Reynolds v Finnigan

[2023] NZHC 729

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-002717

[2023] NZHC 729

BETWEEN

GRANT BRUCE REYNOLDS

First Plaintiff

JOANNE LEE YOUNG
Second Plaintiff

THE LEARNING LADDER LIMITED (IN LIQUIDATION)

Third Plaintiff

AND

PERI MICHAELA FINNIGAN and BORIS VAN DELDEN

First Defendants

RED 9 LIMITED
Second Defendant

THE LEARNING LADDER (2018) LIMITED

Third Defendant

PEAT JOHNSON MURRAY LIMITED

Fourth Defendant

Hearing:

On the papers

Counsel:

K Robinson for the Plaintiffs

V Wethey and R Anderson for the First Defendants

MJ Fisher and JT Yoon for the Second and Third Defendants S Pasley for the Fourth Defendant

Judgment:

4 April 2023

JUDGMENT OF WALKER J [COSTS]

This judgment was delivered by me on 4 April 2023 at 11 am Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

REYNOLDS v FINNIGAN [2023] NZHC 729 [4 April 2023]

Introduction

[1]        On 1 February 2023, I determined two preliminary questions.1 The plaintiffs now apply for costs in relation to the preliminary hearing.

[2]        The substantive case concerns a sale by the receivers of an early childhood education (ECE) centre in Auckland known as The Learning Ladder (the Centre). In short, the receivers of The Learning Ladder Ltd (in liquidation) sold the Centre to The Learning Ladder (2018) Ltd for $470,000 on 9 March 2018. The plaintiffs allege, among other things, that the receivers sold the Centre at an undervalue causing loss to the plaintiffs. They also challenge the service of notice of default by the second defendant and the legitimacy of the events which followed.

[3]        I was tasked with determining two questions formulated by Associate Judge Bell:2

(a) (b)	What was the market value for the business of The Learning Ladder Ltd (in liquidation) at the time it was sold on 9 March 2018? What was the best price reasonably obtainable by the receivers in
March–April 2018?
[4]	The	second question is directed at the cause of action against the receivers for

alleged breaches of their statutory duties under ss 18 and 19 of the Receiverships Act 1993.

[5]                 It was common ground that, although there may be no bright line between the liability and quantum issues, no party sought determination of liability.

[6]                 The plaintiffs contend that although there is a trial on liability yet to come, there is authority for determining an award of costs in a split liability/quantum hearing. They refer to Cousins v FM Custodians Ltd.3 They argue that they succeeded in

1      Reynolds v Finnigan [2023] NZHC 48.

2      Reynolds v Finnigan [2021] NZHC 2668 (Judgment of Associate Bell).

3      Cousins & Associates v FM Custodians Limited [2013] NZCA 99.

establishing that the sale was for less than the market value range and less than the range of best price reasonably obtainable as determined by the Court, with consequent losses.

[7]                 The defendants argue that a cost award is premature and that the orthodox approach is to reserve costs until after the question of liability is determined. They contend this is consistent with Associate Judge Bell’s decision to reserve costs notwithstanding the success of the second and third defendants’ application and r 14.8 of the High Court Rules 2016.

Discussion

[8]                 There is no principle that requires the Court to reserve costs until the determination of the entire proceedings where a trial has been split. Each case must be decided on its particular facts and circumstances.4

[9]                 I considered that the plaintiffs had success in terms of the preliminary issue. But, after reflecting on the submissions made, I agree with the defendants that questions of costs should be deferred until liability is determined. The defendants’ submission, that if they are not ultimately found liable there would be no costs order in favour of the plaintiffs, is cogent and well made.

[10]              The preliminary issue determination narrowed the issues. It may assist the parties to come to a resolution. Had the plaintiffs’ valuation been so discredited that its case would collapse then the preliminary issue may have effectively determined liability. As it transpired however, the determination is provisional insofar as liability is concerned. In this sense the first stage is atypical. The case of Cousins is plainly distinguishable.

[11]            The issues are not also sufficiently discrete that it is appropriate to award costs for this stage. There are no other identified considerations at play such as access to justice which informed the High Court’s approach in Houghton v Saunders.5

4      Cousins and Associates v FM Custodians Ltd, above n 3, at [17].

5      Houghton v Saunders [2019] NZHC 1362 (revisiting costs after a successful appeal of a stage one proceeding). Neither the Court of Appeal nor the Supreme Court deferred costs in the representative proceeding: Houghton v Saunders [2019] NZCA 285; and Houghton v Saunders [2018] NZSC 112.

[12]              For the sake of completeness, I am not persuaded that questions of potential apportionment between defendants in the event there is liability informs the issue at this stage. I note that Associate Judge Bell recorded that the second and third defendants have indemnified the first defendants.6

Conclusion

[13]              For the reasons set out, an award of costs is premature. The appropriate course is to reserve costs pending determination of the substantive proceedings.

............................................................

Walker J

6      Reynolds v Finnigan, above n 2, at [15].