willing and able to do so) to remedy the alleged failure and thereby avoid the court’s involvement. That this is the purpose follows from the requirements that:
(a) The notice must be given before an application is made;
(b) The application can only be made if there is a continuing failure to comply; and
(c) On an application the court is empowered to relieve the liquidator of the duty to comply, and order the liquidator to comply.
[43] To achieve its purpose the notice must clearly inform the liquidator of the duty they are alleged to have breached and how they are alleged to have breached that duty, so that the liquidator is able to determine what he or she needs to do if they are to avoid an application to the court.
[32] Ms McMahon did send an email to the liquidators stating that she was applying to the court to have them removed. She also told them that she was complaining about them to the Society of Chartered Accountants. But none of her communications to the liquidators met the requirements of s 286(2) as set out by Mallon J.
[33] I accept the submission for the liquidators that there are good policy reasons why the notice requirement under s 286 should be adhered to. In some cases where the breach is minor, trivial, or by way of an oversight, it enables a liquidator a short amount of time to remedy the failure and to take legal advice if necessary. Similarly, I accept the submission that if the default is remedied, then the notice acts as a self- help remedy for the complainant as it avoids the need to make an application to the court to remove the liquidator, saving both parties the costs of arguing the application and the court from having to hear and consider the application.
[34] Section 286 has been criticised as being too narrow. It is when compared with the wide-ranging power under the Companies Act 1955. But the intention was clearly to spare liquidators from being subject to general wide-ranging attacks. They should be removed only if the distinct grounds under s 286 have been made out. That is the policy of the legislation. It is not my job to comment on it further, but simply to apply it.
[35] As Ms McMahon concedes the liquidators are not disqualified under s 280, and as she has not given any notice under s 286(2), I do not have any jurisdiction to make any orders under subsection (3). That being so, the exercise of power to remove under s 286(4) for failure to comply does not arise.
The merits of Ms McMahon’s complaints
[36] It may be enough to finish the judgment there, because that effectively deals with Ms McMahon’s application. But that does not address Ms McMahon’s complaints. It is therefore necessary to go into the factual aspects of the case.
[37] When the liquidators were appointed they provided a written consent to being appointed under s 282. With it they provided the certificate required under s 280(4). It says:
(a) We are not disqualified for any reason set out in s 280 of the
Companies Act 1993 from being appointed as a liquidator;
(b) We certify that we have not had a continuing business relationship with any of the parties as set out in s 280(cb) of the Companies Act
1993;
(c) We are not aware of any reason which would disqualify us from such an appointment; and
(d) Should we become aware of any such reason prior to the date of our appointment, we shall advise the court accordingly.
[38] Judges who make liquidation orders are familiar with certificates in that form. It is a conventional wording used by insolvency practitioners. It is that certificate that Ms McMahon contends was false.
[39] Ms McMahon has set out a number of complaints. The first matter does not concern this liquidation but concerns an earlier liquidation of Seastone Construction
and Civil Ltd, which occurred on an application by another creditor, Ian Stephens
Ltd.11
The court made the liquidation order on 4 October 2013. Mr Ah Sam and
Mr Vlasic were appointed liquidators on that application as well.
[40] However, that order was the subject of a recall application. The recall order was made – but not until 16 October 2013. The liquidation order had not been sealed. Two other creditors had filed appearances in the liquidation proceeding or notified the liquidators. Ms McMahon swore an affidavit in support of the recall application. Her application was based on the fact that the debt to Ian Stephens Ltd had been cleared, the last payment of $1,000 having been made on the date of the liquidation order. She said that the company made arrangements to clear the debts to the other creditors who appeared in support. Through her counsel she advised the court that the liquidators’ costs would be met. The recall order was made without
opposition. The recall order was apparently not sealed until 17 October 2013.
