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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] NZHC 729
Decision Date: 4 April 2023

CaseChat Overview and Summary

The plaintiffs, Grant Bruce Reynolds, Joanne Lee Young, and The Learning Ladder Limited (in liquidation), sought costs in relation to a preliminary hearing in the substantive case. The substantive case concerned the sale of an early childhood education centre known as The Learning Ladder, which the plaintiffs alleged was sold at an undervalue by the receivers. The plaintiffs also challenged the service of notice of default and the legitimacy of subsequent events. The court was required to determine whether costs should be awarded at the preliminary stage or reserved until the determination of the substantive proceedings.

The court considered whether to award costs at the preliminary stage or reserve them until the determination of the substantive proceedings. The plaintiffs argued that they had succeeded in 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. They referred to the case of Cousins v FM Custodians Ltd and contended that there was authority for determining an award of costs in a split liability/quantum hearing. The defendants argued that a cost award was premature and that the orthodox approach was to reserve costs until after the question of liability was determined. They contended that if they were not ultimately found liable, there would be no costs order in favour of the plaintiffs.

The court concluded that questions of costs should be deferred until liability was determined. The court agreed with the defendants that the preliminary issue determination narrowed the issues but did not effectively determine liability. The court noted that the case of Cousins was distinguishable and that the issues were not sufficiently discrete to warrant an award of costs at the preliminary stage. The court also rejected the plaintiffs' argument that potential apportionment between defendants in the event of liability informed the issue at this stage.

The court concluded that an award of costs was premature and that the appropriate course was to reserve costs pending determination of the substantive proceedings. The court did not award costs to the plaintiffs at the preliminary stage and reserved the issue of costs until the determination of the substantive proceedings.

Orders