Owens v T R Group Limited

[2016] NZHC 858

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-836 [2016] NZHC 858

UNDER

the Companies Act 1993

IN THE MATTER OF

the liquidation of Brothers Haulage
Limited (in liquidation)

BETWEEN

COLIN DAVID OWENS AND DAVID STUART VANCE

Applicants

AND

T R GROUP LIMITED Respondent

On the Papers
Counsel:	K C Francis and P J Arnold for the Applicants C F J Reid for the Respondent
Judgment:	3 May 2016

COSTS JUDGMENT OF ASSOCIATE JUDGE SMITH

[1]      The  applicants  apply  for  costs  following  my  judgment  delivered  on

14 March 2016 in which I made orders setting aside six of eight payments received by the respondent from Brothers Haulage Ltd (in liq) (Brothers) in the period of approximately ten months before Brothers was put into liquidation.

[2]      The total amount of the eight challenged payments was $59,000.  I set aside the six  payments  made  between  21  March  2014  and  30  September 2014  (total

$34,000) but declined to set aside the two payments received by T R Group in

February 2014 ($25,000).

[3]      There were two main issues:

COLIN DAVID OWENS AND DAVID STUART VANCE v T R GROUP LIMITED [2016] NZHC 858 [3 May

2016]

(a)       whether  the  eight  transactions  were  part  of  a  continuing  business relationship under s 292(4)(B) of the Companies Act 1993 (the Act);

(b)      whether T R Group could rely on the good faith defence provided in s

296(3) of the Act.

[4]      T R Group failed in its argument on the first of those issues.  I found that all of the payments fell outside the scope of a continuing business relationship.

[5]      T R Group was partly successful with its defence under s 296(3) of the Act. In respect of the February 2014 payments, I found that T R Group did not have reasonable grounds for suspecting that Brothers was insolvent when the payments were made, and that T R Group acted in good faith in receiving the two payments. In respect of subsequent payments, however, I found that the position had changed, and T R Group did then have grounds to suspect that Brothers was then or was likely to become insolvent.

[6]      The applicants ask for costs on a 2B basis in the total sum of $11,150, on the basis that they were substantially successful in their claims.  In the alternative, if the Court is minded to reduce costs below scale to reflect T R Group’s partial success, the applicants suggest that an appropriate reduction would be 25 per cent of what would otherwise have been scale costs.

[7]      For the respondent, Mr Reid submits that, where each party has achieved partial success, the usual order is that costs lie where they fall.  He submits that there is no factor present in this case which would justify a departure from that “usual order”.   In the alternative, if the Court considers that the “usual order” is not appropriate, a fair alternative would be to allow each party to claim its entitlement to scale costs under category 2, band B, and then set off one award of costs against the other.  If the Court were minded to follow that approach, T R Group would receive an award of 2B costs totalling $9,812, to be set-off against the applicant’s scale 2B costs.

Discussion and conclusions

[8]      The normal starting point is that a party who fails in a proceeding should pay costs to the successful party.1   Any award of costs should then reflect the complexity and significance of the proceeding.2

[9]      In  this  case,  the  applicants  correctly identify the  central  issues  as  being whether their success in setting aside six of the eight transactions in issue justifies an award of costs in their favour, and if so, whether there should be any reduction below scale costs to reflect T R Group’s success on two of the transactions.

[10]     I accept the applicants’ submission that, where neither party has achieved absolute success, the appropriate approach is for the Court to make a “realistic appraisal of the end result”.3

[11]     I am satisfied that this is a case where an award of costs should be made in favour  of  the  applicants,  but  that  some  deduction  should  be  made  to  reflect T R Group’s partial success.  In my view an award of approximately two thirds of scale costs represents a realistic appraisal of the end result.

[12]     If the applicants and T R Group had achieved roughly equal success, then I accept that there might have been some argument for costs to lie where they fall. But that is not the position here: the applicants succeeded completely on the first of the two main issues, and succeeded on the second main issue to the extent of six out of the eight challenged transactions.  Although the values of the two transactions on which T R Group succeeded were larger, all of the payments were of relatively modest size.

[13]     I do not accept Mr Reid’s submission that it would be appropriate to award each party scale costs on the particular claims on which they have been successful. If that submission were accepted, the result would be an effective award of only

approximately $1,250 in the applicants’ favour.  The case was essentially argued on

1      High Court Rules, r 14.2(a).

2      Rule 14.2(b).

3      Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [6].

the two main issues, and on a realistic appraisal of the position following the judgment, a proper award of costs is the sum of $7,500, representing approximately two thirds of 2B costs under the scale.

[14]     T R Group  has  not  challenged  the calculation  of 2B costs  set  out in the applicants’ memorandum. Accordingly, there will be judgment for costs in favour of the applicants in the sum of $7,500.   The applicants did not seek an order for disbursements.

Associate Judge Smith

Solicitors:

Meredith Connell, Wellington for the applicants

Gibson Sheat, Wellington for the respondent