On-line Digital Solutions Limited v Nathan Sanders Photography Limited
[2019] NZHC 2524
•7 October 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2019-485-406
[2019] NZHC 2524
UNDER the Companies Act 1993 BETWEEN
ON-LINE DIGITAL SOLUTIONS LIMITED
Applicant
AND
NATHAN SANDERS PHOTOGRAPHY LIMITED
Respondent
Appearances: L McKeown for applicant
Respondent represented by its director N Sanders
Judgment:
7 October 2019
COSTS JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[On the papers]
Introduction
[1] On 12 July 2019, the respondent emailed to the applicant a statutory demand pursuant to s 289 of the Companies Act 1993 for $143,725. The applicant filed and served an originating application seeking an order setting the respondent’s statutory demand aside on 26 July 2019. The proceeding came on for hearing before Grice J on 19 August 2019. The respondent consented to its statutory demand being set aside. The only outstanding question is as to costs. Apparently by mutual agreement of the parties, I am dealing with this on the papers. In addition to the originating documentation, I have the applicant’s memorandum of 3 September 2019, the respondent’s memorandum of 10 September 2019 and the applicant’s reply dated 23 September 2019.
ON-LINE DIGITAL SOLUTIONS LIMITED v NATHAN SANDERS PHOTOGRAPHY LIMITED [2019] NZHC 2524 [7 October 2019]
Representation
[2] The first issue is whether the respondent should be given leave to be represented by its director, Mr Nathan Sanders. On the applicant’s behalf, Ms McKeown draws the Court’s attention to the general rule that only solicitors and barristers holding current practising certificates have a right to represent others in the courts. In particular, a company may not be represented by its directors or officers in the way a natural person may represent themselves before a court.1 Ms McKeown refers to the leading case of Commissioner of Inland Revenue v Chesterfields Preschools Ltd, which helpfully summarises the policy reasons for requiring representation by counsel.2 She acknowledges that the Court has a residual discretion to allow persons other than solicitors and barristers to represent others when the exigencies of the situation make this sensible.
[3] For two reasons, the view I take is that this is a situation which the Court should permit the respondent to be represented by Mr Sanders, who is the company’s sole shareholder and director. First, no potential for a conflict of interest arises as Mr Sanders is the only shareholder of the company. Second, Mr Sanders appeared before Grice J and all that now remains for determination is the issue of costs. Ms McKeown has drawn the Court’s attention to Mr Sanders’ behaviour, including towards her as opposing counsel before Grice J. This is outlined in documents attached to Ms McKeown’s submissions and in the affidavit sworn by the applicant’s director, Mr Christopher Bates, on 24 July 2019 in support of the substantive application. Ms McKeown submits that Mr Sanders’ behaviour disqualifies him from acting for the respondent. She also rightly observes that Mr Sanders, as a non-lawyer, would not be restrained by the rules of conduct and client care.3 This is also a point relevant to costs, and one to which I will return. Nevertheless, both parties have put their cases as to costs before the Court and it appears to me that the matter should be brought to an end. Nothing would be achieved by requiring the respondent to instruct counsel at this stage. I therefore allow the respondent to be represented by Mr Sanders for the limited purpose of dealing with costs.
1 Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).
2 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [34].
3 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.
Costs
[4] That brings me to the core issue, that is to say, the respondent’s claim for costs. Ms McKeown acknowledges that in the generality of cases costs on an application for an order setting aside a statutory demand are ordered in accordance with the scales contained in the High Court Rules 2016, and generally on a 2B basis. She calculates costs here on that basis at $6,013.50 and disbursements (filing and service fees) at
$695.25. Ms McKeown quite properly informs the Court that scale costs are less than the respondent’s actual costs and puts before the Court the respondent’s solicitors’ fee notes, which total $21,395.24 (including disbursements). I record that in his submissions in reply Mr Sanders does not question any of those figures. Nor does he raise an issue in relation to the reasonableness or otherwise of the respondent’s actual costs.
[5] To a large extent, Mr Sanders’ submissions in reply are irrelevant to the costs issue. The only components of those submissions that I perceive to be relevant at all are paragraph 3.1, in which Mr Sanders says that he consented to the withdrawal of the statutory demand because he accepted that it had not been properly served, and paragraphs 20–23, in which he says that the respondent opposes any costs order because, so he submits, it was the actions of the applicant that have left the respondent in a parlous financial position. Whilst those points are at least relevant to costs, they do not furnish a basis for refusing the applicant costs. The first is effectively an admission that the respondent did not comply with the appropriate procedure, and there is no evidence in relation to the second.
[6]In my judgment, the applicant is entitled to a costs order.
[7] The next issue is whether that costs order ought to be in accordance with the scales in the High Court Rules or otherwise. Ms McKeown submits that the applicant is entitled to indemnity or increased costs.
[8] Such orders are generally made against a party that has conducted his, her or its case in a way that is open to criticism. A corporate entity such as the respondent can only act through its officers, and in this case the respondent has throughout acted through Mr Sanders.
