Packing in Limited (in liquidation) v Chilcott CA33/03

[2003] NZCA 399

IN THE COURT OF APPEAL OF NEW ZEALAND

CA33/03

BETWEEN  PACKING IN LIMITED (IN LIQUIDATION) FORMERLY KNOWN AS BOND CARGO LIMITED

Appellant

ANDLAURENCE GEORGE CHILCOTT AND PETER CHARLES CHATFIELD Respondent

Hearing:         13 October 2003

Coram:           Gault P Panckhurst J William Young J

Appearances: R Chapman for Appellant

TJG Allan for Respondents

Judgment:      17 October 2003

JUDGMENT OF THE COURT DELIVERED BY WILLIAM YOUNG J

Introduction

[1]      In issue before us is a question of costs.

Factual background

[2]      The appellant was formerly known as Bond Cargo Limited.  Under that name it was subject to voidable preference claims pursued by the respondents, Messrs Chilcott  and  Chatfield  who  were  liquidators  of  WSA  (NZ)  Ltd.    The  voidable

preference proceedings were heard before Master Faire.   He upheld in part the

PACKING IN LIMITED (IN LIQUIDATION) FORMERLY KNOWN AS BOND CARGO LIMITED V LAURENCE GEORGE CHILCOTT AND PETER CHARLES CHATFIELD CA CA33/03 [17 October 2003]

arguments of Messrs Chilcott and Chatfield.  The upshot was that the appellant owed Messrs Chilcott and Chatfield $51,374.17.   The Master subsequently made a substantial costs order against the appellant.

[3]      The appellant paid neither the amount owing under the voidable preference proceedings nor the costs awarded against it.  Instead, those responsible for its affairs changed its name to “Packing In Ltd” (no doubt intended as an amusing pun) and placed it in liquidation.   They appointed Mr Gerard Hulst, an Auckland chartered accountant, as liquidator.

[4]      Mr Hulst told Mr Chilcott that the assets of the appellant had been disposed of shortly before the appellant went into liquidation.   That apart, he has generally been uncooperative with Messrs Chilcott and Chatfield.  If he investigated the asset transfers in question (as he told Mr Chilcott he would) he has provided no detailed information as to the outcome of those investigations.   In a letter of 3 March this year he declined to provide copies of the appellant’s annual accounts for the past three years and, in doing so, gave the reason that it was not appropriate for him as liquidator to supply the company’s creditors with company information.   He has claimed  to  have  “misfiled”  information  given  to  him  by  the  directors  of  the appellant.

[5]      On 21 February this year the appellant applied for leave to appeal out of time against the costs judgment given by Master Faire.   The application for leave to appeal was declined on 24 June this year with the Court ordering the appellant to pay a total (as now established) of $3,393.48 by way of costs and disbursements.  This order has been sealed.

[6]      The  appellant  and  Mr  Hulst  have  declined  to  meet  this  award  of  costs. Mr Hulst on behalf of the appellant said that it has no funds and, for himself, says that the order was not made against him personally.

[7]      Messrs Chilcott and Chatfield now seek an order against Mr Hulst personally for payment of the costs.

Overview

[8]      There are two overlapping issues which arise on this appeal:-

1.Whether this Court has jurisdiction to make an additional order as to costs given the order which was made on 24 June and its subsequent sealing?

2.Assuming there is jurisdiction to make an order against Mr Hulst, should this jurisdiction be exercised?

Whether this Court has jurisdiction to make an additional order as to costs given the order which was made on 24 June and its subsequent sealing?

[9]      Rule 21(1), Court of Appeal Rules, provides:-

21     Costs and disbursements

(1)     The Court may make such orders concerning the whole or any part of the costs and disbursements of an appeal, or of any other proceedings in the Court, as may seem just in its discretion.

[10]     Mr Allan, counsel for Messrs Chilcott and Chatfield,  indicated the order he sought was intended  to supplement the order already made.  He maintained that the terms of r21 are sufficiently broad to permit what in effect is a second application. Mr Allan also noted that there is no estoppel; this given that  the  current  issue between the respondents and Mr Hulst was not before the Court in June this year.

[11]     Mr Chapman, for Mr Hulst,  argued that the order made already has, in effect, exhausted the jurisdiction to make an order for costs.  As well, he noted that all the information now available as to the inability of the appellant to meet an award of costs was known at the time of the previous hearing as Mr Hulst, in his affidavit in support of the application for leave to appeal, made it clear that the appellant had no funds.

[12]     In response to the last point made by Mr Chatfield, Mr Allan argued that

Mr Hulst’s remarks in the affidavit in support of the application for leave to appeal

to the effect that the company did not have any assets was not an assertion that an order for costs against the company would not be met.