[41] In the meantime, the liquidators had begun work on the liquidation. By the time of the recall order, their charges, including GST and disbursements, came to
$3,236.10. Ms McMahon complains about the way the liquidators went about getting themselves paid. When the company was first placed in liquidation it had funds in a Kiwibank account amounting to $1,944.89. On the date of the liquidation order, the liquidators advised Kiwibank to freeze the account and forward the funds to their office. The money did not come through until 17 October 2013. Ms McMahon says that by this stage the liquidation order had been recalled and the liquidators no longer had power to use those funds. The liquidators did use the funds forwarded by Kiwibank to pay part of their remuneration. That left $1,291.21 outstanding. That was paid during November 2013.
[42] In November there was communication between the liquidators and the lawyer acting for the company. That lawyer, by email, advised the liquidators that
11 Ian Stephens Ltd v Seastone Construction and Civil Ltd HC Auckland, CIV-2013-404-3454,
4 October 2013.
the company did not seek reimbursement of the funds that came out of the Kiwibank account, and it advised that the outstanding balance of $1,291.21 would be paid.
[43] The liquidators make the fair point that that really resolved the issue. It was not revived until after the liquidators had begun work on this second liquidation and they began to press Ms McMahon for information and documents under s 261 of the Companies Act.
[44] Ms McMahon complains about some minor matters:
(a) an invoice which the liquidators first issued in the earlier liquidation did not give credit for the payment of $1,944.89;
(b) an advertisement advising of the liquidation was published in The
Gazette after the date of the recall order;
(c) the relationship between the liquidators and the debt-collecting firm which had taken the proceedings on behalf of Ian Stephens Ltd;
(d) excessive debt-collection costs charged by the debt-collecting firm which she says the company was required to pay.
[45] As to the last point, after the recall order Ms McMahon began a proceeding in the name of the company against the debt-collecting company in the Disputes Tribunal to seek at least some refund of the costs that she had had to pay. Once the company was put into liquidation a second time, the liquidators terminated that proceeding in the Disputes Tribunal. Ms McMahon says that the relationship between the liquidators and the debt-collecting company was inappropriate. That seems to be the basis of her allegations of conflict of interest.
[46] I take no issue with the payment of the Kiwibank monies to the liquidators and their using those monies to pay their remuneration. If the liquidation had continued, they would be entitled to use those funds for their remuneration as having first claim under Sch 7 of the Companies Act. If, instead of the liquidation order being recalled, there had been an application for termination of the liquidation under
s 250, the court would have been concerned to see that the liquidators were paid before the liquidation was terminated. When there is a recall application - rather than an application for termination under s 250 – I cannot see why the court would not be similarly concerned to see that the liquidators were paid for work they had done.
[47] Part of Ms McMahon’s complaint is that the liquidators seem to have pressed on with their work in the liquidation even though they were advised that a recall application was being made. The liquidators were probably “playing to the whistle”. But a player is not to be criticised for playing to the whistle. These were experienced liquidators. No doubt they commonly meet a situation where a company is put into liquidation and directors and shareholders of the company protest against that and say that they will challenge what has been done. Nine times out of 10 nothing comes of it. This was an exception – something did come of it. Ms McMahon did arrange for the liquidation order to be recalled and their work as liquidators came to an end. Many times in a liquidation it is important that liquidators take proper steps to secure assets of a company and to ensure that they have the records of the company so that they can carry out their functions properly. They are not to be criticised for playing to the whistle.
[48] The advertisement in The Gazette is inconsequential. The liquidators were required to advertise the fact that the company had been placed into liquidation. There is a deadline for placing advertisements in The Gazette. It is unfortunate that although the advertisement was placed promptly, it did not appear until after the recall order. But there is nothing in that point.
[49] Nor do I see anything in the fact that there seems to be a commercial relationship between the debt-collecting company and the liquidators. It may commonly happen that a creditor or a debt collector may have preferred insolvency practitioners whom they name to be appointed as liquidators. I do not regard that as anything out of the ordinary. After all, the Commissioner of Inland Revenue has her preferred liquidators. No one takes any issue with the fact that the Commissioner regularly nominates particular insolvency practitioners on her liquidation applications and those insolvency practitioners pursue matters vigorously in the
interests of the Commissioner. That simply reflects a commercial relationship. If that can happen at the level of the Commissioner of Inland Revenue, I see nothing different in the present circumstances here.
