Nakhle v HNP Consortium Limited

[2023] NZHC 3212

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-540

[2023] NZHC 3212

UNDER

the Companies Act 1993 s 241(4)(d) and Part 31 of the High Court Rules 2016

BETWEEN

DAVID ELIAS NAKHLE
Plaintiff

AND

HNP CONSORTIUM LIMITED

First Defendant

JOEL MICHAEL NADIN-HARVEY

Second Defendant

On the papers:

15 November 2023

Appearances:

Mitch Singh/Paul Kim for the Plaintiff

Melissa Campbell for the Second Defendant

Judgment:

15 November 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 15 November 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

Glaister Ennor (Mitch Singh/Paul Kim), Auckland, for the Plaintiff

Campbell Law Limited (Melissa Campbell), Hamilton, for the Second Defendant

DAVID ELIAS NAKHLE v HNP CONSORTIUM LIMITED [2023] NZHC 3212 [15 November 2023]

Introduction

[1]        By judgment dated 26 September 2023 the Court made an order placing the first defendant in these proceedings, HNP Consortium Ltd (HNP), into liquidation. The orders were made by consent.

[2]        Following the making of the order for the liquidation of HNP, counsel for the plaintiff and for the second defendant were asked to submit memoranda as to costs. Mr Singh, counsel for the plaintiff, filed a memorandum dated 3 October 2023 and Ms Campbell, for the second defendant, filed a memorandum dated 11 October 2023.

[3]        The plaintiff is seeking costs on a 2B basis of $13,384.00 uplifted by 25 per cent to an amount of $16,730.00 together with disbursements of $2,159.00, resulting in a total of $18,819.00.

[4]        The second defendant submits that costs should lie where they fall, or alternatively that costs should lie equally between the plaintiff and the second defendant.

Plaintiff’s submissions

[5]        At [3] to [21] Mr Singh‘s memorandum, he sets out a detailed time-line as to the correspondence exchanged between the parties for the period from 1 February 2023 through to July 2023. Mr Singh submits that HNP could have been placed into voluntary liquidation when the plaintiff proposed it on 23 March 2023 and again on 9 May 2023. He submits that the accountants should have been allowed to speak to one another, the application for substituted service against the second defendant was unnecessary, and the hearing could have been avoided had the second defendant accepted that liquidation was appropriate but that the costs were challenged (as ultimately occurred).

[6]        Mr Singh submits that there are grounds for increased costs under r 14.6(3) of the High Court Rules 2016, which allows for increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or steps in it by taking or pursuing an unnecessary step or argument that lacks merit or failing, without reasonable justification, to admit facts, evidence, documents or accept a legal argument.

[7]        In rebuttal of arguments put forward by the second defendant, Mr Singh submits as follows:

(a)that the deadlock was caused by the plaintiff ’s refusal to assist with the tax return;

(b)the plaintiff failed to supply the accountant with the necessary information to enable the tax return to be finalised.

[8]Mr Singh submits that:

(a)the plaintiff proposed a reasonable solution to break the deadlock, by having both accountants speak to one another to try and resolve the unexplained variances; and

(b)the plaintiff supplied the accountant with all relevant information that he had to hand and the accountant’s letter enclosing the tax return confirms that it was prepared on the basis of information supplied by both parties.

[9]        Mr Singh also submits that any costs order should be made against the second defendant rather than HNP (which took no steps in the proceeding) and asks that the order be paid out to the second defendant’s dividend from HNP.

Second Defendant’s submissions

[10]      Ms Campbell submits that the plaintiff wanted to prematurely place HNP into voluntary liquidation (around 23 March 2023 and 9 May 2023) before the independent accountant had finished the job he was instructed to do by both parties. She submits the tax return and accounts were provided to the plaintiff on 23 May 2023 and the

second defendant believed it was in all parties’ best interests to wait for the independent accountant to complete the tax return and accounts before agreeing to liquidation of HNP. Ms Campbell submits that if the issue of a discrepancy in the accounts had not been raised then this matter would have been completed quickly upon receipt of the documents.

[11]      Ms Campbell submits the plaintiff should not receive total costs for this matter as the plaintiff has not acted in good faith, which is shown by the steps the plaintiff has taken throughout the process, and the parties should always try to resolve matters before using the Court.

[12]      Ms Campbell submits that ultimately the second defendant accepted that liquidation was appropriate after the plaintiff would not sign the tax return and when the plaintiff did not provide comment or raise any direct queries on what the plaintiff did not agree with in the tax return. She submits the plaintiff did not offer any valid solutions or suggestions on the unexplained variances for the final shareholder distributions to be resolved.

[13]      Ms Campbell submits the plaintiff should not be entitled to increased costs as the plaintiff had not tried to mitigate its losses. She submits the plaintiff made its original application well before the independent accountant had provided the final tax return and the accounts, and this shows that the plaintiff had no intention of accepting the tax return and the accounts once they were completed. She submits the second defendant would have agreed to the liquidation process without Court intervention, but this was not an option with the plaintiff.

[14]      Ms Campbell submits that the plaintiff should pay the second defendant increased costs as suggested, for the reasons set out at [10] to [13]. She submits if the plaintiff had suggested why the tax return was not accepted then this matter could have been resolved sooner and if the plaintiff had suggested or provided documentation of how the discrepancy could be resolved, this matter could have been resolved without Court intervention.

Result

[15]      I am of the view that costs in this proceeding should lie where they fall. The reason for this is that, in my view, there have been actions by both parties which have contributed to the matter not being resolved without the need for Court proceedings being issued. In particular, I note the following:

(a)various proposals were made by the plaintiff in March and May 2023 to put HNP into liquidation without the need for Court intervention, but these were not accepted by the defendant;

(b)the plaintiff taking steps to put into HNP into liquidation were arguably premature, given they were prior to the independent accountant completing the review of the accounts and the tax return;

(c)the plaintiff did not detail his issues with the tax return, which might have allowed the matter to be resolved;

(d)neither of the parties took proper steps to address the discrepancy amounts in the accounts;

(e)neither of the parties took proper steps to resolve the issues regarding the interim distribution and allow that to be resolved by discussion between the respective accountants.

Orders

[16]I order that costs in this proceeding lie where they fall.

…………………………….. Associate Judge Taylor