Quinn v Toon

[2023] NZHC 1563

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-697

[2023] NZHC 1563

BETWEEN

CLIVE ANTHONY QUINN

and
PHILIP SAMPSON WELLS
Applicants

AND

VICTORIA TOON

First Respondent

BRUCE JAMES THOMPSON
Second Respondent

CAROLINE MARY THOMPSON
and

STEWARTCO TRUSTEE SERVICES LIMITED

Third Respondents

PAMELA ISABEL QUINN

Fourth Respondent

On the papers:

22 June 2023

Appearances:

Stephen P Bryers for the Applicants

Greg Blanchard KC/Brett Martelli for the First Respondent Michael Heard/Daniel Nilsson for the Second and Third

Respondents

Judgment:

22 June 2023

COSTS JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

This judgment was delivered by me on 22 June 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

QUINN v TOON [2023] NZHC 1563 [22 June 2023]

Background

[1]    On 30 April 2020, the High Court issued a judgment in respect of this proceeding1 pursuant to which the first respondent was ordered to pay the applicants’ costs and disbursements of $90,258.37. The first respondent successfully appealed the High Court’s judgment,2 and the Court of Appeal held that the costs order in the High Court was to be set aside and the first respondent was entitled to costs in the High Court on a 2B basis. Subsequently, the Supreme Court has declined to grant the applicants’ leave to appeal.3

[2]    As a result of the various judgments, the first respondent is now entitled to costs and disbursements in the High Court in respect of the application.

[3]The following memoranda have been submitted:

(a)the memorandum of the first respondent dated 21 June 2022;

(b)the memorandum of the applicants dated 23 June 2022;

(c)the further memorandum of the first respondent dated 28 June 2022;

(d)the  memorandum  of   the   second   and   third   respondents   dated  5 December 2022;

(e)the further memorandum of the applicants dated 8 December 2022; and

(f)the further memorandum of the first respondents dated 22 December 2022.

1      Quinn v Toon [2020] NZHC 816.

2      Toon v Quinn [2021] NZCA 696.

3      Quinn v Toon [2022] NZSC 53.

Costs sought by the first respondent

[4]    The first respondent, in the memorandum of 21 June 2022, claims costs on a 2B basis of $43,134.50 and disbursements of $24,812.73, totalling $67,947.23.

[5]    The applicants, in their memorandum of 23 June 2022, take issue with two aspects of the costs sought by the first respondent:

(a)As a result the Court of Appeal’s decision in New Zealand Venue and Event Management Ltd v Worldwide NZ LLC,4 where a successful party is GST registered and is therefore entitled to a GST input credit, that party is not able to recover GST. Accordingly, the first respondent submits that the GST on Mr Parson’s fees included in the disbursements sought by the first respondent of $24,202.73 be reduced by $3,156.88, as a result of removal of GST, to an amount of $21,045.85.

(b)The first respondent’s right to recover legal expenses incurred is a statutory right pursuant to s 278 of the Companies Act 1993, and accordingly the first respondent should only be able to recover costs from the applicants to the extent that recovery from the company in liquidation pursuant to s 278 is not possible.

GST issue

[6] With respect to the issue relating to GST on Mr Parson’s fees, as mentioned at [5](a) above, the first respondent accepts that the submission advanced by the applicants on this point is correct and accordingly the disbursements claimed are reduced to $21,655.85 and total costs sought by the first respondents are reduced from

$67,947.23 to $64,790.35.

4      New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282.

Liquidator’s right of recovery under s 278

[7]    As to the second point regarding the ability of the first respondent to recover costs from the company in liquidation, the first respondent submits that the ability of the first respondent to recover, as the successful litigant, scale costs from the unsuccessful party and the legal expenses incurred by the first respondent as the liquidator for the company are separate matters. The first respondent submits that the right as a liquidator to recover the full scale costs from the applicants is a position that is clearly accepted by the Supreme Court judgment in declining the applicants’ application for leave to appeal,5 and it is also clearly envisaged in the Court of Appeal judgment.6 The first respondent submits that this also avoids the other shareholders of the company effectively funding of part of the scale costs awarded against the applicants.

[8]    The second and third respondents in their memorandum of 5 December 2022 support the first respondent’s position in relation to this issue.

[9]    The applicants’ response memorandum dated 8 December 2022 makes the following points in reply:

(a)At [4] of the memorandum it is alleged that the litigation was a direct result of the second respondent breaching the terms of a settlement agreement made between the shareholders and the directors.

(b)In the usual case, the liquidator would not incur any legal expenses because of the statutory right to recoup these expenses from the assets of the company in liquidation, pursuant to s 278 of the Companies Act. The applicants submit the only reason the liquidator has incurred legal expenses in this case is because the amount of funds left in the company after distributions to the shareholders was insufficient to pay the liquidator for those expenses.

5 Above, n 3, at [16].

6      Above, n 2.

[10]   The first respondent’s reply memorandum dated 22 December 2022 seeks to refute allegations at [4] of the applicants’ memorandum and reiterates the point that the scale costs awarded to the first respondent as a successful litigant against the unsuccessful party, is a separate matter from the liquidator’s right to recover out-of- pocket costs incurred in the liquidation pursuant to s 278 of the Companies Act.

Decision

[11]   I am of the view that the submissions made by the first respondent, and supported by the second and third respondents, are correct. The right of the liquidator, as the successful litigant in the litigation to recover scale costs against the unsuccessful party is a separate matter from the statutory right of the liquidator to recover out-of- pocket expenses from the company in liquidation, pursuant to s 278 of the Companies Act. If it were otherwise, then the shareholders of the company in liquidation would be paying part of the costs due to be repaid by the applicants as the unsuccessful litigants. This is not a fair or just outcome.

Orders

[12]I order that the applicants are to pay the first respondent 2B scale costs of

$43,134.50 and disbursements of $21,655.85, totalling $64,790.35.

…………………………….. Associate Judge Taylor

Solicitors:

McVeagh Fleming, Auckland, for the Applicants
HC Legal Ltd (Brett Martelli), Auckland, for the First Respondent

LeeSalmonLong (Michael Heard/Daniel Nilsson), Auckland for the Second and Third Respondents

Copy for:

Stephen Bryers, Auckland, for the Applicants

Greg Blanchard KC/Jack Alexander, Auckland, for the First Respondent