[50] Ms McMahon also says that she has complained to other bodies, including the Society of Accountants. I do not take that into account. Those bodies have not entered into any deliberations and they have not considered the merits of the matter yet. The court has to decide these matters on the basis of the evidence, not on the fact that a party has also made a complaint to another body.
[51] Looking at the matter overall, I cannot see anything in the issues that Ms McMahon has raised that gives rise to any conflict of interest or that would give any grounds for issuing a notice under s 286(2) or for the court to make any orders for removal under s 286(3) or (4) of the Companies Act.
[52] What I do note is that the liquidators have been pressing Ms McMahon for records and information under s 261 and she has been less than enthusiastic in providing that information. On liquidation, control of the company has passed from Ms McMahon, as a director, to the liquidators. The liquidators are conducting matters in the interests of creditors. That means that they must go to shareholders and directors to get information out of them. That can at times seem demanding to those on the receiving end of the requests but directors are under a duty to comply. There is an air about this application that Ms McMahon feels uncomfortable about the way that the liquidators have conducted the liquidation and she would far rather have liquidators who were more friendly and amenable to her way of thinking than these particular liquidators who have been nominated by the creditors. Simply because these liquidators do not suit her is not a proper ground for the court to remove them.
Leave under s 284
[53] As mentioned, I do not believe that s 284 applies. If I am wrong about that, then the question of leave would arise. Ms McMahon did not apply for leave under s
284. However, I regard her application as unmeritorious. I would not have granted
leave if she had applied. She has not raised any seriously arguable question that would require consideration under s 284. A leave application is required as a filter to screen out unmeritorious applications. This is one case where the filter does need to be applied.
Costs
[54] Mr Broad has sought costs for the liquidators. The starting point is to categorise the proceeding. It is category 2. So far as the steps taken in the proceeding are concerned, I apply band B. In particular, I am satisfied that the steps taken could not reasonably be carried out inside band A. The steps that are approved are:
(a) Dealing with initial opposition 2.0 days (b) On the first call 0.2 days (c) Preparation for hearing and preparation of submissions 1.5 days (d) Preparing the bundle of documents 0.6 days (e) Appearance for a half day for one counsel only 0.5 days (f) Sealing the order 0.2 days
Total 5 days
That is $9,950 in total at the rate of $1,900 per day.
[55] Ms McMahon complains that the steps taken were excessive. The liquidators did give a comprehensive answer. But they are not to be criticised for this, given that this was an attack on their professional integrity. They were entitled to give a full answer in response.
[56] Even if they had given a response that was not as extensive as the one they in fact gave, they would still be able to recover costs at the rates as I have approved. The costs calculated on a 2B basis would still be the same.
[57] In addition, Mr Broad seeks an uplift. The court has power to do so under r 14.6 of the High Court Rules. Mr Broad does not seek indemnity costs. The increase he seeks is less than what he says were actual costs.
[58] There are two aspects that in my view justify increased costs: the overall lack of merit in the application and the failure by Ms McMahon to serve her 17 March affidavit on time. She also filed another late affidavit which went beyond matters strictly in reply. It was the late delivery of the 17 March affidavit that has created further work on the part of the liquidators.
[59] As a further factor in the exercise of the discretion to award increased costs, I take into account the fact that to the extent the liquidators are not paid by Ms McMahon, the creditors would have to carry the costs of this unsuccessful challenge to the liquidators carrying out their jobs. The liquidators were properly appointed by the court on the election of the creditors. I am satisfied that this is an appropriate case for an uplift. I order an uplift of 50 per cent.
[60] I make these orders:
(a) I dismiss Ms McMahon’s application to remove the liquidators;
(b) Ms McMahon is to pay costs of $14,925 plus disbursements, if any, to the liquidators.
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Associate Judge R M Bell
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