Price v Darby
[2012] NZHC 1256
•12 June 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-5550 [2012] NZHC 1256
UNDER BRONWYN ESTATE LIMITED (IN LIQUIDATION)
IN THE MATTER OF BARRY'S CAR SALES LIMITED (IN LIQUIDATION)
BETWEEN JOHN ALBERT PRICE Applicant
ANDTERENCE JOHN DARBY Respondent
Hearing: (on papers)
Appearances: Mr C Light for Applicant
Mr Darby the Respondent in person
Judgment: 12 June 2012
JUDGMENT OF ASSOCIATE JUDGE DOOGUE [ON COSTS]
This judgment was delivered by me on
12.06.12 at 4.30 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Counsel:
Stace Hammond, P O Box 19-101, Hamilton – [email protected]/[email protected] /
Alexis Hart, Parnell Law, Auckland – [email protected]
PRICE V DARBY HC AK CIV-2011-404-5550 [12 June 2012]
[1] The liquidator in this proceeding filed an application on 5 September 2011 seeking orders against the respondent, Mr Darby, pursuant to s 266 of the Companies Act for orders that Mr Darby produce to the liquidator documents in his possession and for an order that following the review of such documents he attend before the Court to be examined on oath.
[2] Mr Darby had earlier been examined by the liquidator on 9 August 2011 and he apparently deposed to the fact that he had made an advance to the credit of Bronwyn Estate Limited (in liquidation) in the sum of $73,000. He had not, according to the liquidator followed up on his examination by producing documentation of the loan.
[3] The originating application had its first call date oN 11 November 2011. On that day the liquidator decided to withdraw. Lang J awarded costs in the following terms:
I award costs to the respondent on a Category 2B basis in respect of today’s appearance and the preparation of the memorandum filed in anticipation of it. Those costs are to be paid before the matter is next called.
[4] No further steps were ever taken in the proceeding and on 5 March 2012 the applicant filed a discontinuance of the originating application.
[5] It would appear that no steps were ever taken by Mr Darby to file a notice of opposition to the originating application.
[6] Since that time considerable energy and not a little paper has been expended on arguing issues about costs. Counsel for the liquidator and Mr Darby appeared before me on 30 May 2012 to make submissions.
[7] There are two aspects to the costs matter. Mr Darby apparently considers that the liquidator is not entitled to any more than the sum of $1,128 which is his calculation of the 2B entitlement. Mr Darby considers that that costs order only relates to matters that occurred on the first call date but not to costs on the discontinuance of the proceeding generally. Mr Darby also seeks his costs relating to
the out of Court steps he was required to take which included attending at the
liquidator’s office for examination and for producing documents to the liquidator.
[8] Mr Darby has not filed any application or supporting evidence. It is not customary for that to be a requirement of the courts when considering orders for costs incurred in litigation before the court. However the matter of compensation for costs incurred for the out of court steps that Mr Darby was required to take would seem to be in a different category as I will comment shortly.
Costs on the discontinuance
[9] There is no dispute on the part of the liquidator that he is required to pay costs on the discontinuance of the originating application. He takes the position that costs are only claimable under items 4.10 and 4.17 of Schedule 3 to the High Court Rules. He considers that costs under 4.17 only are required in respect of the appearance at the hearing on 11 November 2011.
[10] I consider that the position taken by the liquidator is correct. I do not agree with submissions made by Mr Darby that he is entitled to more by way of Rule 14.5 or 3.4 and 3.5. But the problem is that both of those apply to preparation of notices of appearance with protest or notice of appearance simpliciter. No such document was filed. The fact was that the hearing before Lang J on 15 November 2011 was never going to be anything more than a call date for the procedure, given that it was unopposed at that point.
Costs for compliance with requirements under s 261 of the Companies Act 1993
[11] Mr Darby very properly accepted that there had been power for the liquidator to exercise the authority under s 261 of the Companies Act on the ground that he, Mr Darby, was relevantly a “... person having knowledge of the affairs of the company”. This was true at least as far as the advance that Mr Darby says he made.
