South Pacific Industrial Limited v Demasol Limited
[2022] NZHC 885
•29 April 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-960
[2022] NZHC 885
UNDER Section 290 of the Companies Act 1993 IN THE MATTER
of an application to set aside a statutory demand dated 6 May 2021
BETWEEN
SOUTH PACIFIC INDUSTRIAL LIMITED
Applicant
AND
DEMASOL LIMITED
Respondent
Hearing: On the papers Counsel:
PJ Crombie and PJ Anderson for the Applicant M Russell for the Respondent
Judgment:
29 April 2022
COSTS JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 29 April 2022 at 4.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
CooneyLees Morgan, Tauranga Kennedys, Auckland
SOUTH PACIFIC INDUSTRIAL LTD v DEMASOL LTD [2022] NZHC 885 [29 April 2022]
Introduction
[1] In my judgment dated 22 December 2021 I set aside the statutory demand served on South Pacific Industrial Limited (SPI) by Demasol Limited.1 I reserved the questions of costs but recorded my preliminary view that SPI is entitled to costs on a 2B basis having succeeded in its application. I indicated that I expected that costs ought to be able to be agreed but directed memoranda to be filed if that was not possible.2
[2] Unfortunately costs have not been able to be agreed and a memorandum was filed on behalf of the applicant seeking costs on a 2B basis totalling $12,130 plus disbursements of $2,625.69.
[3] The respondent filed a memorandum in response submitting that the applicant had wrongly claimed costs for preparing the bundle of documents for the hearing and disbursements for return flights for two counsel. The respondent further confirmed that it had filed a notice of appeal in the Court of Appeal and applied for a stay of any costs award pending the outcome of that appeal.
[4] The applicant filed a memorandum in reply responding to the application for a stay of the costs award and raising further matters relevant to the filing of the bundle and the claim for travel expenses.
[5] Counsel for the respondent, by email to the Registry, asked the Court to disregard the memorandum filed by the applicant in reply as it was filed without leave or, if it was to be considered, seeking leave to file a further memorandum in reply.
[6] I issued a Minute on 29 March 2022 granting leave retrospectively to the applicant for its reply memorandum and leave to the respondent to file any reply. A memorandum was filed on behalf of the respondent in reply on 8 April 2022.
1 South Pacific Industrial Limited v Demasol Limited [2021] NZHC 3597.
2 At [114].
[7] Except for the question of the stay, the respondent accepts that 2B costs are payable but raises two issues in terms of quantum: whether the applicant can claim for preparation of the bundle and whether it can claim air travel expenses.
[8] I consider the quantum issues first before considering whether a stay is appropriate in the circumstances of this case.
Preparation of bundle
[9] The respondent resists an award of costs for the preparation of the bundle for the hearing because the respondent says that it prepared the bundle following agreement between the parties.
[10] The applicant denies there was such an agreement but accepts that it did not file a bundle of documents together with its submissions, contrary to the directions of Associate Judge Bell in his minute dated 11 June 2021.
[11] The respondent further submits that the bundle of documents prepared by the applicant was filed on the day of the hearing and was not paginated so was of little use.
[12] The applicant accepts that the bundle it prepared was filed on the day of the hearing but disputes that it was of little use. Counsel submits that although not paginated all the exhibits were tabulated and set out in a logical order. The applicant says that as it prepared a bundle of documents for the hearing it ought to be reimbursed for the costs of that step irrespective of whether the respondent produced its own bundle.
[13] Schedule 3 of the High Court Rules 2016 describes the item claimed by the applicant for the preparation of the bundle as “[p]reparation by applicant of bundle for hearing”.
[14] Associate Judge Bell directed the applicant to file the “common bundle” with its submissions. This was the bundle for the hearing. The reason for directing that a common bundle is to be filed contemporaneously with the applicant’s submissions is
so that the parties can reference the documents in their submissions. Although there is not a specific rule in Part 19, there is an expectation that the common bundle will be paginated.
[15] In this case I do not consider the applicant can claim for the preparation of the bundle. The applicant did not file the bundle when directed and, by the time it did, the respondent had already filed one so it was unnecessary.
Air travel expenses
[16] The applicant does not seek costs for the appearance of second counsel at the hearing but it does seek reimbursement for the travel expenses for two counsel to attend the hearing (i.e. two return airfares from Tauranga to Auckland). Those airfares total $1,115.90.
[17] The respondent submits these airfares are not payable because the applicant could have instructed counsel in Auckland.
[18] The applicant says in reply that its registered office is in Whangārei and that the applicant filed the proceedings in the Auckland High Court because the respondent’s registered office is in Auckland.
[19] The applicant’s reply memorandum confirms the applicant has a long-standing relationship with solicitors who are based in Tauranga.
[20] In my view, it is appropriate to allow the claim for air travel but only in respect of one counsel as second counsel cannot be justified in the circumstances of this case and so nor can their travel expenses. I reduce the amount claimed accordingly.
Conclusion on Quantum
[21] I do not allow for the preparation of the bundle and so reduce the costs awarded to $10,516.00.3 The disbursements are also reduced by the cost on one return airfare,
$557.95, for a revised total of $2067.74.
Should a stay be ordered?