[9] Ms McKeown refers to rr 14.6(4)(a) and (f) of the High Court Rules. The former addresses situations where a party has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending a proceeding, and the latter addresses situations in which, for some other reason, the Court is justified in making an order for indemnity costs notwithstanding the default position that costs should be determined in accordance with the scales contained in the schedules to the High Court Rules.
[10] I quote the grounds upon which Ms McKeown submits the Court should reach an adverse conclusion in relation to the respondent under those rules:
23Mr Sanders’ (and, through him, NPS’s) conduct in, and incidental to, the proceeding has been improper and unnecessary, and could be views as vexatious, particularly his:
23.1sending inappropriate communications during the proceeding (refer paragraph 14 above);
23.2issuing a statutory demand, despite being aware that there was a substantial dispute as to whether the debt was due and owing;
23.3failing to withdraw the statutory demand when requested:
23.3.1ODS’s solicitor wrote to Mr Sanders/NPS on 17 July 2019, explaining that there was no basis for the statutory demand, asking that it be withdrawn and warning that – if ODS had to apply for an order setting aside the statutory demand – ODS would seek indemnity costs on that application;
23.3.2Mr Sanders responded on 17 July saying: “We would welcome the opportunity to debate the matter in the High Court. You are also welcome to seek damages from my company or myself as neither has any assets”.
24ODS was then put to the cost of applying to set aside the statutory demand.
25It was not until the application was called before Her Honour Justice Grice on 19 August that Mr Sanders/NPS consented to the setting aside of the demand.
[11] In his submissions on the respondent’s behalf, Mr Sanders has not responded to that submission.
[12] Having regard to the terms of Ms McKeown’s submissions, I have reviewed the file including Mr Bates’ affidavit of 24 July 2019.
[13] Having done so, I am satisfied that the respondent, through Mr Sanders, has acted inappropriately in the conduct of this litigation. His behaviour throughout and the terms of his correspondence has been nothing short of abusive. Indeed, the way in which the respondent’s case has been conducted by Mr Sanders illustrates why the Court generally will not allow persons other than solicitors and barristers to act on behalf of parties in litigation.
[14] I do not propose to set out in this judgment all of the instances in which in my view Mr Sanders has acted inappropriately. But I will give one example. The respondent’s submissions in reply dated 10 September 2019 were filed and served that day. The copy of the submissions received by the Registry contained no paragraph
24. However, the copy served on the applicant’s solicitors contained a paragraph 24 in the following terms:
Further, I would cease the cocktail of drugs that keep me in a safe frame of mind these days and rot in a cell on a life sentence or kill myself before I paid one cent to that piece of shit Bates or any of his scumbag solicitors.
[15] As I say, that is an illustration of the way in which the respondent’s case has been conducted by Mr Sanders, and its tone is consistent with earlier correspondence.
[16] I am satisfied that this is an appropriate case in which to award indemnity costs in favour of the applicant to mark the Court’s disapproval of the way in which the respondent’s case has been conducted. There being no issue as to the reasonableness or otherwise of the applicant’s actual costs, I propose to award costs of $20,699.99 together with disbursements of $695.25 making a total of $21,395.24.
[17]The only remaining issue is against whom the costs award should be made.
[18] Given, as I have already said, that the respondent could only act through its director, Mr Sanders, and given Mr Sanders’ conduct, Ms McKeown submits that a costs award ought to be made against him personally.
[19] Ms McKeown refers me to Carborundum Abrasives Ltd, where the High Court said:4
… if a non-party who has been involved in or connected with the prosecution or defence or proceedings through an insolvent company has acted with impropriety or with mala fides, that could be a persuasive reason for the Court exercising its discretion towards the costs against such a non-party. But a non-party could become liable for costs where he has acted without impropriety or mala fides.
[20]And, later:5
Where proceedings are initiated and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in the result, such as a receiver or manager appointed by a secured creditor, a substantial unsecured creditor or a substantial shareholder, it would really be just for such a person pursuing his own interests to be able to do so with no risk to himself should the proceedings fail or be discontinued. That will be so whether or not the person is acting improperly or fortunately.
[21] In this case, not only was Mr Sanders personally interested in the outcome of the proceeding (as the respondent’s sole shareholder and director), in my assessment, he has acted with impropriety and mala fides. Additionally, he involved himself more closely than might generally be the case by attempting to act for the respondent himself. Finally, he has consistently maintained that the respondent company would be unable to meet any award of costs.
[22] Against that background, I make a costs order against the respondent, Nathan Sanders Photography Ltd, and Mr Nathan Sanders jointly and severally. They are to pay costs and disbursements to the applicant in the sum of $21,395.24.
[23] The only other observation I make is that it appears to me that Ms McKeown has acted with her customary competence, propriety and restraint in the conduct of this case.
Associate Judge Johnston
Solicitors:
Duncan Cotterill, Wellington for applicant
4 Carborundum Abrasives Ltd v Bank of New Zealand (No. 2) [1992] 3 NZLR 757 (HC) at 764.
5 At 765.
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