Red_I Ltd v Proactive Workwear Co NZ Ltd HC Auckland CIV 2006 404 004098

[2007] NZHC 1758

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2006 404 004098

UNDER  The Companies Act 1993

BETWEEN  RED_I LIMITED Plaintiff

AND  PROACTIVE WORKWEAR CO. NZ LIMITED

Defendant

Hearing:         25 May 2007

Appearances: Mr Gerard Keightley for plaintiff

No appearance for defendant

Judgment:      25 May 2007

ORALJUDGMENT OF ASSOCIATE JUDGE J P DOOGUE [on Costs]

Counsel:

Gaze Burt, P O Box 91-345, Auckland

Scott Greer, P O Box 259059, Greenmount, Auckland

RED I LTD V PROACTIVE WORKWEAR CO NZ LTD HC AK CIV 2006 404 004098  25 May 2007

[1]      The defendant company is now in liquidation.  The plaintiff filed liquidation proceedings as long ago as 14 July 2006.  The date when the proceedings were first called was 19 October 2007.  The plaintiff had earlier served a statutory demand before filing liquidation proceedings.

[2]      The defendant took no steps to apply to set aside the statutory demand.  As Mr Keightley submitted the usual and proper course where a debt is disputed is for a debtor to take that course:  see Kitchener Nominees Limited v James Products Ltd HC AK M1525-IM01 15 May 2002.

[3]      When the matter was first called it had to be adjourned to the usual way so that the application for stay could be dealt with.  The stay application was allocated a fixture for 9 March 2007.   But shortly before that application came up for consideration the defendant advised that it was withdrawing the application for stay. That advice was given 7 March 2007.  On or about that date the company passed a shareholders resolution that liquidators be appointed.

[4]      The next step in the chronology was that on 15 March 2007 the substantive liquidation proceedings were called again.  They had been adjourned to that date to allow sufficient time for an opposed application for stay to be dealt with.  Apparently at that hearing there was mention of the fact that liquidators had been appointed by shareholders resolution.  Associate Judge Abbott, though, concluded that there was no reliable evidence that a liquidator had been appointed.  He accordingly made an order placing the company into liquidation.

[5]      Some two weeks later His Honour recalled the order placing the company in liquidation following the filing of an affidavit by the liquidator who had been appointed purportedly pursuant to the shareholders resolution.   The Judge recalled the order placing the company into liquidation but directed that the proceedings stay on foot ending further order of the Court.   Thereafter the plaintiffs applied for an order  under  s 250  of  the  Companies  Act  1993  to  terminate  the  shareholder commenced  liquidation.    I  do  not  need  to  discuss  all  that  because  the  s 250 application was subsequently withdrawn and a separate agreement has been reached between the parties as to costs.

[6]      The final step in all of these proceedings requires clearing away of costs issues relating to the liquidation proceedings and to the application in those proceedings for a stay.

[7]      I have read Mr Keightley’s helpful memorandum which contains detailed submissions concerning the approach that should be taken to costs.  As I understand it, his position is first of all that there can be no issue but that the plaintiff is entitled to costs even although the company has been placed in liquidation and remains in liquidation as a result of a shareholders resolution.  The fact that the company is in liquidation by whatever means amounts to an indication of the position that the plaintiffs took in bringing liquidation proceedings in the first place.  I agree with that approach.  The plaintiff should have costs.  The next issue is whether there should be costs on both the substantive liquidation proceedings and the application for stay. Again my determination is that it is reasonable that the plaintiff should have costs on both.

[8]      The next issue is whether or not the plaintiff should have full solicitor/client costs or whether the plaintiff should have an increased award of costs.   The latter would be less than the former.   The actual solicitor/client costs in this case, I am informed, were $26,607.31.  Scale costs would come to $5,040.  Additionally the plaintiff  would  be  entitled  to  disbursements.    Those  disbursements  though  are payable irrespective of the outcome of an application for increased costs.  If a Court declines to grant an application for solicitor/client costs Mr Keightley submits that there should be increased costs representing a doubling of the scale amount which would take the costs award up to a little over $10,000.

[9]      Mr  Keightley  points  to  a  number  of  grounds  upon  which  he  bases  his application.   First he says the plaintiff attempted to assist the defendant when the financial difficulties became apparent.  Second, he points to the late filing of the application for stay which essentially given the appearance of trying to put off the inevitable and to delay and obstruct the plaintiff in putting the company into liquidation.  Third he tells me, and I accept, that he has advised the liquidator of the company that the plaintiff intends to apply for increased costs in one form or another

and that the legal advisors to the liquidator told him that they do not wish to contest the application.

[10]     Dealing with the last point first I think it would be wrong to approach matters on the basis that an application for increased costs should go by default as it were.  I am  not  suggesting  Mr  Keightley  makes  that  submission  but  it  is  necessary  to underline that costs awards have to be fair not just to the plaintiffs but also to the defendant and the creditors who he in a sense represents.

[11]     In some respects, the conduct of the defendant in this case is regrettably not uncommon in liquidation proceedings.   Actions taken at the eleventh hour, steps being taken and then later withdrawn – are all unfortunate aspects of the course of typical proceedings in the companies Court.  That said, they cannot be sanctioned by the Court as being an appropriate way for defendants to conduct themselves in the course of liquidation proceedings.  I consider that the overall picture that is disclosed here indicates that there has been conduct on the part of the defendant which goes beyond what is reasonable.  I am referring to the last minute application for stay, the failure to take steps to set aside the statutory demand and then the last withdrawal of the application itself.  These factors in conjunction, in my view, entitle the plaintiff to some augmentation of the level of costs.   I do not agree that an award of full indemnity costs is proportionate or appropriate.   I do however accept that there should be an increased award and I accept that the figure that should be awarded is

$10,080 together with disbursements to be fixed by the Registrar.

[12]     Finally I grant the company leave to withdraw its liquidation proceedings.

J.P. Doogue

Associate Judge