[22] An application to stay a costs award pending an appeal is governed by r 12(3) of the Court of Appeal (Civil) Rules 2005.
[23] The Court of Appeal summarised the principles applying in Keung v GBR Investment Limited:4
[11]The stay application is brought under r 12(3) of the Court of Appeal (Civil) Rules 2005. In determining whether or not to grant a stay, the Court must weigh the factors “in the balance” between the successful litigant’s rights to the fruits of a judgment and “the need to preserve the position in case the appeal is successful”. Factors to be taken into account in this balancing exercise include:
(a)whether the appeal may be rendered nugatory by the lack of a stay;
(b)the bona fides of the applicant as to the prosecution of the appeal;
(c)whether the successful party will be injuriously affected by the stay;
(d)the effect on third parties;
(e)the novelty and importance of questions involved;
(f)the public interest in the proceeding; and
(g)the overall balance of convenience.
That list does not include the apparent strength of the appeal but that has been treated as an additional factor.
(footnotes omitted)
[24] Before considering each of the factors listed above, I refer to the discussion in Walker v Castlereagh Properties Ltd where Associate Judge Osborne (as he then was) said specifically in relation to staying costs judgments:5
3 The table of costs included in the plaintiff’s memorandum records costs for the preparation of the bundle as $1614 when claiming 0.6 x $2390 amounts to $1434. It makes no difference to the final result as no amount is awarded for the bundle.
4 Keung v GBR Investment Ltd [2010] NZCA 396.
5 Walker v Castlereagh Properties Ltd [2015] NZHC 907.
[42] I view costs judgments as requiring consideration beyond that which applies to money judgments generally.
[43] Those involved in litigation in this Court are subject to a regime whereby costs become payable when they are fixed. Successful parties are intended to have (upon the fixing of costs) the cash flow benefits of the costs to which the Court has found them entitled.
[44] Where the unsuccessful party appeals a substantive judgment, the justice in relation to identifying who should be out of pocket for awarded costs in the interim will most often (albeit not invariably) favour the successful respondent. The respondent has had to bear costs in either suing the other party or defending the other party’s unsuccessful claim. That stage of the litigation is over. If the unsuccessful party elects to embark on a further stage of litigation through appeal it will generally be just that the successful party (through the payment of costs) is reimbursed in the interim for the costs awarded and fixed pursuant to its success.
[45] Such an approach will by the nature of the balancing exercise remain subject to influence by factors of particular relevance in an individual case. One such factor is where the appellant establishes that the successful party may be unable to repay the awarded costs in the event the appeal is unsuccessful. But such factors are more likely to inform the Court’s decision on the way in which the unsuccessful party should make any payment in the interim (e.g. by outright payment to the plaintiff or by payment into a stakeholding) rather than on whether the unsuccessful party should be relieved of the requirement to make payment pending the determination of the appeal.
(footnote omitted)
Will the appeal be rendered nugatory if the stay is not granted?
[25] Requiring the respondent to pay the costs award at this point will not affect the respondent’s appeal or render it nugatory. In the event the respondent’s appeal is successful, any costs order made in this Court is likely to be set aside.
The bona fides of the unsuccessful party’s appeal
[26] There is no question that the respondent’s appeal is brought on a bona fide basis.
Will the successful party be injuriously affected by the stay?
[27] The applicant submits that it has incurred costs in setting aside the respondent’s statutory demand and has been successful in the proceeding. It does not go further than that in terms of any further effect of the stay. But the comments in Walker v Castlereagh Properties Ltd referred to above are apposite to this factor – it will generally be just for the successful party to be reimbursed in the interim.
The effect on third parties
[28] Neither party submits that a stay or otherwise will have an effect on any third parties.
The novelty and importance of questions involved
[29] The appeal raises questions which may be relevant to the construction industry more generally but the reason for the appeal is a private dispute between the two parties. Given the size of the costs award it does not appear that a stay is necessary to allow the appeal to proceed. Nor does the respondent go so far as to make that submission.
The public interest in the proceeding
[30] Other than perhaps for the construction industry as referred to above, the appeal does not raise issues of public interest and nor is there any reliance on this factor by the parties.
The overall balance of convenience
[31] The costs award is $12,583.74 including disbursements. I do not consider that there is sufficient evidence that there is a risk that the applicant would be unable to repay this amount if the award were set aside. The overall balance of convenience favours the applicant.
The strength of the appeal
[32] The respondent submits its appeal is “reasonably strong based on the prescriptive nature of the Construction Contracts Act 2002” and the “overwhelming case law” that the respondent says supports their position.
[33] The applicant submits in response however that because I held that there were a number of different grounds on which the applicant had a reasonably arguable case that the payment claim was not valid the prospects of a successful appeal are not high.
[34] I agree that there were several grounds upon which I found for the applicant. If any of those are not overturned on appeal, then the application to set aside will still succeed. This factor is therefore neutral in terms of any stay.
Conclusion
[35] Taking all of the above factors into consideration, I do not consider that it is appropriate to stay the costs award.
Result
[36] The respondent is to pay costs to the applicant in the amount of $10,516.00 plus disbursements of $2,067.74 for a total of $12,583.74.
[37] The respondent’s application for a stay of the costs award until the respondent’s appeal is determined is declined.
Associate Judge Sussock
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