[13]     Neither counsel cited authority directly on point as to whether an order for costs made by this Court, once sealed, exhausts the jurisdiction of the Court to make an order for costs against a non-party.  We would be reluctant to hold that this was the case as it is not difficult to conceive of a situation which might call out for the exercise of just such a jurisdiction.   So, for the purposes of this application, we are prepared to accept (although we do not expressly find) that we have jurisdiction to make an additional and supplementary order against Mr Hulst.

[14]     Nonetheless, there are sound reasons why this (and indeed any) Court is reluctant to allow parties to litigation to have what, in effect, is a second shot.  As will become apparent, this is a relevant consideration in the particular circumstances of this case.

Assuming there is jurisdiction to make an order against Mr Hulst should this jurisdiction be exercised?

[15]     It is perfectly clear that the order for costs against the appellant is not directly enforceable against Mr Hulst.   When proceedings are brought in the name of a company which is in liquidation, the liquidator is not a party to the proceedings and is thus not exposed, on ordinary principles, to an award of costs, see Re Wilson Lovatt and Sons Ltd [1997] 1 All ER 274 at 278-79. It is otherwise where proceedings are brought in the name of the liquidator (as was the case in Re Wilson Lovatt and Sons Ltd).

[16]     There is, of course, a jurisdiction to award costs against non-parties.   This was the jurisdiction considered and discussed in Carborundum Abrasives Ltd v Bank of New Zealand   (1992) 5 PRNZ 418.      Such a jurisdiction may, in appropriate circumstances, be exercised against a person who is the driving force behind particular litigation.

[17]     The application for costs against Mr Hulst has caused us some anxiety.

[18]     The application for leave to appeal was not prosecuted pursuant to a statutory duty (such as, for instance, requires the settling of a list of contributories).  Mr Hulst had a choice whether or not to appeal.  Messrs Chilcott and Chatfield are the only creditors of the appellant.  In seeking leave to appeal Mr Hulst was therefore acting primarily in the interests of the shareholders of the appellant.   Mr Hulst was undoubtedly  in  control  of  the  appellant  and  must  be  regarded  as  driving  the litigation.  The  proposed appeal as to the costs order had some merits (as this Court recognised when leave was refused).   But this is of little moment given that there was only one creditor.

[19]    As well, there was a broader context.   Mr Hulst was appointed by the shareholders of the appellant.  He has not been particularly co-operative with Messrs Chilcott and Chatfield.  We regard his refusal to provide Mr Chilcott with copies of the appellant’s annual accounts for the last three years as most unfortunate.   We also consider quite extraordinary the reason he gave for this, ie that it was not appropriate for him as liquidator to supply the company’s creditors (in fact the company’s only creditors) with company information.  We note that Mr Hulst sought to justify this stance by reference to the judgment of Laurenson J in Re Tasman Pacific Airlines of NZ Ltd (In Receivership and Liquidation) [2002] 1 NZLR 688. That case, however, dealt with a quite different question associated with records of liquidation. Further, Mr Hulst’s claims to have been acting independently in relation to his decision to seek leave to appeal do not sit entirely easily with his use of the same solicitors who had acted for the appellant prior to its liquidation.

[20]     On the other hand, for us to make an order for costs against Mr Hulst would imply some impropriety on his part.  We would be very reluctant to make such an order  (with  that  implication)  without  being  more  confident  of  the  facts  than  is possible on the basis of the limited affidavits which are before us.  A further reason for caution is that it was a differently constituted Court which dismissed the appellant’s application for leave to appeal and our feel for the underlying merits of the application is therefore necessarily second-hand.    Finally, as earlier indicated, there are good reasons why this Court (and indeed any Court) should discourage applications for supplementary orders for costs which are made essentially as an after thought.  Whatever other criticisms might be made of Mr Hulst, he did make it

clear in the affidavit which he swore in support of the application for leave to appeal that the appellant had no financial resources.  It should have been obvious to Messrs Chilcott and Chatfield and their advisors that an order for costs against the appellant would not be met.  In those circumstances, if there was to be an application for costs against Mr Hulst, it should have been made at the time the application for leave to appeal was heard.

Disposition

[21]     Accordingly, we dismiss the application for costs.   Mr Hulst is entitled to costs on the present application which we fix at $1,000 together with disbursements (including travelling and accommodation expenses) to be fixed by the Registrar.

Solicitors:

Vallant Hooker & Partners, Auckland, for Appellant

Grove Darlow & Partners, Auckland, for Respondents