[12] Mr Darby sought what his lawyer described as a “contribution of $4,000 towards costs incurred in respect of the attendances of my client and myself regarding the examination”.
[13] It was Mr Darby’s position that he was entitled to compensation under
s 261(5).
[14] Mr Darby seeks not just remuneration for his time and expenses but also seeks a payment referable to the expenses of having his solicitor present at the examination which took place in the liquidator’s solicitors’ offices on 9 August 2011.
[15] Mr Knight pointed out for the liquidator that Mr Darby had not filed an application. Nor was any evidence filed by Mr Darby about this head of claim.
[16] In the first place it is necessary to be clear that this is not a matter that the court is able to fix costs on as part of its ancillary jurisdiction to award costs on the originating application. The requirements by the liquidator to attend for examination and the power under the Companies Act to direct compensation for those matters is an entirely separate category from costs in the litigation. Mr Darby was rather dismissive of the need for filing applications and affidavits which he said would only result in more expense and time being lost. However, had an application been filed it would have clearly identified the matters in respect of which he sought compensation and if an affidavit had been filed in support of it it would have proved such factual matters as are necessarily to be determined before orders can be made under s 261. In detail, I observe that it is true that Mr Darby, like any other person summoned for examination, has the right to have counsel present with him, it does not necessarily follow that the costs of counsel coming along to the examination are a matter that he can insist on being compensated for. Before he can seek compensation from the court under sub-section 5 there must be some evidence that the remuneration, travelling expenses and other expenses were incurred “in complying with the requirement of the liquidator under subsection (3) of this section”.
[17] It might be that a person in Mr Darby’s position would have to retain a person providing services in areas such as retrieval of computer information, or accountancy to name some examples. It might further be the case that the costs of retaining such persons would be claimable because otherwise the person under examination could not have complied with the requirement of the liquidator to produce documents and explain them at the hearing. However, it is difficult to see how Mr Darby could assert that it was necessary for him to have a solicitor present in order that he might comply with the liquidator’s requirements. In the absence of any evidence on the point, I am unable to see how such expenses could be brought under ss (5). Mr Darby as I have pointed out has not provided any evidence on the expense application, including this point.
[18] There is some evidence that Mr Darby who is a solicitor did carry out some professional work in relation to the dealings with the liquidator but these relate to the preparation of a memorandum for the hearing on 15 November 2011 – which is a head of claim that has already been agreed to by the liquidator. So that does not take him any further ahead.
[19] Mr Darby is or at least was undoubtedly a solicitor at some point. I do not know whether he was an admitted solicitor as at the date when the examination occurred in August 2011. It is very unclear what reasonable entitlement he has to be compensated for his time. If he had demonstrated that he was a solicitor in practice and that he lost, say, half a day of potentially fee earning time, then it might have been possible to bring more certainty to his claim for expenses. But as I understand it the only proposal that has been forwarded is that from Mr Darby’s solicitor which proposes that the liquidator pay $4,000 in regard to his costs and Mr Darby’s costs.
[20] Overall, while I have some sympathy with Mr Darby’s position I cannot agree that it would be reasonable to make an order under s 261. There is no application or affidavit, as I have noted, and the liquidators have not waived the requirement for such. It is therefore doubtful that I have any jurisdiction to make an order. Further, even if I did there is no evidential basis upon which I could direct the liquidator to compensate Mr Darby for his time. I therefore decline to make any order for costs other than to confirm that the understanding of the liquidator as to the
claimable items relating to discontinuance of the originating application are properly to be paid by the liquidator. There will therefore be an order that the liquidator pay to Mr Darby the amount of $1,128 as particularised in paragraph 3 of the liquidator’s
memorandum dated 3 April 2012.
J.P. Doogue
Associate Judge
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