Packing in Ltd (in liquidation) v Chilcott

[2003] NZCA 124

IN THE COURT OF APPEAL OF NEW ZEALAND

CA33/03

BETWEENPACKING IN LIMITED (IN LIQUIDATION) FORMERLY KNOWN AS BOND CARGO LIMIITED

Appellant

ANDLAURENCE GEORGE CHILCOTT AND PETER CHARLES CHATFIELD

Respondent

Hearing:16 June 2003

Coram:Blanchard J
Tipping J
Anderson J

Appearances:  J B Murray for Appellant

T J G Allan for Respondent

Judgment:24 June 2003 

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

[1]       This application for leave to appeal from a judgment of Master Faire concerns costs.  After a six day hearing of an application made under s294(2) of the Companies Act 1993 by the present applicant (Bond) for orders that 14 allegedly voidable transactions should not be set aside, the Master made the order sought in relation to 11 of them.  He declined the order sought in relation to the remaining three transactions.  Hence Bond was required to repay to the liquidators of the respondent (WSA) the amount involved in those three transactions, namely $51,374.17.  The total value of the 11 transactions which the Master ordered should not be set aside was $60,970.79.  The Master’s judgment was delivered on 4 July 2002.  He sought submissions on the subject of costs.  These were provided and each party sought costs, submitting that it had succeeded.  In a judgment of 10 September 2002 the Master ordered Bond to pay WSA costs in the sum of $35,320.00, plus disbursements as fixed by the Registrar. 

[2]       Bond, which had not traded for some time, was itself subsequently placed into liquidation.  Its liquidator has deposed that Bond was considering an appeal prior to its liquidation.  No such appeal was brought before the expiry of the 28 days allowed.  The matter was then considered by Bond’s liquidator after he had taken office, but the present application for special leave to appeal out of time was not filed until 21 February 2003, in spite of the fact that it was signed on 4 February 2003.  There is no satisfactory explanation for these periods of delay, which amount in all to some four and a half months from the expiry of the time for appeal and nearly three months from the time Bond’s liquidator became involved. 

[3]       Bond has no assets.  Its only debt is to WSA in respect of the payments totalling $51,374.17 which remain set aside.  But now of course it has an additional debt to WSA for costs in the sum of $35,320.00 plus disbursements.  Bond has no external creditors whose position might require consideration.  The intended attack on the Master’s costs decision focuses on his conclusion that, for the purposes of Rule 47(a) of the High Court Rules, Bond was the party which failed in respect of the proceeding.  It takes the view that as it was the applicant for an order that the transactions be not set aside, it succeeded, albeit not fully. 

[4]       In the course of his judgment the Master observed:

As a result of the judgment that I have issued, the liquidator is entitled to demand payment of the sum that represents the transactions that I set aside from the plaintiff.  It is for that reason, that I conclude that the liquidator is the party who has succeeded.

We do not, with respect, consider that the approach evident in this observation is entirely correct.  The Master himself did not set aside the transactions which remain set aside.  The setting aside is the legal consequence of the liquidators of WSA issuing their notice and the High Court declining to order that they not be set aside.  This is not simply a matter of semantics.  The Master’s observation was the basis upon which he concluded that WSA’s liquidators had succeeded.  Looked at from the other side it could equally be said, as Bond contends, that it had succeeded by obtaining an order reversing the setting aside in respect of 11 of the 14 transactions and $60,970.79, out of a total of $112,344.96 by value. 

[5]       In a case such as the present, where in broad terms each party has had similar success, we do not consider it helpful to focus too closely on the question which party has failed and which has succeeded.  Costs in a case such as this should rather be based on the premise that approximately equal success and failure attended the efforts of both sides.  To that starting point should be added issues such as how much time was spent on each transaction or group of transactions in issue, and any other matters which can reasonably be said to bear on the Court’s ultimate discretion on the subject of costs.  In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all material features of the case. 

[6]       In the present kind of litigation, the liquidator of the company disadvantaged by allegedly voidable transactions must necessarily take the first step of filing in Court the prescribed notice to set aside.  That is what the statutory process requires.  Whether this be a “proceeding” or not (and we are inclined to the view that it is not), it is a mandated step if liquidators wish to assert that transactions are voidable.  The beneficiary of such transactions may then seek to retain their benefit by seeking an order that they be not set aside.  Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing on who initiated what step, and the extent to which that step succeeded or failed. 

[7]       We therefore consider that the Master’s approach to the issue of who succeeded or failed in this case was too absolute.  It would tend to create inappropriate consequences:  reluctance to apply for orders that transactions be not set aside for fear of failing to have them all validated, and, conversely, encouragement to set aside too readily.  We do not, however, have to examine the consequences of our conclusion because we consider Bond should not have special leave to appeal out of time.  As noted earlier, there is no satisfactory explanation for the relevant periods of delay.  No injustice arises to any of Bond’s creditors, because there are none, except WSA.  It is obviously not prejudiced by our refusing leave because that is what it has urged us to do.

[8]       In these circumstances Bond’s application is dismissed, with costs to WSA of $2,500.00 plus disbursements including the reasonable travel expenses of counsel, to be fixed if necessary by the Registrar.

Solicitors:
Vallant Hooker & Partners, Auckland for Appellant
Grove Darlow & Partners, Auckland for Respondent